March 12, 2012

Book 'em, Bezos

Remember You've Got Mail, in which Tom Hanks is a thinly-disguised Barnes & Noble executive who runs all those quaint independent booksellers out of business? Maybe they can remake it with Meg Ryan as a thinly-disguised Jeff Bezos who runs B&N out of business.

B&N is in the same quandary as Netflix, trying to shift from a physical to an electronic retail space. The more their Nook-branded tablet and ereaders succeed, the more they lose money. They could, as the saying goes, make it up on volume, but lack Amazon's deep pockets.

Netflix recovered unchallenged from its self-inflicted blunders, showing how difficult it is to get retail right. Google simply can't grasp the concept. Recently, five "traditional" book publishers tried to make up for their incompetence by forming a price maintenance cartel with Apple.

All to keep Amazon from discounting books. Amazon was still paying the same wholesale prices as before. And Amazon still discounts books printed on paper, along with everything else under the sun, just like every other big box retailer in the country.

This is actually another example of the damage caused by DRM. The irony is that Amazon sold the music industry on DRM-free MP3s as a way of escaping Apple's walled garden. Right now, ebook vendors have to support a reader and a format, and pay Adobe a vig for the privilege.

This arrangement favors Amazon and Apple (Apple is hardly betting the farm), but leaves the rest with steep costs of entry, too steep in the case of Borders. Plus, it puts publishers at the mercy of a handful of ereader manufacturers. Hardly surprising that they'd try to fix the game.

The nuttiest thing about it--indicative of a dreadfully old-school mindset--is that nothing prevents publishers from selling their own product. As Seth Godin puts it, publishers still think they're in the paper products business.

A more apt analogy can be found in the early 1950s, when a new electronic medium (television) and an antitrust action (United States v. Paramount Pictures) nearly drove the venerable Hollywood studios into the ditch.

What saved them was the realization they weren't in the theater business, but in the content provider business. The other day, I noticed that the Blockbuster store I've driven past for over twenty years is closing its doors. George Santayana could have seen that one coming.

Later this year, if and when Smashwords follows through on allowing uploading of ePub files, it will have usurped the business model--becoming the Ingram and Lightning Source of independent ebooks--that the "Big Six" publishers should have been pursuing from the start.

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Hey, watch this!
Blockbuster goes bankrupt

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# posted by Anonymous Moriah
3/12/2012 12:09 PM   
"if and when Smashwords follows through on allowing uploading of ePub files"

From your fingers to God's ears.