Why now, and why is it too late? And why at this moment, as opposed to a year ago? We’ve seen massive changes in the ecosystem surrounding publishing, and some changes to traditional publishing within it, but why do we need to change the future now, and what does that mean?
What it means to me is simple: that one company has been determining the course of the future, and we are now witnessing the final gambit.
With its largest acquisition yet in what I’ll call the Book Network space, Amazon is taking us all with it, into its future, whether we like it or not. My personal prediction is that we’ll see an antitrust suit at some point, but it won’t be until the realization is complete in a way that gives plenty of ammunition to actually pursue the giant in an effective way. Even once that happens, it will be years before anything settles or otherwise gets resolved in a way that we can recover from it.
Enough moaning. It’s not really too late, it just feels that way. It even looks that way. So what can we do about it, now? Other people who see this happening have been trying to answer this question for awhile. To really understand what’s going on, consider a small slice of Amazon’s history represented by key land grabs in the area of social activity around books.
The first sign was the purchase of Shelfari, circa 2006 or so (I like rough dates because I know you’re all on the Internet and can look any of this stuff up to be more exact). Shelfari and LibraryThing were two of the first social networks for books that grew quickly and gained significant network effects. But Shelfari was the first one to get the then-very-slippery concept of “social.” They got it, more so even than many “social” book startups do today. And Amazon snapped them up.
The Kindle launched. No one knew it then, but it was a blip, a tiny first step, in Amazon’s overall plan for a device-independent media and sales network. It wasn’t about the device at all, it was about whispernet, which itself was really just about the Internet. It was about getting books flowing there, like music was, like movies were, like books should have been all along if publishers hadn’t been dragging their heels through the turn of the century.
In the wake of the Kindle, Amazon made another key acquisition. A small company called Lexcycle, in Texas, had created a reading app for the iPhone. It was called Stanza, and it had gained a massive following for two reasons. It had the first truly great book reading experience ever on a handheld device, and it had tons of free content available via an open access feed system its founders had devised. On top of their millions of free downloads each month, they’d figured out a way to take a small cut of sales on other titles, and they were profitable. In short, they’d already done what the Kindle team wanted to do. Snapped up, undisclosed sum.
Along the path to now, meaning the future, they’ve made other, less significant acquisitions. They own CreateSpace, which is in the digital self-publishing niche. And Audible, which is audiobooks.These are key pieces, as was a much older acquisition, MobiPocket, the engine behind Amazon’s current proprietary format and DRM for books.
Now for some backstory on their next key acquisition. Around 2010, another company that my own startup had partnered with was called DiscoverReads. They were based in SF, bootstrapped, and they’d created the best book recommendation engine I’d seen. Not only that, it functioned as a social network too. It pulled in Facebook, of course, which was becoming standard practice, but what set it apart was that its system of presenting suggestions to read just worked. It was good. It was addictive. But its founders were weary: they’d been bootstrapping for years. Some of them had families. They’d tried licensing it, but the publishing industry is notorious for not cutting breaks for very small startups, no matter how good the tech. They’re also notorious for not being able to tell when tech is good or not. And on the other side of the possible licensing market, the tech industry was already a staging ground for gorilla fights. The big guys already had some sort of recommendation systems and while they didn’t work so well, no one saw it as a problem. The small startups were almost all focused on content, on building reading apps and competing feature for feature, so no interest there. No one was going to license it.
But another social book company, Goodreads, had been trying to develop something like it, and realized how hard it was to do the recommendation thing well, in a meaningful, useful way. So they snapped up DiscoverReads.
Goodreads was the largest and fastest-growing of the book networks, over LibraryThing, and Shelfari had sagged majorly since getting acquired. Goodreads, for those in the know, was filling in a critical piece of technology, in a piece of the overall puzzle that again, Amazon had not quite cracked. In fact, there were many things Goodreads did that it did much better than Amazon.
My anecdotal contribution at this point is to say that around that time, at a major publishing conference, after a panel, an Amazon employee approached the Goodreads founder Otis Chandler, looked him in the eye, and said “We’re watching you.” That really happened, and yes, that’s how Amazon really represents in those situations. My personal belief, based on no information, anecdotal or otherwise, is that an ongoing dialogue between Amazon and Goodreads had been happening for some time. But it turned serious after the DiscoverReads acquisition.
Goodreads was not in a situation like Shelfari, Lexcycle, or DiscoverReads had been. But they were a VC-funded startup in a late stage of development, funding, and operations. They had tens of millions of UU per month. They had revenue. My guess is they were not profitable, but were raking in advertising dollars and affiliate commissions. A sound assumption is that their margin was nowhere near what a VC would need to justify continuing with it versus exiting. But I’m not a money person, I’m an idealistic English major, so take that with a grain of salt.
All my conjecturing aside, the deal happened this year, and like other deals in that important strategic zone, was an undisclosed amount. At this point, though, the amount does not need to be disclosed or even guessed at to understand the gravity of this deal. There simply is no strategic answer on the other side, if you view it as Amazon vs. Traditional Publishing. The closest thing is a joint venture called Bookish, which burned through 3 CEOs in three years trying to get its product launched, and finally launched without many key differentiating features to a resounding bronx cheer from all the book lovers online.
My point in all this? It’s simple. Watch out. I see industry insiders constantly expressing surprise at each of these moves by Amazon. Along the way, when you turn a blind eye to the startup world and the innovations happening on the social side of books, each of these moves seems confounding, perplexing, mystifying even. But each one makes perfect sense, strategically. And the counter-moves seem pathetically misguided and ineffective. It’s like watching a chess master play an absolute novice.
The difference is that it’s not a chess game, because there are real consequences. A bunch of people like me, who care, are practically screaming advice at publishing companies, and offering our services, and continuing to build great products and license them, or partner up, or get acquired by a publisher. Tons of smart people are trying right now to change this course of events, and it’s not helping because everything seems to fall on deaf ears. It’s not a game of chess, because it does ultimately come back to bear on consumers, on people who buy books, who use Amazon’s products and services, who don’t yet understand all the implications of licensing copyrighted material versus owning it, of multi-platform vendor lock-in, of proprietary DRM, of content availability and pricing controls, of open versus closed ebook formats. And for people in the tech and web community: come on, especially investors, we’ve seen all this before. Without a major history lesson that recounts the Bell breakup, let’s just remember the browser wars. Remember the Google book scanning project and the suit there? How about the recent class action against Apple and several large publishers? If that’s not recent enough, pay attention to what’s going on right now. In the midst of all this, Amazon is sailing forward, unchecked. They control pricing, distribution, access, and potential competition, and no one is taking any significant legal action, consumers are complacent, and the publishers are conflicted because they’re all in thrall. I feel like Charlton Heston in Soylent Green at this point. Can’t anyone see what’s going on?
The philosopher Karl Popper successfully refuted what’s called historicism, or the ability to predict the course of human events to see some kind of common destiny based on what’s already happened. The logical proof against it, like the moves in a game of chess, has been laid out for us. We can change things.
We must continue developing alternatives, and some of us who do must hold out when Amazon comes knocking. For that to happen, publishers need to back some of these alternatives. They need to:
- care about community
- care about what happens to a book after it’s sold
- understand that the context of content and authors is as important as they are
- understand that a seven figure advance for BJ Novak’s book might be a good idea, but so might a $2M investment in a tech startup that helps them with #1, #2, and #3 above.
Technology and social networks both require serious cash. With investment, it is possible to beat back giants. Look at the rise of Apple in 1999 when the company finally started making the right technology choices again. Look at famous disrupting forces like Napster, Redhat, Netscape, Firefox, Twitter, Ubuntu, Chrome. All of those required large amounts of cash to take their share. Is that share important? It definitely is. Can it be measured meaningfully looking at P & L margins alone? No. Publishers: your content is the same way. It’s no longer just about making enough unit sales on a project and then moving along. You have lists, there is a long tail, you have cults of personality, you have devoted audiences, you have long lifecycles for books across all manner of digital media that you don’t control. Wake up.
People who care about books, about reading, about literature and its future, need to change. They are historically the stingiest, most fiscally conservative, most technologically resistant and investment-averse people ever, with the highest percentage of luddites per capita (no, I can’t back up those claims with actual numbers, only with like-minded sentiments and personal experience). This has to change. People who care about books now need to pony up and put cash into the future of books, and that’s the only way there is. Otherwise, be prepared to stand on the sidelines and wait, until shit hits the fan, splatters, and gets cleaned up before anyone can move forward again.