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Amazon vs. The Book Industry: The War That Never Was

The industries have unrelated objectives and are playing completely different games

Howard Chai
Apr 11, 2018 · 15 min read
Amazon’s first New York City bookstore. Photo by Spencer Platt via Getty

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On April 3rd, 1995, a man by the name of John Wainwright placed an order on Amazon.com for a book entitled Fluid Concepts and Creative Analogies. History now has that on record as being the first purchase made on Amazon.com. On November 19th, 2007, Amazon released the first iteration of the Kindle e-reader, with all New York Times best-sellers priced at $9.99. That day would become seminal in Publishing’s “Digital Revolution.” On November 3rd, 2015, Amazon opened its first physical, brick-and-mortar bookstore, in Seattle, with real wooden shelves and tangible books.

These three dates, spanning a total of two decades, are not only key moments in the biography of Amazon and pivotal points in book publishing, they are also bookends to what many perceive to be a decades-long war between the book industry and Amazon. It’s a war that has had multiple points of conflict, it’s a war that has turned a once mutually-beneficial relationship sour, and it’s a war that never really was.

In The Everything Store, a biography of Amazon published in 2013, Bloomberg Businessweek writer Brad Stone makes note of what would become the first theater of this so-called war between Amazon and the book industry:

Americans flock to large retailers for their convenience and low prices. But at a certain point, these companies get so big that a contradiction in the public’s collective psyche reveals itself. We want things cheap, but we don’t really want anyone undercutting the mom-and-pop store down the street or the locally owned bookstore, whose business has been under assault for decades, first by the rise of chain bookstores like Barnes & Noble and now by Amazon.

This feeling of insecurity, of “what’s going to happen now”, is a sentiment that occurs whenever new technology, often labeled as “disruptive”, enters the ring with a tradition-rich industry. Some speculate that everything is about to be changed, others argue tradition will persist.

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Photo by Dan Kitwood/Getty Images

While the effects of online retail remained to be seen, the advantages an online retailer would have over a physical retailer quickly became apparent. As noted by John Thompson in his examination of book publishing in the 21st century, Merchants of Culture:

By offering over a million titles [an online retailer] could excel on selection; by being open 24/7 and aiming to ship books directly to the customers as quickly as possible, it could score high on convenience; and by discounting a substantial proportion of its titles it could compete against the superstores on price.

Selection. Convenience. Price. For online retailers, gone were also the worries of inventory and the exorbitant expenses of operating physical retail. It’s not hard to see why traditional book retailers felt their business was about to be disrupted in a way that could quickly become fatal.

But for all those fears, the effect was more like that of a soft ripple than a tidal wave. In 2005, a full ten years after Amazon’s first book sale, Amazon’s market share for one particular hardcover commercial bestseller (three weeks after publication) was 2.9%, more than half the size of the next smallest player, Borders, at 8%, and seven times smaller than the biggest player in the field, Costco, at 21%. While this is one example, the gap makes clear that for all the prophecies of disruption, traditional retailers remained strong.

This is neglected in The Everything Store. Stone provides a detailed account of Amazon’s birth and growth, as well as its entry into the book industry, but mostly leaves out the effects it had on the rest of the field. This is particularly unfortunate considering Amazon’s reputation for shaking up any industry it so much as sets its sight on, as seen with its acquisition of Whole Foods in 2017, its early 2018 announcement that it would be foraying into Healthcare, and many other instances.

A similar scene would play out again in 2007, after Amazon CEO and Founder Jeff Bezos revealed the Kindle. This was a move that was arguably more disruptive than the company’s entry into the industry in 1995. Bezos began the announcement asking, rhetorically, in the “we’re about to change the world” kind of way that tech company heads routinely do: “The interesting question to think about is why are books the last bastion of analog?”

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Photo by David McNew/Getty Images

This time around, the theater of war was that which when bundled and bounded together, becomes a book: the page. With its fancy E-Ink technology, its ability to hold ten books as if you were carrying one, and the ease at which it allowed you to add to your collection, the Kindle was a threat to the publishing of books, the selling of books, and also the reading of books. In fact, based on an account in Brad Stone’s book, Jeff Bezos was very clear about his vision for the Kindle, telling Steve Kessel, who would helm the Kindle development team known as Lab 126: “I want you to proceed as if your goal is to put everyone selling physical books out of a job.”

The same “Disrupt vs. Dud” debate arose regarding the viability of e-books, like it did with the emergence of online retail. As John Thompson notes:

Opinions were sharply divided about how the ebook revolution, if indeed it was a revolution, was likely to pan out. On one side were the digital advocates who, unfazed by the disappointments of the previous decade, remained firmly convinced that the ebook revolution would happen eventually. On the other side were the digital skeptics who remained attached to the traditional print-on-paper book […]

The effect the Kindle would have, by ushering in the era of e-books, was much larger than its effect on retail when Amazon first entered the industry — and even more so after the Kindle 2 was released in 2009 — and much of that can be attributed to the $9.99 pricing strategy Amazon imposed. “The new low price for top-selling e-books changed everything. It tilted the playing field in the direction of digital, putting additional pressure on physical retailers, threatening independent bookstores, and giving Amazon even more market power,” wrote Brad Stone in his book.

Again, The Everything Store failed to capture the gravity of that change. It goes into great detail about the hush-hush development of the Kindle, from Jeff Bezos’ grand motivations to the technical minutiae of the devices themselves, but it once again omits the fallout. Stone does discuss Amazon’s relationship with publishers and how their relationship faltered as a result of the Kindle’s introduction and the $9.99 price-point, as well as the rivalry with Apple, but little is said about how the Kindle affected physical book sales and the publishing landscape as a whole.

In 2015, two decades after it entered the ring as an online book retailer, Amazon opened a brick-and-mortar bookstore in its hometown of Seattle. Since then it has opened several more locations, as well as an Amazon Go convenience store, with more of both on deck, in what has been a surprising turn for the tech company that made its mark as an online retailer and leader in the digital revolution.

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Photo by Stephen Brashear (left) and David Ryder (right), via Getty

Why, then, is Amazon suddenly pivoting to physical retail? Besides using physical stores as labs to experiment with technology and gather data on consumers, there are a few possible answers. With Amazon’s ever-growing reach, having physical stores spread out across the nation is a great benefit to logistics (fulfillment, shipping, etc.), something Amazon is increasingly focusing on. Brick-and-mortar stores also helps Amazon in its ongoing rivalry with Wal-Mart, the world’s largest retailer by revenue and Amazon’s most direct competitor.

Meanwhile, it appears that reports of the digital revolution — at least as it relates to books — have been greatly exaggerated. Brick-and-mortar bookstores appear to be mounting a comeback, print books in various markets continue to sell more than e-books, while e-book sales are trending in the opposite direction. What happened? Is this further proof that book publishing is one of the most unpredictable businesses in the world or are we just awful at prognosticating the future?

In 1962, a Communication Studies professor named Everett Rogers published a book titled Diffusion of Innovations. His theory was that the adoption of a given innovation is dependent on the innovation itself, communication channels, a social system, and time, and that its lifespan is defined by five distinct segments: innovators, early adopters, early majority, late majority, and laggards. Perhaps this gives us an explanation.

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Based on Rogers, E. (1962) Diffusion of innovations / Public Domain.

The first two points in Amazon’s rise — its entry into the book industry as an online retailer and its championing of e-books — can both be considered innovations, as in both instances, Amazon pushed an idea that was new and against the grain. From their respective introductions, both took off on a trajectory that resembles that of Rogers’ diffusion of innovation wave: a slow but steady rise as innovators and early adopters caught up, and then a rapid boost once the early majority joined.

Then, however, things change. The growth in market share of e-books have since plateaued, which would lead one to believe that this was the result of what Rogers referred to as “failed diffusion”, which is when an innovation, for whatever reason, fails to reach complete adoption. That passes the smell-test. It’s not particularly difficult to find somebody who abstains from e-readers and e-books, whether out of love for the purity of physical books, or perhaps just out of pure stubbornness. It’s clear e-readers have not reached a level of adoption — i.e., a critical mass — that, for example, smartphones have.

The failed diffusion of e-readers and e-books can be explained in two ways. The first is that e-readers like the Kindle are not really innovations at all. It was “not a revolutionary concept, nor a revolutionary technology”, says Keith Gessen of Vanity Fair. John Thompson notes a summation of the e-reader and e-book innovation, by a tech firm veteran who has worked extensively with publishers:

All you’re doing is replicating the narrative experience of page turning and linear reading in a digital form. Are you improving the experience for most users? Probably not — you’re probably actually degrading the experience for most users in terms of the resolution, the convenience, and everything else.

This helps explain why the digital revolution for books never got over the hump. The late majority never fully became adopters of the innovation, because the innovation was not really an innovation at all. The early majority and innovators just didn’t realize it due to the confluence of their technophile nature and not enough time passing for their rose-colored glasses to fade.

The second explanation: Amazon decided not to put all their eggs in the Kindle basket, and started branching out. As Stone notes in The Everything Store, “Bezos started investing in new areas.” This included, among other things, “fixing and improving the efficiency of its fulfillment centers”, as well as “learn[ing] the byzantine ways of the clothing business.”

Since The Everything Store was published in 2013, Amazon has also increased their investment in Amazon Prime Video, begun phasing out UPS with their own shipping service, Shipping With Amazon, and entered the groceries business, along with the previously-discussed brick-and-mortar bookstores and convenient stores. While books were still an integral part of their business, equally as integral, if not more, was “category expansion.”

This was Jeff Bezos’ design. In the introduction of his book, Brad Stone describes an exchange he had with Bezos, in which the Amazon CEO summarized why he believed his company was different from the rest:

We are genuinely customer-centric, we are genuinely long-term oriented and we genuinely like to invent.

While these words don’t explicitly point to it, they — along with an extensive track-record and well-known reputation — are very much hinting at what is referred to as the Long Tail.

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An example graph of the Long Tail. Image by Hay Kranen / Public Domain.

The Long Tail, a term coined by Chris Anderson, author of The Long Tail: Why the Future of Business is Selling Less of More, is the theory that “our culture and economy is increasingly shifting away from a focus on a relatively small number of ‘hits’ at the head of the demand curve and toward a huge number of niches in the tail.” The theory is that because the fire that burns twice as bright burns half as long, it’s in the best interests of businesses, in the long-term, to look for fires that can reliably burn twice as long, even if it means they burn with less intensity.

In a 2004 article he wrote in Wired, Anderson outlined three principles of a long tail approach to selling: make everything available, cut the prices, and then help me find them. Amazon’s well-established reputation in the world of retail speaks to these principals.

  • Make everything available. Across about sixty meetings with investors less than a year after Amazon’s birth, Jeff Bezos pitched his vision for Amazon. One of his beliefs: “that the infinite shelf space of the Web would enable the fulfillment of the merchandiser’s dream of the everything store — a store with infinite selection.” In 2004, when Bezos assembled the team that would develop the Kindle, he named it Lab 126. We’d later find out that the 1 stands for a and the 26 for z, which Stone notes as a “subtle indication of Bezos’s dream to allow customers to buy any book ever published, from a to z.”
  • Cut prices. Following a 2004 legal battle with Toys R’ Us, Bezos hired a man named Kal Raman to help address issues at the core of the disagreement. One other task Raman had: improve the pricing bots, which were “automated programs that crawled the Web, spied on competitors’ prices, and then adjusted Amazon’s prices accordingly, ensuring that Bezos’s adamant demand that the company always match the lowest price anywhere, offline or online, would be met.” When Bezos introduced the Kindle, he blindsided publishers by imposing an infamously-low $9.99 standard. On its first day after officially acquiring Whole Foods, Amazon cut the store’s notoriously-high prices.
  • Help me find them. Much has been made about Amazon’s recommendation algorithms. The quintessential anecdote is the story of how John Krakauer’s Into Thin Air brought Joe Simpson’s more-obscure Touching the Void out of obscurity, to the point of outselling Krakauer’s book, largely due to a feature on Amazon.com: the “Customers who bought this item also bought” sidebar. It’s a feature that’s at the core of online retail like Amazon.com, online publishers like The Atlantic, and social media platforms like YouTube. If there was a secret sauce to the internet, recommendation algorithms would be it.

Make everything available. Cut the prices. Help me find them. Amazon, regardless of whether or not Jeff Bezos acknowledges it, is a Long Tail store. But it doesn’t stop there.

Anderson originally described his theory with retailers in mind, and online retailers in particular, which he argued, similarly to John Thompson, had the advantage of seemingly-unlimited shelf space and the ability to atomize culture — such as splitting one album into thirteen separate tracks — but one could argue that there’s room for his theory to be further refined.

Make everything available. Cut the prices. Help me find it. Boil each of these down to their very essence, and what you get is this: be malleable, give me good value, and facilitate the experience. Once you do this, Anderson’s theory of the Long Tail becomes applicable to businesses in general, and not just retailers. In the context of Amazon, something else becomes clear: Amazon is not just a Long Tail store; Amazon is a Long Tail company.

Consider the Amazon properties we’ve mentioned so far: Amazon.com, Kindle, Amazon Prime Video, Shipping With Amazon, Whole Foods, and Amazon Go. Others that were not mentioned: Amazon Web Services, arguably Amazon’s most profitable venture; Amazon’s Alexa, a leader in A.I. development and dominant figure in the digital assistant market; Audible, the most widely-used provider of audiobooks; and Twitch, the most popular network for video game streaming. At this point, it’s harder to make a list of things Amazon can’t do for you than one of what it can.

The invisible thread that connects almost all of those services, then, is Prime, a paid membership that began as a shipping service but has since integrated Amazon’s other services. Besides allowing you to receive your purchases in two days, Prime also gives you access to Prime Video, Prime Music, more cloud storage for your various devices, and free content on Twitch, and Amazon offers that very unique package to you with one single, very tidy, fee. While the fee has gone up, the list of perks continues to grow, too, but you still get that I found treasure feeling, because it’s all about getting good value.

And because all of the services are housed under one roof, they all have built-in synergy and cross-compatibility to facilitate use. Buy a copy of The Everything Store on Amazon.com and it informs you that customers who bought it also bought an Alexa device, and that both of those things can be at your front-door in two days with Prime membership, which allows you to stream the Amazon exclusive and award-winning film Manchester By the Sea on Prime Video while you wait, and once Alexa arrives, she can play music for you via Prime Music and guide you back to Amazon.com, where the cycle continues. Jeff Bezos once said “When we win a Golden Globe, it helps us sell more shoes”, which gives you an idea of the ecosystem Amazon has built.

Be malleable, give me good value, and facilitate the experience. Amazon can be whatever you want it to be — a store where you can buy anything and everything, a provider of entertainment, the computing infrastructure of your business; it can be all of that for you at at tremendous value, and it can help you every step along the way. As much as Amazon is the Everything Store, it’s also the Long Tail Company.

It’s tragic Brad Stone didn’t realize this. In the opening chapter of his book, Stone provides a broad-strokes synopsis of Amazon’s journey, noting that Amazon is now “frequently delighting its customers with its wide selection, low prices, and excellent customer service.” Stone tip-toes toward the outline of the Long Tail, which he mentions just once in the book, offhandedly, only to stop one step short. Stone notes Bezos’ ambitions for a store with boundless selection, his “perennial quest to subsidize low prices for customers,” and alludes to the company’s internal desire to “become good at product search,” but fails to connect the dots, and the result is a portrait of Amazon that is flush with detail, but incomplete.

Which brings us back to books. Amazon was initially thought of by the book industry as a savior, and then a great customer, but since then: competitor, powerhouse, bully. Such a change implies conflict, or war, but was Amazon ever really engaged in a war with the book industry? Did Amazon ever really care about books?

Jeff Bezos didn’t grow up working in a bookstore. When he birthed Amazon in 1995, he chose books because there was no dominant vendor in the market, he believed the fact that books were sold in places other than bookstores to be a unique quality, and he noticed a wide — i.e., exploitable — gap between the number of books in bookstores and the number of books in print. Jeff Bezos didn’t so much as set out to take down the book industry as make a calculated decision he thought was best for his business.

History would further show this, as Bezos branched out and ventured into other industries. Amazon may have gotten its start as an online book retailer, but books became just one of the many, many things Amazon was involved in, as part of the Long Tail strategy. Quite some time ago, Amazon quietly transitioned into being a tech company first, and as such, it does whatever the markets suggest. It’s never been about books. Books were a means to an end. It’s always been about business. It’s always been about the long game.

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I strive towards a career that ends up leaving me somewhere between Howard Beck and Howard Beale.

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