DISCUSSION

Should publishers open stores to compete with Amazon?

October 24, 2014Written by George Anderson

Now that Amazon.com has come to an agreement with Simon & Schuster to sell the publishing house's print and e-book titles, it's tempting to think that all the other major publishers will soon follow. They may very well or perhaps they'll continue to balk at Amazon's demands. If so, where will that leave them?

Some within the industry believe Amazon exerts undue influence over the publishing market. A group of authors including Douglas Preston, Stephen King, Malcolm Gladwell, John Grisham, Salman Rushdie and Philip Roth have asked the U.S. Justice Department to investigate Amazon's business practices to determine if the retailer is acting as a de facto monopoly. In the unlikely scenario in which the Justice Department takes up an investigation, there is no guarantee it will come to a conclusion that supports the views of the authors.

One other possibility, recently floated by Michael Wolff in a USA Today column, is that authors and publishing houses should get over being mad at Amazon and get even instead. To accomplish this, the publishers would follow the lead of Apple and other manufacturers and open retail businesses (brick and click) to sell directly to consumers.

According to Mr. Wolff, Amazon is looking to achieve a commanding position in publishing by locking up the e-book business. While there is plenty of evidence to suggest Amazon is successfully moving towards that goal, the real money in book publishing remains in printed titles.

According to figures published on the Statista site, worldwide print sales are $53.9 billion compared to $8.5 billion for e-books. Seventy-six percent of readers in the U.S. prefer reading from print publications that digital versions. There may come a day when digital versions of books do to physical books what music downloads have done to CD sales, but that is unlikely to happen in the near-term.

Mr. Wolff asserts that publishers opening their own stores and sites have a pricing advantage over Amazon that they can exploit if competition becomes nasty. "Amazon is still buying books from publishers at something around a 50 percent markdown for physical books," he writes. "Discounted beyond that, Amazon begins to lose serious money, whereas publishers have further room to discount and yet still profit."

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