I believe there’s a simple business fact that writers — especially self-publishing writers — should understand: companies don’t like competition.
Why? It forces companies to compete, which often means lowering prices, offering more for less, and an increase in the cost of doing business.
Recently, I’m reading a lot of news about how Apple’s trying to take a bite out of Amazon’s business by restricting how consumers buy Amazon books on Apple devices, and how Amazon’s responding with ways around it.
Many writers think that will force Amazon to lower their royalty rates to compete. Some think it means Apple is cozying up to “legacy” publishers and bringing legacy publishing’s bad habits into the self-publishing and e-book world.
But overall, author response seems to be fear, or panic–that Amazon could change its rules, or its royalty rates, or other author conditions, bringing the self-publishing party down a notch. Understandably, writers favor Amazon, and find reasons to criticize Amazon’s competition.
I think that’s what Amazon wants you to think–that if other companies charge a fee for providing access to Amazon products, Amazon will be “forced” to give its content creator less money. Amazon wants you to see Apple (and others) as money-grubbing “middlemen”.
What Amazon’s really saying is that it doesn’t want competition. That’s it. That’s all it is. Would you?
But there’s one thing that I don’t hear discussed much: Amazon’s main income in the e-book business is the Kindle, not e-books themselves. E-books are an extremely low-margin business for Amazon, especially in the popular 99 cent to $3 range, where most genre (and self-publishing) authors aim today.
I’ll say that again for emphasis:
Amazon’s main income in e-books is from the Kindle, not e-books themselves.
I think Amazon would be willing to make zero dollars on e-books if it continued to generate more Kindle sales, because there’s much more profit in selling e-readers than bottom-dollar-priced e-books. Does Amazon want e-books to be popular? Of course–but mainly because it means more Kindle sales.
Which makes me wonder: which does Amazon fear more–Apple’s iPad, or Apple’s system of selling e-books?
Today, the Kindle accounts for about 10% of Amazon’s gross income. Books, CDs, and DVDs combined account for about a third of its gross income. That means the majority of Amazon’s business–like Apple, by the way–has nothing to do with e-books or print books. That trend looks likely to continue.
In the first quarter of 2011, Amazon’s net income dropped by almost a third. In the second quarter of 2011, gross income rose by 51%–but net income continued to fall. Why? Infrastructure costs–the cost of doing business. Amazon builds a lot of physical infrastructure and continues to build its delivery system.
So, what does this all mean for writers?
Like I’ve written before, I think the competition amongst companies like Amazon and Apple is great for us writers. I don’t want to see either Amazon or Apple “win”, because I want more equity and access to publishing options, not less. A few large companies controlling the e-book game doesn’t sound good to me. Wasn’t that the problem with legacy (traditional) publishing?
And ultimately, I always want to go where my readers are. As companies compete to make it easier and more affordable for readers to get and read books, writers can only benefit–because the more readers there are, the more I can earn. And that’s one of the main reasons I decided to self-publish in the first place.
In future articles, I’ll keep you posted as I learn more about the ongoing competition to sell and distribute e-books. Stay tuned, and don’t forget to subscribe!
What do you think? Is there more to the story? Got any useful tips or experiences? Please take a moment to share your thoughts and experiences in the comments below–I’d love to hear from you.