A day in the life of the book biz
01.01.70 | Neill Denny
The clear sense of talking to people all day about Waterstones/Amazon is still the basic sense of shock reverberating round the book trade about the fact that James Daunt and Waterstones would get into bed with Amazon. It feels like the book trade equivalent of that moment in 2010 when Liberal Democrats suddenly found out their party leadership was in talks with the Tories to form a government.
At some fundamental, emotional level people had always ruled out a deal between the companies, because in their own way they embody two such different schools of the bookselling, and they have such different corporate cultures.
But perhaps James Daunt's hand was forced. He needed an e-book offer urgently, the previous managements had conspicuously failed to develop a Waterstone's e-reader, and the long-rumoured Nook deal fell apart for whatever reason - although it is worth noting that Microsoft took a stake in B&N only a matter of days ago. Either way, Daunt needed some sort of deal in place for Christmas, and half-heartedly selling Sony (and latterly Elonex) ereaders was never going to cut it.
People (me included) are puzzled as to what exactly Waterstones are getting out of this deal, apart from presumably a cut on every Kindle device sold, and every e-book sold through the instore wi-fi. An obvious danger is that by putting the Kindle under the noses of its customers, Waterstones will merely move more of its heavy book buyers from p to e. Another is Amazon will be the one with all the customer data, as they are handling the relationship once the Kindle is first bought, and they will be able to use that information to woo those customers directly in the future.
Perhaps the clue to Daunt's real strategy is tucked away in the launch announcement, which talks of "an on-going investment plan to upgrade the chain...incorporating a major refurbishment programme and other innovations including dedicated digital areas, free wi-fi access and new coffee shops, all planned for 2012." Essentially, he wants smarter stores with nice coffee shops where people can linger and browse digitally over their Kindle, or physically if they prefer. That is absolutely fine, and the stores are crying out for some real investment, whilst coffee done well makes significant profit in its own right. If this marks the announcement of a major refurb across the chain, then that is great news, and as nearly as significant as Kindle deal.
For Amazon the deal all looks more straightforward. The Kindle gets 300 showrooms, and presumably customers to follow, all of whom are ultimately drawn into the Amazon framework, not the Waterstones one. They also get a certain brand credibility amongst print traditionalists, who may feel that if Waterstones are dealing with Amazon the online retailer can't be all bad. For Amazon, it's incremental business with no downside.
For much of the period that HMV owned Waterstones the book chain's website was essentially a redirect to the Amazon site - a move now recognised as a strategic error. But at the time, when Waterstones was starved of investment money by an HMV management acting like an absentee landlord, it made some kind of sense, and certainly Waterstones was making money from online long before most of its rivals.
It's far too early to say if this tie-up falls into the same category, but what it does underline is that Waterstones is going to be a pure-play physical book shop, and Amazon is going to stay online. Daunt thinks the end point of the digital crossover is that it will comprise some 25% of book sales; my view is that it will eventually settle at twice that level.
That argument will be settled many years in the future. What people will remember today is the shock they felt when they heard the news that Waterstones and Amazon are doing a deal. But who is Clegg, and who is Cameron, is yet to emerge.