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Lessons from history

Last week, I gave a presentation to the World E-Reading Congress, when I suggested that failure to diversify the distribution of book content away from Amazon and Apple would lead to walled gardens becoming super-fortresses. Today's news builds those walls significantly higher, with the Amazon/Waterstones relationship bringing together two companies that together account for over 50% of all the e-books and p-books sold in the UK.

At the congress, I argued for the removal of DRM (which would enable ebook users to be device and retailer agnostic); for the sanity of agency pricing (which would ensure that a book content sold at a realistic pricepoint); and for a plurality of publishers, retailers and routes to market. The prospect of Microsoft/Nook/Waterstones was an intriguing one, but the prospect of Amazon/Waterstones causes the heart to sink, even if there are store refurbishments in the works.

Old-school retail business cannot compete head-on with the giant tech corporations, sitting on their multi-billion dollar cash piles. But it is extraordinary that the trade (retailers, publishers and authors) has allowed Amazon – a corporation which, despite its remarkably low tax bills, could never be mistaken for a charity – to progressively absorb more and more power across our industry.  Amazon has worked with a great many stakeholders over the years, but its focus has always been, unremittingly and unsurprisingly, on what’s good for Amazon. Amazon’s size and power now constitute a very effective barrier to entry for anybody considering selling books, instore or online, pbooks or ebooks.

It is certainly the case, as James Daunt has stated, that UK customers prefer the Kindle – overwhelmingly – to any other eReader but, as Steve Jobs argued throughout his career, do customers actually know what they want, or what’s good for them? Ereaders are plain-vanilla devices; the Kindle is popular because it’s the Amazon ereader, not because it’s significantly better than any other device.

Marriages of convenience have a tendency to favour one party.  Around the turn of the century, both Borders (in the US) and Waterstone’s (in the UK) recognised that it was impossible to compete online with a corporation that was prepared take an operational loss today in favour of dominance tomorrow. This approach didn’t find favour with traditional retail shareholders, particularly after the dotcom bubble, so both businesses ceded their online trade to Amazon.

High and risk-free earnings were predicted for "Borders teamed with Amazon.com", but the Borders customer learnt after a single transaction that they were just wasting keystrokes by entering Amazon through a Borders portal, and Borders’ no-risk online solution became a millstone that contributed significantly to the weakening of the company.

For Waterstones, the opportunity to create an independent online business, benefitting from HMV firepower and leading one day to an ebook solution, was lost. Ultimately, that misstep with Amazon twelve years ago has led to today’s announcement. There’s an irony in there somewhere, but I fervently hope that history’s lessons can yet be learnt.