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Strategy of the giants light years from book trade
18.05.10 | Benedicte Page
Apple, Google and Amazon are not book companies and their actions towards books and publishers must be understood in terms of strategic objectives light years away from those of traditional book retailers, the Book Industry Conference was told this morning (18th May).
Benedict Evans of media and new technologies research company Enders Analysis also pointed to the difference of scale to the book industry, highlighting the net levels of cash each company holds - Apple at $41.7bn, Google with $26.5bn and Amazon at $5.6bn.
He said: "The extremely dominant companies are finding themselves moving into books because of the logic of their own busineses, not because they are books companies."
Apple must be understood as a hardware company running a "reverse razorblade" business - the razorblade model being based on the concept of selling cheap razors which need expensive blades. Evans explained that when Apple sells an expensive iPhone or iPad with access to cheap apps, the model is "reverse razorblade".
Apple's strategic objective is therefore "to create a great content experience to drive sales of consumer electronics", Evans said.
Meanwhile he identified Google as an advertising business: "It makes sure all content is available on Google so that you start your purchasing journey there and Google can sell ads on it. Therefore its objective is for everything to be free."
Evans argued that Amazon is also not a book company, but a logistics business, pushing physical products through the site to achieve economies of scale, bargaining power and so lower prices from suppliers.
"For them e-books are a way of driving you through the site," said Evans. If you buy low-priced e-books on one Amazon visit, you may return to purchase a much more expensive item. "But Amazon can't add value in selling e-books because no logistics are involved - that's the reason for the aggression we've seen dealing with some other players," Evans commented.