Amazon explored

In a typically bold—and at the same time secretive—move, Amazon has swooped on The Book Depository (TBD), thereby tightening its stranglehold on the online physical book market.

Our estimates of Amazon’s UK market share in this area hover around 70%, with TBD chipping in with another 10% or so. Exact figures are impossible to ascertain, but, either way, this is a clear case of a monopoly becoming ever more dominant.

Within minutes of the story breaking on, ex-Borders chief Philip Downer raised the possibility of an OFT investigation, a move that has now been formally initiated by the government body. It’s hard to think of a company less likely to welcome an official, in-depth investigation into its business than Amazon, as for years it has shrouded its operations in extraordinary levels of secrecy. Publishers would welcome a spotlight on the inner workings of Amazon, which is probably now the most powerful bookseller in Britain.

The Book Depository’s £100m-plus turnover was on an upward track, and City estimates the deal at around £100m. Internet valuations are always high, but the contrast with Waterstone’s £53m price-tag only weeks ago is extraordinary—that was for £500m of turnover.

All of which begs the question: why is Amazon prepared to risk a fortune, and the OFT, to buy The Book Depository? Various theories have emerged (none entirely convincing in their own right): it wants to remove a long-term threat; TBD has a superb international distribution system, and buying it is quicker and cheaper than replicating it; it brings Andrew Crawford—who helped establish Amazon here before founding TBD—back into Amazon’s fold; Amazon is too big to worry about the money, or indeed the OFT.

For 15 years Amazon has been hyper-dominant in online bookselling; this deal’s unexpected legacy may be in helping to explain how that dominance has been maintained so successfully.