How has the internet transformed what we think of as more traditional distribution networks? How has Amazon, the largest online retailer for books, transformed the market? This last post will explore the issues particularly surrounding book distribution networks into the digital age.

As of mid-2011, Amazon was the second largest total seller of physical books, behind only Barnes & Noble. Given that Amazon was able to achieve this level of success exclusively as an e-retailer, with physical warehouses but no physical retail presence, what might it do next? The next step was to turn the distribution network Amazon had all but conquered on its head. Amazon began quietly researching and developing their e-reader, the now ubiquitous Kindle, whose name is partially derived from the writing of Voltaire: “The instruction we find in books is like fire. We fetch it from our neighbours, kindle it at home, communicate it to others and it becomes the property of all” (emphasis mine). Amazon did not pioneer e-books, nor was the Kindle the first e-reader, but it was the first to be a commercial success.

Until the release of the iPad (and even to some extent since the release of the iPad), the Kindle has been synonymous with e-readers generically. But to Jeff Bezos and to Amazon, technology exists in a constant state of flux: what is newest in technology should be encouraged, developed and marketed. Bezos feels no sense of sentimentality for books as physical objects, while many people believe specifically in the value of the physical book. Certainly, much of what the e-book does is positive; for example, it cuts down on the amount of natural wood resources otherwise required to print paper books. Also, as Chris Anderson’s book The Long Tail suggests, in electronic format, a wider variety of goods is available to the consumer, including, as in the case of books, out-of-print titles.

Is this theory really borne out in our current market? True, consumers looking for more obscure titles will have an easier time finding them now than they would have previously, when they might have placed a request with an antiquarian dealer, who would then have tried to turn up the title at antiquarian book fairs or through inquiries to colleagues. But where are people looking for mainstream titles likeliest to acquire them? Wal-Mart and similar discount stores like Sam’s Club, Costco, and Target can account for up to 40% of sales for a best-selling book, and about half of all U.S. residents live within five miles of a Wal-Mart store. So a customer looking for the latest Dan Brown, John Grisham or VeggieTales book can find it, more cheaply and quickly, at these chains than if they ordered it online.

Some discount stores, Wal-Mart in particular, are known for requiring their products to conform to a certain moral standard, and will not carry titles they deem offensive. This creates a reaction whereby the discount chains can levy more influence on publishers than other institutional customers like bookstores or libraries. Because the discount chains order in such huge quantities and sell those same quantities, they create the market for what sells and for what publishers will publish. While not directly impacting the distribution network, this issue does speak to a problem of market share being concentrated in too few hands, potentially or actually limiting the content of what can be distributed. This conundrum again raises the question on the impact that wholesalers have wracked on the book industry. Perhaps the initial instinct of publishers and booksellers was correct: that in their efforts to regulate and streamline the industry—and do so with the best bottom line—wholesalers, those middlemen whose intervention was once so strongly urged, limited not the effectiveness of the distribution network but rather its diversity of goods.

This is not to say that the number of titles published each year is shrinking; in fact, the opposite is true. But many of these titles will have few buyers, while a mere handful of these titles will account for a majority of sales and income, leaving the question of how titles by emerging authors or good books without a large publisher’s marketing arm behind them might be successful. Titles by first-time authors, or books that national outfits felt were regional titles, have been successful in the past in part because independent booksellers have championed them, for example, Rebecca Wells (Little Altars Everywhere), David Guterson (Snow Falling on Cedars), Charles Frazier (Cold Mountain), and Kathryn Stockett (The Help). Does Amazon’s algorithmic recommendations system mirror this phenomenon? It is unclear whether it has up to this point.

What might the dominance of Amazon and discount stores mean to the brick-and-mortar independents and to the rest of us, in terms of our ability to locate more obscure titles, or even to have heard of them? Donald Sheehan, in This Was Publishing: A Chronicle of the Book Trade in the Gilded Age, notes that in the early days of the west, many people lived their entire lives and obtained all their reading material without ever setting foot into a bookstore. In our own era, Lee Synnott, a Vice-Chair at Ingram Books, has said, “Books are being sold over the internet to people who don’t even go into bookstores.”

Amazon’s part in internet book sales continues to be an irritant on this point. In France, the government has passed a so-called “anti-Amazon” law in order to prevent the online giant from undercutting France’s independent brick-and-mortar booksellers. France already had a law in place capping the maximum discount on books at 5%. Because this law did not foresee internet book sales, the recent law extends the restriction to books sold online as well. Additionally, France does not allow online retailers to offer free shipping. These new policies are meant to circumvent Amazon’s ability to completely corner the market on book sales. Even so, French lawmakers acknowledge that the new law has probably just bought the bookstores some additional time, but not prevented the inevitable. Indeed, Amazon accounts for 70 percent of all online book sales in France.

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Meanwhile, in the United States, Amazon is fighting a battle with over 900 authors and with Hachette publishing. In its dispute over its profit percentage of e-book sales from Hachette Book Group, Amazon began to discourage customers from buying Hachette titles, and ultimately progressed to pulling some Hachette titles altogether, or delaying shipping on others. Douglas Preston, a Hachette author, wrote an open letter to Amazon’s Jeff Bezos, requesting that Bezos stop using Hachette authors as bargaining chips in their price war with Hachette. Authors and publishers, in this case, are joining together in what they feel is common cause against Amazon. Both the authors and publishers share a sense that books themselves are important and are a different class of retail goods from electric shavers or mixing bowls, whereas they believe Amazon considers all retail goods equal to one another.

Both Amazon and Hachette are middlemen in this example. Does Hachette need Amazon more than Amazon needs Hachette? Probably. Douglas Preston’s book White Fire, published in November 2013, garnered 25,000 pre-sales on Amazon. His most recent book, The Lost Island, was published at the end of August 2014. The Lost Island had only a few thousand Amazon pre-sales, due to Amazon’s policies discouraging sales of Hachette titles.

What larger implications does this tiff hold for the publishing industry? Major publishers continue to acquire minor ones and to merge with each other, as with the merger of Penguin and Random House in the summer of 2013. Penguin Random House will make up a quarter of all U.S. trade book sales. But Amazon’s streamlined distribution process and self-publishing platform may ultimately lead to a stand-off between the online retailer and whatever traditional publishers are left. Amazon may someday be the only distributor left in the book business, unless authors manage to find a way to bypass middlemen altogether.

In fact, the method of distribution is in the process of shifting again, and perhaps in some ways has come full circle to a time when bookstores will be superfluous to obtaining books. Eleven years ago, Jason Epstein, longtime publisher at Doubleday and founder of Anchor Books, envisioned the middleman fading from the picture, but not precisely in the way the last decade has unfolded. Epstein thought that e-retailing outfits like Amazon and Barnes & Noble online would fold, and that, instead, a conglomeration of publishers would band together to distribute their books directly to customers. He also felt that the future of publishing lay not in e-books, but in POD (print-on-demand) books.

To some extent, these two avenues have coexisted. Books continue to be digitized, or to be born digital, but the proliferation of Espresso Book Machines has also enabled retailers to offer print-on-demand services to their customers, nearly while they wait. About six years ago, there were fewer than half a dozen of these machines in the U.S. Today there are approximately 35 in public libraries, university libraries, and bookstores. Individuals can use these machines to self-publish or to create bound editions of specialized material, in essence, taking us one step closer to enabling each person to become his own publisher, his own distribution network.

Literary agent Richard Curtis, writing in Publishers Weekly, said, “Perhaps Amazon CEO Jeff Bezos has glimpsed the vision that has driven so many e-book pioneers for the last 10 years: a book distribution network consisting of nothing more than a writer, a reader and a server.” This may turn out to be so, and though distribution networks shift, they cannot end. In that same interview, Jason Epstein cited William Butler Yeats (“The Second Coming”) as proof of this: “Maybe history moves the way Yeats imagined – in spirals; the center remains the same but the circumference constantly changes. History may not repeat, but it echoes.”

Voltaire, portrait by Nicolas de Largilliere

Do you own an e-reader? Considering that “Kindle” is an allusion to the philosopher Voltaire, do you regard the name as ironic? Or do you think the flap between the book traditionalists and the techies is “a tempest in a teapot”?