Amazon’s E-book Imprints: Another Big Threat to Publishers

It was an important week for Amazon’s e-book business. Not only did the company announce that Kindle e-books now outsell all print books on Amazon, but it also apparently shocked some publishers by announcing it will now start to support the ePub format — an indication that it is beginning to take the e-book lending and library market more seriously and that it is moving away from exclusively supporting the proprietary Kindle format.

More important — though it might seem like the smallest news to come from Amazon this week — was the launch of another imprint by Amazon, a mystery and thriller one called Thomas & Mercer. This may well have the most impact in the long run, as it further illustrates Amazon’s intent to increasingly disintermediate traditional publishers.

How so? Well, genres like mystery and romance generally have large, voracious reader bases, and it may not be long before some of the top-tier writers in these genres decide the economics of having Amazon as their publisher might be better than going the traditional route — something that would have a significant impact on a business traditionally governed by the 80/20 rule.

What are the economics of e-books compared to traditional publishers? Judging by the current royalty splits, the numbers aren’t even close — at least when Amazon acts as publisher. Under the agency model, e-books sold through Amazon’s Kindle or another e-book platform return a percentage of revenue determined by the publisher, usually around 26 percent of the net margin. But if the e-book is sold under an Amazon imprint (or just self-published on Amazon’s Kindle platform), the number is as high as 70 percent of retail. Clearly, the numbers are drastically different and are why some authors like Barry Eisler are walking away from significant publishing deals to self-publish their books.

What Amazon is doing with Thomas & Mercer, as well as with its romance imprint, is taking the place of traditional publishers by offering actual editors, marketing and, of course, distribution. Before Amazon’s imprints (and as is still the case with self-publishing), those going the Amazon route were responsible for executing those operations on their own. With Thomas & Mercer, Amazon is now taking on those traditional publisher responsibilities and services that many authors see as hugely important.

How have traditional publishers reacted to Amazon’s launching its own imprints to directly compete with their own? Initial indications suggest they are not happy. But they can’t do much about it, other than, in the long run, offer higher royalties, something they’ve been hesitant to do. The reality of the situation is that by acting as editor, publisher and marketplace, Amazon puts the publishers in a tough position by essentially collapsing the entire publishing value chain into one company.

What might be of small comfort to traditional publishers is that some of the early e-book stars, like Amanda Hocking, are opting to go with traditional publisher deals after having initial success in the e-book market. The reason for this is that, in many ways, there is still a lot of appeal in going with a name publisher, not only because it likely offers a fuller suite of services but also because many authors still hold the big five in high regard, better returns on Amazon or other e-book publications be damned.

But as Amazon builds out its own imprints, complete with a full editorial team and marketing and distribution services, the differences between what the e-book king and traditional publishing offer are narrowing every day. While some authors may still find the allure of big publishing too hard to refuse, over time the economics of Amazon as publisher will pose an ever bigger threat of disintermediation.

Question of the week

Will Amazon be able to lure big-name authors to its own imprints?
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