This story has been updated since publication in TIME magazine.
Cayla Kluver was 14 when she wrote her first novel. It's a fantasy novel called Legacy, and it's about a certain Princess Alera of Hytanica who's being forced to marry the handsome but obnoxious Lord Steldor when she's really interested in the handsome but mysterious Narian, who hails from Hytanica's bitter enemy, Cokyri.
When she was 15, Kluver and her mom, who live in Wisconsin, formed their own publishing company to publish Legacy. Sales were modest, but the book attracted some rave reader reviews on Amazon.com At 16, when most authors are years away from getting their first big break, Kluver is getting her second: this August, Amazon is going to relaunch Legacy on a grand scale.
The whole story is practically a fantasy: Amazon plucked Kluver out of obscurity to be the first author in its Amazon Encore program, which takes worthy but overlooked books and republishes them for a wider audience. But there's something odd about it too. If Amazon is a bookstore, it's supposed to be buying from publishers, not competing with them. Right? (See the 50 best websites of 2008.)
Except it isn't just a bookstore. As numerous publishing journalists and bloggers have pointed out, Amazon has diversified itself so comprehensively over the past five years that it's hard to say exactly what it is anymore. Amazon has a presence in almost every niche of the book industry. It runs a print-on-demand service (BookSurge) and a self-publishing service (CreateSpace). It sells e-books and an e-device to read them on (the Kindle, a new version of which, the DX, went on sale June 10). In 2008 alone, Amazon acquired Audible.com a leading audiobooks company; AbeBooks, a major online used-book retailer; and Shelfari, a Facebook-like social network for readers. In April of this year, it snapped up Lexcycle, which makes an e-reading app for the iPhone called Stanza. And now there's Amazon Encore, which makes Amazon a print publisher too.
No question, Amazon is the most forward-thinking company in the book business. If there's a Steve Jobs of books, it's Amazon's founder, Jeff Bezos. His vision is defining the way books will be bought and sold and written and read in the digital world — which is to say, the world. The question is whether there will be room in it for anyone besides Amazon.
The Perils of Verticality
If you're a reader, you probably consider Amazon your friend. And it is. It recommends books to you and gets them to your door for cheap. But try shifting your point of view to that of a publisher and Amazon starts looking a bit scarier.
The Amazonians are really good at selling books online, and publishers love them for it. But because Amazon is so much better than anybody else at selling books online — last year, it owned 43% of that market, according to the bibliographic-information company R.R. Bowker — it has a lot of power at the negotiating table. All retailers get discounts from their wholesalers, but some publishers think the discounts Amazon asks for are getting too deep. "They're fast approaching the point where we just can't afford to do business with them," says a well-known New York book editor, who asked not to be identified. "It'll be interesting to see what happens then."
Publishing is a genteel business, and publishers aren't used to playing hardball. Amazon is, and it does. "I think it's fair to say there's some tension," says Jim Milliot, business and news director at Publishers Weekly. "They're the dominant online retailer. Publishers really aren't in the position to argue. Or to fight back." Last year, in a widely publicized scuffle, Amazon disabled its "Buy now with 1-click" button for some books published by Hachette's U.K. division after the companies disagreed about sales terms.
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The whole digital revolution just makes things more complicated. For example: How much should an e-book cost? Right now, Amazon prices most of its Kindle editions at $9.99, which is quite a bit less than the cost of your average hardcover book. "In the digital-books world, a number of the costs are removed, so we believe they should be priced lower," says Russell Grandinetti, vice president of books for Amazon. "Our approach to digital books is that we will allow that to continue."
For now, Amazon takes a loss on these books, since it buys them from publishers at the price of a regular hardcover. The company considers it an investment in getting the Kindle established as a platform. But eventually — soon — it's going to want publishers to start sharing the pain. This may seem a nitpicky issue, but once e-books become a significant part of the market, the price of a Kindle edition could mean the difference between the red and the black for some publishers. "That's the detonation point," says Dennis Johnson, publisher of the prominent small press Melville House. "Because nobody can make a book that sells for $9.99." Yes, you save on printing and shipping, he says, but that's only a small fraction of what it costs to make a book. (See the top 10 gadgets of 2008.)
Don't get them wrong: publishers are thrilled that Amazon is putting all these resources into the Kindle. Any new retail channel for books is a godsend. They're just concerned that the precedent being set is unworkable. "Amazon picked a cost in the beginning that they believed the consumer would like, and of course, the consumer likes it," says Carolyn Reidy, president and CEO of Simon & Schuster. "Who wouldn't like a price that was significantly lower than the price the hardcover is? And we think it's too low." (Grandinetti sticks to his guns: "We believe our approach to digital books allows authors, publishers and retailers to run profitable businesses yet still pass on the savings that digital books allow to readers," he says. Right or wrong, nobody can stay on message like an Amazon exec.)
Such are the conundrums raised by a company that has attained the radical verticality that Amazon has: when it comes to e-books, Amazon doesn't just sell them; it practically owns the entire medium. Of course, they'll all have to make nice eventually, since Amazon needs publishers to survive and thrive. Or does it?
Here's an interesting factoid: last year, for the first time in history, more books were self-published in the U.S. than were published the regular way. Amazon has invested heavily in publisher-free publishing, and it's paying off handsomely. The sector has seen two straight years of triple-digit growth, and on the cultural side, the stigma associated with "vanity" publishing is wearing away.
Or if Amazon can't make a deal with the publishers, it can always just become a publisher. That's where Princess Alera of Hytanica makes her royal entrance. Last year, speaking to Publishers Weekly, Bezos pooh-poohed the idea of Amazon publishing books: "I'm not sure we have any skills per se to be a content originator," he said. "Why would we be better at it? It's a well-served industry." That it may be. But as Amazon Encore demonstrates, Amazon does have one very important skill: it gathers better data on how readers buy books than anybody else. "We're lucky enough to have a passionate customer base who comes to our store and tells us about books that they like," Grandinetti says. "Even great books can be overlooked." When they are, Amazon is the first to know about it.
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If Amazon Encore pans out, what's to stop authors from signing directly with bookstores and cutting publishers out of the loop completely? U2 and Madonna don't have deals with record labels anymore; they did their deals with a concert promoter, LiveNation. That stuff that the labels used to do — production, promotion, distribution — it's just not that hard to DIY now or buy off the shelf. It's the same with publishing. Amazon could become the LiveNation of the book world, a literary ecosystem unto itself: agent, editor, publisher, printer and bookstore. It probably will.
The Sky Isn't Falling
But it's a big leap from there to concluding that publishers are going to perish or that Amazon wants them to. It's true that Amazon plays hardball with them, but that's partly because the online-book world — unlike the real-life Amazon — isn't particularly biodiverse yet. If publishers aren't in a position to check Amazon directly, the market is, or it will be. There will be some painful scenes while we wait for that to happen, but already Google — a company that never met a loss leader it didn't like — has announced its intention to start selling e-books before the end of the year. Simon & Schuster has just announced a plan to sell digital copies of its books through the e-book website Scribd.com. The price? Twenty percent off the harcover price, which comes to a good deal more than $9.99. "Within the next six to nine months, there will be many new devices, some new platforms and formats and a number of big companies entering this field that don't currently have a presence," says Michael Cader, founder of Publishers Lunch, an e-newsletter for book-world insiders. (See 25 must-have travel gadgets.)
As for Amazon the publisher, it's hard to imagine it competing seriously with conventional publishers. Its DNA is just too alien. When Amazon uses its customer base to crowd-source editorial selection, it's doing something radically different from what regular publishers do. "This is a very different method of discovering books than the more classic publishing process," Grandinetti explains. "The robustness of Amazon customer data is a different view into what people are looking for in a book."
He's right. A different editorial method will engage a very different set of literary values. Imagine a world where publishing has two centers rather than one: a conventional literary center, governed by mainstream publishing — with its big names and fancy prizes and high-end art direction — and a new one where books rise to fame and prominence YouTube-style, in the rough and tumble of the great Web 2.0 mosh pit. The two centers will affect each other gravitationally and swap authors back and forth between them, but they're not likely to eat each other. With any luck, they'll energize each other.
Which is why the future of books won't be purely Amazonian. It's not an either/or future. It's both/and. It will have publishers and self-publishers and books and Kindles and probably other devices in it too. The rise of a new model doesn't require the death of the old one. In fairy-tale terms, Princess Alera won't have to choose between the politically expedient Steldor and the mysteriously alluring Narian. She can have them both and live happily ever after. Or if not happily, at least she'll have plenty to read.
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