Sales, Frustrations Build at Amazon
Media group revenue rises 14%, but publishers ask where their new editions are
by Jim Milliot -- Publishers Weekly, 2/7/2005
Even as Amazon.com reported record book sales for 2004 and introduced a new shipping policy, publisher grumbling over how the giant e-tailer posts revised editions on its site grew louder.
Sales in Amazon's North America media group rose 14% in 2004, to $2.60 billion, and revenue for the entire company increased 31%, to $6.9 billion. But in a conference call, analysts hammered away at the company's higher costs in 2004, which ate into margins, and expressed concern about expected increased costs in 2005 associated with Amazon's new shipping program as well as increases in capital spending. Under the new shipping option, dubbed Amazon Prime, customers who pay an annual $79 membership fee will be entitled to unlimited two-day free shipping. Members will also be able to get overnight shipping for $3.99 per item. Amazon's standard shipping offer provides free shipping on orders of $25 or more, and overnight delivery costs $16.48.
Amazon chairman Jeff Bezos acknowledged that the new shipping option will be the company's "most expensive" initiative in some time, but insisted it "will help drive incremental growth." Amazon lost $197 million on shipping in 2004, a figure that is likely to rise in 2005. But over the long term, Bezos said, the lower shipping costs to customers will build business. Bezos said he expects the shipping option to spur growth by increasing the frequency of purchases made by current customers rather than by generating new customers.
While analysts were unhappy with Amazon's higher costs, publishers are growing increasingly frustrated by the way the e-tailer lists revised editions of their books on its site. According to publishers, because Amazon uses a system whereby the first book customers see is the one with the highest sales, older editions of books tend to remain more prominent on the site, while new editions are buried under an "other editions" link. New editions will not appear first until sales overtake the older edition or until the older book is taken out-of-print.
An Amazon spokesperson wouldn't confirm how search results are conducted, but acknowledged that the company is aware that some publishers have expressed concerns over the revised edition issue. She said Amazon is "working to refine the system." Publishers have been told that search results are operating as Amazon intends, and that the company will not circumvent the system to make manual changes. Amazon wouldn't rule out future revisions to the system.
Although the listing of old editions ahead of new ones is not new, publishers said they are hearing more complaints about the practice from authors. "In essence, they [authors] are not getting the sale for the book they just worked on," said one publisher. Indeed, some publishers see the practice as an effort by Amazon to build its used book sales since, in some cases, there are more used copies of old editions available than copies remaining in publishers' inventory. While other publishers don't go that far, they agree the net effect of the system encourages the sales of used books at the expense of new editions.
Amazon's inability, or lack of desire, to change the way it ranks editions on its site "is a disservice to their customers who think they are seeing the most up-to-date book," the head of one mid-size publisher said. The publisher at another house said that while it has contacted Amazon about the problem, "it's not getting any better. It's not a priority."
