Jeff Bezos has been stirring things up in the book business ever since he launched Amazon.com 14 years ago, and this past year has been no exception. During the year, Amazon acquired Audible and AbeBooks, expanded BookSurge, saw sales of the Kindle (and Kindle titles) soar and managed to keep book sales growing at double-digit rates. In a marketplace undergoing tremendous transformation, Amazon is a leader in nearly every aspect. For being the driving force behind one of the industry’s most dynamic, if sometimes controversial, companies, Bezos is PW’s 2008 Person of the Year.
Pushing into new areas is a core mission for Amazon. “We view ourselves as explorers,” Bezos says in an interview at Amazon’s Seattle headquarters. “It’s much more interesting looking at unexplored terrain” and, because of the Internet, “there is boundless unexplored terrain.” Bezos’s vision that people would be willing to buy books online prompted him to start Amazon and reflects his philosophy of taking a long-term view in all business matters. That strategy has sometimes drawn criticism from Wall Street, but, Bezos says, to succeed in new businesses you have to be willing to experiment and to accept possible failure.
Certainly, the sale of books—still Amazon’s largest product segment worldwide—via the Web has been an unqualified hit, with Amazon among the top three customers for most general trade houses and the key account for professional publishers. “It’s very impressive what Jeff and Amazon have done over the past decade,” says HarperCollins CEO Brian Murray. “They keep growing.” Ted Nardin, president of Springer Publishing, notes that Springer’s sales through Amazon “have grown at a rapid clip.”
Despite, or perhaps because of, Amazon’s success, many publishers have a love-hate relationship with the company. They love the units that Amazon can move, but hate its monopolistic position. There is also some fear among publishers that Amazon’s dominance as a bookseller, together with its growing ability to publish original content, will turn one of their biggest customers into their biggest competitor. But Bezos says any such worries are unfounded. “I’m not sure we have any skills per se to be a content originator,” he says. “What would we do differently [than publishers]? Why would we be better at it? It’s a well-served industry.”
On the record, most publishers applaud what Bezos has done. “[He] is a visionary who established Amazon as an incredible force in the industry,” says David Steinberger, Perseus Books Group president. “Of course, with success comes responsibility. We are all eager to see how his plans develop now that Amazon has a major stake in the overall health of the book publishing 'ecosystem.’ ” Off the record, some publishers fret over Amazon’s dominance. The head of one house notes that Amazon has become much more aggressive in looking to dictate terms, pushing for every margin point possible, which the e-tailer then passes on to the consumer. (Amazon has been locked in a bitter dispute over terms in the U.K. with Hachette’s U.K. subsidiary.) The problem, this executive notes, is that in a low-margin business like publishing, there is little margin to give.
Bezos’s focus, however, remains firmly on the consumer. The company is renowned for its attention to meeting the needs of customers. “There is a natural conservatism [especially among publishers] to anything new,” Bezos says. The idea of making negative book reviews available on the site, for example, was met with some initial criticism, but Bezos says Amazon’s job “is not to sell things, our job is to help customers make purchase decisions,” which in the long run ends up selling more product. Nardin says that lots of things Amazon has tried have been counterintuitive in the short term, but that those investments “have kept the customer coming back.”
Bezos attributes Amazon’s sales success to excelling at the “basics”—wide selection, competitive prices and fast delivery. He notes that every year since Amazon’s launch, the number of “defects” in its operations has been reduced—meaning that the number of complaints Amazon receives from customers per unit sold has gone down. For Bezos, that means Amazon is “delivering on [customer] expectations,” something he sees as a key driver in boosting sales. According to Bezos, although there are “tens of millions” of books available through Amazon worldwide, its sales come mainly from bestsellers. Although to some, Amazon personifies the “long tail” concept, Bezos says that while it’s important that so many titles are available on the Internet, “the vast majority of sales is in the top tens of thousands of titles, not throughout the long tail.”
Among some of Amazon’s other controversial tactics are the selling of used books on the Amazon site and the launch of the Kindle. While many publishers and authors contend that used books hurt sales of new titles, Bezos insists that making used books available through Amazon simply makes the sale of used books, which Bezos surmises has been around forever, more efficient. “Every time you make something easier to buy, you are going to [sell] more of it,” Bezos says.
Bezos’s motivation to develop the Kindle stems from a similar motivation. By allowing consumers to purchase books in “less than 60 seconds,” Bezos believes Amazon is making it easier for consumers to purchase books through the e-reader rather than having to go to a store, and by improving the technology, he believes the reading experience on a Kindle will become better than reading a paper book. Some publishers and technologists believe people eventually will read books on a single, multi-purpose device, but Bezos defends his decision to develop a stand-alone reader by maintaining that it’s one thing to read some of the newspaper or other bits of information on, say, a cellphone and quite another to read a complete book. “If ever there was an activity that deserved a dedicated device, surely it’s reading [a book],” Bezos says.
Because of the technology involved, Bezos says it will be difficult to lower the Kindle price beyond its current $359. But even at that level, Amazon has trouble keeping the device in stock and for the second consecutive holiday season is putting consumers on a waiting list. Bezos attributes the shortage to manufacturing problems and declines to discuss the number of Kindles or e-books sold. Typically, he relies on Amazon’s traditional yardstick: for titles available in both print and e-book forms, e-books now account for more than 10% of units sold.
About e-books and digital sales, Bezos is willing to share his long-term vision, but not too much about Amazon’s immediate goals. With 200,000 titles now available for Kindle, Bezos aims to make any book ever in print available, but adds that’s a “decade-plus” goal. As for the number of titles he’d like to have available for the Kindle next year, he merely says, “We’ll keep working at it.” He agrees with publishers that in the short term, e-books will become another format, similar to audiobooks.
Still, Bezos is convinced that the digital future will be better for the book industry. What digital publishing will ultimately mean, Bezos says, is that “you are never out of stock, don’t have to guess at print runs, and there will be no returns.” In that utopia, publishers will sell books at lower prices, but move more units, resulting in higher revenue, Bezos predicts. But equally important for Bezos, the evolution to digital publishing will allow the book to compete with other “attractive media forms.” One digital approach that Bezos is not enamored of is reading book-length narrative accompanied by advertising, a strategy that Google could follow. “I’m very skeptical of advertising as a good [business] model for long-form narrative,” Bezos says. “When I’m reading, I’m not interested in advertising. It’s very different than searching. Searching is all about ads,” Bezos says. Still, he notes, if a business model presents itself, Amazon will “do anything that customers ultimately want.” Except, apparently, open bricks-and-mortar stores, something Bezos has no interest in pursuing.
Bezos acknowledges that Amazon’s relationship with some publishers is better than others, but overall he believes the company has good ties to its vendors: “I’m extremely pleased and grateful with how supportive publishers have been of our endeavors.” Without the cooperation of publishers such initiatives as Search Inside the Book and even the Kindle would have been impossible, Bezos says. “Businesses always have complex relationships, and they may not always agree, but at the end of the day, if it’s in their mutual interests, they figure out a way to agree.”