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How to Counter Amazon: Create a One World E-Book Alliance

In Guest Contributors by Guest Contributor

The aeronautical industry, once dominated by Boeing, managed to develop Airbus. The publishing industry should aspire to create its own “cultural Airbus.”

Editorial by Javier Celaya
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During my presentation earlier this month at the If Book Then conference in Milan, I proposed that European publishers create a joint platform to compete against Amazon. Although I admire Amazon for its culture of innovation and superb customer service, I do not consider it beneficial either for society (readers) or any of the entities involved in the book industry (publishers, bookstores, libraries, etc.) to allow one company to take on such a leading position in the cultural world and be able to determine its future at its own whim. A diverse variety of online bookstores would guarantee more competition, resulting in better services and a broader range of content for all readers.

Although the creation of a joint venture is not an easy task, I am pleased to see that my suggestion was not taken as entirely ludicrous. Last week, the main Spanish financial daily – Expansión – published an article announcing that Grupo Planeta, Telefónica and Bertelsmann are planning to create a common platform to counteract Amazon’s growing leadership position. In the event of any potential criticism by those who tend to disapprove of risky ventures, I take this opportunity to express my support for this strategic decision since these three companies will undoubtedly be confronted with a remarkable challenge.

Amazon is an excellent company with almost 20 years’ experience in electronic business, an admirable customer service policy, and an enviable corporate ethos of persistent innovation. Offering a competitive alternative to Amazon will not be easy, although it will not be an impossible one either. Other industries, such as the aeronautical industry, which was once dominated by Boeing, managed to develop the Airbus consortium. The publishing industry can also aspire to create its own “cultural Airbus.”

To achieve this ambitious goal, European publishers and international online retailers should consider the following key factors:

Aggregating content, financial and human resources offers a competitive advantage

In the analog era, companies reached the top singly; in the new era of social participation, leadership is achieved through business collaboration. As I mentioned during the conference in Milan, aggregating content, financial and human resources on the Internet is essential in order to compete in the new digital economy. The sum of content and services of an Airbus type consortium will prompt economies of scale which will become their main competitive weapon.

Although it may sound surprising, neither Amazon nor Apple are 2.0 oriented companies. And this is their weakest point. Both were born at the end of the analog era and although their corporate cultures may be highly innovative, their strategic focus is still very traditional. Both have created totally restricted ecosystems that only permit limited co-operation with other companies. The future success of any venture in the new digital era will depend on its ability to create an ecosystem which may be entirely open to all kinds of companies that may wish to collaborate in the development of the project with an agnostic viewpoint vis à vis formats and devices.

Initial multi-million euro investments may only offer modest ROI

The financial resources required to create a serious alternative to Amazon cannot be taken on by one company alone, however strong its line of business. Any companies wishing to compete against Amazon will have to realize that they will be running a long-distance race involving annual investments of several million euros in technology. This will deliver only low profits in the mid-term. Various sources believe that 5 to 8 million dollars would be required each year to maintain and update an electronic business platform with new applications and services aspiring to achieve the same level of sophistication and innovation offered by Amazon to its clients. I take this opportunity to recommend the book One Click by Richard L. Brandt, to understand how Jeff Bezos has managed to make his company the biggest and best online store in the world.

Amazon, Google or Apple have been announcing new applications or launching new services on a monthly, and recently, weekly basis, with a view to retaining customers. Any venture seeking to compete against Amazon cannot afford to fail to offer alternatives to its competitor’s future strategies since its platform could become obsolete in a matter of months.

It should also be borne in mind that European and Latin American users are becoming more and more familiar with online shopping. The sophistication of the average user will require the promoters of any consortium to permanently update their platforms to add new, online applications and services to meet the increasing familiarity of users on the Net. In this context of continuous functionality renewal, the promoters of the venture will have to be prepared to make large investments to permanently enrich the platform and compete against Amazon’s 20 years of experience.

Need to cross-sell cultural content beyond books

Another suggestion I shared at the conference in Milan was the need for platforms to cross-sell cultural content (books, music, newspapers, magazines, TV series, etc.)

Cross-selling attracts diverse consumers with different preferences. In any Internet based business, a larger public equals more traffic, leading to a greater potential increase in profits per transaction. This is nothing new in economics, it is just simplified and amplified in a digital format.

From a user point of view, it also makes a lot of sense to cross-sell cultural content and entertainment options on the Internet. People consume different cultural content throughout the day: we listen to music, browse through a newspaper or magazine, watch a TV series or movie, or read a book. Offering all this content via one, sole platform simplifies the purchasing process for users, consequently increasing consumption.

A strong focus on discovery eases purchases and sharing of culture

Just as the Internet has changed the way we access information and our management of knowledge as well as how we acquire various cultural products (cinema or theatre tickets, books, music etc.), the new technologies for recommending books is changing the way we discover, purchase and even read books.

Any ventures wishing to compete in the new digital economy will have to offer their users an exceptional discovery, purchasing and reading experience on the Internet, as well as allow the possibility of sharing any reading experience – which is not the same as sharing the product itself – with other people with the same cultural preferences. In the new era of participation, the ways of discovering, purchasing and reading books will become truly social activities.

Amazon must have viable competition in US market

Various sources indicate that Amazon’s current global market share of e-book sales is close to 30%. If this market share were to exceed 50%, Amazon’s dominant position would have serious repercussions on the global book industry. The only way of suppressing this incredible growth is to create stronger alternatives in its own territory. In the context of collaboration as a way of competing against Amazon, apart from thinking of creating a “cultural Airbus” to defend our natural territories (Europe and Latin America), we should also contemplate the possibility of creating an international alliance of e-book stores, i.e. One World E-Book Alliance, as a way of competing within its own territory.

Any venture that may seek to seriously compete against Amazon would sooner or later have to compete on its home turf in the United States. The Internet has no boundaries and we therefore need to have a global business vision. Starting from scratch in this market would be an unaffordable option. As an alternative, publishers should opt to reinforce existing retailer’s offerings as a counterbalance to Amazon.

As I mentioned in the first part of this article, the successful outcome of a collective venture will depend on its capacity to create a platform entirely open to all kinds of companies wishing to collaborate in the development of the project, with an agnostic point of view vis à vis formats and devices. There are several key online platforms in the U.S. whose position in the market would be strongly reinforced with the support of European and Latin American allies.

All of us who are part of the book world (readers, authors, booksellers, publishers, librarians, etc.) would benefit if we managed to create an e-book market without a single dominant player.

Javier Celaya, a frequent contributor to Publishing Perspectives, is CEO and founder of Dosdoce, an online portal analyzes the use of the new technologies in the cultural sector and publishes annual studies related to trends in the Spanish publishing sector.

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Guest Contributor

Guest contributors to Publishing Perspectives have diverse backgrounds in publishing, media and technology. They live across the globe and bring unique, first-hand experience to their writing.