The Amazon Economy by Barney Jopson

Author:Barney Jopson [Jopson, Barney]
Language: eng
Format: epub
Tags: Corporate & Business History, Economics, General, E-Commerce, RulingClassStudies, Business & Economics
ISBN: 9781101628362
Google: HIzLNpGxqbkC
Barnesnoble:
Goodreads: 17062641
Publisher: Penguin
Published: 2012-11-27T00:00:00+00:00

Digital catchup

By Andrew Edgecliffe-Johnson and Barney Jopson

Jeff Bezos started Amazon as an entertainment store, selling books at the outset then adding CDs and DVDs. The internet let him improve on what physical retailers could do, but for years the product itself remained physical.

Amazon has since transformed itself into a logistics juggernaut, device maker and virtual store for every product imaginable. But $19bn of its $54bn revenues in the twelve months to the end of June 2012 still came from books, CDs, DVDs and their digital equivalents.

Just as content owners have gone through wrenching shifts from physical to digital, Amazon has seen mixed results as it tries to defend those revenues. It single-handedly created the mass market for ebooks that it still dominates, but it remains a laggard in digital music and digital video.

Amazon’s device strategy – including the September 2012 launch of Kindle Fire HD, a souped-up tablet – is partly about reversing that position. In the process it is turning on its head the link that Apple built between tablets and media: the company founded by Steve Jobs uses content to encourage people to buy its iPads; Bezos is using the Fire to tempt people to buy more content. That strategy began with books, a product that Amazon’s founder has been unemotional about even though it was the foundation of his business.

The printed book “has had a 500-year run,” he once said, “but it’s time to change”. That change was the Kindle ereader, which Amazon launched in 2007. It has ensured that more of his customers now get their books not in Amazon’s brown boxes but in digital files sent to their devices. More than one in five Americans read an ebook in 2011, and most did so on a Kindle.

Amazon was not the first mover in digital books, launching the Kindle the year after Sony’s Reader, but its device soon captured 90 per cent of the ebook market. Apple’s iPad and Barnes & Noble’s Nook ereader have since eroded that to 63 per cent, Enders Analysis estimates, but Amazon’s power and cost-cutting mentality still arouse publishers’ concern.

That only deepened in April 2012 when the US Department of Justice sued Apple and five of the world’s largest publishers for allegedly colluding to raise the price of ebooks, a case that has already opened the way for Amazon to cut the prices of some titles anew. In September 2012 a judge approved a settlement between three of the publishers and the justice department. Apple and two others – including Penguin, which is owned by Pearson, parent of the Financial Times – are fighting the charges.

Amazon’s role as an ebook missionary has shown its ability to upend businesses around it even as it reinvents its own. “It’s an example of a company that cannibalised itself successfully and you rarely find a company that’s done that,” says Mark Mahaney of Citigroup. But while Amazon has transformed reading, bookselling and publishing, the ebooks innovator “is now a follower of others” in music and video, notes Ken Doctor, an analyst with Outsell.

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