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Summary:

Amazon.com (NSDQ: AMZN) is now doing some damage control over its plans to control its print-on-demand value chain, and has issued an open l…

Amazon.com (NSDQ: AMZN) is now doing some damage control over its plans to control its print-on-demand value chain, and has issued an open letter to the industry, posted here. It has recently issued a policy telling such publishers that they will have to use its on-demand printing facilities if they want their books directly sold on Amazon

  1. Glenn Fleishman Tuesday, April 1, 2008

    This letter obscures lots of issues. They're saying because POD books may be produced immediately, only POD books that Amazon produces immediately make any sense. Unless you want to use POD books to print books *ahead of demand*, agree to a worse payment, and warehouse those books with Amazon under a different program. The logic is pretty specious.

    Then there's this paragraph:

    "Another example: a few years ago, we made the decision to offer used books, and to make those used copies available directly alongside the new editions. This caused significant consternation, but we stood by the decision because we were convinced it was right for customers. Sometimes a used book will do and it can sometimes be had at a significant cost savings relative to a new book. We stuck with the customer-friendly decision."

    No, no, no. I worked at Amazon from 1996 to 1997, and I started the used book program within the company at Jeff Bezos's request. I was not ultimately the person who put it into operational form. But I designed it at Jeff's request, and spent months pulling elements together.

    The only "consternation" that emerged was that we had to develop a new availability code that explained how long a book might take to deliver. Some variation on the text I composed with input from Jeff and the firm's VPs is still used today, 11 years later.

    We did not start selling used books because of pricing. We did it for depth. We wanted to increase the size of the catalog, which we did overnight from over 1.1 million to 2.5 million. We wanted to have a leg up on BN.com, which was in its infancy, and far behind Amazon in special orders and other basic factors. We wanted to have the higher margins that we thought were achievable from selling used books.

    There's an entirely separate issue of selling "used" copies of books that haven't yet been published, allowing the resale of review copies and even advance bound galleys. That's an unrelated issue.

    This whole POD scheme stinks to me of MBA-ism. Because we can do something, we will try it, and we are the big player, so we get to make the rules. We'll see how this plays out. I suspect it's going to result in a top-down management decision from higher in the Amazon food chain, some apologies, and some more black eyes for the firm.

    (Disclosure: I left after 6 months, and received no stock nor stock options. I left on good terms, and was in regular touch for years after with colleagues at all levels of the company. It was a very entertaining place to work.)

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  2. It never ceases to amaze me why some companies put some things in writing…especially when the world is already reading and dissecting what they're doing.

    I had several issues with their official statement today, but one glaring problem is this.

    They said, "If the POD printing machines reside inside our own fulfillment centers, we can more quickly ship the POD book to customers—including in those cases where the POD book needs to be married together with another item…If the POD item were to be printed at a third party, we’d have to wait for it to be transhipped to our fulfillment center before it could be married together with the inventoried item.”

    First, notice they said "IF" the machines reside in their fulfillment CENTERS (plural). Hmm… Let's look at that more closely.

    According to Wikipedia, Amazon has 10 distribution centers in North America alone; and 14 more abroad.

    Do they have POD printing machines at those 24 distribution centers yet? Or even just the 10 in North America? Or even more than just one?

    Are they currently printing print-on-demand books in each of those centers and able to "marry" those books with the other products they're shipping?

    I don't think so. So, they're "save money/time by packaging POD books with other products" rationale appears to have glaring holes in it.

    If Amazon can't currently print POD books at all its distribution warehouses, why are they implying they can in their statement today, and why are they telling POD publishers to sign that contract RIGHT NOW?

    Also, IF they are not currently printing the books at all their CENTERS, there is no way they can beat Lightning Source's current ability to print and ship those books in 24 hours.

    Glenn? Can you comment on this?

    -Angela Hoy
    WritersWeekly.com
    Booklocker.com

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  3. Glenn,

    I'm still patting myself on the back for predicting that they would use Prime for the excuse three days before they came out and said it. Of course, maybe the borrowed the idea from me.

    But I'd be surprised if they back down without a court order at this point, even if they choose to try to smooth things over with a slower transition or nicer phone calls. I think they see Booksurge as a vital part of their strategy for a vertically integrated media company, along with Kindle ebooks and Audible spoken books. They are making big bets, which I don't think they'd bother with if they hadn't identified books in all their forms as the one Internet market they can hope to dominate. They only other thing that's worked for them at all is electronics, but they just have a so-so share of a very tough market there.

    An Amazon that already sells more media world-wide than Borders and Barnes&Noble;put together is in a great position to start dictating to publishers. I don't doubt that in a few years, they'll be standing on the major trade publishers necks making them provide their "content" to Amazon for distribution as Amazon's best sees fit to "serve their customers", who they invoke like a great silent majority. What will be tough for the trades is having to rejigger their entire economic approach to allow for much smaller offset runs, and Amazon dictated profit margins.

    But I won't be surprised if Amazon stumbles, they seem to be showing their age with this impatience. And maybe Ingram will buy Borders and finally do something with that silly website of theirs:-)

    Morris Rosenthal
    Foner Books

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  4. Glenn Fleishman Tuesday, April 1, 2008

    Angie, your logic on this is impeccable. Despite Amazon's remarkable logistics system, I can still place an order for three items at the same time using Amazon Prime, and receive three boxes from three different shippers with three return addresses, in which one box will be about 3 cubic feet and contain an item that is about 10 cubic inches.

    So when I read their grandiose item that states "all chairs in Bananaland are green, and all chairs are not green," I have trouble keeping myself from laughing. Amazon is remarkably good at aggregation, shipping, and logistics, to judge by how they can give so much shipping away and yet turn a profit.

    Their statement that they would only allow POD to happen using their own POD (which can't yet be ubiquitously colocated as you note) in two hours, which is impossible given the volume needed to make that promise, is just silly. Because in the next moment, they're willing to let POD publishers pre-print and stock books. But POD publishers don't provide enough copies to be in every D.C. (distribution center), which means that Amazon is perfectly happy to let their customers wait for a book.

    This is clearly bubbled up from one division of the firm without being aligned sensibly with the company's overall mission, in which publishers are not merely vendors, and the Long Tail is a driving part of their profit, because books that sell fewer copies are sold at full price, which leads to higher profit margins for all concerned.

    I expect this to rescinded.

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  5. As a book author who has sold many thousands of POD books through Amazon, I'm appalled that they are taking such a heavy-handed, "screw you" attitude toward the publishers that have helped them achieve "the long tail." My own POD publisher is telling all its authors to take down their Amazon Associate links and put up B&N;ones. I run six different travel sites with all kinds of Associate links on them. If I do that, and hundreds of people like me do that, is it worth it just to squeeze a bit more margin on POD books and give the Booksurge people something to do?

    As others have stated, they can't even seem to marry a simple books and CDs order with things they do have in stock–I too get three boxes with three items sometimes. So it's an outright lie to say they're doing it so customers can be served faster. Ingram already drop ships orders (with an Amazon return label even) from their Lightning Press facility.

    Amazon, you are going to get an incredible amount of bad press over this when it gets out to a wider readership. Authors are WRITERS remember? Most of them are bloggers too, as are some of the publishers affected by this.

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  6. I worked at an Amazon fulfillment center last Christmas. There are two or three main ones that have everything including the POD equipment. All the rest are "foward deployment" centers which just have the most popular items in stock just outside major cities. So presumably if you order a POD book with other stuff, it can ship out of there in one box from that fulfillment center. And shipping stuff in one box is much cheaper for all involved (the publisher, Amazon, the environment) even if the cost of multiple boxes aren't passed on to customers directly.

    And if using the Amazon POD service is unbearable, stocking five copies — what $200 tops? — hardly seems like an undue burden. And believe me, the items from orders do get picked within minutes of you pressing that finish order button.

    And Amazon doesn't actually sell used books directly to you, so whatever the margin is, Amazon doesn't get it. Instead, Amazon acts as a broker for used book sellers (even individuals — this turns out to be ridiculously easy) and takes some small fee for doing this. And even if the the motivating factor was to increase the "catalog" of items available and not lower costs, this still is a great thing for customers. Bigger selection.

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  7. Glenn Fleishman Tuesday, April 1, 2008

    Excellent, a sock puppet or a facsimile weighs in.

    Julie writes: "There are two or three main ones that have everything including the POD equipment."

    Which is contrary to Amazon's statement on how they're using POD. They're implying that all of the warehouses in which they stock stuff can produce a POD book in under 2 hours.

    "..presumably if you order a POD book with other stuff, it can ship out of there in one box from that fulfillment center."

    Presumably is a long stretch. Amazon isn't making that claim. They're saying that they have POD equipment close to where they stock a lot of stuff, which reduces time to the customer.

    "And shipping stuff in one box is much cheaper for all involved (the publisher, Amazon, the environment) even if the cost of multiple boxes aren’t passed on to customers directly."

    As someone who has already noted how Amazon optimizes shipments to me by providing multiple boxes with wasted cardboard and space, please don't lecture on the environment. It's not cheaper for the publisher, because the publisher doesn't reap as much margin after BookSurge costs are considered, and much less with the Amazon stocking program for pre-printed books.

    "And if using the Amazon POD service is unbearable, stocking five copies—what $200 tops?—hardly seems like an undue burden. And believe me, the items from orders do get picked within minutes of you pressing that finish order button.:"

    Here's the apologist part coming in. The point of POD is to have no books printed until they are needed. And it's not just $200, it's unsold inventory, a lower margin, and other hassles.

    The picking issue is fine, but that's not the issue here.

    "And Amazon doesn’t actually sell used books directly to you, so whatever the margin is, Amazon doesn’t get it. Instead, Amazon acts as a broker for used book sellers (even individuals—this turns out to be ridiculously easy) and takes some small fee for doing this."

    Oh, good gracious, do you not understand Amazon's business model? I'm trying to avoid being offensive to someone who appears to still be employed by Amazon and is acting as a sock puppet (you don't say you're former, just that you formed at a center last Christmas).

    However, this grossly misrepresents Amazon's margins. Amazon pays publishers of new books as little as 55% off cover price. They then sell many of those books at a slight margin, and handle returns from customers. For used books, they take a percentage of the sale, never have to touch the book, and have, essentially, a higher margin.

    "Some small fee"? It's a significant percentage of the margin of Amazon's media (books, CDs, DVDs) business, even if they don't want to break this number out separately.

    Please don't be disingenuous.

    "And even if the the motivating factor was to increase the “catalog” of items available and not lower costs, this still is a great thing for customers. Bigger selection."

    It's not a bigger selection when existing POD books are listed in the catalog, and Amazon will remove them because it's inconsistent with their desire to control the POD marketplace. That is not helpful to consumers, readers of books, or Amazon customers.

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  8. I too don't think that Amazon has thought this out. The excuses they're coming up with the justify this are just plain loopy (they'll be able to do it faster? Several people ordered copies of my POD novel; the copies arrived in 4 or 5 days. with regular shipping).

    Their secrecy actually screams WE KNOW THIS IS WRONG! I believe that Angela Hoy at Writer's Weekly heard about it from POD publishers who had gotten phone calls from Amazon. They didn't even have the decency, or the guts, to put out a big press release.

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  9. "There’s an entirely separate issue of selling “used” copies of books that haven’t yet been published, allowing the resale of review copies and even advance bound galleys. That’s an unrelated issue."

    No, it's not–because that's what fueled the "consternation" Amazon's statement (about used book sales) refers to. The Authors Guild went head to head with Amazon over this issue and couldn't get it to budge. There was a lot of anger in the author and publisher community, and a lot of people took Amazon links off their websites and blogs and vowed never to shop there again.

    The current furore over the POD decision seems very similar to me. I'm betting it will have the same outcome–i.e., a year later, Amazon will be doing exactly what it's doing, and most people will barely remember a time when it didn't.

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  10. I'm an author of forty books and have a small publishing company that makes about a dozen otherwise out-of-print titles available via POD. I assume, but do not know, that most are sold on Amazon or Amazon UK. I receive $300 to $600 per month, all profit. All my titles are printed by Lightning Source/Ingram. I keep no inventory; it's cheaper to drop-ship books out of the Lightning plant in Tennessee.

    I assume there is a built-in demand for my books that can be handled by B&N;, or that, if pushed hard enough, Lightning or Ingram will drop-ship single books via an online operation they'll find a reason to start up. Hell, =I= can offer to ship single books out of Lightning at a very low premium I can add to an invoice-or just eat, because drop-shipping about doubles my margin. Until right now, it was easier to refer customers to Amazon, but I just realized I even have a PayPal merchant account from which I can email invoices.

    My wife and I purchase about $100 worth of books on Amazon each month.

    I have no intention at this point in my life of having twerps at Amazon telling me how to run my life. I cut them off already when I was printing books via offset. I'm willing to walk away from them. They'll absolutely lose =any= margin on my books plus my purchase of other books plus profits from used books I sell as an Amazon merchant. They'll lose links I was about to place on two new websites.

    I think, in the end, they'll find out the hard way what "restraint of trade" and "interstate commerce" laws really mean in the context of forcing buying decisions on a subservient public–small POD operations like mine, for example. I won't bring suit in Federal court, but I bet a player on the order of Random House will. Or Big Publishing will find a way to ignore Amazon in favor of a firm that shows respect. Believe me, people who tell authors how to live and how much to earn are not going to stand around taking crap from Amazon.

    Sooner or later, one way or another, the cosmos is all about teaching manners to MBAs. Go cosmos!

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