Yes, we are talking about Amazon, the biggest online retailer now shows us that selling more ebooks than printed books is not enough for them. Amazon is also launching imprints to finally complete the largest vertical integration seen in the book industry.
Amazon was founded in 1994 as only a bookstore, but this company has implemented a clear strategy throughout its year which has been based in diversification to drive profits, it was only a matter of months so that it started expanding into other markets like movies, music and electronics, and in a few years it already was covered 16 categories of goods; mastering to accomplish an immense customer base that made it the biggest online retailer. To be honest, the company has diversified so much over the past years that it is not clear to say exactly what they are anymore.
However, with books they took it far beyond. This e-commerce giant started its integration to the downstream of the value chain of the book industry, implementing distribution, storefront and reader. And currently it started conquering the upstream with the introduction of the imprints, to conquer the editorial pieces. If we study the theories that explain vertical integration, we can find some explanations to this expansion, now in the publishing arena:
· From the contracting approach, we see how the Property Rights theory resembles Amazon story, and impulses it towards this integration, why? Well for years Amazon has struggled with publishers to implement its vision of the Kindle Ecosystem, which has made them incur on losses when lowering prices and have always barriers in the availability of selections set by publishers.
· From the organizational point of view, it is only obvious how Amazon can leverage on its already existing resources to expand to this area, the high contact with customers and the experience in analytics allows them to know what are the trends, what is sold, and most importantly, it allows them to push their content to our screens, who is the one giving us the recommendations after all?. Also connected to this point, they already have implemented the Kindle Direct Publishing service which allows authors to upload and sell their content through Amazon’s Kindle platform.
Added to this move, I found in an article that last week Amazon hired former Time Warner Book Group CEO, to help the company boost the imprints. Maybe a lot of power for only one player isn’t it?.
Amazon's Publishing projects
In my opinion, this move is going to affect mainly the other big publishers, which already kind of dislike Amazon for its efforts in lowering prices, but now they are going to see in it an even bigger threat. With Amazon’s new integrated offer and tempting rise in author royalties, important authors might want to shift to their services, since as we have discussed, authors can get new sources of revenues and new business models by using these type of tools to give recommendations or even communicate with their fans. What this does is that it now pushes the Big houses to also consider these types of integration.
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