Amazon Gets Back to Its Roots

Amazon.com (Nasdaq: AMZN  ) used to be a humble online bookstore. It has left those days in the dust, but has never forgotten them, as evidenced by the company's multiyear effort to create its own publishing arm. With its tentacles wrapped around retail, tablets, streaming video, and cloud computing, it seems that Amazon might not stop until it's taken over our lives. Amazon's track record of success elsewhere should have other publishing houses worried.

To boldly go
Amazon's latest effort is a sci-fi, fantasy, and horror imprint called 47North, named after Seattle's (and Amazon HQ's) latitude. It joins five other imprints in the Amazon stable, which range from mystery to romance to foreign translations, all available for the Kindle as well as for your old-fashioned physical bookshelf. The sci-fi and fantasy genres are big business, accounting for a quarter of Amazon's top 20 best-sellers. Three of those are part of the Hunger Games series by Suzanne Collins, published by Scholastic (Nasdaq: SCHL  ) .

Amazon's ability to compete at this level will hinge on its willingness to pay a premium for top talent, as Collins earned a six-figure deal for her trilogy. Amazon's current lineup isn't quite there yet, but its headlining title, The Mongoliad, is an ambitious experimental work of digital fiction that could blur the line between storytelling and interactive spectacle. If this is the sort of risk Amazon's willing to take, it stands to reason that they'd also aggressively court the author of the next Hunger Games.

May the odds be ever in your favor               
The rise of Amazon already sounded the death knell for Borders, and Barnes and Noble (NYSE: BKS  ) shareholders haven't fared much better, as that stock has shed 70% of its value in the past five years. Amazon publishing might distribute through B&N, but why would it need to? Amazon is its own greatest advantage, with a massively popular online storefront that supports millions of customers. All it needs is the financial commitment to attract the best writers and the hottest topics.

Eliminating the publishing middleman would also be a direct attack on News Corp. (Nasdaq: NWSA  ) imprint HarperCollins, CBS (NYSE: CBS  ) imprint Simon & Schuster, and Pearson (NYSE: PSO  ) imprint Penguin Group. Amazon has also demonstrated its proclivity for ushering drastic change into industries. Its Kindle and now Kindle Fire seek to help push the agenda of the tablet and e-reader. However, Amazon might want to be careful not to anger News Corp. or CBS, which control libraries of original videos that Amazon could use in its streaming video war against Netflix.

Armies of failed books
Amazon has some strong industry headwinds to push through, however. Out of at least 1.2 million titles published by the entire industry over the course of a year, almost 80% sell fewer than 100 copies. Only a few books at the very top of the sales lists make any real impact. One analysis estimates that only the top 3,000 or so books on Amazon's sales list will sell 100 or more books a week, depressingly low figures when stretched out over a full year. Top e-books don't fare much better -- the top 1,000 best-sellers sell perhaps 500 copies a week.

The answer to the ultimate question
Amazon's got to be smart with the authors they pursue. One Suzanne Collins is quite literally worth hundreds of subpar novels, and no amount of shameless promotion will make a best-seller out of a terrible author. I take that back -- it might work one or two times, but at the cost of the company's integrity. Amazon shareholders should hope that its publishing bosses have an eye for talent to match their CEO's skill at promotion, and the resources to bring it aboard.

Will the entrenched lords of old media fend off Amazon, or will the muscular upstart conquer another kingdom? Add these publishing powerhouses to your Watchlist to keep tabs on the latest tales of corporate triumph and tribulation.

Fool contributor Alex Planes holds no financial stake in any company mentioned here. Motley Fool newsletter services have recommended buying shares of Amazon.com. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.


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  • Report this Comment On October 14, 2011, at 8:17 PM, megoogler wrote:

    Consider points below before buying Kindle Fire:

    - Amazon confirmed that you cannot download anything to Kindle Fire when traveling outside US.

    - Kindle Fire (or any other Kindle) doesn't have microSD (or any other) card slot thus it is stuck with 6 GB USABLE internal storage unlike other tablets/ereaders that can get up to 32 GB card in to increase content capacity. Kindles are made to be almost like a "dumb terminal" of the past to make sure you're tied up to Amazon's storage on the web (for which you need Wi-Fi connection to get to) and you can only store content you get from Amazon there, not other files. Quoting Amazon on Kindle Fire: "Free cloud storage for all Amazon content". Get it, Amazon content? 

    - The stats of how long the battery can last (Kindle Fire theory is 7.5 hours) are taken with Wi-Fi off. It will last about 3 hours if you use it to access content from their Cloud storage over Wi-Fi. 

    - Amazon can spy on your web activity through their new cloud-integrated web browser of Kindle Fire. 

    - VERY IMPORTANT – lack of microSD slot means that if you decide to"root" your Kindle Fire (or any other Kindle) you’ll have to "root" the actual device thus there will be no coming back. On other devices you can make it boot from a “rooted” microSD card and if you want to get back to the original Operating System you can just take out the card and reboot, and you can go back and forth between different images of various OS's. 

    - Kindle Fire doesn't have a camera. 

    - Kindle Fire has about 70% less usable screen area than iPad 2. 

    - Kindle doesn't support eBooks in ePub format that is the most used format in the world. 

    - Kindle app store contains only Amazon approved apps and it does not include (and will not include) Netflix app that other tablets/ereaders have thus again you're stuck with Amazon content only. 

    - Amazon says it will review every app in its Appstore for Fire compatibility, as part of an automated process. Rejected apps will include those that rely on a gyroscope, camera, WAN module, Bluetooth, microphone, GPS, or micro SD. Apps are also forbidden from using Google's Mobile Services (and in-app billing), which, if included, will have to be "gracefully" removed. In terms of actual content, Amazon has outlawed all apps that change the tablet's UI in any way (including theme- or wallpaper-based tools), as well as any that demand root access (it remains to be seen how the company will treat the root-dependent apps already in its store) - this is what "rooting" can help with.

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