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June 4, 1999

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Subject: A Publisher's Take on the Barron's Article
Author: ZumaWave

Ms. Doherty's article that's created such a fuss -- or should I say buying opportunity -- misrepresents some key facts about publishing. As the head of a small publisher that has worked with Amazon.com in every way, I would like to clarify.

Ms. Doherty claims that because Amazon.com is just a middleman and that direct sellers like Dell have a fatter margin, Amazon will eventually fall prey to direct-selling publishers.

Baloney. When was the last time you cared who publishes the books you read? Rarely, if ever, assuming you're like the majority of readers polled by Independent Publisher, an industry magazine. You buy a book because of its subject, its author, and often because it has the catchiest cover on the shelf or the Web page. You do not buy it because it's published by PenguinPutnam.

"Baloney. When was the last time you cared who publishes the books you read?"

Even if you know that it's published by PenguinPutnam, you don't want to go to their site, figure out a new interface, establish your account, and so on just to get the book. You want to go somewhere that carries all books at cheap prices with known customer service and a familiar interface. At that place, you simply enter the book's title and purchase it without ever knowing the publisher. You do not care who publishes it. Publishers, I'm somewhat sad to report, have become as interchangeable as your electric company. As long as you have light, you don't care who supplies the juice. As long as you have words on paper, you don't care who paid for the printing.

As for the effect of Rocket eBook, don't hold your breath. We've worked with NuvoMedia and would kindly call their operation experimental at best. It's prohibitively costly to the reader, way too much work for publishers, and not at all enjoyable to use. You will not be curling up by the fire with your eBook anytime soon. Even when the technology does finally catch on, you will want to buy eTitles at the same retailers that you use to purchase paper books. Nobody wants to remember hundreds of Web sites.

Finally, the notion that being "just" a middleman is a weak position is absurd. It's the ultimate position in the publishing industry. Ingram, the wholesaler who B&N wants so badly, enjoys the best risk/reward ratio in the business. It doesn't pay to print, doesn't pay to ship, doesn't pay to advertise, and doesn't care what's currently winning in the bookselling marketplace. Yes, it needed to build warehouses around the country to get to that point. You'll notice that's exactly what Barron's laughs at Amazon.com for. Why? Because they're establishing the infrastructure that will allow them to play super Ingram to the publishing industry as well as other retailing ventures they pursue?

"...the notion that being "just" a middleman is a weak position is absurd. It's the ultimate position in the publishing industry."

Amazon.com does spend lavishly on building its brand name, unlike Ingram. That's because it hopes to command a much broader customer base. Meanwhile, it is lessening its dependence on wholesalers and establishing excellent deals with publishers of all sizes.

Which brings me back to my original point. You only know a handful of publishers by name: Random House, Warner, PenguinPutnam, and such. There are thousands more like Goofy Foot, JK, Dazzle Nut, and Willow Brook. You don't know their Web addresses and you never will. But you can currently get their titles at Amazon.com. In some cases, that's the ONLY place you can get their titles.

All in all, what looks like a bomb to Barron's looks like a superb long-term business plan to me. Amazon.com will enjoy all the benefits of Ingram with all the retail sales clout of B&N. And that's only in the book business. Addressing Amazon.com's other business ventures would require a much longer post and I suspect you already know the arguments anyway.

To Your Wealth,
ZumaWave