Pearson, REDgroup, Amazon and the Depository: The Market Concentrates

Big news the past couple of days! So very big that I’m still having trouble digesting it all. But here it is – Pearson, the parent company of Penguin Australia – have bought the online arm of the bankrupt REDgroup (that is, Angus & Robertson and Borders). That was a couple of days ago. And then in unrelated related news, Amazon bought the Book Depository – the only real international competitor they have for selling books.

This is big news for everyone in the Australian book industry (and possibly everywhere else). But particularly the Australian industry. The Book Depository represents only a small part of international book sales – and still only a small proportion of the UK book market, where the company is based. But in Australia? A massive chunk. Forget Amazon. The reason local booksellers are threatened by online bookselling is largely to do with the Book Depository and their loss-leading free-shipping tactics.

So what the hell is going on? Was there monopolistic Kool-Aid in the water supply over the past week? Or am I cynically bundling two vaguely related stories into one neatly packaged blog post? You be the judge.

Let’s start with Amazon and The Book Depository. The Book Depository was founded by ex-Amazon people, and I’ve always secretly thought they didn’t see the business model as particularly sustainable, and were waiting to be snapped up by Amazon at a later date and a decent profit, once they’d had off with as much investment money as they could garner (which, I should point out, they’ll pay off in spades with the sale of the company to Amazon). There’s no evidence I can find that they were profitable yet – though they may well have been eventually (or might have been already – I’m not one of their investors). According to some reports it appears that they were somewhat dependent on a massive discount from the Royal Mail – which they may not continue to get with Amazon in charge. At any rate, there is already speculation about investigation from various trade commissions into this new potential monopoly.

Either way it’s quite possible that the Book Depository will cease to be as good as it used to be at doing what it did best. And what the Book Depository was very good at doing was stealing market share from Amazon. That is without doubt a blow to competition. It’s certainly true that since the Depository has been around, books have been available more cheaply to readers – especially in Australia. But there’s also an argument to be had here that this was a bubble that was always going to burst – based as it was on investment rather than profit – and in the meantime it has contributed significantly to the decline of local booksellers (both on and offline).

Now to the Pearson–REDgroup Overmind. This is a real noodlescratcher. There’s a diversity of opinions here. Peter Donoughue over at Pub Date Critical believes that it’s a stupid move by Pearson. The intricacies and subtleties of running an online retailer are too great a burden for a mere publisher, he says. On top of that, it might be that the dual (and sometimes conflicting) responsibilities of being a publisher and a retailer will be too much for one company. But I guess if they run into trouble, they might ask Amazon for advice. It’s very likely that some publishers, as Donoughue says, will be deeply suspicious of Pearson’s intentions, and may refuse to work with them. Just as other book retailers have been unwilling to stock the books that Amazon’s publishing imprints are beginning to put out in print.

Once again, I’m of two minds about this. On the one hand, it seems to me that a massive corporation like Amazon needs to have competition from someone – and perhaps one day that’ll be from someone like Pearson. On the other hand, however, all this concentration of power into the hands of fewer owners doesn’t seem to me to be a good thing for anyone except the owners. Cultural diversity is a beautiful thing. Being flexible and nimble is also a good thing. Monopolies are traditionally not very good at fairness for their customers in the long run, nor at adapting to change. This has been the whole problem with publishing companies in the past few years – too slow to react, too massive and too conservative to change when a reaction is deemed necessary. You can see the Big Six publishers in the US (and Australia) are struggling under the same conditions now. Does it really make sense for Pearson and Amazon to be getting bigger and even more burdened by conflicting responsibilities in this climate? As always, I do not have the answer. But I’ll admit that this news makes me distinctly uncomfortable. Let me know what you think in the comments below.

Special thanks to Twittervirate @ryanpaine, @mrconnorobrien and @felicetherese for the long email conversation this evening. Most illuminating.

What the Failure of REDgroup Means for Ebooks in Australia

Anyone who follows book news cannot have failed to hear about the collapse of REDgroup’s Borders and Angus & Robertson bookchains last week. But what does this mean for ebooks? Depending on who you listen to ebooks are one of the causes of REDgroup’s slide into administration. But is this true? Are ebooks destroying the common dead tree bookseller? And did video kill the radio star? Read on to find out more.

For those who don’t know, Kobo is a Canadian ebook platform that partnered with Borders in the United States, and Borders/A&R in Australia. As I said back at Christmas, it may not have been the brightest move on Kobo’s part to tie themselves so closely to Borders, but they did. And that means that even though Kobo is not REDgroup, they will suffer some of the consequences of the collapse, including the withdrawal of books by some publishers from their joint library.

Although I’ve complained about the Kobo ereader and their flaky platform before, they were the only real competitor to Amazon’s Kindle ecosystem and Apple’s iBookstore. They were unique in Australia because their partnership with Borders brought them mainstream, nationwide legitimacy and a physical retail presence – something neither Apple nor Amazon can compete with. From all reports this partnership has been relatively successful – it was one of the few areas of their business that REDgroup wasn’t entirely bungling. This is part of the reason why ebooks cannot be blamed for the collapse: like it or not ebooks are still only about 1% of the industry here in Australia – and REDgroup had already carved themselves a healthy chunk of that 1%. While that number is growing very fast, ebooks are not putting booksellers out of business just yet.

No, what destroyed REDgroup was incompetence and greed. While various pundits have tried to blame parallel importation, the GST, and even the internet as a whole – the fact of the matter is that REDgroup are the only Australian bookseller currently under administration. And while plenty of booksellers are struggling, they haven’t had fraught relationships with suppliers for the last twelve months, and they haven’t been jacking the prices of their books up over RRP. And they haven’t been selling barbecues instead of books.

Regardless of the outcome of REDgroup’s period under administration, the Borders brand has been seriously tarnished by this collapse, and that’s only going to get worse with issues like the recent decision not to honour customer book vouchers. You can safely predict that Kobo’s ascendancy in Australia will be slowed for a while to come.

So where does that leave ebook buyers and readers? Or rather – where does it leave readers who don’t want to submit to the Amazon or Apple gulag platforms? Well, with the recent news that Google are looking to partner with groups of retailers rather than individual booksellers, things on the indie front appear to look a bit bleak. But it’s not all doom and gloom. The annual post-Christmas survey in Bookseller+Publisher demonstrated that while the dead tree book industry is trembling under the threat of a shrinking market – ebook readers and ebook sales are healthy and growing. Not only that, but 40% of booksellers not already selling ebooks are planning to do so in the next year. This is great news for readers – with the freeze of Borders/Kobo, there is a lot of room for new growth. And new growth in books can only be a good thing.

As a culture, we’re currently undergoing one of the largest paradigm shifts in cultural consumption ever. It is now more than any other time that we cannot afford to have dead weight like REDgroup dragging the rest of us down. So I say the king is dead – long live the king.

Ebook News Christmas Wrap-up

So the silly season has come and gone, bringing with it what is most likely the biggest shift in consumer behaviour in regards to ebooks that has ever occurred. As I’ve been saying for the past six months – the future isn’t just coming sometime soon, it’s already here. Here’s a wrap-up of the ebook news over the past couple of weeks that you might find useful.

As predicted, Amazon made great strides this Christmas into the ebook space. They announced that the Kindle is now their best-selling product of all time. This means it has outsold the final Harry Potter book, so we are talking millions of Kindles out there over the Christmas period. And due to the instantaneous nature of ebook purchasing, we’re quite likely to see a spike in ebook sales over the few days of the Christmas period – though we’ll likely have to wait a while before anyone releases those figures. Guestimates so far have pegged the number of books sold as close to 3 million, which is damned impressive.

A poll has shown that almost a third of internet users say they already have a Kindle or plan on buying one in the next year, and that 40% of iPad owners already have a Kindle or are planning to buy one – which seems to support the assertions of Jeff Bezos (Amazon’s CEO) that the Kindle and the iPad are not in direct competition.

All in all this has been a superb holiday period for Amazon’s Kindle – all the more reason to hope they don’t do anything (else) evil in 2011.

Google has hinted at a timetable for the Australian launch of the Google eBookstore initiative, indicating they may launch early this year.

The Borders/Kobo tagteam appears to be coming apart at the seams – at least one major publisher in the US has halted shipments to the embattled chain and Hachette are considering doing the same. This is bad news for Kobo, which has tied itself quite closely to Borders in the US and here in Australia (Australia’s REDgroup – which includes Angus & Robertson and Borders – has been considering cuts and facing disappointing sales for months).

Choice magazine has named the Sony Touch the best ereading device, which is good news for the ereader (and for the potential fortunes of other independent ereading devices that aren’t chained to a single retailer).

Forecasts are showing that tablet sales will more than double this year in the US, which is great news for Apple and the iPad, which will likely snap up a big chunk of that.

2011 is shaping up to be the biggest year yet for digital reading. Thanks for reading in 2010, and I look forward to your comments and support if you decide to stick around this year. If there’s anything you’d like to see covered or analysed in more detail – let loose in the comments or get in touch on Twitter.