About the Author

Geoffrey Moore

Managing Director, TCG Advisors Venture Partner, Mohr Davidow Ventures

Geoffrey Moore is a best-selling author, a Managing Director at TCG Advisors and a venture partner at MDV.  More...

November 2008

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« Unbalanced Scorecards, Please | Main | Microsoft, Meet Darwin—Again »

Amazon: Bad Idea

When Amazon announced it was enabling the sale of portions of books as well as on-line access to books, it was clearly intended as a positional move relative to Google’s “information wants to be free” approach to the market.  The parallel we are all intended to draw is one to Apple versus Grokster/Napster.  These excerpts are to be like the iTunes of literary form.  They will allow the publishing industry to make its peace with the Internet and lead to a new flourishing economy enabled by sales at a unit level.

Except they won’t.

The reason is simple.  A song is the consumable unit of an album.  Indeed, an album is nothing more than an aggregation of songs.  People connect to the song, not the album.  The opposite is true for books.  The chapter, the excerpt, is not the consumable unit.  It does not matter what you price these units at—they are the wrong unit.  Even if they were free, it wouldn’t work.  It’s not how people think of books.  People don’t say, “Hey, don’t you just love Chapter 23 of Harry Potter?”  Same goes for non-fiction as well.  The closest approximations literature has to this format are the poem, the short story and the essay, none of which have ever sold as units in any quantity.

You cannot teach consumers that they should refocus on a new consumable unit.  Indeed, you cannot teach consumers anything.  Consumer business models must avoid such friction-creating strategies at all costs.  Amazon knows this.  It was the most friction-free e-commerce site of its generation, and that is why it enjoys the position it holds today.  So what could it possibly be thinking?

Well, currying favor with the publishing industry does come to mind.  Clearly publishers are looking for some leverage against Google, and if Amazon were to be able to provide it, that would further secure its hegemony in the industry.  But this is a head fake.  It does not deal with Darwin.  The evolutionary force of the Internet will force much more radical mutations to the publishing industry in our lifetime, marginalizing the current leaders, displacing them with God knows what.

Publishers today have little differentiation.  Their primary value is access to distribution which they do not do themselves but feed through established relationships.  Disintermediating their role in the value chain is easy to imagine.  Amazon, interestingly, is probably the single best positioned established enterprise to bridge this gap.  But it has too much at stake in its relationships with the current regime to drive this change.  Instead, it will likely begin with second-tier publishers selling direct over the Internet, leading some weakening first-tier publishers to do the same, leading then to Amazon publishing its own list of titles in self-defense.

The critical success factor for the next generation will be marketing capability.  Whoever can "make" the next J.K. Rowling or Dan Brown will have the power.  That is a skill set we have seen in Hollywood for some time.  Going forward we should expect to see it in publishing next.

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Comments

Chris Anderson

Geoff,

Are you sure about this? I'd argue that it depends on the kind of book: the consumeable unit (pun!) in a cookbook is the recipie. One page.

Likewise for programming books and other how-tos.

Chris

Geoff Moore

Chris,
Actually I don't think that recipes are a consumable unit for a cookbook. At least the cooks I know browse these books like magazines. Yes, they have files of individual recipes, but they perform a very different function. It's a bit like the difference between buying and shopping, the latter being an anthropological activity taught by females to males (in rare instances).

Art Ignacio

I might go with Chris Anderson's inclination, though cookbook may not be the compelling example. Tech books (programming guides, using an application, etc.) might be another example. It's a bit of the browse vs reference mode in an information UI. O'Reilly Network Safari Bookshelf is an example. So, maybe it's bad idea for Amazon, good idea for O'Reilly.

Geoff Moore

I think Art and Chris are right about the consumer convenience for a niche market of consumers. I was thinking of the Amazon investor's return on this as a volume retail effort, which I am arguing will be minimal. That said, there is another way to look at this opportunity. I am going to post an upcoming entry about how companies like Google are syndicating fragmented media in package deals, and that might be where Amazon could create a positive return.

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