Why Won’t Amazon Compete in the ePub Market?

Since the beginning of the "modern" ebook era, when Amazon entered the marketplace with its Kindle, I've wondered why Amazon chose to follow its own path as regards format and DRM rather than adopting the ePub standard and a more benign or universal form of DRM. I've wondered because by choosing its own path, Amazon has decided that readers who are not Kindlers (by which I mean consumers who read on dedicated e-ink devices that are incompatible with Amazon and thus cannot buy ebooks at Amazon unless they are willing to strip the DRM and convert the file, which the majority are either unwilling or unable to do) is not a demographic to woo.

What is it about ebooks that makes them different from virtually every other market that Amazon is in? Amazon sells, either directly or indirectly, all kinds of universally usable electronic equipment and entertainment. It does not sell, for example, digital music or movie DVDs that are incompatible with the devices consumers already own or buy at Amazon or elsewhere. Only in ebooks has Amazon struck a different path.

In every other category of goods for sale at Amazon, Amazon tries to woo every consumer it can. Only in ebooks does it deliberately exclude millions of potential customers. Why? What is it about ebooks that warrants this divergence by Amazon from its very successful business plan? Granted that Amazon would prefer to sell you a Kindle and lock you into its eco system, but that, at least on the surface, makes no sense as a reason to exclude millions of other ebook consumers from being able to buy ebooks at Amazon. One would think that Amazon's priority is to sell ebooks on which it makes a profit, not reading devices on which it is said to lose money.

Try as I might, I see no obvious reason for this discrepancy. Amazon could sell its Kindles and also sell ebooks in a Kindle-specific format alongside an ePub format. Or it could sell its Kindles and simply make Kindles ePub compatible. Yet it does neither. It prefers to exclude millions of ebookers who are using devices that require the ePub format.

So I ask again: What makes the ebook market different from the other entertainment markets in which Amazon competes?

It surely can't be because Amazon doesn't think it can have a winning hand. Amazon has competed and continues to compete in the hardcover and paperback market on equal terms with all competitors, yet it is the dominant bookseller in those markets. I would expect Amazon to dominate in the ePub ebook market as well, simply because of its marketing prowess, its reputation for value and low prices, and its willingness to operate at a loss fiscal quarter after fiscal quarter.

Although no one has accurate numbers, I think it is reasonable to speculate that Sony, Kobo, and Barnes & Noble have sold millions of ereading devices, not one of which is compatible with the Amazon ebook store. Yet every B&N-branded device is compatible with the Sony and Kobo ebookstores (and every ePub ebookstore except Apple's) -- buy a book at Sony, download it to your computer, and sideload it onto your Nook. No questions asked. Similarly, Kobo and Sony devices work the same with any ePub ebookstore except B&N and Apple.

Why is Amazon willing to ignore the millions of readers in the ePub market? Strategically, Amazon has always tried to make people want to shop at Amazon because of price, selection, and ease of buying. Isn't that the rationale behind the patenting of the 1-click system? And this is the strategy Amazon follows in everything it sells -- except ebooks. Why?

I wonder about this but have no answer. I'm certainly open to suggestions, but I struggle to see how ebooks are different from movie DVDs, digital music, televisions, baby diapers, or any other commodity within Amazon's sales world. The rationale for establishing an exclusionary system for ebooks when all else is inclusionary eludes me.

What else also eludes me is why Amazon thinks this is good policy for Amazon. Amazon has always worked on the principle that if a person buys their hardcover or paperback books from Amazon, they will also buy their TV from Amazon. So if a person won't or can't buy their ebooks from Amazon, are they likely to buy their TV from Amazon? Does this exclusionary policy on ebooks have a snowball effect on other items Amazon sells and on the other markets in which it competes?

Consider this difference as well: Amazon has gone to great effort to create the Kindle, its own dedicated reading device using a proprietary format and DRM scheme. But it hasn't gone to that effort for other devices such as a DVD player. Why? What makes ebooks and the ebook market different from every other commodity that Amazon sells and every other market in which Amazon competes?

The only answer I have come up with, and I don't find it a satisfactory answer, is that of all the industries represented by the goods that Amazon sells, the weakest in every sense of the word is the publishing industry, making it the one industry that is highly vulnerable to a direct attack by Amazon. Amazon can become a major publisher because of the industry's weakness and thus be a vertically integrated enterprise -- something that would be much more difficult and costly if attempted in the movie or TV production industries.

Of course, the same question can be asked about B&N's choice of a DRM scheme, but at least B&N has made it freely available to all other device makers. That it hasn't been adopted by Kobo or Sony, for example, does make me wonder if B&N hasn't made a major error in not changing its DRM scheme to be compatible with Sony and Kobo. I think given a choice between the Sony, Kobo, and B&N ebookstores, most ebooksers would shop at B&N, even if they prefer the Sony or Kobo device over the Nook.

What do you think?

21 Comments on Why Won’t Amazon Compete in the ePub Market?

  1. The only -nsatisfactory- answer I can work out is “foolishness”.

    Maybe the very idea and ambition to Dominate the Market is iteself cause of errors.

  2. I really do not understand it. When I first bought my ereader and went to buy books for it I am sure I would have bought them from amazon if I could because I had been buying books there for years.

    “I think given a choice between the Sony, Kobo, and B&N ebookstores, most ebooksers would shop at B&N, even if they prefer the Sony or Kobo device over the Nook.”
    I think that is incorrect. The B&N ebookstore only operates in one country. Even if that country has the largest ebook market (not sure if that is true), I think there is enough other countries that it competitors sell to that more ereaders can’t buy from B&N (regardless of the type of DRM) than can.

  3. Thank you so much for this article. I am a new budding eBooker myself, as both an author and promoter/helper guy. I will be honest, I am new to epub. Just as new as I was to Smashwords and Amazon. This article has made it clear to me I have so much to learn. Going to start checking out the other sites you’ve mentioned. Thanks!

    p.s. I think Amazon is taking what they can while they can, but the eBook/internet movement for writers is still a newborn. Writers have only just been set free upon the world.

    Cheers

    –Damien

  4. I think it is because the ebook market is fragmented and Amazon thinks they can totally dominate and control it, something they cannot do if they provide compatibility. Because DVD’s are established, few would purchase a DVD system from Amazon that wasn’t compatible with other DVD’s. But in ebooks, given their strong position in physical book sales, they can easily offer proprietary ebooks and readers in the hopes of completely controlling that market. Like most businesses, they are greedy (this is not intended to bash them), and want it all.

    Why give B&N or Kobo or Sony or whoever the additional sales might of the Amazon store?

    • The thing you are forgetting here is monopoly rules. If Amazon were to pull this off (and by now they should have realized that they can’t, or they would have succeeded in doing it by now, since we are past the nascent market stage) then they would be forced to alter the scheme to include other sellers and do things like have the kindle store offer the option to buy from other sellers. It would actually be detrimental to Amazon to completely dominate the market.

  5. The strategy seems pretty simple to me, but maybe I am naive. Amazon entered the ebook market when there was no market. They bought mobi to get a format and then built a dedicated device, the kindle. The strategy is to own the ebook industry.

    Why didn’t Amazon do the same with digital music? Because Apple already owned it; Amazon’s only response was to be cheaper and more open. Why didn’t Amazon do the same with DVDs? Because Amazon is moving to all-digital where it comes to content. (And because had Amazon adopted one of the Chinese dvd formats, they would have had to deal with Hollywood, and the whole dicey attempt was likely to fail.)

    In future, Amazon might let Epub format back in, but I’ll bet they do it a la Apple, wrapping the xhtml files in Amazon’s own proprietary DRM.

  6. As far as why Amazon ignored epub in the first place- they didn’t.

    When the Kindle was originally developed (2006-2007), epub didn’t exist yet. Mobipocket was the dominant format at the time, and it made sense for Amazon to build their ebookstore on it.

    Epub became epub precisely BECAUSE Amazon wasn’t using it.

    Fast forward to now- they can’t switch because their existing customers can’t switch. You can’t just roll out a software update that converts all of your users books. And it’s difficult to roll out an update that converts ereader hardware.

    Read “The Gorilla Game” by Geoffrey Moore. In it he explains the benefits of customer lock-in, networking effects, the need to standardize formats, etc.

    It’s clear that the upper management at both Amazon and BN has. Sony probably wrote a couple of chapters.

  7. I think the main reason is, that at the time the Kindle was created, going mobibook was the fastest way to get a working system with DRM not by Adobe. Without DRM, the fragmentation will no longer matter.

  8. As usual, the fact Amazon paid millions of dollars for MobiPocket S.A. at a time EPUB wasn’t even a concept is forgotten.

    It was an investment and they will make mobi evolve as long as they both technically and juridically can. Why would they waste those millions ? That’s just business rules. If EPUB existed at the time they launched Kindle, they would have had no reason to spend a lot of cash for Mobipocket, the leading e-book format at the time…

    Maybe I’m down to earth but nobody takes that into account when it comes to explain why they keep on “mobifying”.

  9. KF8 currently embeds an epub if it was generated from one. So in that sense (and the sense that KindleGen accepts epub as input), Amazon has their bases covered. Why should they cater to others when they are the dominant player? For Amazon to change it’s game, the other vendors need to somehow disrupt them or offer something in epub that KF8 doesn’t.

  10. This is really more of an issue of Adobe DRM. Apple uses epub also, but you can’t read iBooks on Nook or Kobo because the DRM standard is different.

  11. I think you need to take a writing class.

  12. One thing forgotten is that Amazon could have made Mobi and could make its current DRM scheme available to all comers without restriction. Recall that when Amazon bought Mobi, it required that Mobi be the only scheme on a device or a maker couldn’t license it.

    There is no reason why ePub has to be the default standard. There just needs to be a default standard that everyone has access to on equal terms.

    • But Adobe created the standard DRM, not Amazon.

      Amazon was just looking to copy the exact business model Apple used with the Itunes and generic mp3s. They figured the competition would continue to consist of two types of companies:

      1. Stand alone device manufacturers- who would continue to use mobipocket and ditch Sony and Microsoft’s proprietary products.

      2. Digital pirates- who would continue to adopt DRM-free mobi. There would be no competition from true independent ebookstores because Amazon was selling all the ebooks at a loss!

      But what they didn’t count on was innovation.

      They didn’t realize Adobe would show up and innovate a SHARED DRM solution (there’s no such thing in music or movies). And they didn’t realize Barnes and Noble would show up and innovate the razor-and-blade e-book business model. And they certainly didn’t realize Apple and the publishers would throw their weight behind these new solutions by innovating the agency model.

      Consequently, all the OEM’s have been forced to partner with Kobo (another innovator) and/or Google and/or Borders and/or Barnes and Noble, because that enables them to make some money off of ebooks themselves. Since there was no ebookstore offering OEMS a cut of mobipocket sales (because their was no ebookstore trying to make money off of mobipocket sales), that format was simply abandoned outside of Amazon.

  13. “I think given a choice between the Sony, Kobo,
    and B&N ebookstores, most ebooksers would shop at B&N, even if they prefer the Sony or Kobo device over the Nook.
    “I think that is incorrect. The B&N ebookstore only operates in one country.”

    I do not like the B&N store, I prefer the sony store. Both try to only sell to people in the USA but there are ways around that.
    Also I have no problem buying books from amazon, stripping DRM and converting to epub for my Sony PRS-T1. Warning: depending where you live this may be illegal.
    But I can not see the harm. I buy books. I read them. If they do not allow me to buy books depending on the country I live in or the device I use, that could drive me to search for other ways to get the books…
    The books I buy from Sony, Amazon, B&N and as of 2 years ago Waterstones UK, last year WHSMith UK (now sold to Kobo) are not available as an ebook at a German bookstore in english.
    So I am not excluded from a certain shop, with the exception of Apple iBookstore (DRM).
    Regional restrictions on sales and DRM is just silly and should be done with.

  14. Amazon’s lockin is through DRM and the cloud, not their format. The format incompatibility is only a minor hurdle to overcome (although a tough and expensive one for publishers and authors). With over 75% of the US market, Amazon doesn’t have to worry about competitors, so there’s no pressure to make the kindle format “better.”

  15. You are quietly ignore all the DRM-incompatibilty issues within the ePub “community.” Not to mention the Apple “ePub” source incompatibility issues. The Kindle “ePub” compatibility issues are hardly more or different than the Apple “ePub” compatibility issues. Kindle kf8 can be considered simply yet-another ePub DRM scheme — if the ePUBs are not DRM’ed then the problems more-or-less go away. And Kindle IS wooing this ePub audience by making Kindle readers available for every target machine you can think of –Some of your ebooks have Adobe DRM on them. Some have Apple DRM on them, and some have Kindle DRM on them. Each “flavor” of DRM’ed ebook you have on your machine will, unfortunately, only open in the corresponding “flavor” of ePub reader on your machine. So you get to have a least three different incompatible flavors of ePub reader on each machine you own.

  16. Amazon is doing this because they can. They dominate the marketing of books. They also dominate the sale of eReaders. Until it is in their interest, or until they arrive at agreements with other format vendors and possibly publishers, it is likely to remain this way. You will find, however, that many new indie e-pubbed books on Kindle, especially in fiction, are DRM-free and can be easily converted with the free program, Calibre. I have info on my webpage – http://www.richardjschneider.com. Also, it is not difficult for publishers to publish a Kindle format on Amazon and epbub and other formats on other download sites (B&N, Smashwords, Sony, etc.). Amazon is experimenting with an exclusive Amazon-only program (called Kindle Select) that requires a limited time of exclusivity. They are testing their free-borrowing program for Amazon Prime members. Authors are compensated for the number of times their titles are borrowed. I am experimenting with them – with two new mysteries. I suspect the program will not work in the end. I do not see the numbers thus far as that promising. That means most eBooks will be published on multiple platforms anyway when they are released, so Kindle owners can pull theirs from Amazon, Nook owners from B&N, etc., and folks who chose to use Calibre can get DRM-free eBooks from anywhere and just convert them.

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