Sunday, April 29, 2012
I'm just dealing with some sick folk. The inpatient rotation of medical school is extremely demanding. There are only two shifts per day, and we take care of some rather complex patients. I've just finished my first month on service and have one more month to go. I'll have much more time for fun stuff after that. Right now, I'm just working my six shifts per week and counting my blessings when I get to see the sun.
Saturday, April 14, 2012
To Our Shareholders,
Invention comes in many forms and at many scales. The most radical and transformative of inventions are often those that empower others to unleash their creativity – to pursue their dreams. That’s a big part of what’s going on with Amazon Web Services, Fulfillment by Amazon, and Kindle Direct Publishing. With AWS, FBA, and KDP, we are creating powerful self-service platforms that allow thousands of people to boldly experiment and accomplish things that would otherwise be impossible or impractical. These innovative, large-scale platforms are not zero-sum – they create win-win situations and create significant value for developers, entrepreneurs, customers, authors, and readers.
Amazon Web Services has grown to have thirty different services and thousands of large and small businesses and individual developers as customers. One of the first AWS offerings, the Simple Storage Service, or S3, now holds over 900 billion data objects, with more than a billion new objects being added every day. S3 routinely handles more than 500,000 transactions per second and has peaked at close to a million transactions per second. All AWS services are pay-as-you-go and radically transform capital expense into a variable cost. AWS is self-service: you don’t need to negotiate a contract or engage with a salesperson – you can just read the online documentation and get started. AWS services are elastic – they easily scale up and easily scale down.
In just the last quarter of 2011, Fulfillment by Amazon shipped tens of millions of items on behalf of sellers. When sellers use FBA, their items become eligible for Amazon Prime, for Super Saver Shipping, and for Amazon returns processing and customer service. FBA is self-service and comes with an easy-to-use inventory management console as part of Amazon Seller Central. For the more technically inclined, it also comes with a set of APIs so that you can use our global fulfillment center network like a giant computer peripheral.
I am emphasizing the self-service nature of these platforms because it’s important for a reason I think is somewhat non-obvious: even well-meaning gatekeepers slow innovation. When a platform is self-service, even the improbable ideas can get tried, because there’s no expert gatekeeper ready to say “that will never work!” And guess what – many of those improbable ideas do work, and society is the beneficiary of that diversity.
Kindle Direct Publishing has quickly taken on astonishing scale – more than a thousand KDP authors now each sell more than a thousand copies a month, some have already reached hundreds of thousands of sales, and two have already joined the Kindle Million Club. KDP is a big win for authors. Authors who use KDP get to keep their copyrights, keep their derivative rights, get to publish on their schedule – a typical delay in traditional publishing can be a year or more from the time the book is finished – and … saving the best for last … KDP authors can get paid royalties of 70%. The largest traditional publishers pay royalties of only 17.5% on ebooks (they pay 25% of 70% of the selling price which works out to be 17.5% of the selling price). The KDP royalty structure is completely transformative for authors. A typical selling price for a KDP book is a reader-friendly $2.99 – authors get approximately $2 of that! With the legacy royalty of 17.5%, the selling price would have to be $11.43 to yield the same $2 per unit royalty. I assure you that authors sell many, many more copies at $2.99 than they would at $11.43.
Kindle Direct Publishing is good for readers because they get lower prices, but perhaps just as important, readers also get access to more diversity since authors that might have been rejected by establishment publishing channels now get their chance in the marketplace. You can get a pretty good window into this. Take a look at the Kindle best-seller list, and compare it to the New York Times best-seller list – which is more diverse? The Kindle list is chock-full of books from small presses and self-published authors, while the New York Times list is dominated by successful and established authors.
Amazonians are leaning into the future, with radical and transformational innovations that create value for thousands of authors, entrepreneurs, and developers. Invention has become second nature at Amazon, and in my view the team’s pace of innovation is even accelerating – I can assure you it’s very energizing. I’m extremely proud of the whole team, and feel lucky to have a front row seat.
As always, I attach a copy of our original 1997 letter. Our approach remains the same, and it’s still Day 1!
Jeffrey P. Bezos
Founder and Chief Executive Officer
I cut out the testimonials that start the letter, but you should read through them all. If you frequent the indie publishing scene, you'll recognize some familiar names. Here's Black Crouch's statement. You may recall that I recommended his superb thriller Run on this blog a few months ago:
“I had no idea that March of 2010, the first month I decided to publish on KDP, would be a defining moment in my life. Within a year of doing so, I was making enough on a monthly basis to quit my day job and focus on writing full time! The rewards that have sprung out of deciding to publish through KDP have been nothing short of life changing. Financially. Personally. Emotionally. Creatively. The ability to write full time, to be home with my family, and to write exactly what I want without the input of a legacy publisher marketing committee wanting to have a say in every detail of my writing, has made me a stronger writer, a more prolific writer, and most importantly a far happier one…. Amazon and KDP are literally enabling creativity in the publishing world and giving writers like me a shot at their dream, and for that I am forever grateful.”
What's so frightening and/or cool about this letter is that Mr. Bezos strikes upon all the key factors that make me value my publishing arrangement with Amazon (the reader driven ratings and rankings, creative freedom, retention of copyright, flexible pricing, and aggressive royalty rates are head-spinningly wonderful.) This tells me that he truly understands my needs as an indie author, and that he really does intend to go for the throat of the traditional publishers. He's telling them that their gatekeeper function is unneeded. That in the future, they will need to figure out how they can add creative value, rather than act as a quality filter that readers don't really need.
Another thing that this letter has made me realize: I'm now also pretty sure that the CEO of Amazon reads Joe Konrath's blog. I know this sounds insane, but some of the phrases Mr. Bezos chose are all too familiar to regular readers of Mr. Konrath's influential blog on self-publishing. I guess this should come as no surprise. Mr. Bezos' company courted Mr. Konrath quite aggressively, and signed him as one of their first Amazon imprint authors.
Finally, I think I'm beginning to understand all the strident criticism leveled at Amazon by those in the traditional publishing industry. There's only one thing scarier than a man that knows how to do his job better than anyone else—a man that knows how to do your job better than anyone else.
Wednesday, April 11, 2012
In a lawsuit filed in U.S. District Court in New York, the government painted a portrait of an industry desperately trying to turn a profit amid rapid changes in technology and aggressive competition from online retailers. In phone conversations, e-mails and dinners at exclusive New York restaurants, the companies’ top executives colluded to wrest control of the market from Amazon.com and raise prices on e-books, according to the complaint.
"The customer pays a little more, but that's what you want anyway," Jobs told the publishers at one point, said Sharis Pozen, the acting head of the Justice Department's antitrust division.
The complaint cites email messages and specific phone calls — sometimes occurring one after another — between the publishers. It tallies “at least 56” phone calls among the publishers’ U.S. CEOs between December 2009 and January 2010. The complaint also quotes several statements by publishing executives and Jobs, without always noting the source for each quote.
The complaint alleges that the publishing executives met in “private dining rooms of upscale Manhattan restaurants,” without counsel, to “discuss confidential business and competitive matters.” According to the complaint, the meetings started no later than September 2008 and continued for at least a year.
One venue was a private dining room called “The Chef’s Wine Cellar” at a swank restaurant, Picholene, where guests currently can enjoy multicourse tasting menus for as much as $195 per diner.
Besides sitting down to expensive meals, the publishers allegedly “engaged in a series of meetings, telephone conversations and other communications in which they jointly acknowledged to each other the threat posed by Amazon’s pricing strategy and the need to work collectively to end that strategy,” according to the complaint.
One publisher “bemoaned the ‘wretched $9.99 price point,’” according to the complaint. The Justice Department also details how — after Amazon rolled out a proposal to “prominent authors and agents” in January 2010, whereby copyright holders could bypass publishers and sell directly to Amazon — a “decisionmaker” said “he was ‘p****d at Amazon for starting to compete directly against the publishers and expressed his desire ‘to screw Amazon.’”
For an explainer about the Big-6 publishers, go here.
To read the entire filing by the DOJ, go here.
And for the best prices on e-books, go here.
Updated to add: David Gaughran just posted a superb review of the entire anti-trust case that is a must read for those interested. It reviews the entire history of agency pricing, what is known about the alleged collusion between Apple and the publishers, and the implications for the case for indie authors and big publishers alike. Bravo, David!