The answer to Felix Salmon's question, is Amazon bad for publishers, is a definitive yes. Yet Amazon.com Inc (NASDAQ:AMZN) can't be blamed for the shift that is happening in the content industry. It's the internet and e-readers that are a lethal combination to the traditional publishing model. Amazon happens to be the force leading the charge against traditional publishers but it could have been coming from anywhere online.
Felix Salmon thinks Amazon disintermediation of publishers is not what they are worried about:
It's not like Amazon has disintermediated publishers, allowing readers to buy millions of books directly from authors. There's a very small business along those lines, but I don't think that's what publishers are worried about.
I disagree and think publishers are and should be highly worried about being disintermediated.
Book publishing relied on a model of editors selecting the most (commercial) promising works from those submitted to them and on actively scouting for talent to nurture. They tied talent to them by offering valuable services; editing, marketing and distribution, in exchange.
Because traditional distribution was limited to only a few books and authors in no short supply, publishers had a very strong position as opposed to authors.
The internet allows for content to be spread at a faster pace as consumers are able to take it in. The development of cheap, easy to use e-readers have made content available in a form that is equal or even superior to that of the physical book.
The marketing done by publishers usually involved a lot of work done by the author and or the book store. Most of the marketing that publishers performed can easily be copied by authors and or performed by online stores.
No doubt traditional book publishers are full of talented editors but equal talent can be contracted on the freelance market easily, often at better rates than those required to keep all kinds of specialists in house.
To summarize: On the internet there is an army of marketers ready to promote books working on fees or even commissions, there is an army of editors with little or no overhead at your service and at home on your coach, and you are but one click away from having the latest Krauthammer downloaded on your e-reader.
No writer needs a publisher anymore.
Some writers argue they are better of without a publisher. Publishers are surviving for now because to authors leaning on brand authority to add credibility to their publications is still valuable. In addition the distribution publishers control access in stores nationwide, and that is still valuable as well.
But when more and more successful authors start to self-publish, and brick and mortar bookstores close, the stigma on self-publishing will erode and publishers that do not evolve and find a new business model are doomed. Amazon is a key player in this revolution but it would take place without Amazon as well.
Blaming Amazon is like blaming Ford for the demise of road side taverns.
Ford may have destroyed road side taverns, it didn't destroy the need for transportation or sleep.
People still want to write and read.
Felix Salmon also worries about the disappearance of real-world triggers driving book sales.
"The result is that there are fewer real-world triggers which remind us about how wonderful books can be. In a world with lots of small bookshops, you pass such things regularly, and even if you don't go in and buy something most of those times, at least you're reminded of their existence, and you nearly always have a good feeling about the store and its ambiance. Just about every book reader thinks that bookstores are wonderful, magical places - and, of course, that their contents are wonderful, magical things. As such, small booksellers were the best marketing devices that the publishing industry had. Not through anything they particularly did, so much as just by dint of their simple existence."
It's true real-world triggers are disappearing. But the triggers are just moving online. The internet allows book marketers to pinpoint audiences and remind them of the perfect read at the most opportune of times. And that at little or no cost and high conversion rates.
Bloggers are the new independent bookstore in that respect.
These power bloggers can also reach you anywhere, anytime on your smartphone and other wireless devices. The local bookstore isn't going anywhere. You might actually often encounter them when you have no time for books.
There are not just as many book reviews, excerpts and lists as there used to be as Felix Salmon argues. The online sales channel maturing and the affiliate marketing model have made it possible for an industry to thrive around recommendation. Again, the death of brick and mortar is the bread of bloggers.
Amazon is the embodiment of the changes in book publishing and it's a very real threat to book publishers. Amazon is bad for publishers but it's great for writers. It's unfair to blame it for making the world a better place and provide more efficient access to valuable content.
From a practical point of view: I would stay away from book publishers trying to translate the traditional model into the new paradigm.
The online market for books will consolidate into just a few really big players - like iBooks by Apple Inc. (NASDAQ:AAPL), Amazon and Barnes & Noble Inc. (NYSE:BKS) - and countless tiny marketplaces. For example authors selling their books on blogs.
The large marketplaces will hold considerable power over authors. As long as they control traffic, they will be able to capture significant margins and returns on equity well in excess of cost of capital.
Amazon controls a platform that is very valuable to authors. It is securing this competitive advantage further with the Kindle, affiliate and prime programs. In my article of 20 September 2013 on Amazon I discussed how the company ties in marketers and bloggers. It's the one company I'm convinced will remain a big player in the new model of book publishing.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Additional disclosure: I'm an active blogger I am a participant in the Amazon Services LLC Associates Program, an affiliate advertising program designed to provide a means for sites to earn advertising fees by advertising and linking to Amazon.com. Amazon is important to me and that may color my perception though I make an honest attempt to tell it as true as I see it.