Caught between madmen and mercenaries

This is not a comment on the recent court ruling on Apple, agency contracts, and price fixing.

But a cursory glance at the history of ebook retail makes one conclusion crystal clear:

Ebook retail is a horrible horrible business to be in.

On one side you have self-destructive madmen like the big publishers who have done the following lovely things to their ebook retail partners:

  • Abruptly changing all ebook distribution contracts to agency. Which would be fine if delays on their part hadn’t meant that smaller ebook retailers in many cases spent months without any inventory from the big publishers.
  • Complete refusal to even consider tactics that would level the playing field for the retailer, such as going DRM-free or adopting a wholesaling strategy that would let ebook retailers implement in-app purchases on iOS devices.
  • Near nonexistent quality control of ebook formatting, shipping titles with errors ranging from extensive spelling errors not in any other format, to garish formatting errors, even to the point of text being missing from the ebook edition.
  • Next to zero participation in developing ebook format and ebook-related standards, mostly letting tech-oriented companies run rampant with no consideration to production or distribution costs.

This is without even considering the things publishers could be doing to specifically help ebook sales such as creating ebook-optimised covers.

On the other side you have the cutthroat mercenaries. Amazon seems willing to run its entire Kindle business at break-even, which would be fine if it didn’t also make massive development investments in hardware and software. Investments that it seems content with never recouping. Apple seems willing to butcher lucrative product categories because of its inability to let any buck pass by an iOS device without demanding a thirty cent cut.

Anybody planning to start a new ebook retail store would be stabbed in the back by publishers or cut to ribbons by ruthless competitors before the first year is out.

Your suppliers have no concern for the viability of your business and are quite willing to ruin it for little to no personal gain. Your competitors have corporate parents who are willing to run the ebook retail unit either at a loss or break-even (and that’s without taking their substantial R&D investments into account, most of which are focused on developing or protecting vertically integrated silos, not innovations that actually benefit the customer).

In short, it’s a sector that desperately needs new, competent, and innovative entrants but is too irrational to sustain any sane business development or investment.