Amazon’s Fight Against Content Middlemen: Books, TV, Movies, Games

4/23/12Follow @curtwoodward

The publishing industry was rocked last year when Amazon.com, long the most important retailer in books, got serious about becoming a publisher. No longer content to control a few niche imprints, Amazon took aim at the big publishing houses’ cash cows by directly signing up best-selling authors and hiring an industry insider to run the show.

The war of words surrounding that competitive assault has been pretty brutal, with Amazon accused of trying to destroy a valuable cultural institution. And now that Amazon’s drive to sell books at lower prices appears to be winning a legal fight over the publishers’ price-fixing with Apple, blood will probably start boiling even more.

The middlemen in other content industries had better get used to that feeling. The Seattle-based online juggernaut (NASDAQ: AMZN), well known for its methodical approach toward squeezing the competition and rooting out inefficiency, is also interested in producing TV shows, movies, and video games.

These initiatives are in their early stages, but when combined, they illustrate a four-front offensive against the middlemen of digital entertainment, where the barriers surrounding distribution and production are quickly being erased by technological innovation.

As affordable digital tools make content creation easier than ever, the channels for delivering that content are also going through a revolution: faster broadband enables large files to be streamed nearly anywhere; ubiquitous mobile devices can put a high-resolution, connected screen in anyone’s hands; software-supercharged distribution channels make it easier to help consumers find and procure content.

Publishers aren’t the only ones who should be paying attention as Amazon signs up more content creators. Apple, Google, Facebook, and perhaps Microsoft appear to be barreling toward a future of separate walled gardens to distribute content and capture user data, where they control most of the value chain: delivering digital services over the air and straight into the consumer’s face (and pocketbook) via their own mobile device.

Each of the big players is better at some aspects of this chain than others—Apple’s devices are the envy of the business world, while its software is pretty subpar. But none of them is making a play to own content as aggressively as Amazon.

In fact, since Amazon’s mantra is to focus on the long term, it might be better to simply see this as a drive by the company to play in content, full stop—not movies or books or games or TV shows.

Our ideas about what defines each of those different formats could very well be changed, too, by the converging digital media landscape we’re in the middle of right now. In 10 years, do you think we’ll really have separate cable boxes and video game consoles and laptops and Blu-ray players, all handling different types of content?

In Amazon’s battle against these content producers, technology strategy consultant and writer Venkatesh Rao says, “there aren’t four fronts. There is just one front: content.”

“Maybe the next big hypermedium will be movies with read-along book chapters inserted between scenes. How do you position for something like that? You have to own the distribution chain from cloud store to device, and have a stake in the creative experimentation in the content world,” Rao says. “It’s the only way. A pure bet on just movies or TV would be too risky.”

It’s possible that these forays into publishing are more like experiments for Amazon, which has shown a willingness to try completely new businesses that might not pay off or become a major initiative for a long time. Its Amazon Fresh delivery service, for instance, could be a “last-mile” shipping competitor with trucking companies, but still only operates in Seattle.

Fred Zimmerman, an author and small publisher, thinks Amazon’s expanding publishing footprint fits into this experimental category rather than a plan of world domination, since “they can never publish enough content to be more than a drop in the ocean relative to all providers.”

“I think it’s more about 1.) skimming the cream, 2.) filling obvious profitable gaps, 3.) organizational manifest destiny (why should we restrain ourselves when we can create a best seller with one push of a button?)” Zimmerman wrote in response to my question on Quora.

That is definitely possible. But remember, this is a company with a track record of turning quirky side pursuits into big businesses—like on-demand cloud computing, a key technological enabler in a world of ubiquitous digital content. And the signs that Amazon is interested in building its own content-publishing businesses are pretty clear.

BOOKS
This is the foundation of Amazon’s whole online retailing business, and it’s also been the first place for Amazon to make bold moves into cutting out the middlemen. A fantastic primer on the subject is this Bloomberg Businessweek story about how Amazon drafted publishing veteran Larry Kirshbaum to lead its newly aggressive publishing arm.

Since then, Amazon has continued to sign up authors and acquire the rights to valuable back-catalogs, including the James Bond books. Kirshbaum recently said that Amazon is publishing about 40 books a year, and is looking for literary novelists for its roster. The company also counted a major victory when the Justice Department set out to smash Apple’s pricing agreement with the major publishers, an arrangement that previously allowed the publishers to take back control of retail prices from bargain-happy Amazon.

Authors, meanwhile, seem divided on the effects of … Next Page »

Curt Woodward is a senior editor for Xconomy based in Boston. Email: cwoodward@xconomy.com Follow @curtwoodward

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