Kindle: The Greatest Publishing Business Model Since Gutenberg

In the final week of May 2009, BookExpo America—the vast annual book publishing conference—took place at the Javits Convention Center on the West Side of Manhattan.

According to the MediaBistro blog GalleyCat, a panel featured 56-year-old editor Tina Brown (Tatler [UK], The New Yorker, Talk, Vanity Fair and currently TheDailyBeast.com) railing against Amazon.com for its lowball pricing of books for the magical new e-reading machine, Kindle.

“$9.99 is a paltry, pitiful sum,” Brown proclaimed.

Brown is a great editor, but she doesn't know squat about book publishing or business models.

The History of Book Printing in 154 Words

• First came the monks, scribes, scriveners, copyists, illuminators—those dedicated men who saved the knowledge of humanity by creating one-off books by hand. They painstakingly handwrote every individual letter and word, and these manuscripts were bound as books for the rich and powerful.
• Next came woodblock printing. Type was hand-carved on blocks of wood, enabling a printer to create multiple copies of single pages that were assembled and bound into books.
• Then c. 1450 AD, Johannes Gutenberg invented movable type, where individual letters of the alphabet were cast in metal and assembled into sentences, paragraphs and pages. After the pages were printed on a press, the type was disassembled to be reused over and over again.
• Seven centuries later came the next great breakthrough in book publishing, Amazon’s Kindle machine. It catapults Jeff Bezos (Amazon's CEO) next to Gutenberg and Jason Epstein (inventor of Print-on-Demand) in the pantheon of book publishing innovators.

The Genius of Kindle
My wife, Peggy, is a member of a local book club. Members read one book a month and meet to discuss it. In May 2009, the chosen book was F. Scott Fitzgerald’s classic “The Great Gatsby.” Could I get it on my Kindle? Peggy wanted to know.

I fired up the Kindle and “shopped the Kindle store.” The title was available for $9.80, and I ordered it. Within 30 seconds, it was in my reader. I handed it to Peggy, and she started reading “Gatsby.”

To Tina Brown, $9.80 is a, “paltry, pitiful sum.” I maintain it's more than fair—a hell of a deal for Peggy, for Amazon.com, for the publisher (Scribner) and F. Scott Fitzgerald’s estate. Here’s why:

Great for Peggy:

• She had the text in her hands within four minutes of telling me she wanted it.
• Amazon offers to send a sample of any text for free, so the reader can get a feel for the story and how the author writes.
• The cost: $9.80 billed to my credit card.
• We didn't have to make the rounds of local books stores, racking up time, gas and parking charges at Borders or Barnes & Noble in the hopes one of them had a copy.
• If special ordered, it would have taken several days, and we would've racked up more time, gas and parking charges to retrieve it.
• Had we ordered the printed book from Amazon, the price of the printed book would have been the same, $9.80, but I would have to pay extra for shipping.
• If we wanted a used edition, we could have gotten one from $2.82 to $3.87, but I would have had to spend time shopping, waited a week or more for delivery, and that delivery fee probably would have wiped out the savings.

Great for Amazon.com:

• Zero cost. This “Gatsby” is a smidgeon of electricity—no paper, printing, binding, shipping, warehousing or reserve for returns, no hurt to the environment. The $9.80 (minus a few cents for the wireless transaction, which Amazon.com pays) drops right to Amazon’s bottom line.

Free Money for Scribner:

• “The Great Gatsby” was first published April 10, 1925. After a slow start, the title has been racking up sales for 85 years. This is free money, for which Scribner has done nothing.

Great for Authors:

• This was also in the pockets of the author’s grandchildren, Bobbie and Cecelia Lanahan, with zero deductions for projected returns.
• Amazon.com is keeping old titles available, something no bricks-and-mortar bookstore can possibly do—not even the giant boxes of Barnes & Noble or Borders.

Kindle vs. Mainstream Book Publishing
Today, the main business of mainstream book publishers is gobbling up vast quantities of energy in order to turn trees into landfill. Books are printed on paper, bound, jacketed and shipped on a fully returnable basis to the booksellers that ordered them. The leftover books are sent to warehouses.

This bizarre consignment system—unique in retailing—is detritus leftover from the Great Depression that nobody has had the cajones to change in 80 years. Bookstores do not need to pay for books for 30 to 90 days, which means the publisher takes all the risk. As a result of this nutsy-fagen consignment system, somewhere between 35% and 40% of all books shipped to booksellers are returned to the publishers’ warehouses, whereupon one of three things may happen to them: