Indie Authors – Can Amazon Remain Relevant?

indie author handbook

Indie Author Handbook

Okay, the obvious answer is yes.  But there are some things on the horizon that I think bear watching, especially for indie authors.  Read on…

Indie Authors And Amazon’s Stock Tumble

Did anyone notice that Amazon had a poorer holiday season than expected?  One group did: investors.  Amazon’s stock recently tumbled – shares are down 10%.  Amazon posted a profit in the last quarter of 2013, but it fell short of expectations.  Now I get that this is mostly investor-speak and issues for the stock market, but…what many don’t realize is that Amazon doesn’t make a huge profit in general (Jeff Bezos spends a lot, so the profit margin isn’t huge).

Why is the market so unhappy?  It’s hard to say.  Amazon has a long history of spending lavishly on new developments at the expense of its own profits.  And, for a long time, Wall Street has essentially put its trust in Jeff Bezos and given him a bye on these figures.  But analysts are now pointing to an ongoing deceleration in the company’s unit sales growth, which fell to 23 percent from 25 percent in the previous quarter, as possible cause for concern.

What does this mean for indie authors?  Who knows, but it’s important to realize that Amazon makes about 7% of its revenue from ebooks (I can’t find the article on this, if someone has this reference, let me know).  I’ve also read recently that Apple and Google are taking bigger shares of the ebook and ereader market.  Would this mean that Amazon will finally start charging authors to publish?  Or give us a lesser share on our sales (remember, they already changed the royalty revenue for audiobooks so the author gets less)?

Amazon’s Profit Weakness Highlighted

I found this article to be very interesting.  Alibaba, the Amazon of China, has filed a prospectus with the U.S. Securities and Exchange Commission.  Here are some things to note:

  • Alibaba’s profit totaled $2.8 billion for the nine months ended Dec. 31 on revenue of $6.5 billion
  • Amazon hasn’t had much in the way of net income during its 20-year history, with $274 million earned for all of 2013 on sales of $74.45 billion

As the article notes:

Put another way, Amazon makes less than a penny for every dollar in revenue, while Alibaba makes about 43 cents.

Alibaba’s ability to churn out profits underscores how Amazon Chief Executive Officer Jeff Bezos’s strategy of pouring money back into the business and pressuring already razor-thin margins isn’t the only way to become one of the world’s biggest online-commerce companies.  That may exacerbate investors’ recent dissatisfaction with Amazon — they have pushed down the company’s shares 25 percent so far this year, as Bezos ramps up spending on fulfillment centers and delivery operations.

It gets worse for Amazon:

Amazon, meanwhile, has built out a massive infrastructure of distribution centers and delivery options.  The company’s expenses rose 23 percent in the first quarter, with fulfillment costs climbing 29 percent and technology and content costs jumping 44 percent.

Amazon has already raised prices for Amazon Prime.  With rising pressure from investors, will Amazon do other things to make more money?  Stay tuned…

PS – on a different note, how will this affect ebook sales?  Amazon, in general, stinks at ebook sales outside the U.S.  What will Alibaba being in the U.S. mean for ebook sales in China?

About Renée Pawlish

Award-winning author Renée Pawlish writes the bestselling horror book, Nephilim Genesis of Evil, the Reed Ferguson mystery series, short stories and non-fiction ghost stories.
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4 Responses to Indie Authors – Can Amazon Remain Relevant?

  1. Mary Pax says:

    Interesting… I don’t want to see Amazon flounder.

  2. Great post, Renee. And I believe you’re right. Pressure will force Amazon to squeeze, and a likely target will be authors, especially indie authors. Not only will Alibaba apply pressure, but if Apple ever gets serious about ebooks it could really pressure Amazon. In fact we might be seeing the first indications of the squeeze with the Hachette mess going on now.

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