During the years 2007 through 2010, Jeff Bezos and his team at Amazon did several things which would cause a sea change throughout the publishing industry. Taken each on their own, these business decisions probably looked innocuous. But they collected into a tidal wave which washed over the industry and changed the nature of books and content curation.
✥
First, in August 2007, Amazon launched a way for independent authors to sell their print books directly through Amazon's online bookstore, without any middlemen or barriers. Amazon had purchased several print-on-demand services in prior years, and they chose one of these, CreateSpace, to integrate with their online bookstore.
Unlike vanity presses, CreateSpace would not charge the author any fees, yet it enabled your book to be listed in the world's biggest online bookstore. This undermined the appeal of vanity presses such as iUniverse.
Amazon made another smart business decision by charging a listing fee to print-on-demand catalogs outside the Amazon umbrella, such as Lulu. In other words, forget Lulu. Forget iUniverse. If you wanted your print book to show up on Amazon's already-market-dominant online bookstore, Amazon's CreateSpace was suddenly the most attractive option.
✥
In November 2007, Amazon introduced Kindle Direct Publishing, known as Amazon KDP, along with its first generation e-reader.
Now authors could sell virtual books—ebooks—directly through Amazon, without any middlemen or barriers or third parties. You could only sell your ebooks in the United States, but that was a large marketplace.
The Amazon Kindle e-reader turned out to be cutting edge. It used e-ink, a new technology which cut down on screen glare. Thanks to e-ink, you could read a Kindle in bright sunlight, on the beach. The Kindle had few buttons, making it more intuitive and easier to figure out than competing e-readers. People began to desire Kindles. Not just tech-savvy Silicon Valley programmers, but teenagers and grandmas wanted them as well. They made great gifts.
Even book reviewers and book clubs were going digital. Goodreads overtook LibraryThing as the social media of choice for bookworms.
By 2009, Amazon had complete dominance over the rapidly growing digital marketplace for ebooks. It owned 90% of the ebook market. It cemented its digital dominance with the acquisition of Audible. Now it owned 90% of the marketplace for audiobooks as well. Soon it would integrate all three formats—ebooks, audiobooks, and print books—by introducing WhisperSync, so that readers could keep their place across multiple formats of the same book.
✥
As for print...
Amazon signaled strong interest in the future of print with its purchase of AbeBooks in December 2008. AbeBooks was (and still is) the predominant site for buyers and sellers of rare and out-of-print books. This purchase also gave Amazon a stake in LibraryThing, a precursory competitor to Goodreads.
Borders struggled to imitate the Amazon business model by incorporating a print-on-demand service. It signed a deal with Lulu in 2009. However, their online catalogs lacked the easy search and also-bought recommendation algorithms which made Amazon dominant. Their audiobook marketplace could not complete with Audible, and for ebook fans, they were not selling anything as nifty as the Kindle. The last year Borders had turned a profit was 2006. It was in a precipitous decline.
Barnes & Noble fared better than Borders, premiering its Nook e-reader device in 2009. Although the Nook could not quite gain as much traction as the Kindle, it relied on the popular Android operating system. And Barnes & Noble had cultivated a loyal customer base. They would survive the next few years.
Amazon gained even more market dominance with help from a company called Smashwords. This helpful little company gave independent authors a one-stop service where they could get their ebooks into the biggest online stores in the world. They began distributing to Amazon in 2009.
✥
On the app front, smart phones were a new thing. Apple had cornered the music market with its iPod, and now it was taking over the mobile phone market with its iPhone. Next, it wanted to create a marketplace for touchscreen tablets. It planned to unveil the shiny new iBookstore along with its shiny new iPad in 2010.
However, Apple came to the digital ebook market too late.
As it became apparent that the market for print was shrinking while the market for ebooks was growing, the whole corporate world began to fear Amazon as an unstoppable monster. Borders was dying. Barnes & Noble was losing money. The Big Six were grappling with a single, gigantic, obstinate retailer. Leaders at Apple understood that if they wanted to undercut Amazon's dominance over ebooks, they might need some extra leverage.
Together, Apple and the Big Six banded together to file a federal-level antitrust lawsuit against Amazon. They claimed that sales of newly released ebooks on Amazon were eating into sales of newly released hardcover print books, threatening the integrity of the curation of literature.
Amazon purposely subsidized its low-priced ebooks, in some cases paying the publishers more than it earned from ebook sales. It claimed that its famous $9.99 price cap was a selling point for Kindle customers. The Big Six wanted to be able to raise ebook prices to $15 or more, in order to keep print releases relevant.
Legally speaking, it was the United States versus Amazon. And Amazon refused to budge.
✥
Towards the end of 2009, one of the Big Six, MacMillan, antagonized Amazon with delays every time it released a new book. In January 2010, Amazon responded to that antagonization by removing the "buy" button from all the MacMillan books listed in its online store. Amazon did this without warning or fanfare. Suddenly, on a Friday, MacMillan books were no longer available for purchase in the world's largest bookstore.
It was clear that MacMillan—which owned one sixth of all the publishing imprints throughout the English-speaking world—could not withstand this treatment. The lawsuit would not end until several years later, but it settled in Amazon's favor. Apple was found guilty of conspiring to raise the retail price of ebooks.
The same month, Amazon went on a lightning rampage, announcing changes to its ebook business that took the world by storm.
Firstly, Amazon was going global with its ebook marketplace. Now you could sell ebooks not just to customers in the United States, but also Canada, the United Kingdom, Australia, and even foreign language markets in France and Germany.
Secondly—and this had an enormous impact—Amazon offered independent authors a mouth-watering royalty rate of 70% per ebook.
If you published through a Big Six publisher, you were lucky if you saw 5% of the net profits from your books. After all, the publishing house had people to pay. Editors and cover artists and the marketing team all needed to earn a living. And once they took their share, your literary agent needed a customary 15% as well.
Entrepreneurs looked at Amazon's royalty rate with green money emoticons lighting up their eyes.
Let's say you were a self-help guru with 15,000 fans. Or maybe you were an expert in personal investments or electrical engineering. In any case, let's say you could count on 8,000 fans to buy your ebook. Let's say your ebook price was the maximum $9.99. At a 70% royalty rate, you stood to earn $56k. If you had gone with a traditional Big Six publisher, you would net maybe $4k from selling the exact same amount of books at the exact same price point.
No one else in the creative industries offered a rate even remotely that good. Art galleries took more than 50% from artists. Online galleries, print shops, and game asset stores usually offered 5% to 20% commissions to artists. YouTube's shared ad revenue was laughable. Film and TV was tied up with agents and other middlemen.
And here was Amazon, casually offering the lion's share of profits directly to content creators.
Amazon would give you a platform on its global online bookstore, with its world-class search algorithms, for free. No listing fees. No hidden fees. It would pocket 30% of any profits you made and pay the rest to you. All you had to do was write a good book and make it stand out.
The floodgates were slammed open. Entrepreneurs with a penchant for writing surged into self-publishing through Amazon.