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Amazon.com has many reasons to celebrate these days. First, it has challenged successfully major retailers like Best-Buy (NYSE:BBY) and Wal-Mart (NYSE:WMT) in traditional merchandise—they both reported lackluster earnings results for the last quarter, due to margin pressures. Second, it has sidetracked major bookstores, including Borders Group that is no longer around. Third, it is about to challenge Apple (NASDAQ:AAPL) in the iPad market with the launch of its Fire Tablet. Will it succeed?
As we did write in a recent piece, Amazon’s success in this area hinges heavily on the ability of the company to bundle Fire with content within its Prime program. The problem, however, is that Amazon.com doesn’t own this content. It has to purchase it from book publishers and authors. And as the Netflix (NASDAQ:NFLX) case has demonstrated, it is the content providers rather than content distributors who have the upper hand in this relationship.
In fact, authors and publishers aren’t terribly happy with Amazon’s e-book subscription/lending program that allows Amazon Prime subscribers to download 5000 e-books for free. In an e-mail sent out yesterday, The Author’s Guild claims that the Big Six publishers – Random House, Simon & Schuster, Penguin, HarperCollins, Hachette, and Macmillan – have not signed up for the program. The Author’s Guild further argues that Amazon’s efforts to persuade small size publishers to participate in the program have draw little interest. Nevertheless, the Guild claims that Amazon might have included many titles in its program without publisher/author consent.
While we aren’t in a position to confirm these claims, we can certainly see that Amazon.com will eventually run into serious problems with publishers and authors that may undermine or even derail its “bundling” plan; extinguishing the fire behind Fire.
Disclosure: Short on NFLX
