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Colin Robinson

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Bedtime for Bezos: OR Books Says "Thanks, But No Thanks" to Amazon

Posted: 03/22/10 01:42 PM ET

Amazon, the world's largest book retailer, is once again throwing its substantial weight around. Having been forced in January to allow big publishers to set the price of their own eBooks on the site, Amazon is now fighting a rearguard action with the smaller houses. According to The New York Times of March 17th, Amazon "has threatened to stop directly selling the books of some publishers online unless they agree to a detailed list of concessions..."

At OR Books, the new start up by myself and John Oakes, we have simple message for publishers being menaced in this way: You are in an abusive relationship. It's doing little for you that you can't do better yourselves. It's time to say "IT'S OVER".

With sales of $24 billion in 2009 (up 26% on the previous year), Amazon didn't get to where it is today by being touchy-feely. This is a company, after all, founded by Jeff Bezos, a man so devoted to the cold science of calculation that, for evening companionship after a hectic day on 80s Wall Street, he developed a system called "women flow", a variation of finance's "deal flow".

Amazon has resolutely opposed unionization in its warehouses on both sides of the Atlantic. And it has shown equal determination in refusing to pay state sales tax, utilizing a fiscal loophole that disadvantages local businesses and deprives states of much-needed revenue. It spent nearly $600,000 in just the last three months of 2009 lobbying the federal government on the issue.

In the battle over pricing of eBooks the company's steely calculus has once again flared to open aggression. Struggling to secure the future of its eBook reader Kindle, it wants to sell all e-titles at $9.99 or less. Publishers are worried that such cheap prices will eat into sales revenues of their conventional books.

Two months ago Amazon removed all of the buy buttons for Macmillan's titles from its site after the publisher insisted on setting its own prices. A tense stand-off followed before Amazon backed down, displaying characteristic contempt for the very idea of a publisher as it did so. In an unsigned letter to its customers it claimed it was being forced to accept Macmillan's terms "because Macmillan has a monopoly over their own titles." The Emperor had been exposed, if not as naked, at least as wearing armor with some serious chinks.

The stakes here are high: Apple's iPad is about to arrive on the market and five of the six largest publishers have already persuaded Apple to agree to terms allowing eBook sales on the device at prices of their own making. With its biggest competitor taking this stand, chances of a successful Amazon hold-out seem remote. But everything about its history suggests the company will go down with knuckles bared. Publishers who dissent can expect more tough offers that are difficult to refuse.

Thankfully, that's not a problem we face at OR Books. In starting our new publishing company we looked hard at what Amazon costs a small publisher, and what it provides in return. We decided it wasn't worth it; that we would be better off on our own.

To sell our titles, Amazon would require a discount of 55% or even 60%, that's $11 or $12 on a $20 book. Amazon would use some of this money to discount the book to its customers -- that's what gives it its edge. If, as a publisher, you try matching their reduced price, Amazon will insist your new, lower price is the basis for their discount, so they can cut their price still further. That makes it pretty much impossible for you to compete with direct sales to your customers.

For their very substantial take on a book, Amazon will rarely do more than simply make it available. Rather than going out and finding customers, it waits for them to come to it. And, of course, plenty do -- Amazon.com received 615 million visits in 2008; the company has 50 million customers annually.

But at OR Books, our calculation is that, for the amount of money we would have to give Amazon, we can do a better job finding customers ourselves. We know who our audience is, we share their interests, we visit the same websites and read the same writers. We empathize with them in a way that is impossible for the Bezos behemoth.

Orbooks.com will never, remotely, be a destination site in the manner of Amazon.com. But by investing our money in clever advertising and extensive online mailing, in imaginative viral video and lively author events, we are heading out into the world to the places where our potential readers already congregate.

When we arrive among them our pitch is not that of a big corporation fighting ruthlessly for market share. It's that of a couple of editors who love the books they publish and hope to convey their enthusiasm to like-minded readers. For every e-mail we get querying why our books are not available on Amazon, we get another saying how much our new approach is appreciated. We're keeping all the addresses; they'll be hearing from us again.

It's early days but it seems to be working. Our first book "Going Rouge: Sarah Palin -- An American Nightmare" became a New York Times bestseller. Now orders are pouring in for our second title, Norman Finkelstein's biting philippic "This Time We Went Too Far: Truth and Consequences of the Gaza Invasion." A collection of short stories by the renowned modernist writer and editor Gordon Lish is up next. You can check out or books on www.orbooks.com. Just don't look for them on Amazon.