Cover Story: Amazon: The Elephant in the Room

Generally, publishing industry observers grant Amazon the right to publish its own titles, and compete with other publishers for authors. They also note that while it may hurt retailers, publishers and agents, it's good for authors, because another buyer in the market increases competition and compensation for their services. But it may not be a game changer. "I remember 10 years ago, everybody was up in arms when Barnes & Noble decided to publish books," Norris notes. "They had some pretty lofty goals about how much of their revenues they wanted to be from their books." Today, of course, Barnes & Noble talks much less about publishing than it talks about the Nook—and in January, put Sterling, the publisher it bought in 2003, up for sale.

A Role For Regular Retail?

The most surprising recent development with regard to Amazon is a persistent—as of press time neither confirmed nor denied by the company—rumor that the e‑commerce giant is planning a move into bricks-and-mortar retailing. As described by those who claim to have to talked to Amazon insiders, the stores would have no inventory, but would allow shoppers to order for later delivery books they've seen samples of in the flesh—a showroom model much like the one many booksellers feel they've been relegated to today.

Some observers think it's not likely. Shatzkin says that Amazon stock is priced as if it were a high-flying e‑commerce company, not a pedestrian retailer tied to heavy capital investments in real estate and physical stores. Although a prospective Amazon store is likened to Apple's highly successful retail stores, Shatzkin points out that Apple is a manufacturer of high-margin, high-tech devices, not a middleman of mass-market consumer goods like Amazon is, with the exception of the Kindle.

But retailing may have more appeal than skeptics think. Amazon surprised many by distributing Kindle through Target and other mass merchandisers, signaling that it respects the unique advantages of a physical channel. And Barnes & Noble's surprising success with aggressively featuring the Nook in its stores shows how a physical display can overcome consumers' reluctance to buy things they can't see and touch. Finally, it's worth recalling that most analysts thought Apple was making a big mistake by opening retail stores.