[Paleopsych] NYT: Amazon Expands Into Book Printing

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Amazon Expands Into Book Printing
http://www.nytimes.com/2005/04/11/technology/11ecom.html
April 11, 2005

    By BOB TEDESCHI

    SURE, [1]Amazon.com can sell books. But can it make them?

    The company itself raised that question, among others, last week when
    it purchased BookSurge, a book printing business based in Charleston,
    S.C., that specializes in so-called on-demand printing. BookSurge,
    which was privately held, is among a handful of companies spawned
    during the dot-com boom that rely on Internet technology to print a
    few books at a time, or even one at a time.

    The services have been most popular with writers who are unable or
    unwilling to strike deals with publishing houses, and who do not want
    to spend thousands of dollars to complete a print run of, say, 2,000
    books on a traditional offset press. Publishers, too, have used
    digital printing companies to satisfy small orders of obscure titles.

    Amazon.com declined to share specific details about the acquisition -
    its second in five years. "We feel we can do great things together.
    We're just not saying what that might be," said Patty Smith, a company
    spokeswoman. Nonetheless, Amazon appears a good match for BookSurge's
    would-be authors, because it attracts perhaps more literary types than
    any other electronic commerce site.

    The BookSurge deal, for which terms were not announced, may also help
    Amazon protect what remains a crucial part of its business, said Mark
    S. Mahaney, an analyst with the investment firm American Technology
    Research.

    "Anything to boost book sales is a good thing for Amazon's business,
    and for the stock," Mr. Mahaney said. "This could help."

    Sales of books and movies, Mr. Mahaney said, made up the bulk of
    Amazon's $2.6 billion in North American media sales last year -
    revenues that also included music. In the fourth quarter of 2004, in
    particular, he said, Amazon's North America media sales jumped nearly
    18 percent from the year-earlier period.

    "That's remarkably robust, given that it's Amazon's oldest, most
    mature business," Mr. Mahaney said. That growth is particularly
    important, he added, because book sales garner profit margins of
    between 20 percent and 30 percent, compared to consumer electronics,
    which generate profits of 10 percent to 15 percent.

    Profit margins have been Amazon's Achilles' heel in recent months. In
    early February, the company said that its 2004 sales had climbed 31
    percent, compared with 2003, but it said that its operating margins
    had dropped to 7 percent - well off the company's stated long-term
    goal of 10 percent. At the same time, Amazon.com's share price slipped
    from nearly $42 to about $36.

    The stock fell 30 cents to $34.60 a share on the Nasdaq on Friday.

    According to Robert Holt, BookSurge's managing director, the company
    has created proprietary software programs that automate the printing
    process to the point where even single-copy print orders are
    profitable, even though the book's final price is comparable to that
    of books produced through traditional means.

    "For a print run of 10,000 or 50,000 books, the manual costs can be
    spread out," Mr. Holt said. But for smaller print runs, he said, labor
    costs kill the economics of the operation.

    While lean manufacturing technology has existed for years at companies
    like BookSurge and Lightning Source, a division of the book
    distributor Ingram Industries, other elements have helped bring these
    services more squarely into the cross hairs of publishers and authors.

    Print quality has improved considerably, said Lorraine Shanley, a
    principal at Market Partners International, a publishing industry
    consulting firm. "You can now use color in a book, and produce
    hardcovers as easily as paperbacks," she said.

    And perceptions about on-demand publishing have also changed.
    Previously, many writers rejected the notion of so-called vanity
    publishing - the province of aspiring authors who spend tens of
    thousands of dollars to see their name on books collecting dust in the
    basement.

    With costs down and quality up, though, self-publishing has become
    more acceptable. And thanks to the Internet, authors have a greater
    chance of actually distributing their books. Susan Driscoll, chief
    executive of iUniverse, a service for self-published authors that is
    based in Lincoln, Neb., said one of her company's authors, Robert T.
    Dirgo, has found a steady market of about 800 copies a year for his
    book, "How I Reversed My Hashimoto's Thyroiditis Hypothyroidism."

    "With the Internet, these kinds of authors can find and reach their
    readers," Ms. Driscoll said.

    According to Bryan Smith, chief executive of AuthorHouse, another
    self-publishing business that is based in Bloomington, Ind., writers
    have also been emboldened by success stories like that of Joe Vitale,
    an AuthorHouse writer who reached No. 3 on Amazon.com's best-seller
    list in 2003 with "Spiritual Marketing: A Proven 5-Step Formula for
    Easily Creating Wealth From the Inside Out." Other AuthorHouse
    writers, he added, have moved from self-publishing to traditional
    publishing houses.

    Of course, for every writer who achieves financial or literary success
    through self-publishing, there are many more who have little,
    financially speaking at least, to show for the roughly $700 they pay
    to have their manuscript designed and bound, or the additional money
    they pay for marketing or editorial advice.

    Jill Scharff and Jaedene Levy, co-authors of "The Facelift Diaries,"
    which BookSurge published in October, have appeared on "Good Morning
    America" and the Fox News Channel, and have been mentioned in an
    article in The [2]Washington Post, among other publications. Yet the
    authors said they have yet to turn a profit on their initial print run
    of 500 books, for which they paid an undisclosed amount.

    "There is no money in this," said Ms. Scharff. "There are some authors
    that seem to make money, but they probably have to put a lot more work
    into it - although we have put a lot of work into it."

    Still, Amazon appears well suited to sell its services even to those
    who more vaguely believe they may have a book in them, as do more than
    80 percent of Americans, according to Ms. Driscoll, of iUniverse.
    Since many of those prospective writers are presumably readers, the
    Web's dominant bookseller could easily reach them.

    The Web site is already well-trodden ground for many experienced and
    would-be authors, analysts said, since it ranks the popularity of
    millions of book titles and provides a reliable database for those
    researching available books on a given topic.

    And Amazon.com's new BookSurge clients could help increase advertising
    revenues, which now represent a small fraction of the company's
    overall sales.

    Amazon charges authors and publishers about $750 monthly to promote
    their books on the site's item description pages for various
    best-selling titles.

    These ads, which have been a fairly well-kept secret in the industry,
    could attract new authors who are experiencing slow sales. After all,
    as any author knows, if a book does not sell well, it is clearly a
    marketing problem.

References

    1. http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=AMZN
    2. http://www.nytimes.com/redirect/marketwatch/redirect.ctx?MW=http://custom.marketwatch.com/custom/nyt-com/html-companyprofile.asp&symb=WPO