Some disconnected thoughts on Waterstones and Amazon

Well, that caught everybody napping, didn’t it? A day after telling Robert McCrum that Waterstones would be “different” and “better” than Amazon when it came to selling digital books, Waterstones announces that it’s signed a “commercial agreement with Amazon (NASDAQ: AMZN) to launch new e-reading services and offer Kindle digital devices through its UK shops”.

Hey, Daunt? My gun's bigger than yours

Twitter this morning has erupted in a volcano of dismay, incomprehension and more than a little sarcasm. The words “suicide note” are being bandied around. And on the face of it the deal does look barking mad: plucky British bookseller puts its head in gigantic American lion’s mouth, instead of lying down on the plush sofa in the next cage.

Some random thoughts on all this:

  • Commenting on any deal like this is like shooting a pistol in a dark room. There’s an information imbalance here. If one assumes that neither Waterstones nor Amazon is run by reckless idiots with an appetite for self-immolation, one has to consider what the reasons for a deal like this would be. In fact, when a deal is this startlingly unexpected, one has to think even harder.
  • The Waterstones press release is short, lacking in detail and, perhaps, a bit rushed? One of my first thoughts was that perhaps this deal is a reaction to something else external to both Waterstones and Amazon. What could that be? Well, is Nook up to something (see below)?  That’s the kind of thing that could have sent Waterstones scurrying into the arms of Amazon.
  • This is, paradoxically, a bet on the physical, by both companies. Waterstones is essentially saying it is happy to outsource much of its digital future to a third party, leaving it to concentrate on physical bookselling. Whatever you think of the intelligence of that move, you shouldn’t ignore the benefits of freeing up management headspace. Digital has been a huge distraction for Waterstones; arguably, it now won’t be. Again, I should say that doesn’t make this a smart move. But it might be a tick in the “pro” column. Also, some analysts in the U.S. have been saying that Amazon’s main weakness is its lack of a physical High Street presence; this is certainly the line Barnes and Noble has been peddling. Well, that problem is now sorted, in the UK at least.
  • So much remains to be made clear. I find it interesting that the press release refers to “new e-reading services”, which seems to be a careful phrase with lots of headroom. How then will Waterstones handle DRM? File formats? Buy one format, get the other free (presumably impossible without publisher buy-in)? Customer data? And, following on from that, community activities like highlighting and commenting and sharing – all of which sit within the Kindle data store? What are the “dedicated digital areas” in stores the press release mentions?
  • What is Nook doing? Did it have a deal with Waterstones which was then dismissed? Was Waterstones using Nook to negotiate with Amazon? Is Nook talking directly to publishers about direct digital distribution of their books?
  • Did WH Smith just become the most complete, vertically-integrated bookselling company in Britain? What does that mean for book retail, and for publishers?

Random thoughts, as I say. Will add to them as and when. But what do you think?

UPDATE:

Here’s the video Waterstones have put out with James Daunt discussing the deal. It doesn’t really answer any of the specific questions, but the emphasis is very much on the “reading experience”.

 

About Lloyd Shepherd

Lloyd is the author of The English Monster and The Poisoned Island. He lives in London, but dreams of Manchester.

Comments

  1. Nice article. I wasn’t as surprised as the rest of the twittersphere pretends to be. Although Nook was rumoured as a Waterstone’s partner last year, their recent Microsoft deal plus lack of any further news suggested this was a dead end. Waterstone’s pre-Daunt dabbling with Elonex and other ‘busted flush’ eBook makers was embarrassing. Younger readers may have forgotten, but in the early days, Waterstone’s used Amazon as their online homepage. They basically stuck a Waterstone’s logo onto Amazon and that was it. Don’t believe me? Check it out. They ended a 5-year partnership way back in 2006: http://www.brandrepublic.com/news/557968/Waterstones-ends-Amazon-deal-launch-its-own-website/

    What this deal tells me is that Waterstone’s under Daunt is going to be a flat-out bookshop. A real one. WH Smith is now the online/offline choice if you want vertical integration. Actually, vertical integration makes very little sense at all. The commercial and supply-chain aspects of eBook versus paper book are totally different, and likely incompatible. Amazon are building real shops in the US already and likely to try something like it here. But it’s basically a front-end to their website. Waterstone’s is totally different, and the eBook market is not as vibrant here (yet) as it is in the US.

    What this deal does is allow Daunt to focus on the shops. The partnership almost certainly has various get-out clauses but should stop people asking him about their e-Strategy for at least another five years. By then, the Kindle may be a mature device worth having rather than the prototype it is now. And does this mean UK readers will no longer have to wait 6 months longer than US readers for the latest product? Not likely. Amazon and Apple are forging ahead with their ‘use our software/media/books on our devices, and only on our devices’ strategy and it is, simply put, doomed.

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