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A worker stacks a shipping trailer with boxed items for delivery at Amazon’s distribution centre in Phoenix. (RALPH FRESO/REUTERS)
A worker stacks a shipping trailer with boxed items for delivery at Amazon’s distribution centre in Phoenix. (RALPH FRESO/REUTERS)

Digital dilemma: Amazon pushes to package up more profit Add to ...

“If that’s the way the people are, and they’re hired for those skills, you can just imagine how they do business with other companies – it’s going to be like that.”

But beyond the headline disputes, Amazon is starting to employ a strategy that has the potential to affect traditional content gatekeepers much more significantly than the occasional passive-aggressive broadside.

Quite simply, Amazon is starting to create the content itself.

Going direct

Listening to an Amazon executive describe KDP, the company’s self-publishing service, it’s hard not to think of it as a direct competitor to traditional publishing houses.

“If you want to be published by a publisher and if they’ll buy your rights and publish your books, that’s great, and we’re very happy to sell those books,” said Kindle executive Mr. Naggar. “If you decide that you want to control your own rights, decide what your cover looks like, earn a 70-per-cent royalty, be available globally instantly, KDP is now available to you as well.”

(Asked whether Amazon makes more money every time it sells a KDP book, compared with books delivered by a traditional publisher, an Amazon spokeswoman refused to comment).

The book industry may be the most immediate example of an area where Amazon is starting to – at least in some cases – replace the traditional middleman, but it is not the only one. The company also runs a service called CreateSpace, which allows musicians and movie makers to self-publish their work and sell it on-demand – in physical form – through Amazon.

“Historically ... [if] you want to make an album, well you’re going to have to do a minimum run of CDs or DVDs or books of some minimum value,” said Bill Carr, vice-president of music and video at Amazon. “But the ability to print on-demand or burn on-demand is a meaningful innovation, a meaningful way of solving that problem.”

So far, CreateSpace has been responsible for only a small portion of Amazon’s overall media offerings. But the company has taken the strategy one step further by launching its own production company. Amazon Studios, announced last year, is currently producing five original TV shows, following the lead of digital media companies such as Netflix.

Amazon’s ongoing effort to act as middleman in the creation of almost every sort of digital content has also, more recently, seen the company expand into newer fields. Amazon AppStream, a cloud-based service, allows app developers to run complex or processor-intensive applications remotely, taking advantage of Amazon’s massive cloud computing infrastructure. In effect, the service is part of a group of offerings through which the company hopes to do for app developers what its self-publishing tools have done for authors.

Taken in sum, Amazon’s myriad expansions mean the company is positioned as a potential gatekeeper in virtually every major area of digital content. As such, should investors continue losing patience with the company’s financial results, Amazon’s acrimonious disputes over pricing and profit margins may begin to be felt by more than just a few publishing houses.

“I remember seeing [an illustration] of Jeff Bezos a while back,” Mr. Pliniussen said. “He had six arms, he was smiling and each hand was holding a different product group.

“Now it may be more appropriate for him to have 18 arms.”

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