An article I came across recently explains some of the hidden intricacies behind Amazon's ultra-successful business model, including some of the recent changes that have some publishers and authors a bit worried.
Up until recently, when you clicked the prominent Add To Cart button on Amazon's websites (known in the trade as the "Buy Box"), you were agreeing to buy a book through Amazon itself, secure in the knowledge that Amazon has in turn purchased that book from a publisher or a publishing wholesaler. Under that system, you knew that Amazon took a sizeable cut, typically around 40%, but you also knew that 60% went directly to a publisher, which then used this money to pay the author his or her cut, as well as to cover the other expenses of producing and distributing the book, plus their own profit margin.
But, for some years now, Amazon has also been in the business of selling books through third-party sellers. Under this system, Amazon typically keeps about 15% of the total sale price including shipping, plus a $1.85 flat fee per item, with the rest going to the third party seller to pay for purchasing, shipping and warehousing costs. But it seems that, although the books sold by third party shippers are technically new and unmarked, they are often not actually purchased from publishers. It seems that just where they do come from, and how extensive the problem is, is not actually known, either by the publishers or by Amazon itself, but it is thought that many of them may be free promotional copies and/or perhaps books with minor cosmetic damage bought up from warehouses at a substantial discount. Either way, the publishers do not benefit much, or even at all, from these transactions, and the poor authors, who rely on their publishers to pay them, get even less of nothing.
Anyway, be that as it may, the recent change that Amazon has brought in, means that when you click on the Buy Box now, without looking for more options, you are buying a book from the "Buy Box Winner", which may be Amazon or it may be an approved third party seller, being the result of a competitive bidding algorithm for each product that Amazon advertises on its sites. So, you no longer have the assurance that a publisher, and therefore an author, is actually benefitting from your purchase. In addition, if a Buy Box Winner happens to be out of stock of a particular title you try to buy, it will look as though the book is not available anywhere else on Amazon, which may not be the case.
If it is more difficult for publishers to make a profit on Amazon sales, this will probably also result in them being less likely to publish artistically challenging or commercially risky books, so that the market will be (even more) flooded with Daniel Steel, James Patterson and Nora Roberts novels. Eventually, as Amazon drives the price of books down and down, fewer and fewer people will be able to make their livings as writers, difficult as this already is - even a typical Man Booker finalist, for example, can only rely on between 10,000 and 20,000 book sales, and sometimes a little as 3,000 - and so fewer and fewer will even try. Not a good prognosis for literature as a whole.
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