Amazon launches yet another loss-leader, but what is its plan?

The Kindle Owners Lending Library will sell a lot of Kindles – but Kindles don't make money.

Amazon's Kindle Owners' Lending Library (KOLL) is expanding to the UK later this month, according to paidContent. The program allows Kindle-owning Amazon Prime members to borrow one ebook for free each month, and has been relatively popular in the US.

Although it started with a focus on traditional titles, in recent months it has become a key vehicle for promoting self-published authors through a program called KDP Select. The payment model earns authors who opt in comparatively large sums – Amazon says that "in September, authors earned $2.29 per borrow" – and asks for a 90 day period of exclusivity in exchange.

The program is yet another example of Amazon, depending upon your viewpoint, either being a devious long-term-thinker or displaying a foolhardy disregard for profit. Self-published authors who opt-in are paid from a pool of $700,000, and for a while Amazon even put books in the program without the publishers' permission, paying the full wholesale price whenever a customer took it out. Anyone who owns a Kindle and has an Amazon Prime subscription can gain access to it – but both of those are commonly perceived to be loss-leaders.

Amazon revealed yesterday that it makes no profit on Kindle Fires or the new Kindle Paperwhite, with Jeff Bezos confirming that "we sell the hardware at our cost, so it is break-even on the hardware".

Amazon Prime, meanwhile, costs $79 (£49 in the UK), and gives subscribers access, not only to the KOLL, but also to a library of free videos (including AAA, albeit older, titles like the Iron Man 2, True Grit, Sherlock and Downton Abbey) and free two-day delivery on most things the site sells. This last aspect alone is probably enough to make Prime a loss-leader; Amazon is notoriously cagey about these sort of things, but most analysts estimate that the average Prime user buys enough that the shipping costs outweigh the cost of Prime.

Independently, these two loss-leaders make sense. Prime serves to boost customer loyalty, and allows a feeling of instant gratification of the sort which mail-order companies had previously struggled to deliver. Kindles, meanwhile, lock customers in to buying all their ebooks from Amazon, basically forever.

But the KOLL is a loss-leader which serves to boost take-up of two other loss-leaders. It's turtles all the way down, at this point.

The larger battle which KOLL is fighting is against the publishers. By offering up KDP select authors for free, it serves to break the ice between the typical reader and the typical self-published author, enabling Amazon to consolidate its control over the publishing industry.

It's a battlefront which has also seen Amazon move from enabling self-publishers to becoming a traditional one itself. The company secured the exclusive North American rights to Ian Fleming's James Bond novels in April this year for its Thomas & Mercer imprint, which prints traditional paperbacks as well as an extensive Kindle library.

All of these loss-leading strategies mean that the company's finances are not particularly similar to those of more traditional corporations. Amazon's second quarter 2012 sales were $12.8bn; its second quarter profit was just $7m. Although the profit was especially low, because it included the $65m Amazon spent buying robotics firm Kiva Systems, the distinction stands.

And it's not just the revenue:profit ratio which is out-of-kilter. Amazon's price:earnings ratio (the cost of a share versus the earnings per share) stands at over 300:1; a normal value is around 10:1. (Incidentally, one of the noteworthy things about Apple is that despite having an astronomical market cap and share price, its P/E ratio 15:1. The company isn't overvalued, it's just overprofitable.)

The high P/E ratio implies that investors expect Amazon's profit to increase at some point in the future. But there's only two ways that could happen: either Amazon vastly increases its revenue, or it vastly increases its profit margin.

It sounds almost conspiratorial, but the only way the company can really do this – and its actions indicate that it knows it – is by becoming the only player in town. Amazon's success to date has been built around winning every price war going, but once it gains control of a field, then it wins that price war by default.

The problem the company has is that its competitors aren't taking its success lying down. Wal-Mart is the latest giant of Old Retail to attack Amazon on its own turf, testing same-day delivery (£) for a flat $10 fee in a few US locations.

As the New York Times writes:

If Wal-Mart expanded its same-day shipping across the country, it could essentially transform the more than 4,000 Walmarts, along with Sam’s Club and other divisions, into distribution centers. Amazon, by contrast, had fewer than 40 distribution centers in the United States at the end of last year and has plans to add about 20 worldwide this year. . .

Wal-Mart, meanwhile, has been building up its e-commerce site as it tries to do things that Amazon cannot, such as allowing customers to pay for online purchases with cash.

Amazon is in a good place to earn a lot of money. The Kindle dominates ebooks, a growing industry; the Kindle Fire is one of only two serious competitors to the iPad; and for a lot of people, "Amazon" has become to buying media what "Google" is to searching the web. But it's not the only company with a lot of advantages, and it's not guaranteed to own the future just because it was started in the 1990s.

Amazon's opaque network of loss leaders, plans for the future, and smart investments may still be leading somewhere. But it's unlikely that that place is as profitable as the company's investors hope.

A Kindle. Photograph: Getty Images

Alex Hern is a technology reporter for the Guardian. He was formerly staff writer at the New Statesman. You should follow Alex on Twitter.

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Just face it, being a parent will never be cool

Traditional parenting terms are being rejected in favour of trendier versions, but it doesn't change the grunt-like nature of the work.

My children call me various things. Mummy. Mum. Poo-Head. One thing they have never called me is mama. This is only to be expected, for I am not cool.

Last year Elisa Strauss reported on the rise of white, middle-class mothers in the US using the term “mama” as “an identity marker, a phrase of distinction, and a way to label the self and designate the group.” Mamas aren’t like mummies or mums (or indeed poo-heads). They’re hip. They’re modern. They’re out there “widen[ing] the horizons of ‘mother,’ without giving up on a mother identity altogether.” And now it’s the turn of the dads.

According to the Daily Beast, the hipster fathers of Brooklyn are asking their children to refer to them as papa. According to one of those interviewed, Justin Underwood, the word “dad” is simply too “bland and drab”:

“There’s no excitement to it, and I feel like the word papa nowadays has so many meanings. We live in an age when fathers are more in touch with their feminine sides and are all right with playing dress-up and putting on makeup with their daughters.”

Underwood describes “dad” as antiquated, whereas “papa” is an “open-minded, liberal term, like dad with a twist” (but evidently not a twist so far that one might consider putting on makeup with one’s sons).

Each to their own, I suppose. Personally I always associate the word “papa” with “Smurf” or “Lazarou.” It does not sound particularly hip to me. Similarly “mama” is a word I cannot hear without thinking of “Bohemian Rhapsody”, hence never without a follow-up “ooo-oo-oo-ooh!” Then again, as a mummy I probably have no idea what I am talking about. If other people think these words are trendy, no doubt they are.

Nonetheless, I am dubious about the potential of such words to transform parenting relationships and identities. In 1975’s Of Woman Born, Adrienne Rich describes how she used to look at her own mother and think “I too shall marry, have children – but not like her. I shall find a way of doing it all differently.” It is, I think, a common sentiment. Rejecting mummy or daddy as an identity, if not as an individual, can feel much the same as rejecting the politics that surrounds gender and parenting. The papas interviewed by The Daily Beast are self-styled feminists, whose hands-on parenting style they wish to differentiate from that of their own fathers. But does a change of title really do that? And even if it does, isn’t this a rather individualistic approach to social change?

There is a part of me that can’t help wondering whether the growing popularity of mama and papa amongst privileged social groups reflects a current preference for changing titles rather than social realities, especially as far as gendered labour is concerned. When I’m changing a nappy, it doesn’t matter at all whether I’m known as Mummy, Mama or God Almighty. I’m still up to my elbows in shit (yes, my baby son is that prolific).

The desire to be known as Papa or Mama lays bare the delusions of new parents. It doesn’t even matter if these titles are cool now. They won’t be soon enough because they’ll be associated with people who do parenting. Because like it or not, parenting is not an identity. It is not something you are, but a position you occupy and a job you do.

I once considered not being called mummy. My partner and I did, briefly, look at the “just get your children to call you by your actual name” approach. On paper it seemed to make sense. If to my sons I am Victoria rather than mummy, then surely they’ll see me as an individual, right? Ha. In practice it felt cold, as though I was trying to set some kind of arbitrary distance between us. And perhaps, as far as my sons are concerned, I shouldn’t be just another person. It is my fault they came into this vale of tears. I owe them, if not anyone else, some degree of non-personhood, a willingness to do things for them that I would not do for others. What I am to them – mummy, mum, mama, whatever one calls it – is not a thing that can be rebranded. It will never be cool because the grunt work of caring never is.

It is not that I do not think we need to change the way in which we parent, but this cannot be achieved by hipster trendsetting alone. Changing how we parent involves changing our most fundamental assumptions about what care work is and how we value the people who do it. And this is change that needs to include all people, even those who go by the old-fashioned titles of mum and dad.

Ultimately, any attempt to remarket parenting as a cool identity smacks of that desperate craving for reinvention that having children instils in a person. The moment you have children you have bumped yourself up the generational ladder. You are no longer the end of your family line. You are – god forbid – at risk of turning into your own parents, the ones who fuck you up, no matter what they do. But you, too, will fuck them up, regardless of whether you do it under the name of daddy, dad or papa. Accept it. Move on (also, you are mortal. Get over it).

Parenting will never be cool. Indeed, humanity will never be cool. We’re all going to get older, more decrepit, closer to death. This is true regardless of whether you do or don’t have kids – but if you do you will always have younger people on hand to remind you of this miserable fact.

Your children might, if you are lucky, grow to respect you, but as far as they are concerned you are the past.  No amount of rebranding is going to solve that. This doesn’t mean we can’t change the way we parent. But as with so much else where gender is concerned, it’s a matter for boring old deeds, not fashionable words.

 

 

 

Glosswitch is a feminist mother of three who works in publishing.