What Amazon's acquisition of social network Goodreads could mean for publishers, retailers and consumers-Who comes out on top? Who takes a hit? What does the future look like for the publishing industry?

Sandy Yang

LOS ANGELES , April 11, 2013 (Industry Intelligence Inc.) – Amazon.com Inc.’s agreement to purchase social network Goodreads Inc. in the second quarter of 2013 has reverberated within the publishing world and beyond since its announcement on March 28. The proposed deal is rife with speculation but there are few confirmed details of what the merger will mean for publishers, booksellers and consumers.

What is known is that Goodreads has 16 million members, 23 million book reviews and 525 million titles read, according to its website. Meanwhile, Amazon has captured 65% of the e-book market, well ahead of second-place Barnes & Noble Inc. at 25%.

Amazon’s purchase price was estimated at US$150 million, Motley Fool reported April 4. Industry insiders are also speculating on the benefits and fallouts of the merger between the world’s largest online retailer and the world’s largest site for readers and book recommendations.

Consumers

Customers would benefit from the merger if Amazon integrates Goodreads’ extensive data from 16 million people, which could then better match readers with the books they want to read, said Mark Coker, CEO and founder of Smashwords, Good E-reader reported March 29.

It remains to be seen whether Amazon will take all the Goodreads information on individuals and match it up with its own data, such as purchase history. But even if a consumer isn’t a Goodreads member, there is a clear benefit from more comprehensive reviews. The Authors Guild President Scott Turow pointed out in a March 29 blog post that the nonfiction title “Animals Make Us Human” by Temple Grandin and Catherine Johnson generated 123 reviews from Amazon and 40 reviews from Barnes & Noble, but that number surged to 464 reviews on Goodreads.

Coker called the deal “a brilliant acquisition for Amazon” and “a win for both Amazon and Goodreads,” citing the fact that combining the two powerhouses will make it harder to “game the reviews.” Unlike Amazon’s reviews, Goodreads’ are tied to a social profile, thus making it harder to create aliases. Moreover, Amazon had recently banned writers from reviewing books in the same genre they publish in, following embarrassing press coverage of instances where authors used aliases to trash their rivals’ work and write glowing reviews about their own work.

Moreover, the merger would bring the Goodreads experience to Kindle, according to Goodreads CEO Otis Chandler, adding that Goodreads members had been asking the company to integrate e-readers into the experience.

However, the news has not been sitting well with some Goodreads members, several of whom have canceled their memberships at the prospect of Amazon acquiring their information. On the other hand, Chandler said in an emailed statement to The Wall Street Journal that more people signed up for a new Goodreads account in the three days after the announcement than in any other three-day period in the site’s six-year history.

Retailers

Booksellers that are not Amazon appear to be at the losing end of the deal. Because Goodreads directs readers to Amazon links as well as Barnes & Noble, Kobo, Half.com and other booksellers for titles that are reviewed on the site, Coker predicts the inevitability that “Amazon will start neutering or disadvantaging the buy links to their competitors.” Moreover, eliminating the links to competitors’ sites would give Amazon “an ever-increasing share of each book dollar’s pie,” Coker said.

Also, because the reviews will be more in-depth than anywhere else, Barnes & Noble and Apple won’t be able to compete, and those that use Goodreads reviews such as Sony and Kobo “are in a tough bind,” Coker said. “These retailers have lost control of their reviews.”

Amazon expects the deal to close in the second quarter of the year, Bloomberg reported March 31, and it remains to be seen whether Coker’s prediction would become an issue with regulators.

Turow, the bestselling author of “Presumed Innocent,” voiced opposition to the merger in his March 29 blog post published on the Authors Guild website, saying that it represents an intention “to eliminate or absorb competitors before they pose a serious threat.”

He added, “With its 16 million subscribers, Goodreads could easily have become a competing online bookseller, or played a role in directing buyers to a site other than Amazon.”

However, an Amazon spokesman said that the company’s other acquisitions, such as online shoe and apparel store Zappos.com, have continued to operate with few changes, The Wall Street Journal reported April 3.

Publishers

Smaller publishers could find a bright spot in the merger, as their titles could compete with books from the big publishers on Amazon’s platform. The online retailer itself is a small publisher with six imprints, the most recent one called Little A, whose print editions will be distributed by Houghton Mifflin Harcourt’s New Harvest imprint. And it offers authors a platform to self-publish their work though Kindle Direct Publishing Select program and to get paid for content that’s loaned to Amazon Prime members.

Some have enjoyed incredible success via Amazon’s publishing services, such as John Locke, the first self-published author to sell more than 1 million books. Thanks to the merger, self-published and independent authors would gain access to new promotions and a new pool of highly influential readers, Forbes reported March 29.

Science fiction author Hugh Howey weighed in on the argument in a March 28 blog post, commenting that it’s not so much about Amazon against other booksellers or anyone else in the publishing industry, but that the fight is between books and all the other media competing for consumers’ attention. Howey pointed to TV, Facebook and video games—media that’s free or cheaper and offers more instant gratification—as the real competition.

“Our war is to get more people reading,” wrote Howey, whose Wool book series was self-published on Amazon and has since signed a print distribution deal with Simon & Schuster Inc. and has sold film rights.

“Amazon and Goodreads have been fighting that war. If anyone thinks the fighting has been between them, I don’t know that they’ve looked up from their books and studied the landscape.”

* All content is copyrighted by Industry Intelligence, or the original respective author or source. You may not recirculate, redistrubte or publish the analysis and presentation included in the service without Industry Intelligence's prior written consent. Please review our terms of use.