Pipeline: Amazon and comiXology, Cause and Effect

Tue, April 29th, 2014 at 2:58pm PDT | Updated: April 30th, 2014 at 2:33pm

Comic Books
Augie De Blieck Jr., Columnist
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AMAZON/COMIXOLOGY CAUSE AND EFFECT

Quoting the Seattle Times:

Amazon.com's shares sank nearly 10 percent Friday after a handful of analysts lowered their price targets for the online retail giant.

When Amazon announced its first-quarter financial results Thursday, it reported modest profits of $108 million on sales of $19.74 billion. And the company told investors to expect an operating loss of between $55 million and $455 million for the current quarter that ends June 30, compared with $79 million in operating profits in the second quarter of 2013.

Saturday afternoon, per CBR's report:

The convenience of buying comics directly from your iPad through comiXology's app is a thing of the past. The company, which is being acquired by Amazon, announced today that users can no longer purchase comics on iOS devices.

Let's let 9to5Mac spell it out:

Amazon does this to bypass Apple's App Store rules, which guarantee the iPad maker a 30 percent cut of all content sold through downloadable applications. By forcing users to access a browser, Amazon can keep its percentage of sales without needing to pay 30 percent to Apple.

As always: Follow the money.

It's all business. It's Amazon's right to make this move, just as they made it with their Kindle bookstore when Apple first started enforcing this rule three years ago.

Apple isn't evil for making this charge/tax/rake/whatever term you want to use. Apple provides a lot of infrastructure and promotion to apps in its store. It's pushed comiXology repeatedly over the years, and being amongst the top-grossing apps every week added to the app's visibility significantly. Most app creators would sacrifice limbs for that kind of promotion.

They sure as heck won't be seeing that love from Apple anymore.

This is a fight over two things: First, the tablet market. Amazon still believes they can take over the tablet market with their Kindles, and they'll do what they can to push them. I don't blame them. Seems a waste to not promote your own product with everything you've got. But that goes beyond the scope of this column, so we'll skip it.

Let's talk about the more relevant part here, and that's the 30% of sales that Apple takes from all in-app purchases. Historically speaking, 30% is low. Heck, Amazon's own Kindle self-publishing program runs from 35% (plus data transfer costs) to 70%. And Amazon can change your title's price at any time and only give you the cut based on that lower number. Without asking you.

This is the bed comics publishers now find themselves in. When it comes time to renew contracts, it'll be interesting to see how much pressure Amazon exerts.

Arment expands upon those thoughts at his blog this week. And everyone is linking to Gerry Conway's piece that kicked that off.

ComiXology is not alone in Amazon's recent drive to become a seriously profitable company. The price of Amazon Prime has risen, and the royalty rates on Audible's self-publishing program just went down, too.

Also, Amazon's sales are dropping significantly in states they charge taxes in, which will eventually be all of them.

Amazon needs to show serious cash flow. While comiXology might not be a large percentage of their overall business, every penny counts, particularly for a company famously trading on low profit margins to build up market share.

FOLLOW THE MARKETING

Amazon/comiXology is defending the move, pointing out the benefits it will have to their readers. The problem is, these benefits aren't all that beneficial. Let's run them down:

Because of the content restrictions our mobile partners have, shopping on the web provides even greater selection of comic books and graphic novels.

Comics that once were not available via the iOS app were still available on the web store before this change. After this change, those comics are still not available on the iOS app, and are still available on the web store.

No change.

iOS customers will now be able to save money with comiXology's exclusive web-only bundles
take advantage of subscription features

These features were added last summer and were web-only then. Removing in-app purchasing from the iPad doesn't impact either of these two points at all.

No change again.

The one truth in all of this is that Apple's pricing system is done in tiers, each tier ending in 99 cents. So you couldn't bundle together two 99 cent comics and sell them for $1.29 or $1.49. You couldn't make them an even dollar. Now, perhaps, Amazon/comiXology can do that.

enjoy eGift cards

Because Apple never made iTunes gift cards, the cheap -- hey, wait! iTunes gift cards are available at checkout counters at supermarkets and Target and pharmacies and gas stations and convenience stores...

That's OK, though, you can buy one of the bright shiny Amazon gift cards that are often next to the iTunes gift cards and -- oh, wait, no, you can't. Not yet, at least.

We also made our website more tablet/mobile friendly on all devices to make the purchasing process that much easier.

They could have saved themselves the energy by just keeping the iOS app, but OK. I'm glad to hear that if they're going to force this change, at least they're accommodating their users for it.

And in Safari on iOS, customers can easily save a shortcut to our webstore with the “Add to Home Screen” feature.

Yup, true. This isn't an advantage, per se, but it'll make the process slightly easier than, I don't know, typing "comix" in the URL bar of Safari and letting it auto-complete for you, or keeping a bookmark.

I'll give them this -- they're giving it the good ol' college try. They'll keep spinning plates and we'll hang on their every word. Right now, it's weak. It's a desperate attempt to placate ticked-off fans with some hand waving and reassurances that don't make any sense if you take a minute to think about them.

I can't help but flash back to the tweet I posted at the top of this column the week the sale happened. So true.

WHERE DO YOU BUY YOUR COMICS?

Good news: Your local comic shop still accepts credit cards.

Even better news: Image Comics sells its books digitally -- even the ones Apple blocked on its App Store -- in a DRM-free format, so you can take it to any comic reader you want. Those of you who've spent hundreds or thousands of dollars at pre-Amazon comiXology might wish you had those kinds of comics right now.

Here's the thing: Human beings are creatures of habit and inherently lazy. Make a simple process slightly less simple, and it'll have big impacts. Even if the process is still relatively simple, the slightest bit of friction will cause great upset and change habits.

I haven't bought many comics through comiXology. The few that I have, I believe I mostly bought through the website, in an effort to help the little guy out in their quest to change the world of comics. (Silly me.) I knew the difference between buying on the website versus buying through the app on my iPad. I wanted to help cut out the extra middle man, which has always been digital comics' biggest problem. Amazon/comiXology just helped to solve that problem by removing Apple.

Problem is, Apple is also a major distributor for comiXology. Amazon/comiXology knows those numbers. I don't. I have to believe, though, that more comics are bought through the App on iOS than on the website. And if it's not a plurality, it is at least a very large non-ignorable number. I guess so long as they don't lose more than 30% of those users, they'll come out ahead. And, being creatures of habit, comics fans are not likely to desert Amazon/comiXology, no matter how much they vent on-line.

FRICTION

Apple has a well-known "secret" in their business plan. They specialize in making things simple. They work hard to file off the rough edges. They simplify things to within an inch of their lives to help their customers do the things they want to do. That leads to an enormous catalog of credit cards on file. They made buying TV shows and movies and songs and even computer programs as simple as possible. Click a button, verify your password, and the download begins.

The new process isn't really that tricky. You can bookmark items in the Safari web browser or whichever third party app you're using. You can even create a bookmark on your launch screen, alongside all the other apps you use. Theoretically, you can put a comiXology bookmark next to the App launcher (the springboard). Go to one to buy a comic, then flip to the other to read it.

Seems kinda dumb, though, doesn't it? This is precisely the kind of silly friction Apple had removed with its in-app purchasing. You need to punch a bunch of extra buttons and be logged in twice. A big convenience factor has now been removed, and that will annoy people. Whether they're "right" or not, they will form new habits, some of which won't be healthy for the comics industry.

Buying digital comics with Amazon/comiXology is now the equivalent of going to the comics shop to buy your comics to take them home to read them. The digital world was supposed to solve that problem. For sure, it's gotten better. The web site is still much quicker and costs less in gas for your car. It just feels like more of an effort will be required to buy comics. And, yes, those impulse purchases will take a hit.

Amazon/comiXology doesn't release its numbers, so we'll never know. Will the loss in impulse purchases result in a noticeable difference to the publishers' bottom lines, to the point where they'll complain about it? Or is this just the move those companies needed to see to put more effort into concocting their own system and pulling out of Amazon/comiXology. Will Marvel go Heroes World on digital? Will we lose our one stop iTunes for comics all over again?

THE SAD LONELY WORLD OF THE COMIXOLOGY READER APP

I went through the process of moving to the new comiXology app on my iPad this weekend. Shifting from the teeming, busy, and bustling world of the comiXology store app to this new Amazon/comiXology reader app is a bit come down. It's like stepping into a Ghost Town. You know there used to be a lot of activity in the app, but that's been stripped back to its barest component. It's just an empty comics reading app with options to log in and out, and send Amazon/comiXology an email.

Sad.

THE BIGGER PICTURE, THE BIG QUESTIONS

This is the thing we don't know yet. We don't have a clue what the impact to the comics industry as a whole will be with this move. I don't believe Amazon cares about the comics industry. I believe comiXology did, at one point. It behooved them to. Amazon just sees a big market opportunity. It's their chance to be the top dog in distributing another "vertical."

Will this set back digital comics? Will this make anyone return to the local comics shop instead? Will this actually bring more money into comics thanks to that reclaimed 30%? Will comics lose readers? Will the dream of an iTunes for comics ever really come true? Is this just the first step to more changes?

We don't know the answers to any of this. I know a lot of people are complaining this week and talking about leaving comics again and threatening boycotts. But they say that anytime an X-Men dies or a DC character changes their costume. DC's New 52 still moves some units. If anyone on-line every really followed through on their threats, the world might change.

The big question mark centers on the more casual reader. Those who got into comics or back into comics thanks to the convenience of the iPad app. They don't need a weekly fix. They read when they want to, sample what is recommended to them or what they hear about on-line. They're not die-hards. They can go back to The CW and fill their wish fulfillment needs just fine there, thanks. TV shows are free and take up more time.

Do we lose those born-again and new readers, for whom the convenience of comiXology made all the difference? That's the scariest part. That's the unknown part.

Will Amazon bring in lots of new readers by attaching comiXology to their store? Will it be more than the ones they lose from pulling their store front off of the means of reading the comics they hope to sell? Will integrating comics into the overall churn of Amazon be the new newsstand?

I wish I had the answers. Right now, I'm too cynical about the whole thing to hazard a guess.

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