Free «Case Study of Innovation: Amazon and Random House» Essay Sample

With the continuous development of technology and science in the 21^st century, it has become possible to massively alter and develop the entertainment industry, including the book publishing that has evolved into digital books and presents a new rival for the conventional book editions. This paper examines and analyzes how the introduction of the e-reader Kindle by Amazon influenced one of the major editor publishers, the Random House, and defines whether such innovations are relevant. Moreover, it explores if Random House was ready to deal with competitive electronic reading devices.

Development of electronic books can definitely be considered to be an innovation both in digital technology and in the publishing industry. It left a deep imprint on the conventional publishing that was not ready for the rapid increase in the electronic books’ popularity that had definitely shattered the publishing business. A newly developed electronic book reader Kindle by Amazon appeared only in 2007 and has taken the leading position since then, while already by Christmas of 2009, Amazon reported that people purchased more of e-books than printed editions. Previously, after entering the market in 1994, Amazon was welcomed by the publishers, since it became their chief customer and was selling books. With the appearance of Kindle reader developed by Amazon, other e-reading devices such as Sony Reader were left behind due to the introduced innovation of Kindle – it had wireless connection and made it possible to buy and download books from the Amazon website. Moreover, the users could access journals, blogs, and newspapers via Kindle. Due to newly introduced capacities of Kindle, it exceeded Sony Reader in a couple of months only. Amazon has been continuously developing and introducing new possibilities of Kindle that make it more user-friendly and simple.

What sufficiently impacted the publishing industry and The Random House in particular was that Amazon started to lower prices for e-books setting them at $9.99, when the average price of printed books was $25. At this point, publishers of the hardcover and paperback books began to delay the e-books editions in order for the printed editions to be sold first. In 2009, Amazon faced rivalry from e-readers such as Nook, new edition of Sony Reader, and Apple Tablet. Moreover, the book publishers usually focused on their 15-25% of people who were regularly buying printed books. With the development of new technologies, they have lost the customers represented by the youth, since young people prefer electronic devices and Internet to the conventional books.

Due to the decrease in demand for printed books, the major owner of author’s rights for books, the Random House company faced a challenge whether to introduce further innovations in order to compete with Amazon or to set up negotiations concerning possible future cooperation with their major competitor. In comparison with the conventional publishing, e-reader market is extremely fast and less source- and time-consuming. Furthermore, Amazon was having better return and refund conditions of the books that it offered to the retailers. While Random House return rates were nearly 25-30%, Amazon had only 5%.

It can be concluded that the major publisher The Random House was not ready to face the rapidly developing industry of electronic books in perspective of technology, lower prices, as well as the return conditions and rates. With Amazon Kindle appearance on the market and their business success, the publisher’s sale rates dropped. All in all, publishing business had little chances to compete with the e-book market because electronic devices are cheaper, faster, more accessible and less time- and money-consuming. However, the conventional publishing industry should consider the idea of compromising with their competitors in order to stay on the market.