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Impossible to think about digital books in Brazil without thinking about Amazon and Bookwire, respectively the largest seller and the largest supplier of digital books. Bookwire, the German company with subsidiaries in Brazil and other countries, besides being the “largest” supplier is also the “only” one for 80 thousand digital books from more than 700 Brazilian publishers. After negotiating for months in Germany, the two companies reached an impasse on financial issues that led Amazon to remove all ebooks from Bookwire for 3 weeks, from February 22 to March 14. The impact of this was immediately felt in Brazil, with readers complaining about the ebook blackout on Amazon and publishers, with tied hands, limited to indicating other competing stores of Amazon.
The standard narrative of this story portrays Amazon as the terrible villain, whose brutal tactics would aim to extract everything from its suppliers, reminiscent, albeit remotely, of a 2021 negotiation between Brazilian publishers and Amazon. However, there are some differences. The main one is that the overwhelming majority of the 700 publishers do not negotiate digital books individually with Amazon. For these publishers to work with Bookwire, they are obliged to grant exclusivity of the distribution of their digital content to Bookwire. Because of this, it was Bookwire that negotiated with Amazon, without interference or participation of the publishers in this process.
Another difference is that not all of the more than 700 publishers associated with Bookwire were offline from Amazon for 3 weeks. According to the same Publishnews article mentioned at the beginning, “some publishers have different contracts with Bookwire, or negotiate digital books directly with Amazon,” including “Companhia das Letras, Record, and Rocco.” Of these 3 mentioned houses, two are former founders of DLD (Distribuidora de Livros Digitais), along with Sextante, Planeta, L&PM, and Novo Conceito. Apparently, all of them maintained the privilege of negotiating their conditions directly with Amazon, as their ebooks remained online throughout the Amazon blackout. For these publishers, life went on as usual. DLD ceased to exist in 2017 because it was absorbed by Bookwire.
If we compared Bookwire to a cruise ship, the publishers from the old DLD would be the first-class passengers; all others, the second or third class.
A brief disclaimer: my publishing house, Simplíssimo, distributed its ebooks directly to stores and bookshops between 2010 and 2016. Between 2016 and 2023, it was a client of Bookwire. Since April 2023, Simplíssimo has again distributed its content and that of other partners on its own. Thanks to this change, Simplíssimo’s ebooks were not affected by the impasse between Amazon and Bookwire.
With this disclaimer made, the decision to publish an opinion piece criticizing another company was based on the following reasoning: an outage of 80.000 ebooks in the main ebook store (out of around 100.000 available from Brazilian publishers) was much more than a problem of just Amazon, Bookwire, or their clients. It was a huge shock, immediately noticed by consumers, felt by everyone. In just over 10 years of selling digital books through major stores in Brazil, there are still many skeptical looks towards the digital book. It systematically suffers from a small share in publishers’ revenues. And now, more recently, from controversies involving Bookwire. Colleagues in the publishing market may disagree with the conclusions, but the controversies are not “mere coincidences.” At the origin of them is a very specific way of doing business that is detrimental to everyone.
In August 2023, when the negotiations of the State Government of São Paulo came to light to eliminate physical books from schools in favor of digital books, these digital books would be provided by Bookwire without bidding. At the time, as the São Paulo Department of Education and Bookwire justified, this choice was due to “the impossibility of competition, as only Bookwire has exclusivity in distributing the indicated works.” As Bookwire itself stated at the time, “In more than a decade of operation in Brazil, Bookwire’s catalog comprises about 700 publishers and 80 thousand digital books,” and such supply to the government would occur due to its specialized services “and exclusivity over the works.”
Without delving into the absurdity of replacing printed books with digital ones in Brazilian public schools (lacking even basic infrastructure), the origin of the Amazon blackout and the controversy over digital books in schools can be summarized in one word: exclusivity.
Regardless of how private monopolies arise, they create problems that would be minimized, or wouldn’t exist, if there were competition (or conditions for the existence of such competition). The exclusivity practiced by Bookwire is a “closed gate,” through which the entire digital catalog of each of the more than 700 publishers falls under its exclusivity. It is an excessive concentration of the digital collections of Brazilian publishers in a single company. It makes it the only company capable of negotiating and supplying more than 80.000 products in the market. From this mechanism, only Bookwire has the power to decide for whom, how, when, and under what conditions these products will be supplied. This form of exclusivity demanded by Bookwire is the root of recent controversies and, if it continues, will be the root of other atypical, paradoxical situations in the future for the Brazilian digital market.
It is impossible to have balanced competition under such conditions. Any competitor of Bookwire who wanted to start today in the country would begin out of the game a priori. It is a monopolistic practice without “technical” justification, as there is no reason of this kind requiring that, for a distributor to operate, it needs to have exclusivity over the complete digital catalog of its clients.
Limited exclusivity, applied only to the works that the publisher itself wanted to offer, through distributor A, B, or C, would not hinder competition or the emergence of other competing distributors in the digital book market. Selective exclusivity over just some works, without this “closed gate,” would allow, for example, the publisher to work with different parts of its catalog with different distributors or sell digital books directly to stores and specific channels more aligned with the audience and content, according to the needs and interests of each publisher. If Bookwire worked with a more “normal” exclusivity, without a “closed gate,” there wouldn’t have been controversy with the government of São Paulo because there would have been enough competition to hold a bidding process; the digital books would still have gone offline on Amazon, as it was a problem in Germany, but the effect in Brazil would have been irrelevant. Publishers could simply remove the books from Bookwire and put them back on Amazon through distributor A, B, or C, or independently. They would have returned to Amazon much more quickly. In summary, there would be more competition to distribute the digital book, with all the benefits that competition allows in any market segment.
Publishers are especially disadvantaged. The lack of broad competition alone increases the distribution costs paid by the publisher, but there are worse problems. An illustrative example: selling ebooks directly via social networks. If readers discover the content there, it makes perfect sense for them to buy there without having to leave the social network and go to store A, B, or C. Some networks have plans for this. However, the more than 700 publishers have already foregone the opportunity to negotiate their own terms with the networks and the chance to earn more by doing so—not only with social networks, but with any other stores and sales channels that may be interested. After all, Bookwire has exclusivity to provide digital books to social networks, or other stores, distributors, etc. Anyone wanting to negotiate and offer digital books must seek out Bookwire, and only it, as the exclusive intermediary, to access these products. This is a real scenario, not hypothetical, as it is exactly what happened last year in the sale of digital books to the São Paulo government. If a publisher wants to negotiate directly with a channel, present or future, say, TikTok, it will need permission from Bookwire to do so. Even with stores or partners that do not yet work with Bookwire. Note well: a publisher, seeking authorization from the distributor, to negotiate its own books. This is the kind of distortion caused by “closed gate” exclusivity.
Ten years ago, when ebooks and digital content yielded nothing for Brazilian publishers, it was irrelevant if they granted absolute power over digital content to just one company. Time passed, the relevance of digital content grew, and it becomes evident how this “strategy” was not exactly sensible for those who produce content. And the consequences resonate in society.
The digital book somewhat resembles the gold of colonial Brazil. The Brazilians of those times paid a tax on the extracted ore, called the Quinto, to the Portuguese Crown. The publishers, in a way, not only pay a Fifth to a new metropolis in Europe but also concede to the metropolis the power to decide what to do with the rest of the gold. The Brazilians of the gold cycle hated the Fifth and jokingly nicknamed it “The Fifth of Hell”…
The mechanisms of colonization have modernized and perfected with the digitalization of business, disguising their appearance and are out there. Whoever looks for them, finds. I conclude with a post from the former vice president for audiobooks at Spotify, Nir Zicherman, which I found on LinkedIn through consultant Carlo Carrenho:
Nir Zicherman full reflection about monopoly is here.
