Amazon Rakes In More Cash, And Spends It Wisely

Amazon announced its Q2 results yesterday, and the growth was stunning – net sales were up 51% on 2010, topping out at $9.91bn for the three month period ending June 30.

Founder and CEO Jeff Bezos said that “low prices, expanding selection, fast delivery and innovation are driving the fastest growth we’ve seen in over a decade.” He also noted that the Kindle 3G with Special Offers (priced at $139) quickly became their bestselling Kindle. As usual, no exact numbers were given.

Those deep pockets just keep getting deeper. But what are they doing with the money? Despite this staggering growth, profits are down 8% on the same period last year. Why?

Some of the details from Amazon’s press release give us a clue.

International sales, which includes Amazon sites in the UK, Germany, Japan, France, Italy, and China (but not Canada), increased to a phenomenal $4.51bn.

This means that international sales are now approaching parity with North American sales ($5.4bn for the same period, which will include many international sales from countries without a dedicated site).

Amazon, unlike Barnes & Noble, are reaping the benefits of finding and exploiting the potential in international markets. They have a strong presence in seven ex-US countries, and they are planning more, investing heavily in international expansion.

India, with a fast-growing population of over 1.1 billion, is next. While full details of the plan are yet to emerge, it looks certain that they will have a website presence there and have already purchased facilities in Mumbai and Chennai to add to their existing Kindle development team in the country.

I’m not sure if a full-on Kindle Store will be the next step (my guess would be that they will roll out other e-commerce operations, including print books, first), but a Kindle Store is sure to come at some point.

There are also lots of rumors that Amazon is hiring for Spanish, French, and Italian Kindle teams. The Spanish language market, in particular, has huge potential, encompassing Spain, Mexico, all of Central America, most of South America, and some of the Caribbean.

If Amazon rolls out these four new Kindle Stores, that will be well over 1.5bn people who will be able to purchase Kindles without heavy import duties and delivery charges (which make the cost prohibitive). They will also have access to cheap e-books for the first time (as they will then escape the $2 Surcharge Amazon levies on most e-books internationally).

While only a quarter of a million people in India classify English as their mother tongue, an estimated 30% of the population speak it to a greater or lesser degree – including most of the burgeoning middle class, the ones who will have the disposable income to purchase e-readers.

While there is a market for English books in all the above mentioned places, sales will always be dwarfed by local language works. As such, to fully exploit international markets, some writers may begin considering translating their works. Joe Konrath, in a blog post yesterday, was quick to spot the potential.

Times have changed. The potential to make money world-wide is an unprecedented opportunity for vast riches that makes current ebook sales pale by comparison. There are billions of people in 196 countries. More and more have acquired computers, cell phones, and mp3 players. Ereaders will come next.

He also notes that one of the few indie writers to gain success in the German market is Scott Nicholson, who is currently riding high in the charts with a translated edition of The Skull Ring.

However, this is where most indies run into a problem, as evidenced by the comments on Joe’s post. A proper, professional translation will set you back between $10,000 and $20,000. That may only be a one-time cost, but it’s a significant investment.

Self-publishers may cast around for a solution, thinking this might be a case where sharing the risk and giving up a percentage to a third party may be prudent. But we don’t need to reinvent the wheel here.

Every few weeks, an indie writer posts on Kindle Boards checking the bona fides of a European publisher that wishes to purchase foreign rights (often before they have been approached by any domestic publisher).

While there may be far more money and control in going it alone, most writers don’t have the cash lying around to risk on an expensive translation that may or may not be recouped. Selling the foreign rights to a publisher may be a much more prudent option.

This is one of the areas where agents could carve out a niche in this new world (rather than ill-conceived attempts to move into publishing). The exploitation of subsidiary rights is one of the core roles of an agent. I’m surprised that agents aren’t scouring the Kindle rankings looking for writers with foreign sales potential.

Then again, very few seem to be scouring the rankings at all. I know indie writers who have sold tens of thousands of e-books (in the last year) who have never been approached by a single agent or publisher.

That stuns me.

If a self-publisher is shifting tens of thousands of e-books, and hasn’t made a dent yet in print, that’s as close as you can get to a sure thing in publishing. We aren’t talking about a self-publisher who is demanding too much in terms of an advance or royalties, they have never been approached at all!

Some agencies have moved swiftly to sign some of the bigger fish, but others, including some of the largest agencies, don’t seem to be interested in indie writers at all.

Amazon, however, know where the money is, and how to get it. They aren’t just investing in international expansion, they are beefing up the rosters of their imprints so they have lots of books to sell to all these new customers.

As I announced yesterday, J Carson Black has agreed a deal with Thomas & Mercer, joining Joe Konrath, Blake Crouch, Barry Eisler, and the potentially lucrative backlist of Ed McBain.

On top of that, Stephen Leather, who has sold over 200,000 e-books, has been signed by Amazon Encore. 90% of Leather’s sales have been in the UK, and Amazon must feel that he has a huge potential audience in the US (and elsewhere) that he hasn’t been able to reach yet.

Success doesn’t always “translate” across the Atlantic, but Leather will have some very deep pockets to give him the best possible chance.

EDIT: Some commenters have indicated that the suggested translation cost above might be a little high and for some languages a short novel can be translated (by an experienced professional) for $5,000+. While this is still a significant investment, and would put it out of reach of most writers, it does significantly reduce the amount of books you would need to sell to cover the cost. More details in the comments.