Software isn’t taking over

The opening of Amazon.com’s first brick-and-mortar store last week proves that software is not really “eating the world,” as venture-capitalist Marc Andreessen put it in 2011.

In his widely noted Wall Street Journal column about predatory software, Andreessen wrote:

“Today, the world’s largest bookseller, Amazon, is a software company – its core capability is its amazing software engine for selling virtually everything online, no retail stores necessary. … Amazon rearranged its website to promote its Kindle digital books over physical books for the first time. Now even the books themselves are software.”

Retail stores are still not strictly necessary, and yet Amazon now has one in Seattle. That’s because the book market has proved less one-dimensional than publishers and sellers feared in 2010 and 2011.

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In September, The New York Times revealed that the Association of American Publishers had registered a 10 percent decrease in digital book sales in the first five months of the year and that the number of independent bookstores was actually growing. This isn’t to say that e-books are doomed: It’s just that, in this process of disintermediation, publishers are losing some of the market to self-published authors on Amazon and elsewhere.

Even Barnes and Noble, which unsuccessfully tried to compete with Amazon in e-book sales and which struggles to halt a fall in revenue, has returned to profitability this year after four years of losses.

It’s safe to say software hasn’t destroyed the book market but instead forced all of its participants to play to their strengths. Publishers reach for potential strong sellers and insist on relatively high prices, authors rejected by publishers package and promote their own work and traditional booksellers stress the personal experience.

Amazon, too, isn’t opening the real-world store as an admission of defeat. Its choice of titles to stock is going to be backed by the company’s powerful analytics.

I’ve noticed lately that my kids and their friends prefer paper books to digital ones, though I have completely switched to e-books. It’s about personal preferences, not progress. That’s why I’m pretty sure the manual gearbox, the custom-made suit, the hand-rolled cigar and even the paper magazine will be around 100 years from now. •

Leonid Bershidsky is a Bloomberg View columnist.

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