"It's easy and glib for us to say that Amazon doesn't care about the book business, the truth is they love the book business," said Napack, who joined Providence, the private equity firm, last year after working as Macmillan's president from 2006 to 2011. "Amazon, in its heart, is a customer relationship business while publishers, in their hearts, are author relationship companies and to a large extent [intellectual property] companies." "We book publishers have to do a better job not just of editorial but also in customer development. We have to go after those relationships." To augment its relationship with book readers, Amazon in February acquired Goodreads, the San Francisco-based Web site that has become popular among book readers and publishers. Goodreads, which was founded in 2007, has more than 16 million members, many of whom participate in one of the website's more than 30,000 book clubs. The Goodreads acquisition, Napack said, is just one of many examples of an erosion in booksellers' relationships with book buyers. The merged Random House and Penguin "should have" acquired Goodreads, he said. "Publishing is having significant leakage out of the value chain," said Napack, who while at The Walt Disney Company (DIS - Get Report), founded Disney Educational Publishing and was a co-founder of Disney Interactive. He also held senior positions at Simon & Schuster. "Sure, there's Amazon but it's also entertainment companies and all sorts of self-publishing ventures." Amazon this week said it will start a publishing platform for fan fiction, a popular trend by which readers write their own stories based on books, films and television shows. amazon said it will host the new platform at its Kindle store. To counter or at least chip away at Amazon's central position in the book business, publishers are likely to seek ways to get larger, Napack said.
"It appears what we're seeing is a squeeze on the small and mid-sized publishers," Napack said. "There is an inexorable move and irresistible force to pursue scale. There will be a move for consolidation as companies have to look outside. We're going to see some of the big guys looking to acquire innovation, acquire consumers and manage them better." -- Written by Leon Lazaroff in New York