Skip to:

Owning the channel

Whatever business you are in, you run the risk (or you have the opportunity) of gaining or ceding control how you reach your customers. Two news stories almost on the same day highlight very clearly this situation. First, the German airline Lufthansa decided to impose a €16 charge on all bookings for its flights made through a third-party online booking service such as Expedia or Amadeus (Bloomberg, "Amadeus, Sabre Tumble as Lufthansa Levy Squeezes Booking Margins". 3 June 2015). In this case, Lufthansa are attempting to claw back some of their market by selling tickets direct to consumers. Lufthansa claimed they were paying hundreds of millions of euros each year to third-party agencies.

 

Secondly, the hotel group Accor (which owns several hotel chains, including Ibis and Sofitel) announced it was opening its online booking service to independent hotels ("Accor expands online booking" FT 4 June 2015.). This seemingly pointless move, opening up a single provider's channel to competition, is based around a similar situation to the first story. If you are the dominant player in the market, it makes sense to control the channel and to offer space to your competitors. Even if (as Lufthansa and Ibis) you are not the market leader, it might still make sense to pull users away from an otherwise dominant neutral service. Because, as we know, dominant players that control the market can control prices. Does the same apply in digital publishing? Of course, with Amazon controlling 65% of the online market for buying print and/or ebooks. (The Wire, May 30, 2014). With that dominance, it makes sense for individual publishers to do everything in their power to create their own direct sales channel. This could mean becoming an aggregator for other publishers' online content (as Cambridge and Oxford University Presses do), or, more riskily, attempting to impose a levy on the dominant neutral portal. Can you imagine any publisher trying to do that with Amazon?