It appears that Amazon is failing to establish itself as a big player in book publishing -- at least to the degree expected by many industry watchers. After more than two years as the head of Amazon's book publishing operations, Larry Kirshbaum will be leaving the company in early 2014, as the retail giant beats a strategic retreat in publishing.

Amazon announced in May 2011 that it was setting itself up as a publisher to compete with major houses such as Simon & Schuster. Kirshbaum, the one-time head of Time Warner Book Group, was working as a literary agent when Amazon tapped him to lead its book operations headquartered in New York City. But, so far, Amazon has been unable to land the next big thing in publishing.

Kirshbaum is expected to resume his career as an agent upon leaving Amazon.

"I have no idea why Amazon, with all its data and all its talent and all its competitive advantage, couldn't make it happen," says Sucharita Mulpuru, an ecommerce and retail analyst at research firm Forrester. "They choked."

As Mulpuru points out, Amazon has a tremendous amount of data about which books sell and which ones don't. And although Amazon doesn't break out revenues from its book publishing operations in its quarterly earnings reports, the group has so far largely failed to crack the code that allows experienced acquisitions editors at major publishers to launch successes year after year.

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Actress Penny Marshall's biography, released in September 2012, was an important title for Amazon. But according to online publishing industry newsletter Shelf Awareness, which broke the story of Kirshbaum's departure today, Marshall's book posted disappointing sales. Says Mulpuru, "Maybe they underestimated the challenge of creating hits."

Amazon may also have failed to reckon fully with the role brick-and-mortar bookstores play in generating interest in new books. Barnes & Noble refused to carry Amazon titles, as did many independent bookstores, long sore over what they saw as Amazon's efforts to drive them out of business.

When the Department of Justice settled a case about e-book pricing in Amazon's favor last year, it only angered its rivals further. In this case, the opposing parties included not only large publishers and booksellers but also independent shops and the Authors Guild. The Department of Justice decision "was a Pyrrhic victory, and it alienated the publishers more than they had ever been alienated before," says Mulpuru. It seems likely that writers felt similarly aggrieved, which would have made it more difficult for Kirshbaum to acquire their books for Amazon.

In contrast to the prevailing view that Amazon can dictate terms to other companies, Mulpuru says manufacturers who produce desirable content have the upper hand on Amazon. "They built this beast that they now have to feed," Mulpuru says. "They can't afford to sever their relationships with Simon & Schuster and Harper Collins."

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