However this shakes out, it should make you as an author more wary of the notion that it's better to have a publisher than it is to self-publish. Judging from the responses I got to Trang, I probably could have gotten it published by a small press eventually. I chose not to for a number of reasons, not the least that I was sick and tired of waiting two years for replies. Other reasons were that I knew a small press wouldn't pay me any kind of money for it, and (here we are, getting back on topic) I didn't see an advantage with distribution.
Small presses are generally pretty limited in their distribution (with some, all they do is list you in a catalog), in no small part because the big chains just want the big books. I could get myself distributed on the Web just as easily, so they offered no advantage there. Once I get some more books published, I can produce my own little catalog and sell to indie bookstores on my own.
All this is why I've predicted that small presses won't do well. (At least not the traditional ones. Writers can and do start one-person "small presses"--go here and look at Pen Name's comments to see how that can work.) To survive, existing small presses will have to adapt to changing circumstances--including a world where Amazon is a lot more powerful than their distributor.
Amazon, as that story notes, wants to make more money, and so they are interested in squeezing out middlemen. If you are a small press, you're already a middleman, and if you're a small press going through a distributor, that's two middlemen right there.
Regardless of what happens with IPG, if I owned a small press I'd be looking very hard at the decision to pay a second middleman to distribute my e-books. It's not like warehousing and shipping paper books--uploading book files to retailers is pretty simple. The fact that my distributor now can't distribute my e-books on Amazon, a major e-book market, would make me look at that decision even harder: If you're going to pay a middleman, he should be making life easier for you, not harder.
I don't own a small press (not even a pretend one, although that may change). I'm an author. And as an author, I take note of the article's comment, "The only two essential parties in the reading experience, Amazon executives are fond of saying, are the reader and the author."
Stuff like that sounds really exciting and empowering and like Amazon wants foster this glorious indie-book revolution. But did you notice who's not in there? Amazon!
Oooh, I bet Amazon executives actually want Amazon to stay in that equation, don't you? Sounds like they're being a little disingenuous. Remember that Amazon is a business, and like any other business, their job is to maximize profits. Right now, they're focusing on doing that by squeezing out middlemen, which also entails treating their suppliers (i.e. authors) well.
Will they always? Well, Wal-Mart is where it is today because it squeezes suppliers. Big publishers are squeezing suppliers. Squeezing suppliers is a long and cherished method in corporate America to cut costs and maximize profits.
So writers who distribute on Amazon may well find themselves in the position of IPG one day. That's why it's a good thing for Amazon to have competition. That's also why I think authors should reach out to their fan base directly. Amazon isn't the devil, but it is a business--it's run by people who want to make money, not run by people who have any especial love for you.