With a New York Times article yesterday on Amazon’s efforts to encourage more and more writers to publish directly with them, it would seem that the traditional publishing industry is one step closer to extinction.

The Times article quoted an agent/e-book publisher as noting that Amazon is not just competing with bookstores, but with publishers and agents “because it is offering authors the opportunity to publish directly and cut you out.” Or, as an Amazon executive put it, “The only really necessary people in the publishing process now are the writer and reader.”

Amazon, according to the article, will develop, publish and promote 122 books this fall, in both physical and e-book form, reportedly paying advances as high as $800,000 (for a memoir by actress/director Penny Marshall).

So is this development a good deal for writers? For Amazon? And how worried should traditional publishers be?

According to Wharton management professor Daniel Raff, Amazon has already done these types of deals with a few prominent writers, and also has set up a “genre operation — where it is the brand name, like Harlequin, rather than the individual author’s name, that matters.” In addition, there are “conspicuous antecedents for explorations of this sort of disintermediation: From the far upstream end of the value chain, Stephen King tried serializing a novel or novella of his online in this way several years ago, although I think he thought the better of the idea in the end. But Amazon is the obvious First Experimenter…” in this area.

“It is often said that the big commercial publishers do not edit much anymore,” says Raff, and in some categories, such as big name authors, “the question may arise [as to] whether what the publisher does for them is worth the foregone income. Publishers still do think of themselves as coordinators, marketers — relationships with store owners and buyers, [for example], as well as advertising and arranging for television and radio interviewing — and curators, meaning that their name on the spine is a kind of quality guarantee.”

But Raff doesn’t consider Amazon’s move a notable “wave of the future. I think there is some opening here and that Amazon will be able to make some money doing it. I think that many books currently being published will not be so susceptible to this, although the fact that Amazon may be well-situated to identify potential purchasers will give publishers pause, if anything does.”

His “gut intuition” is that however much happens over time, not much will happen quickly. The real question is how this “domain grows … and whether it has natural constraints or not.” The question which ought to “worry ordinary onlookers here isn’t about electronic distribution per se,” he added. “It’s about having much of the nation’s reading matter passing through a single source.”  

As for the risks to specific writers, there are two, according to Raff. Writers who “don’t have a following may have a hard time getting exposed to readers. Amazon will take digital files from them and use its database to advertise, but is this really as good as the old system for non-genre books? And writers who do [get exposed] may find themselves unable to effectively auction off rights to sell their books.”

The benefits to Amazon, however, could be considerable. “Unlike a publisher, Amazon doesn’t have to worry about alienating the trade. Most of what Amazon has to worry about are long-term general equilibrium sorts of consequences.  I bet this looks all good to them in the short run.”