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Summary:

The conventional wisdom seems to be that by putting the screws to publishers like Hachette, Amazon is displaying its monopoly powers and ruining the book industry. But it is actually making the market better — not just for book buyers but authors too

As Amazon continues to tighten the screws on book publishers like Hachette — by making its books difficult to find, impossible to pre-order, and so on — the conventional wisdom seems to be that the company is an aggressive and possibly illegal monopoly aimed at killing publishers, and that its behavior is also bad for authors and probably consumers as well. The only problem with this view is that most of it, if not all of it, is completely wrong. What Amazon is doing is not only good for book-loving consumers but arguably good for authors as well — and even for some publishers (although not Hachette and its ilk).

Is Amazon a true monopoly? Not in any meaningful sense of the word — not any more than Walmart has a monopoly on sales of toothpaste. Yes, the electronic retailer has a large share of the ebook retailing market, but this is also a market that it effectively invented, because publishers like Hachette and other members of the traditional “Big Five” cartel (formerly the Big Six, before Random House and Penguin merged) showed no interest in doing so.

And even after the major publishers were dragged kicking and screaming into that market, they have continued to try and keep prices high and their gross profit margins large — to the extent of engaging in illegal collusion in order to do so. To quote Amazon CEO Jeff Bezos: “Your margin is my opportunity.”

Book buyers benefit, and that’s what matters

This isn’t much different from what happened to the music industry when Apple came along: it recognized that the market was changing, and created the iPod to take advantage of it. Eventually, the major labels had to play ball with Apple — which used many of the same negotiating tactics as Amazon has — in order to access that market, because they had failed to do so themselves. And they tried in vain to keep the price of digital music higher and royalties lower, and by doing so dug themselves an even deeper hole. Meanwhile, music buyers benefitted.

jeffbezoswithkindle

Even if Amazon does have a large market share, and is either a monopoly or a “monopsony” (the term for a market in which there are many sellers but only one large buyer), from a legal perspective the primary benchmark for whether a monopoly is illegal is the impact on consumers, not the impact on the large competitors who are being disrupted or having their margins narrowed. And by almost any measure, Amazon’s entrance into the book publishing and distribution market has been nothing but good for consumers — because it has meant both lower prices and more choice — and arguably for many authors as well. As author Barry Eisler put it recently in The Guardian:

“Legacy publishers pay authors only twice a year [and] they generally pay us only 12.5 percent in digital royalties, compared to the 70 percent we get from Amazon. They insist on taking control of our copyright not for a reasonable term, but forever. They’ve done all they can to try to keep the prices of books artificially high, which hurts consumers and costs authors money. They have a record of zero innovation. And they’ve run the industry for decades in a way that has benefited the few while stifling new opportunities for the many.”

It’s true that Amazon has a large ecosystem it has constructed around books, with the Kindle and other devices and services, and that has helped create a form of “lock-in” for book buyers. But even here, traditional publishers like Hachette have been the architects of their own destruction, by requiring that Amazon use punitive DRM restrictions on their books — which author Charlie Stross has argued gave the retailer “a stick with which to beat them.” Unfortunately, as my colleague Laura Owen has pointed out, getting rid of DRM isn’t much of a solution at this point because the horse has not only left the barn but is already in another county.

electronic digital library

At the simplest level, what Amazon is doing with Hachette is no different than what any other retailer does with a supplier: namely, negotiate a better deal when that supplier’s profit margin seems overly fat compared to its costs (Amazon reportedly wants a higher commission than the 30 percent that Hachette has been paying). As Amazon noted in a recent post about its dispute:

“Negotiating with suppliers for equitable terms and making stocking and assortment decisions based on those terms is one of a bookseller’s, or any retailer’s, most important jobs…. a retailer can feature a supplier’s items in its advertising and promotional circulars, ‘stack it high’ in the front of the store, keep small quantities on hand in the back aisle, or not carry the item at all, and bookstores and other retailers do these every day.”

If Amazon is bad, the Big Five are worse

As a number of authors have pointed out, including Hugh Howey, the biggest competitive threat in the book business isn’t the electronic retailer, it’s the Big Five publishers. They’re the ones who have tried desperately to keep book prices high — especially ebook prices — and yet continue to pay their authors a fraction of what Amazon does. As Howey says: “The culture of the Big 5, which was built by gobbling up successful small presses and rolling them into imprints, left the door wide open for Amazon, a company that dared to sell direct to consumers, innovate the way we read, and pay authors a living wage.”

What makes Amazon’s dispute with publishers different from a typical battle between a retailer like Walmart and a supplier, of course, is that books are not toothpaste or toilet paper. They are a cultural artifact that brings all kinds of emotional baggage with it, involving the struggling author, the nature of the creative impulse and other intangibles. And yet, they are also a physical product — one that is going through the same kind of wrenching change that any other kind of content is, from newspapers to music. All we know for sure is that the market cannot remain the same, and the forces that are trying desperately to make it do so are on the wrong side of history and are likely doomed.

Old typewriter

Does this mean that writing will become a low-margin business that fails to attract the kind of creative output it has in the past? Author Charlie Stross argues that the risk of Amazon’s dominance is that it kills publishers and then authors have no intermediary to look out for them, at which point many leave the industry and Amazon reigns supreme. Or as Evan Hughes describes it:

“The Amazon–Hachette dispute is different from a battle over terms between, say, Walmart and Coca-Cola: Diet Coke has a set formula of ingredients, so the actual beverage is not going to get worse if Walmart drives a hard bargain. That’s not necessarily the case with books, each of which is a unique product. If publishers make less money on every book, they are going to pay people less to write and edit them, and talented people will decide to do something else with their time.”

Could this happen? Perhaps. But that vision of the future seems awfully pessimistic to me. I think it’s more likely that small publishers like Martin Shepard — who has defended Amazon as a friend of small businesses when compared with the Big Five — and authors like Barry Eisler and Hugh Howey will not only continue to do well but could potentially do even better in the kind of environment Amazon envisions than they would under the old regime. Publishers like Hachette and the rest of the Big Five could do less well, but that is as much their fault as it is Amazon’s.

Post and thumbnail images courtesy of Shutterstock / Vladimir Melnikov, as well as Thinkstock Vasabii and Thinkstock / Worac

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87 Comments

  1. Deborah Smith Wednesday, July 2, 2014

    Matthew you do realize that what happened to the music industry has left musicians and songwriters in deep trouble while fans get cheap entertainment and corporate entities make most of the money?

    While consumers may cheer for Amazon and revile the major publishers (who actually care about books and make their income only from selling books, unlike Amazon, which uses books as loss leaders and bait) the end result will be a writing ghetto, and what consumers will get will be a small selection of massively franchised bestsellers atop a heap of self-published authors desperately trying to make enough to cover the costs of their marketing plan.

    The books that require a publishing investment — the high-risk non-fiction titles that take years to research, or the controversial books that require the backing of a legal department — will have far less chance of being published. Amazon won’t be there with a checkbook to fund those books. But yes, consumers will get their 99 cent porn and free self-help books, don’t worry.

    1. This seems dangerously naive. Publishers are for-profit businesses. They care about their bottom line. People in the industry may love the art and craft of writing, but if and when that conflicts with the interest of the business, profits will and must come first.

      Change here is inevitable. Hitching your wagon to the incumbents is a recipe for disaster and in no one’s long-term interest.

      1. You hit the nail right on the head Jack.

    2. I have to agree with Deborah’s comment. Not to mention that we count on publisher’s as curators. Take that out of the mix and its just a free-for-all and I, as a reader, may have to sift through a hundred pieces of trash to find something worth reading. When quality work by quality writers gets lost in the mix, it returns to the notion of writers unable to pay their bills because they’re not making as much money when people aren’t buying as many of their books.

      Certainly there are positive things that can come from Amazon, but you miss the mark if you believe, as this writer sketches out, that Amazon is mostly positive. Cheaper product might be better for the consumer’s wallet, but not necessarily better for the consumer.

      1. YOU may count on publishers to “curate” content but I don’t, so please don’t use “we”, use “I”. If you have to look at a hundred “pieces of trash” before finding something decent to read you may need to take some remedial computer courses to better help you navigate one of the most consumer friendly websites in existence. I don’t need a cartel of big publishers pushing the latest celebrity dreck down my throat, thank you very much. As a consumer, I also do not need to subsidize wealthy book publisher CEO salaries or real estate costs in the most expensive city on earth, while the average mid-list author could qualify for welfare based on their book earnings..

        As digital book world has reported, the BIG 5 publishers profit has increased over 25% over the last 5 years, largely on the back of Amazon’s innovations in e-books and also logistics – Amazon rarely returns books, unlike typical retailers. Not surprisingly, none of this profit windfall has resulted in increases to standard e-book royalty rates or advances to new authors. In fact, advances have continued to trend down during this period. Don’t blame Amazon for wanting to share in the higher profits that have been derived from their own innovation and investment. You would be better served arguing for improved royalty rates and incomes for authors, not media conglomerate owned publishing houses.

      2. Josh MLot:

        I don’t know the worldwide figures but I believe something like 100,000 hard copy titles are published in the UK each and every year. Most of that output is dross. If I go to a bookshop, I can waste hours and hours of my time wading through absolute drivel looking for that one book which is worthy of my time.

        Two points occur to me: one, my estimation of worth may not be the same as the next person’s; two, the publishers who churn out 100,000 titles a year are not exactly doing a good job of ensuring that only quality material reaches the shelves.

        Whichever way you look at it, the traditional publishers have acted just like trades union leaders: they are too comfortable with the way things are and will defend to the death their way of life and their way of doing things. They are the same people who would have opposed the teaching of literacy in the middle ages because it would have been an assault on their ability to manipulate and control the information which reached the masses.

        Traditional publishers are not fighting for their readers or their authors, They are fighting to continue doing business in their own self-interest. It is a fight which they are doomed to lose because there is no compelling argument for the rest of the world to accept the old ways any more.

    3. The changes to the music industry haven’t been universally negative to musicians and songwriters, though. As with any change, you hear most from those most hurt, because they squawk loudest. Those happy with the changes don’t have as much reason to complain, after all. There are quite a few musicians of my acquaintance who are making a lot more money AND who are much more in charge of their destinies in the modern world.

      As for those books that require a publishing investment: those investments are only made when there’s likely payoff, or the modern, cut-throat publishing industry would never make them. If the investments are good, there will be investors. It’s not like the current publishing industry is fronting those costs out of the goodness of their hearts. It’s because they are confident of return on their investments.

      Same with controversial books that require legal defense; publishers take these on because the risks are worth it. Legal risks are part of the cost/benefit equation for a publisher. There are plenty of book ideas that get turned down because the publisher doesn’t think the legal risks are overcome by profit potential, you know.

      1. Music was always in a better position that writing here because musicians have for decades and decades made most of their money on concerts and merchandise.

        Authors don’t make money on that. No one pays for lit readings. No one buys t-shirts of authors (who are living at least.) The sale of books is the only income authors have.

        1. But authors could, if seems they do not even try to exploit that revenue stream.

          :Archillies

        2. Tesla:

          Actually, not quite true. How many books have been turned into films or TV series? There is no reason in this modern age why authors who pen the right sort of stories should not turn to merchandising – dolls, figurines, computer games ….

          The fact that few authors are yet thinking of themselves as self-contained businesses and are not thinking in terms of add-ons, licensing deals, sharing platforms with similar-genre authors and so on does not mean these opportunities do not exist … they mean only that most authors lack the imagination or drive to turn interesting ideas into profitable revenue streams.

          The real revolution will come when every author who wishes to make a living through their keyboard starts to think of themselves as businessmen rather than somewhat fey, romantic figures locked away in a garrett for no better reason than that they cannot bear to think of themselves as plying anything so sordid as a trade.

    4. How many of those are getting published now? Trade publishing is going the way that movies have gone since Jaws debuted in 1975—it’s evolved into a dependence on blockbusters and celebrity authors, and the midlist and less popular titles have suffered. People don’t read as much anymore, and what they do read is predominantly genre fiction. What publisher is going to fund “years of research” unless they can be assured of making that money back? And how are they going to make that money back on a non-fiction title that might sell at a trickle? Why would they pay for a book that would sell at a trickle when they might use the same money for one that could theoretically be a blockbuster?

      You know who publishers are investing in these days? Here’s a hint: Snooki got a huge advance for a book she didn’t even write herself and that totally flopped when it came out.

      We didn’t even have megaconglomerate publishers until the last couple of decades, and somehow we got along just fine without them before. We’ll get along just fine without them again if they go away.

    5. Robert Gregory Browne Deborah Smith Thursday, July 3, 2014

      Sorry, but indie musicians are doing better than ever, just as indie authors are now. The only people hurting are the traditionalists who continue to rely on an old business model that just doesn’t work anymore.

      1. By the way, the traditional music industry has a HORRIBLE track record when it comes to the way they’ve treated musicians. I wouldn’t be crying over its descent into mediocrity.

      2. When you are starting at rock bottom, doing better than ever isn’t saying much. How many indie musicians are playing arena tours?

      3. Indie artists are doing worse than ever. Many are looking to supplement their income, via placement, whether be it commercials or films or television, i.e. Tegan and Sara or Matt and Kim, who, unlike 10 years ago, do not care about ruining their “indie cred” when the van is broke down and the mortgage is due (although some indie artist still work anonymously) . Artists like Adele, don’t count because she has a great contract and is on a label, XL, that is distributed by Sony.

  2. I’m not sure that rooting for any multi-billion dollar corporation is in anyone’s (sans stockholders) best interest.

    I’m also not sure that Amazon is interested in anything other than long term profitability, but at the same time, throwing support behind complacent and entrenched legacy Publishers is both futile and bad for consumers. It’s especially ill-advised to side with the Publishers, given their track record.

    Consumers should maintain a healthy level of skepticism on all of these issues. These companies are for-profit businesses and you are a potential customer, not a friend.

    To be honest, and this may irk some, but I don’t think it’s particular wise to root for “the author” either. Authors operate as a business and their interest and those of their reader *can be* in dichotic opposition. I support the authors that I like by buying their books or by supporting their side-projects that I value. Treating “authors” as a homogeneous group or heroic seems naive, sentimental, and misguided.

    1. Good points, Jack — thanks for the comment. Rooting for a multibillion-dollar corporation is not something I feel terribly comfortable doing, but I think on balance Amazon is likely to be better for a majority of authors than the existing publishing system. Only time will tell, I suppose, but I am optimistic about the potential for authors to expand their reach and keep more of the money they make instead of giving it all to the Big Five.

  3. extendedfootnotes Wednesday, July 2, 2014

    Actually, it’s definitely not in the authors’ (or publishers’) best interest for Amazon to take a larger share of ebook revenue, which is what the current dispute is about. Publishers Weekly said it better than I could, so see this clip from an article by Michael Cader:

    “On a 30 percent retailer commission and 70 percent publisher split, a standard author agreement allocates the equivalent of 17.5 percent of the consumer price to the author. A 40 percent commission turns that into 15 percent of consumer price (a 14 percent reduction in author share); a 50 percent commission turns that into 12.5 percent of the consumer price — a 28.5 percent drop in author share. And yes, the big publishers ought to have increased their royalties for “hardcover” ebooks long ago — but on a 50 percent commission split, a 35 percent royalty would leave the author standing still, while reducing the publisher’s final net by 38 percent.”

    Amazon is a business first–they’re out for themselves. Their growing contingent of 14 publishing imprints is only the beginning. They want to be the be-all, end-all in the book world. Taking even more revenue from publishers–even the big ones–will eventually get them there. And what will our culture look like when the only books available are the poorly cobbled together books on the Amazon list–the ones that suffer from Amazon taking a bulk of the profits without putting in half the effort that traditional publishers do for every single book? That’s not a world I want to live in.

    1. You make the assumption that authors must still rely on publishers in order to make a living. Many of us, including former traditionally published authors like myself, are doing quite well publishing on our own—which is only possible thanks to Amazon and Apple and Nook Press.

      Yes, those authors who stick with traditional publishing will be hurt—that’s inevitable considering big publishing’s track record with lowball author royalty shares—but those of us who are taking our careers into our own hands (and keeping control of the work we create) are doing better than we ever have in the past. In fact, the latest authorearnings.com reports show that indie authors are more likely to make a living wage than traditionally published authors.

      Even if Amazon at some point decides to offer us less of the pie for their distribution of our product, it’s still more than what publishers have or ever will offer. There seems to be this universal impression—promoted by publishers—that authors still need them. But thanks to Amazon and others and, of course, technology, that’s no longer true. We still write the same books. But we take them to the readers ourselves, without going through three middlemen.

    2. Thanks, but all your argument — or the Publishers’ Weekly argument — says is that publishers will rob their authors regardless of how much Amazon or another retailer charges in commission. Those percentages aren’t set in stone. If publishers want to compete then they need to change their royalty structure, among other things.

  4. There are no longer any bookstores in my town; this is not good for me. I can no longer peruse the well-chosen fiction section of a bookstore; this is not good for me. I can no longer hold the book in hand before I buy it; this is not good for me. I can no longer buy it and read it the same day; this is not good for me. The book review section has disappeared from my local newspaper; this is not good for me.

    I have read many, many very good books published by the major publishers; long may they continue to do what they do. I know people who work in those companies and they publish some books they know will make money and some books they know will not make money. They finance the translation of books from other languages; they advance money to authors to carry out research and then write the book. They nourish projects for years, even decades, like Robert Caro’s magnificent multi-volume biography of Lyndon Johnson. That is an intellectual endeavor of the highest order, and whoever makes that possible, more power to them. This is not an “emotional” attachment–this is culture, and if you cannot see the difference you have an impoverished life for sure.

    1. Robert Gregory Browne iliad1954 Thursday, July 3, 2014

      Buy a Kindle. It will change your life. It did mine.

  5. Bryan Leipper Wednesday, July 2, 2014

    Interesting that some think that making a profit has nothing to do with satisfying customer needs. I wonder where they think profits come from … only the government can force people to cough up the dough. Business has to offer something people want one person at a time.

    Amazon serves customers by providing better selection and better prices with better customer interactions. You can choose books by looking at how others rate it or you can take advantage of Amazon’s getting to know your interests and making suggestions based on its developed customer knowledge and insight. That’s in addition to the usual ways that have been and still are in common use (browsing, recommendations from friends, etc)

    As for the music industry, have you read the stories about how some musicians have embraced the new paradigms and increased their profits?

    The change is rapid and there is a lot of opportunity. It can be difficult and sometimes even painful to adapt but the gains are tremendous. Some will fight the change and they will lose. Others take advantage of it and they make a profit and we get wealthier as well in terms of what we have available to us and what we can do.

  6. “Book buyers benefit, and that’s what matters” But when you “buy” a book from Amazon, you don’t own it, they can take it back at any time, and have.
    “If Amazon is bad, the Big Five are worse” Exactly. A curse on both their houses. Greedy, abusive, power-mad silo-builders. The ebook market is dead because people hate lockin.

    1. Amazon sell paperbacks as well. Next day delivery on many of them.

      :Archillies

      1. Bookstores sell books as well. Free same day pick-up on all of them. With a smile!

  7. This ignores a few major points. Publishers do more than just dump content into an e-reader. They do publicity, cover art, editing, copy-editing, printing. Those services have real value. With Amazon, you do all that on your own, which is fine, but it costs money.

    Also, this article rather naively assumes that once Amazon controls everything they would STILL give the authors (some of whom would really give nearly anything to get their book published) a nice chunk of the royalties. If they’re squeezing the Big 5, you really don’t think they’re going to squeeze you, the writer, with absolutely no other options and no legal team behind them?

    The other points about the eventual quality of writing were well made above by Deborah Smith.

    1. You know, right this very moment, authors can pay out of their own pocket for cover art, editing, and e-book formatting, put their book on Amazon, and earn a 70% share of the cover price. (Or they can have their friends do it, or they can do without. Most free Internet fiction isn’t professionally-edited, but a lot of it is still pretty darned good without.)

      The traditionally-published authors get a paltry 12.5 to 17.5% of cover price, and don’t get any of it until they’ve earned out their advance. They’re often locked into a relationship with publishers by contracts that lawyers have called “unconscionable,” so that even if they do want to break free they can’t without legal help.

      Even if Amazon cut its royalties in half, they’d still be better than what publishers are paying. Why worry about what Amazon might do in the future, when publishers are the ones screwing authors over right now?

      1. I’m judging that you were not a math, accounting or philosophy major. Try looking at the publishing question through these lenses:
        • How much of the costs of the advance effort does an Amazon published author pay out before seeing the first royalty payment from Amazon? Answer 100%.
        • How much of the ancillary costs, like cover art, editing, book tours, booking appearance on late night talk shows to promote the books, etc) come out of the authors share of an Amazon royalty? Answer 100%.
        • How much of that magical 70% is left at the end of the day? Depends on how good the author is at all those other jobs. As much as they’d get from taking a real publishing houses deal? Kind of iffy, but if they aren’t good enough to get a regular publishers deal, a lot more. (I seem to recall JK Rowling had a very hard time selling the idea for the Harry Potter series to the traditional industry, but she prevailed ).

        There are two ways a blogger makes money. Having something to say worth reading, or mechanically manipulating the system with SEO tricks and whorish headlines. Given your lack of talent for the hard sciences, try to be worthwhile. Your current approach is kind of icky.

        1. Sure, the self-publisher starts out in the hole, but he gets 70% of each sale to earn out of that hole. Say he spends $500 on his starting effort, prices his e-book at $4.99, and sells 200 copies earning $3.50 per copy. He’s already $200 ahead.

          Say that same author gets a $2,000 advance, his e-book is priced at $14.99, and he gets 25% of the 70% the publisher takes in, or 17.5% of $14.99. If he sells 200 copies, he’s earned about $525 of that advance and has to hope he sells another 600 or so before he even starts earning $2.62 per book over and above that advance. By which point he would have already made a total of $2,300 in profit selling the same quantity self-publishing. Fairly close to the $2,000 advance, of course, but the gap between $3.50 and $2.62 widens with every sale.

          How many paid book tours, appearances on talk shows, or other publicity budget does the average author get if he’s not Stephen King or James Patterson? NADA. These days they’re generally told, “There’s Facebook. There’s Twitter. There’s a blog. Have fun, don’t forget to write!” Which…a self-publishing writer can do just as well, with the exact same publicity budget.

          There are cases of self-publishing writers turning down seven-figure advances to continue self-publishing. Joe Konrath makes over a million a year these days. Not everyone is going to have that kind of success story, but then not everyone would even be accepted by a traditional publisher either. At least with self-publishing, you can have a chance someone will buy it.

          1. Oh, and also, the author would be a lot likelier to sell those hundreds of books at $4.99 than at $14.99, even if Amazon discounted the publisher’s list price to $10-11ish.

          2. I may not have a realistic grasp of the anticipated sales of some of these publications. I never knew people spent their time writing books with anticipated sales of less than 1000 copies. You are certainly correct that there is place for the tools for self-publishers that Amazon (and Apple) provide.

            That said, I fail to see why success for self publishers must come at the expense of failure for the traditional publishing industry. They don’t seem to be mutually exclusive. And if the publishing industry should choose to adopt the agency model for selling their books through Amazon, how does that impact the success for self publishing? As I understand it, you get to set your price for your works. What will you do when Amazon starts paying a sliding scale, or requires a maximum price of $1.00 per book for the first 1000 books?

            Failure of the big publishing houses is not salvation for the undiscovered author and rooting for Amazon to punish them to right some perceived wrong seems short sighted. Now that the DoJ and the courts have tied the hands of the big publishers, Amazon is starting to show its true colors. I regard it as a warning sign.

        2. You seriously think the average mid list author goes on book tours and late night TV? What century are you from? A self-published author can get a good product on Amazon very inexpensively. Here’s a clue: They don’t have to cover the cost to rent office space in Manhattan, they don’t have to pay for a CEO and hundreds of $100k salaried corporate folks, they don’t have to pay for returns of unsold printed books….the list goes on and on. Trade publishing is an inefficient 20th century distribution model with very high overhead that is rapidly being superceded. It’s amazing, that in an age where the average advance from the big 5 is between $15k to $20k for a novel that may have taken years to write and more years to pimp, that you would continue to try to support this model. I guess authors should live on cat food for the good of the Big 5 publishing cartel. Because culture….or something.

          1. I’m clearly not an author, but I fail to see how the success of self publishing through Amazon (or Apple) must come at the expense of the traditional publishing industry. The only benefit to the less well known author would be the resultant forcing of name authors into the self publishing mode. As a consumer, I don’t see the gain.

            But the tussle between Amazon and the established publishing industry is not about that. It’s about a dominant seller trying to force what he wants to pay for a product on a potential supplier. When that seller decides that you, the independent author will only be allowed to charge $2 for your book, will you be OK with that? Be careful what you wish for.

            All of the modern tools that Amazon can bring to the table are great and should be used by those who need them. Amazon shouldn’t be allowed to force them on publishers who neither need nor want them. If Amazons tools are better, they will prevail without the strong-arm tactics.

    2. If they’re squeezing the Big 5, you really don’t think they’re going to squeeze you, the writer, with absolutely no other options and no legal team behind them?

      I haven’t exactly had a legal team behind me, but Amazon has *raised* the amount they pay me in 16 different countries over the past three years. Amazon used to pay me 35% of cover price on my sales in Ireland, for example, but they just raised that to 70%.

      (Credit to David Gaughran for pointing that out.)

      I guess Amazon is afraid that I might get a big legal team someday, right?

      Because by your logic, the best motivation for doing something now appears to be the fear that someone else *might* do something else in the future.

      1. Thanks for that info, Evan.

      2. Evan Rail:

        I would add to what you have just said. Amazon may be dominant now but they have no god-given right to dominate the planet forever. As authors become more savvy, they may start to form themselves into little internet islands where similar genre authors bad together and sell each other’s stuff as well as their own. All you need is a programmer to handle the back-end management (payment processing, file management, accoun t management) and there is no reason why authors cannot form themselves into co-operatives, partnerships or other legal entities and develop their own internet presence. Why, for example, could readers not learn in time that http://www.scifiauthors,.com (just made it up I think) is THE place to go for the best sci-fi? Why can’t authors take matters into their own hands in time? The price of entry has never been lower; the price of technology has never been lower.

        The reason authors are not yet thinking along these lines is because they still have the mindset that they write the books and someone else makes them wealthy. They do not want to get their hands dirty with anything so sordid as “tarde”.

        I call this the “garrett mentality”. It is exactly the same as the “slum mentality” of late Victorian and early 20th. century times. Those who found themselves in the slums had two options: passively accept their lot or determine to fight their way out. – literally in the case of many who escaped via boxing and other entertainments. For some reason, we admire those who escaped the slums whilst simultaneously admiring those who hide in their garrets without ever realising that both words are just synonyms for “serfdom”.

    3. Robert Gregory Browne Sandra Block Thursday, July 3, 2014

      All of the things you mention can be done for a fixed cost. And why is doing it on your own a bad thing?

      If you’re a chef who wants to open a restaurant, it’s going to cost you money. If you’re a dancer who wants to run a dance salon, it’s going to cost you rent and other start up costs.

      And just like that chef or dancer, authors have to learn to be business people as well. In fact, they should have been all along. And there’s nothing wrong with investing time and money into your own business.

    4. Sandra, I agree good publishers do those things — and I think there is still a place for them to do so. I am not advocating that they all be driven out of business, just that the cost and profit structure of the Big Five and much of the mainstream publishing industry is out of whack.

    5. “This ignores a few major points. Publishers do more than just dump content into an e-reader. They do publicity, cover art, editing, copy-editing, printing. Those services have real value.”

      I think you’re missing an important qualifying phrase: “If you’re Stephen King…” I’m a traditionally published author – a business author, not Big 5 but with a big, highly reputable business publisher (if I gave you two guesses, you’d get it). Yes, they did cover design but it was essentially take it or leave it; I was offered the option of hiring my own designer if I wanted something else, but assured that the reps who service the big bookstores LOVED the design. The publisher did put the book through several rounds of edits, but to my eye introduced more errors than they corrected — and at each step of the way, I had to re-edit my book, as the publisher made it clear that I was ultimately responsible for the accuracy. And the publisher’s publicity plan consisted of asking me what my publicity plan would be. On a $10,000 advance, I spent $40,000 on my own publicist plus paid my own travel to book launch events I coordinated on my own. The first time I booked a speaking gig following the publication of my book – at a small, poorly attended convention known as SXSW Interactive (sarcasm intended) – the publisher “forgot” to provide inventory to the onsite bookseller. All of this despite the fact that my book was a “featured title” in the publisher’s catalog for the quarter in which I was published.

      So if these services have value, I’d argue that value is pretty limited.

      Despite all this, the book somehow sold out its print run (10,000 copies – the average book sells under 500 copies in its lifespan, from what I’ve heard) and is now available in e-book and POD only. I’ve received not a single penny in royalties.

      1. Robert Gregory Browne Greg Verdino Thursday, July 3, 2014

        Every traditionally published author on the face of the either, with the possible exception of the Stephen Kings, has been through what you describe, Greg. From the “make sure you start a blog and get on Facebook” form of marketing by the publisher to the forgotten shipments to bookstores for that all important signing.

        And these are just isolated incidents. It happens time and time again.

      2. Robert Gregory Browne Greg Verdino Thursday, July 3, 2014

        Every traditionally published author on the face of the earth, with the possible exception of the Stephen Kings, has been through what you describe, Greg. From the “make sure you start a blog and get on Facebook” form of marketing by the publisher to the forgotten shipments to bookstores for that all important signing.

        And these are just isolated incidents. It happens time and time again.

  8. Mike Marchant Wednesday, July 2, 2014

    “If you love books then you should be rooting for Amazon, not Hachette or the Big Five”

    Mathew you are a complete moron. Amazon will just f you over. Publishers do way more than just charge a price for a book.

    If you love the lowest common denominator then you may be right.

    If you would like interesting and inspiring writing then you are just so f’ing wrong.

    OM, why is this rubbish being published here?

    1. Robert Gregory Browne Mike Marchant Thursday, July 3, 2014

      Interesting and inspiring like 50 Shades of Grey, which was merely fan fiction published by the biggest publisher out there? Or Snookie’s latest tome?

      What publishers do is push books that they think will make them money. Period. They are in business to make money, just like any other business. And there’s absolutely nothing wrong with that.

      But don’t fool yourself into thinking that what they do is look for interesting and inspiring writing. That may have been true several decades ago (if it ever was), but it’s not the case today.

    2. If you love the lowest common denominator then you may be right.

      If you would like interesting and inspiring writing then you are just so f’ing wrong.

      One of Simon & Schuster’s biggest acquisitions so far this year is a piece of erotic fan-fiction about the boy band One Direction, for which the author received six figures.

      Source: http://defamer.gawker.com/young-writer-earns-six-figures-with-erotic-one-directio-1592782576

      How does Simon & Schuster’s acquisition of erotic fan-fiction about a boy band fit with your claim about publishers not pandering to the least common denominator?

  9. if you love local brick-and-mortar bookstores, and big publishers,
    then you should head out to those brick-and-mortar bookstores
    and buy lots and lots and lots and lots of expensive paper-books.

    because if you don’t (and probably even if you _do_, but certainly
    if you do not), your local bookstores will close, and those publishers
    will find an exit from a marketplace which no longer provides them
    with the obscene profits to which they have become accustomed.

    so go! do it now! stop reading these websites, on your computers,
    and go to your bookstores and buy those expensive paper-books.

    or else it’s all your own fault.

    -bowerbird

    1. Oddly enough, as of late 2013 there were 20% more independent bookstores in business than there were in 2009. Seems like one way or another, Amazon’s been good for them.

      1. amazon _did_ do good for independent bookstores,
        by knocking borders clean off the face of the planet.

        and amazon will do an even _bigger_ favor to those
        independent bookstores when it kills barnes&noble.

        nonetheless, few of those independent bookstores
        will consider amazon to be their friend, nor will they
        stock books being published by amazon’s imprints.

        so, you know, that was a nice _attempt_ at refutation.

        -bowerbird

    1. pig21:

      Remember that France is an intensely Socialist country and a great fan of top-down, command and control dirigisme. As far as they are concerned, Government knows best – which is why so much business and creative talent chooses to flee the country.

  10. Suerly the success of the big five is not all down to greedy business, but because they actually know what a good piece of work is and can mould and shape mediocre manuscripts into something worth reading.

    1. Sorry about the spelling error! That’s what happens when you spend all day proofing other peoples scripts, you get tired of checking your own.

    2. Robert Gregory Browne Freya Thursday, July 3, 2014

      Do you honestly believe that? As someone who was traditionally published for several years and knows many others who are and have been as well, it seems to me you’ve just spit in our faces.

      We don’t produce mediocre manuscripts, thank you, and in some cases they’ve BECOME mediocre thanks to a publisher’s meddling in order to force the work into a more “commercial” category. With one exception it has been my experience that my editors did nothing to mould one of my books, and that exception continues to be my worst seller.

  11. Monopoly regulations evolved out of large companies preventing smaller companies from doing business, not on the impact to the consumer.

  12. In response to a NY Review of Books article on the issue I submitted this letter that coincides with Matthew: Steve Coll’s fine summation of Jeff Bezos and Amazon’s current dominant position in the book industry accurately describes the various anti-trust issues they face. However, books are not toothpaste and restraint of trade would be difficult to prove given the rather closed nature of the publishing industry. For an author to gain access to the “market” today, he or she must acquire an agent who has close relationships with a few publication houses and, as we all know, these agents have become, more and more, representatives of companies rather than writers. Furthermore, book reviews in prominent newspapers and journals tend to be linked to these firms, not to mention the obvious internecine relationship between and among the peak publications (the New York Times, the New Yorker, and even, if I may be so bold, the NYR) and public television. If one considers the number of books that are reviewed on a weekly basis, the duplication of the subject of these reviews, and the “needs,” of commercial houses (prominent serious, political and media authors), the “market,” is not that open. Reviews are the manna for authors. Without them, book stores will not stock the “product,” and without them, writers are, if I may alter a euphemism, spitting into the wind.

    Now take what Jeff Bezos has done: he has opened up self-publication (previously an expensive enterprise) to anyone who has the will and some few resources to access the public. True, the quality filter of agents and publishers is not there (although, from a good many books being sold these days, I am not sure “quality” can be argued), but nevertheless, Bezos has opened rather than closed what can be argued is a publication cartel.

    As a recognized and published historian who recently worked through Amazon to bring my new work to light (after a prominent agent said he liked the book but “didn’t know what to do with it), I am beholden to Amazon. That said, we can look back to history and another populist, Henry Ford, who put middle-class Americans on the road, to understand that good works may go awry and yesterday’s revolutionary capitalist may become tomorrow’s tyrant.

    1. That’s a great response, Kilometro — thanks.

  13. Most informative.

  14. Bill Steigerwald Thursday, July 3, 2014

    The truth hurts. As an author of a serious work of journalism, Dogging Steinbeck, that didn’t make the grade with the Big 5 or any other legacy publisher, I thank Amazon every day. It cost me zero dollars to get my book in front of Amazon’s global customer base, either as an ebook or a print on demand book. I get 70 percent of every $5.99 ebook sale and about $5 for every POD. My “literary expose” has changed the way “Travels With Charley” will be read forevermore, yet it wouldn’t exist without Amazon. I should complain and cry for the big publishers who’ve been robbing consumers and abusing/exploiting authors for two centuries? Let them die — which they all won’t do, anyway; some will adjust to the changing world, shrink, merge and learn to live with lower profit margins the way music companies and newspapers will have to do. And by the way, the fact that many independent book stores won’t carry my paperback edition because it’s been tainted by Amazon’s “evil” hand tells you all you need to know about their high moral principles and their attitude toward authors.

  15. Matthew, you have things completely backward – your view of Amazon and the Publishers is inverted.

    Amazon’s long-term strategy is to sell products at a discount for a sufficiently long time to both undercut other retailers and establish new pricing expectations among consumers. (They can only do this if they are allowed to run, unprofitably, quarter after quarter – which is exactly what Wall St. allows them to do – a pass no other company gets.)

    Amazon clearly sees the publishing companies as anachronisms ready to be disinter-mediated, but that is only partially true, at best. That’s because book companies take risks that enable authors to develop, research and produce their products. The vast majority of these risks (made by giving out advances) don’t pay off, and the few that do pay for the ones that don’t. This enables a lot of creative innovation (on the behalf of authors) that wouldn’t be economically feasible otherwise – and why Mr. Eisler’s comment that the publishers have “a record of zero innovation” is nonsense. If that’s true then so do venture capital firms, that play the same role – providing risk capital and guidance – with startups that publishers do with authors.

    If we cut the big payouts that VC firms make on selling a startup to Facebook or Google, or going public, then we would limit ithe pool of capital for small, less proven startups and their innovations. So too when Amazon wants to cut the profitability of the best-selling title, what they’re really doing is making it possible for the publishers to take fewer risks – which inevitably doesn’t hurt “big” authors like James Patterson, but smaller, first-time authors you’ve never heard of, or midlist authors who are on their way, maybe, in a few books, to writing something that wins a National Book Award.

    Amazon doesn’t care at all about ANY of this. They care about maximizing their economic dominance. They don’t have a vision for how publishing should work, other than that they should get the publisher’s margins. If you care about books, they are the bad guys in this fight.

    1. Robert Gregory Browne A Guest Thursday, July 3, 2014

      How has big publishing innovated?
      Please tell me. Because you sure didn’t above.

    2. You are confusing risk-taking with innovating. VC’s do not innovate anymore than the Big 5 publishers do. what they do do is take risks by investing in other companies that innovate. Big publishers don’t take much risk at the end of the day, nor do they invest in innovators. They only accept those manuscripts that have what they believe to be a high degree of commercial appeal. The Big 5 profit margins have been fairly steady over the years and in fact have increased over the last 5 years by 25%……I don’t see much risk taking there and Eisler was right…they have done exactly nothing that even remotely resembles innovation.

  16. I’ve been a publisher for 30 years. I gamble MY money printing ideas that I like. ANYONE can do this. Just look up “Printer” in the phone book. That eliminates the notion that the publisher is a monopoly or a gatekeeper. That’s like saying Ford has a monopoly on Ford cars.

    Secondly, the way that Apple got as big as they are is because the record companies were so devastated by Napster they granted Apple a license to their entire catalogs for no advance, for the world. That was a $14B industry vacuumed up for no money down. They let Apple tell them what they would pay them and what they would sell the music for. Can you imagine a car dealership telling Ford, we want all your cars and this is what we will sell them for and what we will pay you for them? If you don’t do the deal then stealing cars becomes an offense that no one will prosecute, as long as you don’t steal too many. The music business has gone from $14B in 2000 to $5B in 2014 (That’s $3.6B in 2000 $) How can you argue that this has been good for the artists? Ridiculous.

    Third the collusion case against the other publishers was a joke. Apple publicly announced that they would let the publishers set the price and they would take 30% to host the file. At that time Amazon was taking 70% (for doing essentially nothing.) Publishers flocked to Apple. Three days later Amazon “capitulated” (their word) because “unfortunately McMillan have the exclusive rights to their titles.” That said it all to me. Amazon just assumed that they could take whatever they wanted until competition came along. So they cried foul and some idiot at the US Justice department fell for it. The publishers settled because it was killing them (nowhere to sell stuff.) So Apple were stopped from exercising THEIR rights to be more generous to their suppliers, so what happens next, Amazon starts demanding more of the pie,

    Fourth, if you think publishers are all rich you’re dreaming. The distributors have been taking 65% of the retail price (Amazon takes up to 60% if you’re a small publisher). That leaves 35% to pay the author, the accountant, the editor, the layout (or coding) person, the marketer, the literary and licensing agents & the salesman. Then you buy advertising and maybe you have to pay to license images or translate it into another language. On a $20 book all of that comes out of $7. Of course you can just insist that all of these people are irrelevant to the process. Then see how the quality will drop. Amazon argue that more books are selling than ever. 40% of them are used. There are more titles than ever because any idiot can put up a recipe for a hamburger, charge $10 and call it a book.

    The gatekeepers aren’t the publishers, the gatekeepers were always the big retailers. If they didn’t want your book, too bad. Amazon changed that & provided a place where anyone could sell a book. That’s the best thing they did. Now they are taking that away. They’re saying anyone can sell a book but ONLY if you give them most of the money. That’s exactly what they supposedly fixed. They just became the biggest gatekeeper ever. And for those of you who think books are expensive, why don’t you ask what Amazon does for the 60% they take? Ship it? Host the file? Wow…they’re so over worked. How anyone can justify allowing Amazon to demand a bigger cut for doing virtually nothing at the expense of the people who actually create the product in the first place is incomprehensible. I know it’s the American way but followed to its logical conclusion we’ll all be growing our own food soon because god forbid Walmart not get more of the pie than the farmers.

    If people found out that a car cost $3000 to make and the dealerships were selling them for $10,000 do you think everyone would be demanding the car companies lay off their employees? Or tell them to make them cheaper just so the dealerships could keep their 70%?

  17. thornleyjoseph Thursday, July 3, 2014

    Mathew, thank you for the thought-provoking post. There are two areas in it that I hope you will write more about.

    First in the second paragraph, set the context by asking, Is Amazon a true monopoly?” It seems to me that you set an unrealistically high threshold in focusing us on the question of monopoly. A dominant company can do great damage to an economic sector without achieving monopoly status. I think the right question is, “Is Amazon becoming so dominant that it can distort the market to its own advantage?” If this is the case, then we should be concerned, because what is of advantage to Amazon will not always be to the advantage of consumers.

    Second, I hope that you will write in greater detail about the evidence that you’ve found to support your belief that small publishers and authors “will not only continue to do well but could potentially do even better in the kind of environment Amazon envisions than they would under the old regime.” I’d love to believe that you are right. However everything that I’ve seen from Amazon to date says that only Amazon will do well and anyone in its supply chain will be squeezed.

    1. Thanks, Joe — I agree that the question of market dominance is an important one, regardless of whether Amazon or any other company (Google etc.) qualifies as a monopoly. In a nutshell, I believe that market forces eventually destroy monopolies and monopsonies, although that process can take time. As for your second point, as with music there is substantial anecdotal evidence that independent artists and authors are better off now, and are making more money and reaching a larger audience than they could have before. There are a couple of good examples in these comments, in fact, along with people like Amanda Hocking and others.

  18. James F. Ellis Thursday, July 3, 2014

    Until you’ve paid $200 for a law school case book, you haven’t lived. Publishers have long grown wealthy as a direct result of such monopolistic practices. The times they are a-changing and it’s the consumer that is opting for electronic over paper. That’s a tidal swell that all the PR by the Big5 cannot control. You are witnessing the dying gasps of another industry fallen prey to to the eRevolution. Good or bad? That’s up to each of us to say for ourselves. Controllable, avoidable? Never.

  19. It’s great of you to try and defend what is basically illegal according the Sherman AntiTrust Act. Remember that without the product, the customer will not be satisfied. People wrote the books, and they have to make their living at it because it is hard work, not something you can just dash off an assembly line. The publishers sign contracts with those producers and have to negotiate terms with Amazon based on those contracts. Amazon cannot and should not dictate the price of the ebook, “punish” publishers by delaying shipments or removing preorder buttons because as far as the customer is concerned they can’t get the book timely and they WILL go somewhere else. Amazon is not the best thing since white bread. It has basically taken a whole industry and destroyed its capacity to provide products to the consumer based on its cost structure, not on some artificial future expectation on the part of Amazon. Basically, what I am saying is that you don’t know what you are talking about. Do some real research before you spout about Amazon again.

    1. Tired of this bad argument. T Moore Friday, July 4, 2014

      Please actually read the Sherman Act and respond again.

  20. Rational Man Thursday, July 3, 2014

    The discussion and article seem to miss the issue that Amazon is damaging Hachette’s business by playing games with consumers ability to buy the Hachette book vs. other publishers. Links for pre-order which go no where for example. This is damaging.

    Does Amazon make it easier to buy book for a lower price, history would say yes. Does Amazon create businesses by disrupting the current model. Most certainly and those who are hurt cry about it.

    1. Well, duh, of course Amazon is damaging Hachette’s business. They’re in a negotiation! You don’t win concessions from the other side by saying “pretty please with sugar on top.”

  21. If the Big Five wanted to hurt Amazon’s monopoly, they’d demand all of their books to be made DRM-free tomorrow, so people can easily take their books with them to other platforms or partners of theirs, which would lead to a diminishing of Amazon’s power – which is what they want, right?

    1. Mathew Ingram Tim Thursday, July 3, 2014

      Great point, Tim.

    2. I suspect Amazon would like that actually. Amazon pays for the DRM to be added, removing it would be a cost benefit for them.

      :Archillies

    3. Robotech_Master Tim Friday, July 4, 2014

      Frankly, I suspect that if DRM magically went away tomorrow, most of the people who buy from Amazon now would keep right on buying from Amazon, and would be in a complete quandary if they ever needed to move their books to another platform. If even sideloading is too hard for the average consumer, how could they be expected to figure out how to convert their e-books to another format and move them to a new reader? They’d probably just buy another Kindle rather than go to all that trouble.

  22. Matthew,

    Your premise that low prices are always good for consumers is wrong, because market failures occur that make higher prices better for consumers.

    For example, the price of clean air is zero. Good for consumers? No, because it causes people and companies to pollute the air without taking into consideration the costs imposed on others for doing so. The problem stems from the fact that no one has a property right in clean air, so no individual has a legal basis to raise the cost of clean air, which would curtail the pollution. So, governments enact laws to impose those costs that affectively raises the price of clean air.

    Books (like music) have a their own market failure: if authors did not own their books, then no one would have to compensate them for making copies. We would then have an undersupply of books. Authors, of course, could write books, but they would have to earn money by other means. But the price of books would be zero. Good for consumers? No. Consumers of music would not have been better off if John Lennon had to drive a taxi full time to earn money; by compensating him for his song production, he was able to devote as much as full time to it.

    The means chosen to encourage the production of books and music is the copyright law. The Constitution gave Congress the power to create the copyright law to promote writings; they did not need the power to promote fruits, toilet paper, and garden hoses (or other such things you can buy on Amazon), but copyright law was necessary because of the market failure that would be caused without it: the underproduction of works of authorship.

    But there is another market failure going on: Amazon’s significant monopsony power (i.e., the power to reduce the price of the goods it buys, like e-books). To deny it is to ignore the facts: for example, when they had 90% share of the ebook market, and Macmillan approached them with a new pricing model, Amazon deleted all of the buy buttons on Macmillan’s printed and electronic books. In an instant, 90% of Macmillan’s e-book revenue and 25% of its printed book revenue. If it continued, they would be out of business. That’s monopsony power: the power to lower the price of goods (e.g., ebooks) you buy. In Macmillan’s case, Aamzon exercised it by its “refusal to deal” with Macmillan, at least temporarily.

    Since the marginal cost of digital goods can actually go to zero (or very near it), Amazon’s monopsony power poses a direct threat to the purpose of the copyright law, which is to compensate authors. Again, we compensate authors, not because we like authors, but because the public is better off with an efficient production of books.

    Thus, what Amazon is really trying to do is delete the copyright law. It would be happy pay nothing for ebooks and give them away as part of Amazon Prime.

    Now, it is naive to think Amazon will stop at Hachette. Once traditional publishers are gone and Amazon has 90% of the market for e-books, they can easily turn their turrets against self-published authors. Read your Amazon Kindle Direct Publshing contract which gives Amazon the right to drop your royalty rate from 70% to zero on 30 days notice. (A traditional publisher would require an author’s permission to change the royalty or any other term of the agreement).

    In other words, if you like Amazon’s leverage over traditional publishers, you’ll just love their leverage over self-published authors. After Amazon tells you they won’t pay you any more for your e-books, what stops them from charging you to help you reach out to new readers? That’s exactly Amazon is trying to do now to the major publishers.

    I’ve written some “friend-of-the-court” briefs and have blogged on this subject, which you can find on my website at http://www.bobkohn.com.

    Bob Kohn

    1. Amazon had 90% of the market six years ago. Now they have anywhere from 50 to 60%, and that share is falling because of other companies like Smashwords and Kobo. How exactly is that achieving a monopsomy?

      When Amazon and Macmillan were fighting, they set up a fund to compensate Macmillan authors. Amazon offered to do the same this time around, Hachette said no. Why?

      Lastly, how many Hachette authors own their books, that is, own the rights to those books?

      Lastly, if Amazon stops paying self published authors, what stopping them from selling their works on other platforms, or their own websites?

      If Hachette goes out of business, do Hachette authors get their rights back?

    2. Copyright Law doesn’t encourage production anymore than gas taxes encourage less travel…

      And if the Marginal costs for something digital are close to zero, how do you justify a $14.99 ebook price?

  23. diannanarciso Thursday, July 3, 2014

    Excellent and on point. The good news is that as Amazon Derangement Syndrome brings out more and more outrageous arguments against them, Amazon will continue on just fine.

    Trad’s apologists can rant against the so-called Tsunami of Swill all they want (as if no swill ever got a trad publisher’s logo on its spine), but independent publishing is here to stay. It’s creating its own editing and cover art industries. Gone are the days when a bunch of elitist suits can tell readers what they should read and what they must pay for it.

    Readers now have more choices than ever. And that’s because authors now have a choice. They can seek out a traditional contract, or not. And if they seek it out and are unsuccessful, they can know that there is publishing, validation, and money waiting for them through independent publishing.

  24. Mark Horowitz Thursday, July 3, 2014

    Matthew: nice, provocative piece, but I’m not sure a story based mainly on existing news stories and corporate statements gives the full picture. Reality is a little messier, and the only way to get a snapshot of what’s really going on in publishing is to spend a lot more time trying to get editors, authors, publishers, Amazon insiders and others to talk to you, which I know ain’t easy. As most news accounts make clear, publishing figures are terrified of talking on the record because they fear retaliation from Amazon. It’s tempting to fill in the story by applying general business theories to the few known statistics, but the fact is that most of what we read today on the publishing business is inaccurate or incomplete.

    Let me give you an example. Your estimation of Amazon’s market size and power is based on a few industry statistics, and does not conform to the actual experience of publishers and authors. Talk to a random sample of successful authors and publishers. Simply put, Amazon is everything now if you are in the business of selling books, whether you’re an individual author, an indie publisher, or one of the big legacy houses. If AMazon refused to sell your book, you are dead. If Amazon buries your book and doesn’t let it come to the top in searches for it. You’re dead. (As you know, Amazon makes publishers pay extra to get better search optimization for their titles on the site.) If Amazon stops shipping your books, you aren’t going to survive. Unless you dig around and cite examples of successful authors who don’t rely on Amazon, you’re not making a very compelling case. How you define a monopoly really depends on the market you’re talking about. Monopoly or monopsony, Amazon has clearly reached a level of dominance in the book marketplace that at least warrants serious scrutiny from anti-trust lawyers. It controls the book marketplace today, and it’s power is still growing.

    Let me give another example of how on-the-ground reality doesn’t conform to your view. You think this Hachette kerfuffle is a standard negotiation between two large corporations over widget pricing. But from what I’ve seen up close, the tactics Amazon is currently using against Hachette are not confined to negotiations with big publishers. They use the same tactics on individual authors and individual books, regardless of previous existing contracts.

    When a recent nonfiction title I know of hit single digits in Amazon sales ranking recently, Amazon suddenly “lost” thousand copies that had been shipped to it by the publisher and announced on the book’s Amazon page that they were out of stock and copies could no longer be delivered for 4 to 5 weeks. They admitted privately to the publisher that they did have the books, but they had been placed to the “wrong wherehouse.” Execs had to fly to Seattle where they were forced to agree to a short-term kickback on ebook prices, one on that allowed Amazon to sell the ebook for a discounted price for several weeks, with the publisher absorbing the cost. Once the publisher agreed, the books were imediately “found” and began shipping again. Previous contracts and agreements didn’t matter. Amazon wants to sell ebooks, not hardcovers (which they lose money on). Apparently, based on the reaction of publishers and authors to the story, Amazon does this kind of thing routinely. (More reporting, more difficult reporting, would be needed to get the whole picture.)

    So what’s really going on? Here’s another hypothesis. In the past, Amazon discounted books below cost, losing money, as a way of undercutting competitors and roping in customers. Now they are facing some pressure to cut losses, and they are trying to get publishers to subsidize their predatory pricing. They are still using below-cost pricing tactics to put competitors out of business, but they are now using their market power to extort kickbacks from publishers to pay for the tactic.

    I think you’re right about the Big Five being their own worst enemy – as Michael Wolff pointed out, you still can’t buy a Hachette book directly from Hachette. But Amazon is using its overwhelming leverage to force publishers and authors to help them undercut and endanger others sellers, i.e. bookstores.

    Amazon’s goal is not to “rationalize” the book industry and lower prices to the consumer. Its goal, made clear in some of their statements and in material easily accessible in books and articles about Amazon, is to eliminate the legacy publishing industry and replace it with an Amazon controlled publishing system, or at best a collection of small indie publishers, entirely dependent on Amazon.

    It’s just as logical, using your assumptions, to say that once Amazon finishes destroying its competition, it will then raise prices. There is no “logical” reason to assume otherwise. (Indeed, it already raised the price of Amazon Prime, and statistics suggest that book prices have continued dropping in relation to Amazon’s market share.) In fact, in order to bring prices in line with their real costs – in order to make a profit — you’d expect prices to rise at some point.

    I’m all for a contrarian take, and I’m as pro-technology as you, I suspect, but Amazon is a big, big story, and you’re going to have to dig a lot deeper – and do a lot more research and reporting — before you can convince me that you’ve got the alternative scoop on what the future holds.

    1. Thanks, Mark. I agree that the picture is almost certainly more complex than can be described in a 1500-word blog post, and I will continue to write about it as much as I can. But the bottom line is that I think — based on the available evidence — that Amazon is more of a benefit or a positive influence on the ability to buy and sell books (print and digital) than the large players who make up the existing publishing industry cartel are.

      Is Amazon itself a large force in the book distribution market? Undoubtedly. Does it play hardball with suppliers? I have no doubt that it does, and will likely continue to do so. But the benefits to both buyers of books and (potentially) to authors outweigh those factors, I think. If the existing publishing industry had tried harder to serve its customers and authors better, I don’t think we would be where we are now.

  25. Steve Dallas Thursday, July 3, 2014

    The publishers should set up an Amazon competitor if they want to keep the playing field level. Team up with one of Amazon’s international rivals like Rakuten or Alibaba.

  26. Vanessa Williams Thursday, July 3, 2014

    Thanks for saying it, Mathew. What really saddens me is authors who have bought into the “total war against Amazon” propaganda from their publishers. They don’t realize that punishing their readers with exorbitant prices doesn’t screw Amazon, it screws the readers, publishers, and authors! They also don’t get that if it weren’t for Amazon, most people wouldn’t even be able to buy their books. Brick and mortar bookstores are really nice and everything, but they stock only the latest releases and precious few of those. Want to read Book 1 of a trilogy? Amazon is your only option. So bottom line: authors should be telling publishers to stop acting like jerks so that everyone can benefit. And as for Amazon’s alleged monopoly, it may be an unfortunate situation but it’s not as if they did anything unfair. Others left the field, refusing to try to compete, and this is where we are now. I have no sympathy for the whiners who didn’t even try.

  27. James Connolly Friday, July 4, 2014

    Amazon wants to be the eWalmart of the globe. If they can’t buy an item from a business cheaply enough, they look to manufacture it themselves. Thus, the Kindle and Create Space. They squeeze all of their suppliers for margin. It is only the legacy manufacturers that can resist them and hold their ground. Why should publishers be any different? They’d love to do away with publishers and work with the self-published masses…much easier to control and bully. Amazon, from day one, has simply used books as loss leaders. So, they look to staunch that bleeding whenever and wherever they can. If, in the depths of your folly, you think Amazon is a friend and good business partner to authors, please consider how they have treated publishers. Read the Create Space publishing agreement. Buy Kindle books that you don’t even own. eBooks are simply the digital age’s mass market paperback. Cheaply written, cheaply made. They occupy about 20% of the overall market. That’s fine, but books (no matter how you view them) are more than items. They are elements fundamental to any modern culture and society. I, for one, don’t want Jeff Bezos from his bully pulpit, deciding who and what gets published under his terms. Take it or leave it. Making legacy publishers out to be the villains here is just reflective of a true naivete of the business of book publishing.

  28. Whoa, what a lot of misunderstanding of the issues in book publishing and the nature of etail. Unusually, more by the author, who doesn’t seem to have any grip on the issues, than by the commenters. Luckily, the first commenter (Deborah) brings up many of the crucial issues unmentioned or misrepresented by the author. Here’s some others.
    . Lots of commenters, egged on by the roundabout way the author deals with the royalty questions, don’t get that the high percentage given to authors by Amazon is only for e-books (which, of course, has negligible overhead, that’s the point). Any author (or small publisher like me) who believes Amazon’s hype that, for their on-demand publishing, you are going to get up to half the retail price you set will quickly discover the hard fact that you only get a substantial portion of the price for customers you drive on your own to your own private page. If you allow Amazon to make your book available via a simple search, you will discover that doing so allows Amazon to make your book available to discounters at the same price you are paying for it, and your page has to compete with whatever margin they deem adequate, paying the publisher or author a commission starting under 10%, rising ever so slowly as volume rises. If you don’t lower your price to match theirs not only will you be unable to compete, but most of the people you do drive to your page to pay “retail” will discover the “market” price and feel ripped off.
    . Nobody here seems to realize that Amazon’s fight against the agency system (which, in the absence of progressive legislation, is over), in which, astoundingly, they have been able to enlist the full support of the U.S. government and the Justice Department’s Antitrust Devision, is about whether Amazon can be allowed to continue their rise to complete dominance of mass-market consumer products by selling below cost. It’s a permanent price war in which only those with unlimited access to capital can hope to survive. In particular, in the present battle with Hachette (and all publishers), it’s a travesty for the author to characterize the fight as simply a negotiation between a supplier and a middleman to get the best price possible for consumers. Amazon’s raison d’être is to gain control of every corner of etail that can be controlled. That’s why Amazon has never shown a profit: they get investor money based upon a scenario where they will end up as the ONLY significant etail player; and when they start to run low they go and raise even more from investors, based upon the relentlessly increasing perception that their monopoly is solidifying. What in the world would lead anyone to believe that it would be realistic to go into competition against that business model? You’d have to invest enough on advertising to reach some kind of parity with the Amazon brand, and even if you succeeded YOU’D STILL HAVE NEGATIVE CASH FLOW. The only reason to do it would be some etail innovation that held out the promise of putting Amazon out of business, because the name of the game in etail is complete dominance. Even well established companies are falling to Amazon’s deep pockets: EBay is in a death spiral. (The Amazon Affiliates program is aimed squarely at EBay’s customer base.)
    . The Internet is a revolution in our relationship to production. The adjective the people who stand to gain the most have worked hard to plant on this revolution is “disruptive”; what they mean is, all the production relationships that have been negotiated heretofore can be destroyed, leaving those with money to invest choices in every industry to undermine long-standing sources of income for small capitalists and working people and reduce all non-players to unskilled laborers lucky to be able to survive in jobs that essential amount to customer support. Governments that actually care about preserving the jobs and the standard of living of their citizens need to rush in and regulate these destructive forces while there are still jobs and a standard of living left to defend. In the publishing industry in particular, where the preservation of publishers and small bookstores has crucial cultural significance, the EOC (and France in particular) have moved swiftly and forcefully, as all responsible governments should. I urge everyone to follow pig21’s link (some 2 posts before this one) to understand just how much is really at stake, and how much can still be accomplished with decisive action.

  29. Linda Kottler Tuesday, July 8, 2014

    Amazon has already killed the book industry, and i for one will miss bookstore browsing, one of my fav activities. They have always been the happy book murderer…

  30. Jfc this is either the most naive article I’ve ever seen or the most blatantly biased toward Amazon article I’ve ever seen.

    The simple fact is that if you care about choice and competition, NOBODY should be cheering for Amazon, who are doing everything they can to eliminate both in order to reap big profits on small margins. It is similar to how Walmart operates in the retail market.

    I wish MORE publishers and producers would stop supplying to Amazon and let them either die out or be forced to change their policies.

    That would be the only way you and I would EVER win in the case against Amazon.

  31. Gary Dauphin Monday, July 14, 2014

    BS. Too much power in either Amazon or publishers hands is not good. But, Amazon holds most of the cards here, if you care to be honest.

    Yes, the big publishers have too much power. But, at least I have the option (as an author or smaller publisher) not to deal with them and do it myself.

    Still, Amazon is now taking too much control of the industry. The reality is (I am an author) that if I want my book to sell in quantity, I have to use Amazon, even if I would prefer not to.