Amazon Flexes Its Muscles in Fight Against Publishers
bits.blogs.nytimes.com
bits.blogs.nytimes.com
What is supposed to happen here? This article and each of the others linked don't offer much beyond jabs at Amazon.
As far as I can tell, publishers are unhappy with Amazon - period. Two years ago the hot news was about Amazon pricing books too low [1]. Now at least part of the complaint is that Amazon isn't discounting enough and allowing prices to approach list price - which I assume is set by the publisher. Isn't that a publisher problem?
Also, this all reminds me of what we used to hear in the music industry - creators hurting because the label (publisher) they're contracted with is feuding and refusing to eat whatever compromise rather than pass it on directly or indirectly.
Would it be a terrible thing if Amazon pressured books into changing the same way iTunes changed music?
1: http://www.cnn.com/2012/04/11/tech/web/apple-lawsuit-cheaper...
The core point of the article is to claim that Amazon is abusing his dominant position; which is a real problem, and in some countries illegal, regardless of the nature of the company.
No, the claim is that they are doing that selectively, along with other things like directing people searching for a book to other publishers books, and extending the shipping time for the targeted publisher's physical books -- as means of discouraging purchases of the targeted publisher's physical books to create leverage on contract terms related to e-books.
Is there something specifically wrong with that sort of leveraging?
Businesses in the online and physical world negotiate all sorts of things selectively for their own benefit. Amazon doesn't give every publisher the same deal just like I'm sure publishers don't give every author the same deal.
There are multiple ways to get books published and multiple ways to sell them.
Amazon is big, and as one of the linked NYT articles says 'controls about a third of the book business', but that is a far cry from the modern-classic example monopoly of Microsoft on the desktop (90% share) in the 90s or perhaps Comcast (Sole option) in some places today.
Amazon and Hachette are doing what big businesses do and authors, who have a direct relationship with Hachette, not Amazon are apparently suffereing.
I'm not seeing how Amazon becomes the villain here.
Better shelf placement, positioning near the front of the store, checkout placement ... All assets that retailers can exploit to woo vendors. Amazon is doing the same thing. Their assets are less tangible but offer just the same incentive to cooperate and play by their rules.
If you don't, you get pushed to the back of the store, placement out of eye level, etc.
The articles don't go into detail, but from what I've seen of the relationship between Amazon and the publishers, I'm inclined to think that Amazon is probably trying to push for very unreasonable terms. Which is to say, Amazon is used to pretty much dictating whatever terms they want to the publishers, because they are in such a dominant position, and I expect that this is just more of the same.
Amazon and their suppliers are supposed to work out their contract negotiations before it gets to the point where mommy and daddy are fighting in public, using the NYTimes to take shots at each other.
it was a really odd application of antitrust law at the time, since Amazon is the one with monopoly power, and price fixing typically means competitors agreeing to price things higher than the market would otherwise bear.
antitrust has never been reasonably applied to tech, going as far back as DOJ going after microsoft for bundling IE, not for leveraging the Office team's relationship with the Windows team to push out competitors like Corel.
now you're seeing amazon flex that monopoly power - hey buddy, you had to pay a fine to the DOJ for refusing to participate in our monopoly, and we were able to hurt apple's book-selling business, and now we're shutting you off entirely unless you agree to our terms.
Publishers are certainly allowed to, as you put it, "refuse to participate in under-pricing books". The problem occurs when they decide to act in concert.
I agree with your points about DOJ and the tech industry, and maybe there's something that needs to be done about Amazon right now. I'm not sure. But definitely the wrong thing to do would be to allow a cartel of publishers have any influence over the price structure of the market.
The lawsuit was about price-fixing and collusion. It had nothing to do with "monopoly power" (which Amazon does not have now and did not have then).
1. Don't you dare discount our ebooks!
2. Don't you dare stop discounting our paper books!
However, these positions are perfectly consistent. They're just consistent in a way that I suspect wouldn't occur to most HN readers.
What publishers really want from Amazon is simple: "Reverse, stop, or at least slow down this damn ebook transition!"
They don't say it that way for obvious reasons, but it is the common thread underneath their apparent insanity.
They're like the entrenched interests at Kodak that tried to stop the development of digital cameras (which Kodak actually invented) to support film sales.
All they managed to do was ensure that the digital cameras were developed by companies other than Kodak, and now Kodak is bankrupt.
The same thing is happening with ebooks. In many genres, 50% or more of the best-selling ebooks are either indy or small press.
This doesn't end well for the big publishers, I'm afraid. It sure as hell didn't end well for Kodak.
If your little corporate fiefdom is based on film sales, you're going to try to stop digital even if that's not in the long-term interests of the company, or so the story has it.
Physical books are wholesale model. The retailer sets the selling price, and the publisher always gets the negotiated wholesale price, usually around 50% of list.
So they are two different things. The publishers are mad at Amazon fro hating on agency pricing. Agency pricing takes away Amazon's ability to compete on price - that's why Amazon doesn't like it.
Remember that the majority of publishers just recently colluded with Apple to essentially fuck over Amazon. Why would we afford them the presumption of goodwill here?
From the article: "An Amazon spokesman declined to comment"
Looks like no one wanted to talk to these reporters/bloggers. :)
I don't know the NYTimes's plan to succeed in the digital age, but acting like a 24/7 TV news outlet probably isn't that way to go.
I also worry that newspaper publishers see themselves as the publishing industry does and have a bias against digital distribution and will do anything to damage it. This piece feels anti-Amazon in an unfair way. The publishers aren't these poor underdogs, they're all well-heeled corporations with lawyers and experts. Let them hash it out.
Well, that's certainly how the Justice Department chose to see it. That doesn't make that statement the objective truth.
I still don't see how anyone can say with a straight face that the new entrant in a market is "fuck[ing] over" the dominant player. Especially when countless economists have weighed in saying that the kind of corrective measures employed by Apple and the publishers are not (and should not be) illegal and that the Justice Department basically got everything wrong.
(Google is failing me here for finding these economist opinions that I've seen in the past, but amusingly, my search is chock full of articles from before the ruling saying that economists think the DOJ is going to lose the case)
Apple gave the publishers leverage to use with Amazon, which is a wee bit different. But I'll give you "colluded", because it doesn't really matter.
I wish Google would actually find the various articles I've read in the past about this, but my recollection is that various economists have explained that this sort of "corrective measure" is actually legal and the right course of action under certain circumstances, and the ebook market (with Amazon's near-total dominance) qualifies.
You say "mainly the people being screwed", but that's not true. Amazon tried to claim that prices were lower before Apple came along, but that's actually only true for some (admittedly popular) books. Prices on other books were higher before Apple. Not only that, but the low prices that Amazon was talking about was not actually a sustainable market, but instead was Amazon engaging in predatory pricing. And predatory pricing is not something that the DOJ is supposed to be in the business of defending.
Basically, many people have looked at the overall book market both before and Apple entered it, and found that, when looking at the entire market instead of just e.g. the NYT bestsellers list, prices were not higher after Apple showed up.
It's also worth pointing out that Apple was being accused of violating antitrust laws, which are essentially laws designed to prevent unfair monopolistic practices. It seems rather ridiculous to claim that a minority player in a market could be guilty of monopolistic practices, since that generally requires being a monopoly. It's even more absurd when one of the main goals of antitrust is to promote fair competition, and yet it was used to punish the only real competition that Amazon had in the market. Basically, the DOJ used fair competition laws to hand a government-sanctioned monopoly to a single company.
---
I did a bit more digging, and what Apple was found guilty of was a "per se" violation of a horizontal price-fixing conspiracy using a series of vertical agreements. I've found a MacObserver article[1] that talks about a 30-page amici curiae brief filed by two economists explaining why Judge Cote's ruling was wrong.
[1]: http://www.macobserver.com/tmo/article/economists-on-apple-e...
There's a 3-paragraph summary at that article, which should give you a good idea of what was wrong with the ruling.
I've seen a number of other articles since the ruling where other economists weigh in and say essentially the same thing, but Google is still being difficult.
---
Edit: One comment about this brief says that the DOJ didn't make these considerations because it found Apple to be per se liable, which is to say, the DOJ considered the actions to be illegal regardless of any possible motivation. Some of the other economists I've referred to argued specifically against this point, saying that these kinds of vertical agreements are not a violation of the per se rule and that Judge Cote royally screwed up in applying it. Of course, Judge Cote's ruling also said she would consider Apple to have been guilty under a rule of reason as well, but I find it hard to believe given how much evidence there is that Apple's actions were indeed in its own independent business interest, and that these kinds of vertical agreements and the provisions they contained are not in fact illegal under these circumstances (my understanding is basically that they can be illegal when used by a dominant player in a market, because it's anti-competitive, but when used by a new entrant in a market with an existing dominant player, they are ok, but IANAL).
Basically, many people have looked at the 5 publishers accused of collusion and have seen that prices were higher AFTER the collusion
The fact is that the ebook average price from the accused publishers went up, it is irrelevant for that case that the total market average prices were down.
I don't think that's true. I have never heard that the smaller publishers kept dropping their prices.
If so, can you post a single proof of that.
You're asking for "usable" sources and in fact you don't have provided a single one.
It is clear that you won't believe any source so, have a good day
> It is clear that you won't believe any source
I won't believe obviously-biased "sources" that have no real data.
In any case, I think focusing on the current prices of eBooks is not actually very helpful. Amazon has the power to set prices at whatever the heck they want. And the publishers had no recourse, because not selling on Amazon meant not selling, period. But the artificially-low prices Amazon was using for e.g. bestsellers was not sustainable for the publishers. It was not a healthy market, and there was zero reason to believe, had Apple not entered the market, that Amazon would continue selling at those prices indefinitely.
Artificially low prices are usually assumed to be good for consumers, and the DOJ certainly made that claim, but that's not true. Consumers do not benefit in the long-term from an unsustainable market. They also don't benefit from a market with no competition. The latter is what Amazon was trying to create, by keeping prices artificially low on bestsellers. This is predatory pricing, and their goal was to control the entire eBook market. Once they had complete dominance, it's reasonable to expect that they would have raised prices so they would stop taking a loss on all these $9.99 books (in case you aren't aware, Amazon was actually paying the publishers more than $9.99 for the bestsellers they were selling at that price). And in a market without competition it's very likely that Amazon would be selling books at prices higher than a healthy competitive market (like the one Apple was creating with their entry). Here's an article from a year ago with evidence that Amazon was already starting to raise prices: http://www.nytimes.com/2013/07/05/business/as-competition-wa...
Perhaps Eddy Cue is not a biased source and he admitted in the trial that ebook prices raise
http://www.cnet.com/news/apples-eddy-cue-yep-we-caused-e-boo...
> But the artificially-low prices Amazon was using for e.g. bestsellers was not sustainable for the publishers.
Why not? Publishers were paid full price. In facts publishers earned LESS money with the agency model than with the wholesale model.
> This is predatory pricing, and their goal was to control the entire eBook market.
Any proof of that? Do you also believe that DoJ lied when its investigation of Amazon found no predatory pricing?
> Once they had complete dominance, it's reasonable to expect that they would have raised prices
I think that precog police still don't exists >And in a market without competition it's very likely that Amazon would be selling books at prices higher than a healthy competitive market (like the one Apple was creating with their entry)
A competitive market where ALL the stores must sell the ebook for the same price? Where the heck is the competition?
Is this your definition of competition, fixing the prices for all the stores and books?
Because Apple leveraged an existing market where they were the dominant player (iOS). You could've said the same thing about Internet Explorer being a new entrant to the browser market, back when they fucked over Netscape.
And even if you do purely concern yourself with reading eBooks on smartphones and tablets (and ignore the fact that iBooks doesn't even exist on Android devices, and consider the Kindle to not count because it's not a general-purpose tablet), the Kindle iOS app still was the dominant player there. Apple could not leverage their ownership of iOS to give an unfair advantage to iBooks. The only advantage it had was that visiting the App Store for the first time would suggest you download iBooks, but the Kindle app had plenty of promotion within the App Store as well.
I also find your attempt to claim this is analogous to Internet Explorer to be preposterous for multiple reasons. Not only did Microsoft literally bundle it with Windows, it was a free competitor to the then-paid Netscape Navigator, and there wasn't an established market for web browsers at that point anyway. Microsoft also enjoyed an overwhelming monopoly in the desktop OS market with Windows, whereas Apple has never had a monopoly in the smartphone market with iOS.
Despite what various pundits keep claiming over and over again, iOS never had a majority share of the smartphone market.
I like a conspiracy theory as much as the next guy but couldn't the book just be... unavailable? If they wanted to impede its distribution why are they still selling the Kindle, Hardcover, and Audio versions?
There is no physical shortage.
If Amazon doesn't want to sell something, even a book, that is entirely their right.
Its unavailable in the sense that Amazon doesn't make it available -- so it is, literally, unavailable from Amazon. Strictly speaking, this is not inaccurate, it just doesn't mean what people who trust Amazon's comprehensiveness are likely to think it means, as its not unavailable from the publisher, which is why its also not unavailable through other retailers.
Seriously people you need to confirm your facts. Not everything you read in the papers is true.
Source: http://www.amazon.com/The-Everything-Store-Bezos-Amazon/dp/0...
Why does she not blame her publisher for setting the price of her books to be too high[0]? This seems to be a regular merchant/vendor price dispute - nothing new about it.
The publisher is just a middleman here[1] - if she were trying to sell directly to Amazon at the same price, Amazon's reaction (presumably) would be to refuse to sell the book based on the prices she set. At that point, she'd have two options: (1) Lower the price of the book, or (2) Accept that the book won't be available on Amazon.
> “Your actions to raise the prices of our books, place banners touting books that ‘are similar but lower in price’ and saying that our books will ship in 3-5 weeks when they are in stock is not only a disgusting negotiation practice, but it has made me tell my readers to shop elsewhere — and they are and will,” she wrote.
This is a minor point, but for what it's worth, it appears that Amazon is saying that the books are "unavailable", not "out of stock", from the screenshot. Amazon does sometimes say that items are "out of stock" instead of "unavailable", so it's not that they're trying to imply any reason for the lack of availability - they're just saying that they are not available and not specifying the reason.
[0] This is mostly rhetorical - I can understand why she may not want to lower her price - but that's the way supply and demand works in a supply chain (ie, when you're not selling direct-to-consumer).
[1] As is Amazon, for that matter! She always has the option of selling the e-books herself, if she decides that that's a worthwhile endeavor.
Because Amazon's the one making it hard for her readers to get their hands on her books. We don't know it has anything to do with the prices they want for her books.
http://www.amazon.com/The-Everything-Store-Bezos-Amazon/dp/0...
And notice that the book IS AVAILABLE?
Also, note that Hachette is one of the publishers involved in the e-book suit who settled, so not exactly a great history with Amazon.
I have no sympathy for complaining publishers that refuse to actually circumvent these "bully" distributors.
Sure they do. They can put the book on Amazon themselves and make 70% of retail rather than 15% of retail.
No, instead, I go to a local bookstore, they don't have it.
I go to Amazon, they have it. I order it, two days later it's at my door, for 30% off the price on the back of the book.
So everybody does the same as me, and now Amazon is the 800-lbs gorilla in the room, throwing its weight around, and you're complaining?
You had the opportunity, 10 years ago, to kill Amazon, and you didn't, because you wanted to keep charging us more for less service.
Tough.
The tears, they just aren't coming.
Amazon also previously used this playbook with MacMillan Publishing.
Amazon isn't publicly objecting to any Hachette practice. Per the earlier article on the dispute linked from the source article, [1] Amazon is seeking more favorable contract terms with Hachette (and neither side seems to be disclosing what particular terms are at issue), and is working to discourage sales of their books -- and promote alternatives to people specifically seaching for Hachette books -- to force Hachette to agree to Amazon's preferred terms.
[1] The earlier article: http://www.nytimes.com/2014/05/10/technology/writers-feel-an...
[1]Of an amazon monopoly on retail is a bad result, but in principal that has nothing to do with publishers
This kind of unequal distribution can cause the slight lessening of pain for a large number of people to mortally wound the few actually producing content, leading to a serious destabilizing of the market, which requires that both parties have something to provide.
Which was the point of the GP comment, and something you didn't even remotely address, instead making a pedantic point about words chosen for effect.
In the current market, I think that publishers get far too large a fraction of the revenue and authors far too small. If the author creates the content and promotes the content (with the help of Amazon) what value is the publisher adding? Copyediting? Legitimacy stamp?
Amazon pays individual authors 70% of retail. That's far more than they get from any publisher.
I sympathize with authors that are hurt by this battle, but it just shows that Amazon's marketplace is becoming more important to their sales than their publisher is.
(General note: Please at least somewhat carefully read over that before arguing. First, I'm only saying that it's suggestive, not proof, and secondly, there's a lot of misconceptions about what exactly is forbidden w.r.t. monopolies.)
The book publishers have done a great job painting this as a David vs. Goliath story, but it's really two Goliaths battling over a shift in publishing and distribution.
Talking about "hurt a publisher" is broadening the scope too far of what a monopoly is. A large retailer taking your products off of its shelves will hurt you in the sense that you'll make fewer sales, but that doesn't mean they have monopoly power. All it means is they have non-zero negotiating leverage with you. If you don't like it, go sell your books on Barnes and Noble or eBay or direct to customers on your own website.
Think for a moment about why we hear all this wailing about Amazon in the book market but not in the market for e.g. AWS, even though Amazon has a large market share there as well. It's because in the book market the publishers are also Amazon's competitors and they're the ones wailing. Because Amazon wants everybody to buy eBooks, the vibrant success of which gives authors significant leverage over publishers once it becomes viable to forgo a print edition entirely unless publishers provide sufficiently attractive terms.
That puts the squeeze on print publishers from both ends. Amazon is demanding lower prices from them and authors are given leverage to demand higher royalties. That's the natural state of the market when your product requires you to operate an industrial scale printing facility and have a significant unit reproduction cost for your product and competitors are providing similar customer value by copying bits. The print publishers are screwed and they're trying to figure out how not to be, but they're already dead and they just haven't hit the ground yet.
If customers in practice had easy and significant choices, they'd just go elsewhere easily and the publisher would feel no pain.
They kind of are. You can get into the whole bit where it's an antitrust violation for a group of companies that should be competing to instead get together and collude with each other, but that doesn't have any relevance to Amazon. Nobody is accusing them of colluding with anybody.
I'm not sure what you're getting at with the Wikipedia article. Are you reading the list of conduct which is prohibited for monopolies (and cartels) as something you expect to be prohibited in general?
> If customers in practice had easy and significant choices, they'd just go elsewhere easily and the publisher would feel no pain.
That's not how it works. If Macy's stops carrying your clothing line, you're going to lose a nontrivial amount of sales even though they have a hundred other competitors. All profitable companies have a little bit of market power or customers and suppliers would squeeze their margins to zero and put them out of business.
> They kind of are.
Not in US antitrust law, where market power and monopoly power are mostly defined in relation to empirically demonstrated effective power to raise prices or exclude competitors. [1] The existence of effective competition would deny these abilities (by definition), but actually having other competitors exist in the market at issue doesn't. So, the statement that they are not strictly about "not having any other options" is precisely correct.
[1] See, e.g., http://www.ftc.gov/tips-advice/competition-guidance/guide-an...
What they're doing is actually a demonstration of their lack of monopoly power. When they raise the price they charge for a book, any customers doing comparison shopping who want that book in particular will get it from a different retailer. If Amazon had monopoly power you would instead expect substantially all customers to either pay the higher price to Amazon or not buy the book from anyone.
The market characteristic that Amazon is taking advantage of is that if they raise the price for books from one publisher, it shifts impulse purchases from that publisher to another for customers looking through Amazon's website to find a new book to read. It's essentially the same strategy as putting the product of the publisher you don't like at the back of the store, or replacing mention of it in your promotional materials with mention of a competing product you also sell. The publisher cares a lot more than Amazon about which publisher's books Amazon sells more of, which provides Amazon with negotiating leverage against the publisher. All retailers have that leverage over their suppliers. It doesn't require monopoly power. Obviously being bigger gives you more leverage, but being big and having a monopoly are not the same thing.
There is a difference between what something is and what you can use as evidence of it. There is this whole issue in antitrust law about how you define the market. For example, is MacOS in the same "market" as Windows? The accused monopolist always wants to paint the market as broad. Microsoft says it doesn't have a monopoly because Apple is competing with it. If Microsoft claims the market is that broad, but they can still do all the things you would expect a monopolist to be able to do and customers don't abandon them, it's evidence that the supposedly competing company isn't actually providing competition and they do actually have a monopoly.
> The existence of effective competition would deny these abilities (by definition), but actually having other competitors exist in the market at issue doesn't.
That's just a language trick. Effective competition comes from having competitors. If you don't have effective competition it's because your "competitors" aren't actually competing with you, either because they're cooperating or because they're not actually offering the same product in the same market (i.e. in either case they aren't actually competitors).
If Walmart has enough local monopolies, this is a self-reinforcing strategy, since it's unlikely all of the monopolies will be challenged at once, and Walmart can thus have a few of them with unusually low prices while the rest sustain that one during the conflict (since they're guaranteed to have business, being the only store in town).
So take Walmart. Do they have a local monopoly? First, question, on what? If you want to buy a television then they almost certainly don't, because they have strong competition from Amazon and six dozen other Internet retailers, and on top of that customers tend to be willing to drive out of town to save real money on a big ticket item.
But what about, say, groceries? That pretty much puts the Internet out of the running, because you can't ship a single gallon of milk in a refrigerated truck for anything resembling a competitive price. So then the question is, how far away is the nearest local competitor? If it's only a five minute drive, maybe that's enough competition. If Walmart's prices get out of hand people will start to make the drive. But what if it's 15 minutes? 30 minutes? 45 minutes? What if a substantial portion of the local population doesn't own a vehicle and that "15 minute" drive is a two hour walk? So maybe some Walmart stores have a local monopoly on groceries.
But wait, there's more. If Walmart's local prices start to get out of hand, how hard is it for a competitor to open up? It turns out the answer is, not very hard. A small grocery store is a one person operation. Low barrier to entry. If new competitors spring up six hours after Walmart raises their prices, they can't actually raise their prices very much no matter how far away the nearest existing competitor is. Which is why, even in towns with only that one Walmart, it still doesn't cost $20 for a gallon of milk.
It would only take a local wage initiative, for instance, to likely bother the closest Walmart. So there's an inherent incentive not to let prices rise so much that people are angry enough to get the government involved because they can no longer buy milk (or food).
No one has said that they are. Likewise, the affected publisher, and the news media, are not obligated to fail to inform the public of Amazon's tactics so that they are aware that Amazon having smaller-than-usual discounts, "not available" notices, and long shipping times may well be a sign not of any issue with the availability of the book, but of Amazon's disputes with the publisher, and that therefore if they are encountered when looking for a particular book, a consumer would be well advised to look at other online retailers, who, while their usual discounts may be lower, may have better discounts for the book at issue or have it available when Amazon says its unavailable, or have it with a more reasonable shipping time when Amazon does not.
Amazon is essentially leveraging the trust that consumers have in them as presenting a seemingly comprehensive catalog and best terms in the online book retailing business to selectively pressure publishers, and its completely fair to inform consumers that, in the particular case of these kinds of disputes, that trust may, however well earned it was previously, not be warranted -- and what the particular symptoms are that such a dispute is affecting the book you are looking for.
Amazon's big cachet was always "Earth's biggest selection". If they are going to behave like cable companies and refuse to sell books from major customers, they are really failing their customers.
If I want to buy a book, I shouldn't need to know or care about who publishes it, and whether or not they are in a pissing match with Amazon. The first time I run into that situation will be the last time I use Amazon.
I'll reserve judgement on whether Amazon's conduct is legal or not. But, Apple's collusion was decidedly illegal.
In any case if the DoJ feels that Amazon is misusing monopoly power, then the solution is to prosecute both and not, it'll all cancel out in the long run.
In the e-book conspiracy, all the publishers wanted better terms than Amazon would give, and they didn't want to give Amazon the chance to play hardball, so they banded together and forced Amazon's hand.
Not really sure how the second is better. It's certainly way more illegal.