Publishing in the age of Goliath

Every time I get comfortable using amazon again, it, like my cat, likes to remind me that it's a big old jerk with a god-complex.

http://bits.blogs.nytimes.com/2014/05/23/amazon-escalates-its-battle-against-hac...

I've been finding that story very very bizarre, because it seems to go counter to everything Amazon has always said about its mission to be the customer's best friend.

I agree, SBL. I'm not minded to give Amazon advice, but it seem so unnecessary to me. Amazon is winning. It's crushing the competition in paper books, and it's most of the market for digital ones. It doesn't need to have this fight now. Besides, books are a relatively small piece of their bottom line now--yet bullying there has press and popular "legs" that they'd never have in other markets. It seems an unnecessary fight for them, and one which moves the possibility of legal or legislative action ahead a number of squares.

Agree--it seems like overkill. And suggests that, once again, much idealistic rhetoric is just a pitch.

I buy DVDs on Amazon but rarely a book. I simply can't find ALL the movies I may want at Bookman's in Mesa but the Tempe public library and Changing Hands bookstore do me nicely...

Mr Welsh, I miss Changing Hands bookstore. I'm glad it's still there!

Here's an article that explains why the dispute between Hachette and amazon matters to readers.

http://www.salon.com/2014/06/01/amazons_scorched_earth_campaign_why_the_internet...

>6 RidgewayGirl: So when Amazon says – as it did in a press release this week detailing its side of the business dispute with Hachette — that “we regret the inconvenience,” we’re suddenly in new, uncharted, alien territory.

From a post I wrote for another forum:

My mother, who takes the (very) long view on such things, thinks that all big companies have a life cycles and that at some point they go from being an innovator that embraces change to something more like a behemoth, which resists it. When that happens they lose their claim on the future, so to speak. (Her favorite illustrative example being IBM).

I can't help feeling that Amazon is approaching that point, if not actually tipping over it. There are hundreds of ways they could increase pressure on Hachette without yanking the books off their virtual shelves, but that they've chosen this route, and gone about it so blatantly, suggests they have lost sight of their original mission, or no longer consider it the best business strategy.

>7 southernbooklady: I think your mom is right, I've always felt that companies eventually jump the shark and lose market share or fold. I remember the first Borders I was ever in; a friend and I drove the 45 minutes to get there from one end of the District suburbs to the other. We'd never seen anything like it before and spent hours and eventually days pouring over the stacks. When Borders closed, I wasn't sad but I was pissed. Their failure to adapt ruined a good thing for me.

Amazon's statement
http://www.amazon.com/forum/kindle?_encoding=UTF8&cdForum=Fx1D7SY3BVSESG&amp...

Hachette's statement
http://www.hachettebookgroup.com/news/

Taken together, they don't pass the 'smell test' for me. Neither side has revealed the terms of the negotiation. What are the Hachette terms that Amazon isn't agreeing to, and how are they substantively different from those of other publishers which have reached terms? Hachette gives a clue: 'We will spare no effort to resume normal business relations with Amazon—which has been a great partner for years—but under terms that value appropriately for the years ahead the author's unique role in creating books, and the publisher's role in editing, marketing, and distributing them, at the same time that it recognizes Amazon's importance as a retailer and innovator. Hachette seems to be seeking terms that benefit authors in the future, but doesn't say how, although Amazon's discounting policies on eBook sales is one likely reason.

Hachette has lain the groundwork for an anti-trust complaint, and Amazon the groundwork for its defense. Hachette claims that Amazon is 'limiting' and 'preventing' consumers from purchasing Hachette books, and Amazon has said that the books are available from third parties and their competitors.

Both sides are now battling for public sympathy and Amazon is really sucking at it. There isn't enough information for me to make up my mind who's on the side of the angels. That being said, I'm inclined to give Amazon the benefit of the doubt, if for no other reasons that Hachette was previously found guilty of price fixing, and they're just a little too precious with the David/Goliath thing.

Looks to me like this is heading for the courts and (God help us all) congress. It's an ugly mess.

#7 & 8

It's not so much that companies start to resist change (though that does happen) as much as they become so weighed down with layers of bureaucracy that the people making the firm's business decisions become detached from the customers and they lose touch with the market. Oftentimes the smaller companies that fill the gap are started by people who were potential customers who just didn't see the product or service on offer or who decided there was a better way to make or deliver it. The visionary entrepreneur who creates an entire market from scratch is actually a rather rare bird.

While both Amazon and Hachette will position themselves as being on the side of the consumer, what they are actually negotiating about right now is how to divvy up the profits from selling Hachette's books. Amazon has finally hit a point in its corporate existence when investors are starting to demand profit margins above 1%, which is low even by the retail industry's standards. Amazon's stock currently has a p/e ratio of around 480, which is mind-bogglingly high for a company that, for the most part, does the same thing that Wal-Mart does, except over the Internet (for comparison, Wal-Mart's p/e is just under 16). There's only two ways to increase profit margins: raise prices or decrease how much it costs to produce each unit of good or service sold. Amazon has wrung about as much cost-savings out of its own operations as it can, so unless it wants to start raising prices and risk losing market share, it's going to have to start doing what Wal-Mart has been doing for years: squeeze its suppliers until they squeak (which Hachette has apparently already done).

#8,

I doubt that an antitrust case against Amazon would make it very far. Hachette would have to make an argument that Amazon's agenda in how it is dealing with Hachette is an attempt to create a monopoly in a given market. Of course, how you define the market matters, but if Amazon isn't in the book publishing business and is just a book retailer, it seems like a pretty tall order to convince a court that Amazon is trying to create a monopoly in the book retail industry by making it difficult for potential customers to buy a given publisher's books. In fact, such a move would undermine any attempt to create a monopoly since potential customers would be encouraged to buy that publisher's books from a competitor.

>10 Bretzky1: Nice points. You're right, probably not in the US. Hachette will probably argue that Amazon is so large that it no longer is driven by market forces but has become the market, in which case its prices are inherently unfair regardless of price point, and seeking to lower prices is unsustainable and illegally shutters competition.

EU law is disposed to regard with suspicion any company that plaintiff can prove has a majority of the market. Hachette may be able to make real progress there, and Amazon being a US company doesn't help.

>8 SomeGuyInVirginia: I felt similarly angry about Borders, looking back. It is still #5 "from where" source in my LT stats.

>10 Bretzky1: but if Amazon isn't in the book publishing business

Just as a point of order, they are in the book publishing business.

>12 matthewmason: I know, I feel blue about it now because I miss it. I wonder how book selling is going to evolve?

One thing this dispute has underscored is how insignificant books are to the over all Amazon world view. Publishers--even big ones like Hachette, depend on their A-list authors for much of their bottom line. Back in the Harry Potter days, Scholastic's stock actually fell when Rowling finished the series. These writers are important to their publishers--a significant part of their financial stability.

So I find it sort of awfully fascinating that Malcolm Gladwell can lament how he has "made millions" for Amazon (he has) and was thus worth millions to them. Obviously, on the Amazon scale of things, "millions" isn't all that significant.

They won't do it, but I think since this is all about who controls ebook pricing, it would be kind of hilarious if publishers all decided to only produce ebooks in the epub format.

Stephen Colbert gives Amazon the finger. Really.
http://thecolbertreport.cc.com/videos/ukf9gv/amazon-vs--hachette

>16 timspalding: I'd flip them off, too. I'd also flip off Hachette.

This article is the most clear I've read on the situation, and makes a good case for Hachette.

http://www.publishersweekly.com/pw/by-topic/industry-news/publisher-news/article...

I think this post takes a well-balanced look at the two sides...and is written from a content provider's point of view: http://jakonrath.blogspot.com/2014/06/guest-post-by-michael-j-sullivan.html

Here's background -- a recounting of amazon's beginning.

http://www.newyorker.com/reporting/2014/02/17/140217fa_fact_packer?currentPage=a...