Amazon Flexes Its Muscles in Fight Against Publishers

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

by kjhughes • 12 years ago

136 121 12 years ago

bits.blogs.nytimes.com

btrombley2• 12 years ago

The article is short on details, but I'm not clear why Amazon is obligated to sell a publisher's books, much less at the publisher's desired prices. Wal-mart is famous for using its size to lean on suppliers ensuring "everyday low prices." Why is publishing different?

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.

jerf2• 12 years ago

If Amazon can significantly hurt a publisher in this manner, it is suggestive that they may have a monopoly power that they are abusing: http://en.wikipedia.org/wiki/Monopoly#Law

(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.)

btrombley2• 12 years ago

I think this is backwards: it was the book publishers (and Apple) that were sued for colluding to raise e-Book prices and had to settle -- which is what anti-trust laws are meant to protect consumers against. Amazon using its size and some questionable tactics just doesn't fall into that category.

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.

AnthonyMouse6• 12 years ago

The thing is, they don't. Amazon is like Walmart or Google. The reason everyone uses them isn't that there are no other options. There are. The reason is that they're better at it. A monopoly is, for example, Comcast, because there is no reasonable alternative provider for the same service.

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.

dragonwriter11• 12 years ago

but I'm not clear why Amazon is obligated to sell a publisher's books, much less at the publisher's desired prices.

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.

a3n• 12 years ago

Amazon lying to customers - there's a winning strategy.

HNaTTY• 12 years ago

I like your writing style.

Spooky23• 12 years ago

I think this reveals Amazon's key weakness -- they don't make any money.

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.

bd_at_rivenhill• 12 years ago

They make plenty of money, but that is then invested back into expanding the business, so it's more accurate to say that they don't make much profit at this time.

seacious• 12 years ago

What practice of Hachette is amazon objecting to? The article doesn't specify the cause of the conflict.

jasode• 12 years ago

In the 10th paragraph: "Amazon, which is under immense pressure from Wall Street to improve its profit margins, is trying to get better terms on e-books out of Hachette,"

Amazon also previously used this playbook with MacMillan Publishing.

dragonwriter11• 12 years ago

What practice of Hachette is amazon objecting to?

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...

waterlesscloud• 12 years ago

Yes, of course the publishers wouldn't want authors to see the details of their Amazon deals.

smackfu9• 12 years ago

Probably e-book pricing. Hachette doesn't really have any reason to come out publicly and says they are trying to keep e-book prices high, since while that is good for authors and Hachette, it's bad for the consumer pocketbook.

tsunamifury• 12 years ago

Can we stop with the mindless idea that the point of capitalism is only to drive down the price for consumers. The point is to provide an equilibrium between suppliers and customers. The difference between 12.99 and 9.99 doesn't hurt consumers and provides significant difference in paying authors. Amazon is unfairly trying to kill the suppliers for short term gains at the expense of the industry.

chrismcb2• 12 years ago

The practice of not giving Amazon even more money.

mmed• 12 years ago

That's a vulgar way of demonstrating Amazon's muscle power.

smackfu9• 12 years ago

The main reason this is getting publicity is that the authors are getting punished but they have no power. Otherwise it's just a standard retailer/supplier conflict.

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.

dragonwriter11• 12 years ago

Another major reason is suggested in the earlier article -- Amazon's market power in the book retailing business (particularly if online book retailing is regarded as a distinct market) is so great that a lot of commenters have raised antitrust concerns about that power being applied as leverage for better terms in the e-book market (developing market power isn't illegal by itself, but applying it to use dominance in one market to acheive dominance in another can be an antitrust violation.)

dublinben• 12 years ago

The publishers are completely free to sell DRM-free ebooks directly to consumers that can be enjoyed on their Kindle or whatever. They insist on relying on greedy middlemen like Apple and are shocked when Amazon doesn't fall in line.

I have no sympathy for complaining publishers that refuse to actually circumvent these "bully" distributors.

Turing_Machine6• 12 years ago

"The main reason this is getting publicity is that the authors are getting punished but they have no power."

Sure they do. They can put the book on Amazon themselves and make 70% of retail rather than 15% of retail.

chimeracoder• 12 years ago

“I have supported Amazon for as long as Amazon has existed. I’ve been published for 20 years now and you have sold so many of my books,” she wrote in a Facebook posting she also sent to the retailer.

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.

dap3• 12 years ago

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.

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.

revelation• 12 years ago

These articles can really go either way, but NYT seems to continuously go the publisher side. Theres not a single Amazon statement in this article.

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?

tzs• 12 years ago

Theres not a single Amazon statement in this article

From the article: "An Amazon spokesman declined to comment"

jack-r-abbit2• 12 years ago

And... A Hachette spokeswoman did not return a message for comment. A Bonnier spokesman could not be reached.

Looks like no one wanted to talk to these reporters/bloggers. :)

sxcurry• 12 years ago

I agree. I think part of it is that the NYT reporters see their own industry slipping away, and really identify with others who are struggling to maintain ink on paper publishing. BTW, the recent internal NYT report stated that the future for the "paper" is a thriving digital publishing environment, with a secondary emphasis on the traditional newspaper.

eridius9• 12 years ago

Remember that the majority of publishers just recently colluded with Apple to essentially fuck over Amazon.

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)

chrismcb2• 12 years ago

"corrective measures employed by Apple" what were the measures and what were they correcting? And how did the Justice Department get it wrong. Apple colluded with the publishers to set the price, and forced Amazon to sell for the same price. With mainly the people being screwed (well in some cases the publishers actually lost money too) Unfortunately the corrective measures taken SINCE the ruling having really made much of a change.

chongli2• 12 years ago

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.

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.

paulgb• 12 years ago

The paperback edition of Brad Stone’s “The Everything Store: Jeff Bezos and the Age of Amazon” — a book Amazon disliked so much it denounced it — is suddenly listed as “unavailable.”

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?

cube132• 12 years ago

That's true. However, making a JK Rowling book completely unavailable? That's incredibly suspicious. It's pretty much a guaranteed bestseller.

smackfu9• 12 years ago

That book is still a preorder, so a lot easier for Amazon to play games with. If they aren't selling it on release date, that's a much bigger deal.

001sky2• 12 years ago

"For several months, Amazon has been quietly discouraging the sales of Hachette’s physical books by several techniques — cutting the customer’s discount so the book approaches list price; taking weeks to ship the book; suggesting prospective customers buy other books instead; and increasing the discount for the Kindle version."

There is no physical shortage.

chris_mahan2• 12 years ago

Wait, you're telling me that the book is available elsewhere (like the barnes & noble website), but not amazon? What's stopping average joe to go to a different seller and buy it there?

If Amazon doesn't want to sell something, even a book, that is entirely their right.

dragonwriter11• 12 years ago

I like a conspiracy theory as much as the next guy but couldn't the book just be... unavailable?

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.

rhizome2• 12 years ago

There is at least a century and a half of precedent for using the term "Out of Stock."

waveman2• 12 years ago

It's unavailable in the sense that you can actually buy it now. I just did. That is, in the sense that it is available. And right now the claim made is demonstrably false, if not a deliberate lie.

Seriously people you need to confirm your facts. Not everything you read in the papers is true.

hartator• 12 years ago

It is not.

Source: http://www.amazon.com/The-Everything-Store-Bezos-Amazon/dp/0...

zimbatm• 12 years ago

Wouldn't the censorship then be too obvious ? It's best to make it sufficiently inconvenient and/or expensive.

IBM• 12 years ago

Looks like the publishing industry needs to consolidate further.

mpweiher• 12 years ago

Boy, aren't we all glad the DOJ protected poor little Amazon from the evil and all-powerful Apple e-book conspiracy and monopoly.

terminus• 12 years ago

Two wrongs don't make a right.

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.

smackfu9• 12 years ago

OK, so in this case, Amazon wants better terms than Hachette will give, so Amazon plays hardball.

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.

dragonwriter11• 12 years ago

Assuming the first player has monopoly power (which its tactics wouldn't have any effect if it didn't) both are equally illegal.

Turing_Machine6• 12 years ago

The lawsuit had nothing to do with Amazon.

incision2• 12 years ago

Honest questions here...

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...

pelario• 12 years ago

The analogy with the music industry is not good:

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.

dragonwriter11• 12 years ago

Now at least part of the complaint is that Amazon isn't discounting enough and allowing prices to approach list price

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.

incision2• 12 years ago

Right.

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.

jchendy• 12 years ago

The concern seems to be that publishers aren't being treated equally. Supposedly Amazon is only applying these price and shipping delay penalties to publishers it doesn't like.

smackfu9• 12 years ago

What is supposed to happen here?

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.

justizin• 12 years ago

to be clear, the lawsuit was against apple and the publishers, who were accused of price fixing by refusing to participate in under-pricing books, but also refusing to price ebooks as high as ~$25.

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.

richdougherty• 12 years ago

I have the different view: that the Apple/publisher case is a pretty straightforward case of a price fixing conspiracy.

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.

Turing_Machine6• 12 years ago

"it was a really odd application of antitrust law at the time, since Amazon is the one with monopoly power"

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).

fpgeek• 12 years ago

Yes, it does seem like publishers want two contradictory things from Amazon:

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.

Turing_Machine6• 12 years ago

You are absolutely correct.

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.

gdilla• 12 years ago

eBooks are agency model - that is, the publisher sets the selling price, the retailer takes a cut like 30% on sale (like the appstore)

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.

higherpurpose• 12 years ago

It would be nice of Amazon removed DRM the same way Apple did for music.

umsm• 12 years ago

Does this article still make sense if you click on this:

http://www.amazon.com/The-Everything-Store-Bezos-Amazon/dp/0...

And notice that the book IS AVAILABLE?

leoc• 12 years ago

Was that the case when the article was written though?

davidw• 12 years ago

http://www.powells.com/ - this is a great place to get books, although the best thing of all is to go there in person and wander around. I generally like Amazon, by and large, and I love my Kindle, but wandering around looking at that many books in person is great too.

bhewes• 12 years ago

I have started two publishing companies over the last two years. What I can say on the economics of print is that the margins are not good compared to ebooks. What this article misses is the fight is not really between publishers and Amazon, but between printers and Amazon. Printers and their distribution system are getting squeezed.

chris_mahan2• 12 years ago

Why don't the publishers make it easy to buy books from them, instead of all this rigamarole about rights and regions? I want to go to your website, pay with a credit card, and you ship it to me, anywhere in the world, and fast.

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.

jrockway• 12 years ago

This is a great way of putting it. Their business doesn't need a middleman. They added a middleman. Now they don't like the middleman.

The tears, they just aren't coming.

dap3• 12 years ago

... and since many people did the same thing, and many of the local bookstores have closed (particularly those with large selections), Amazon effectively has considerable influence over what kinds of things most of us read. Tough indeed. For us.

Amazon Flexes Its Muscles in Fight Against Publishers

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