Amazon, Innovation, and the Rewards of the Free Market

Our article from two weeks ago, Publishing’s Ecosystem on the Brink: The Backstory, and similar articles spur frequent comments online that Amazon is simply reaping the rewards of its innovation, that its growing dominance of book publishing is merely a demonstration that the free market is functioning as it should. This isn’t really what’s been happening.

Useful innovation should of course be rewarded, but we’ve long had laws in place (limits on the duration and scope of patent protections, antitrust laws, stricter regulation of industries considered natural monopolies) that aim to prevent innovators and others from capturing a market or an industry. There’s good reason for this: those who capture a market tend to be a bit rough on other participants in the market. They also tend to stop innovating.

Amazon’s first Kindle, released in November 2007, was certainly innovative, but its key breakthrough wasn’t any particular piece of technology. Sony had already commercialized e-ink display screens for handheld e-books in September 2006.  (E Ink, a Cambridge company co-founded by MIT Media Lab professor Joseph Jacobson developed the displays used by both companies.) Amazon’s leap was to marry e-ink displays to another existing technology, wireless connectivity, to bring e-book shopping and downloading right to the handheld device.

Amazon’s innovation, in other words, was to untether the Sony device and put a virtual store inside it. This is no small achievement, and Jeff Bezos’s particular genius seems to be his ability to grasp the transformative potential of this sort of thing long before others do, just as he saw the potential of databases and the Internet to facilitate shopping for books and the potential for one-click shopping to ramp up online sales before most others had caught on.

Amazon’s reward for developing the wireless e-reader should have been that it would become a significant vendor of e-books and earn a profit commensurate with the value it added to the publishing ecosystem. Whether it would then continue to be a significant e-book vendor should have depended on whether it continued to innovate and provide good service to its customers. Amazon’s reward should not have included being able to combine its wireless e-reader, deep pockets, and an existing dominant position in a related, but separate, market — the online market for physical books — to prevent other vendors from entering the e-book market. Amazon’s reward as an innovator, in other words, shouldn’t be getting to wall itself off from competition.

By all appearances, this is precisely what Amazon was trying to pull off two years ago, when it removed the buy buttons from nearly every Macmillan book. Amazon removed the buy buttons for both e-books and, stunningly, print books, even though its disagreement with Macmillan was confined to the sales terms for e-books. Amazon had about 90% of the market for e-books at the time, but that market was then quite small: Macmillan could handle Amazon’s e-book blackout indefinitely. Amazon’s 75% of the online print book market, on the other hand, provided real leverage on Macmillan, and Amazon chose to use that leverage. By using its print book dominance to dictate terms in the nascent e-book market, Amazon crossed a clear, anticompetitive line.

One anticompetitive tactic in service of another

But it was even worse than that. Amazon had deployed its buy-button removal weapon before, but never so publicly, never on such a massive scale, and never (to our knowledge) as a means of shielding its ability to use a separate anticompetitive tactic: its practice of routinely selling e-books at a loss. Such practices, commonly known as predatory pricing, are a means of using superior capital resources not to innovate nor to provide better service, but to weaken or eliminate competition.

In Amazon’s hands, predatory pricing can be a particularly potent weapon. Surely no retailer in American history has had anything approaching Amazon’s database of deep, detailed, real-time market knowledge. This database eliminates the guesswork from marketing, as Amazon can run countless pricing experiments and immediately analyze the results. With this information, predatory prices can become smart bombs that are precisely targeted to maximize the sales of the latest Kindle to the most desirable categories of consumers, for example, or to maximize the losses of an incipient competitor.

… in service of a third

Predatory pricing could, in turn, help Amazon buttress its other critical barrier to entry into the e-book marketplace: its use of a proprietary e-book format, rather than the industry-standard epub format. Kindle owners would naturally be reluctant to switch to incompatible devices after they had sunk money into a personal e-library of Kindle editions. Viewed this way, Amazon’s costs incurred in selling e-books at a loss amounted to an investment in erecting walls around its young, booming e-book marketplace. The more Amazon succeeded in locking customers in to Kindle’s device and format, the less rewarding the market for any potential competitor. Amazon’s investment could pay off handsomely as the e-book market took off.

Amazon’s blackout of Macmillan’s titles came at a critical moment. Barnes & Noble, Amazon’s most significant bookselling rival, had just begun shipping its Nook e-reader the month before the blackout. The Nook was the first direct threat to Amazon’s e-book dominance, the first wireless e-ink challenger to the Kindle. Though sales of the Nook were reportedly brisk, Barnes & Noble could never hope to win a war of financial attrition with Amazon. If Amazon could compel publishers to fall in line with its predatory pricing of e-books, it could eliminate a thinly capitalized but potent (because of its physical, brick-and-mortar presence) competitor from the e-book market. It could smother Barnes & Noble’s Nook before it could pose a genuine challenge.

Amazon backed down — though not before decrying Macmillan’s “monopoly” over its books — and restored the print and e-book buy buttons. Macmillan and its thousands of authors regained access to the marketplace where 75% of online book buying transpires. The buy-button removal tactic had, for once, backfired on Amazon; the publicity over the blackout had taken a decidedly negative turn before the company changed course. Barnes & Noble would get a toehold in the e-book market, and, as we described in our last post, would turn out to be a surprisingly nimble and innovative competitor in the e-book market.

That rare setback for Amazon may yet prove to have been but a speed bump: through creative use of its capital and ever-growing market power, by compelling publishers to participate in its free book-of-the-month club for Kindle owners, by requiring public libraries to redirect their patrons to Amazon’s commercial website to borrow books for their Kindles, by starting an imprint to compete for authors now published by the largest commercial houses, and, no doubt, by countless uses of its powerful database of consumer behavior, Amazon continues to tighten its grip on the book industry. Its ambitions haven’t scaled back, and Barnes & Noble, still in the game (in no small part because of its success with the Nook), remains its most significant impediment.

We aren’t Barnes & Noble’s champions, or at least we aren’t their champions by choice. We’d favor a far more diverse and robust retail landscape for books, and we encourage all readers to patronize their local bookstores as they would their farmers’ markets or any other businesses that enrich the quality of life in their towns and neighborhoods. But here’s where we are: Barnes & Noble is book publishing’s sole remaining substantial firewall. Without it, browsing in a bookstore would become a thing of the past for much of the country, and we would largely lose the most important means for new literary voices to be discovered.

A truly competitive, open market has no indispensable player that can call the shots. The book publishing industry has such a player, and Amazon is poised and by all appearances eager to use its muscle to rip up the remaining physical infrastructure of book retailing and the vital book-browsing ecosystem it supports.

If Amazon succeeds, the free market will have had little to do with it.

Comments: more
  • Jon Colt

    Proposed: New Acronym for Authors…RYFC!…(Read Your F*@&ing Contract!)

  • Hoosier

    You guys are a bunch of assholes. LendInk was legally exploiting the lending agreement your clients signed, and now it is gone. Censoring and witch-hunting them? Read your own contract. What’ll happen the next time somebody tries to censor a library, or a big book dealer, and you appeal to the community for support?

  • Guest

    This is not a dig at Amazon per se but a dig at the nonexistent “barrier of entry” to the direct publishing market in general. I’m sorry, but there needs to be a vetting process on the road to publication that just doesn’t seem to exist anywhere but the traditional publishing world.

    Amazon is not a “publisher” by any standards, because it lacks a sense of creative professionalism that only qualified agents and editors can offer. It is merely a supplier, a warehouse, a database, and not a curator. It’s practically an automated system run by a computerized algorithm rather than people, real people, invested (in time, interest and money) in the world of books. The closure of Borders marked the end of the big-market old-school bookstores, which is why I will continue to support BN until it breathes its last (even though it has a direct-publishing system), and my local indie shops for all time (or until they breathe their last and Amazon renders print books obsolete). Amazon is the Wal-Mart of online retailers. It’s not even a “bookstore” either.

    Amazon lacks quality control because it’s all about “innovation,” which in Amazon’s view is technology and nothing more. I won’t read any book that has not been checked, rechecked, and checked again with a fine-tooth comb and a microscope. Simply put, the Big 6 system has an edge when it comes to editing and critique, while KDP Pokefreaks and their anime fanfic beta retards have little more than the Microsoft Word paperclip. Amazon is total anarchy, which is why you get chapterized Wikipedia books and Sixty-Nine Shades of You-Can’t-Spell-BDSM-Without-DSM making the rounds. Were it not so popular in the shady shadows of “viral” (pun intended) media, no publisher would (ahem) touch that X-rated filth of a rape manual with *anyone’s* fifty-foot pole. (Then again, the Big 6 did publish Twilight, but that’s an anomaly in terms of its filtered lens being more like clouded beer goggles.) The least they could have done was give the buyer a paper bag to wrap their Kindle in, maybe two just in case she wants to put it over her head while perv hubby dons his executioner’s mask.

    I may have been neither Team Edward nor Team Jacob (and I am certainly not team fifty shades to beat your lover), but I am team AG and trad pub when it comes to defeating the mega-monolith anarchist haven turned smut peddler that is Spamazon. I award them no points, and may no one have mercy on their nonexistent souls.

  • Rahip13

     www.anythingraffle.com is a great way to get amazon gift codes! It’s a raffle site that requires a certain amount of raffle entry’s obtained by doing offers, to win a the prize. Most prizes allow you to get all available entry’s to have a 100% to win that prize!

  • Anonymous

    Why has the Authors Guild never taken a strong stance against the used book market and library business which definitely cut into authors’ royalties?  Amazon is succeeding because it provides a superior customer experience. I have purchased many, many more books since the advent of Amazon and as a college library director even used them more often than the major book distributors because I could get books from them faster and cheaper than Baker and Taylor and Ingram.  Working with independent booksellers when trying to having an author promotion in the library was an absolute nightmare. B&N was marginally better, but Amazon always came through.  Businesses succeed because they do something either cheaper or better.  Amazon does both.

    Ironically, the true monopoly in this discussion is the Authors Guild.  Perhaps you folks could use some competition.

    • Lylaward

      Or, as I indicated in my comments, why isn’t the Author’s Guild paying more attention to authors and the benefits Amazon afford them? Well known authors would not be signing on with the new Amazon imprints if the terms were not greatlhy superior to those offered by conventional publishers.

       
       
       

  • Kristen

    “Without it, browsing in a bookstore would become a thing of the past for
    much of the country, and we would largely lose the most important means
    for new literary voices to be discovered.”

    Browsing Roulette is not a marketing strategy, it is suicide and has been responsible for a staggering failure rate among novelists. As of I think 2007, 93% of books (both traditionally and non-traditionally published) sold less than 1000 copies. This is a 93% FAILURE RATE.

    I don’t care for monopolies and Amazon is a whole other bag of beetles, but to protect B&N out of some noble sentiment to help new artists get discovered? That is hogwash and we are not buying it anymore.

    Placement in bookstores is negotiated by an agent. For newbies? Forget the airport. Not gonna happen. Oh, and the front of the B&N, uh that is for VIPs only (people they already KNOW will sell lots of books, btw). Tables? Maybe, but really don’t count on it…really. So for new authors, the best we can expect is to be spine-out on a shelf, and we better hope that our last name puts us at eye-level.

    Amazon might not be looking out for the artist’s interests, but NY hasn’t been doing a great job of it either. They have continued to cling to an outdated, archaic business model, and now they are paying for their lack of vision.

    I hope they come around, too. Heck, I have even offered to help. But here is the thing, social media is putting indies on all the best-seller lists and NY still wants to bank on Browsing Roulette. That should be food for sobering thought.

    • Guest

      “Social media is putting indies on all the best-seller lists”

      Because these KDP “books” were written by people with the vocabulary level of 12-year-old twits who begged their parents to buy J-Beebz’ “biography” but never actually read it.

      In short, 12-year-old twits who like J-Beebz. 12-year-old twits LIKE J-Beebz.

  • http://nussernews.com/ Richard Nusser

    Richard  Nusser
    I’m wondering if The Authors Guild is still interested in getting involved in the digitalization of books by authors who own their copyrights?  I seem to recall something of that sort was under discussion with  Google. Has any progress been made on this subject?

  • http://lylaward.blogspot.com/ Lyla Ward

    Re: Amazon. A lot has been written about Amazon, other publishers, independent bookstores, but not much about the product producers..the authors. I sympathize with everyone, but this is my experience as an Amazon author.

    A funny thing happened on the way to 2012.The day after Christmas—December 26, 2011—my book, “How to Succeed at Aging Without Really Dying.” rose to #79 on Amazon’s list of 100 top sellers, all genres. If you’ve never heard of it or me, I’m not surprised.
    This slim book of humorous essays satirizing the perils and pleasures of seniordom arrived with little fanfare in April 2010 . It was one of the first books published by  the nascent Amazon/Encore Publishing Group. A  PR campaign resulted in some radio interviews where I was repeatedly asked to what I attributed my overly long life. I felt sad answering, “a sense of humor,” because if longevity was tied in with humor, these folks’ days were numbered. There were also book talks and signings at local (CT) luncheons, libraries and community meetings. The galley edition was sent to all media that covered the AARP crowd (it was a first book by an 82 year old author.) A few reviews were written on and offline.
     
    Independent bookstores made no secret of how they felt about carrying a book published by their arch enemy, Amazon, and with the exception of an occasional Barnes and Noble brick and mortar, where it could be found on the black crepe “”Aging” shelves, “How to Succeed—“ could be ordered but not picked up at your neighborhood bookstore, if one remained.
     
    In the year and a half, following publication, sales of the book were less than spectacular. It had been included in a few Amazon promotions, as a gift book for Mother’s Day; at other times bundled with another humor book or a manual on the rites of death in the Belgian Congo. Whatever. The mention would produce a spike in sales that month, but the highest rank for the hardcover prior to December ’11 was in the high 800’s.
     
    The Kindle edition, released at the same time as the hardcover, to my surprise, fared somewhat better. Remember, the Kindle had only been introduced a few years before, and I didn’t think the older crowd would accept no less embrace the new technology. Wrong. The e-book ranked either 1,2 or 3 in the essay category and/or humor, and/or aging and, following promotions in both January and May 2011,  more than 200 e-books were sold.
     
    The hard cover was a different story. Despite being offered more than once at a bargain price, and some excellent 5 star reviews on the Amazon site, sales of this version, could only be described as sluggish. Some weeks 1 or 2 copies sold; some weeks, 12. It was hard to find a month where even 25 copies had been sold either wholesale or through Amazon.
     
    Then it happened. In October, 2011, following a Kindle promotion of selected e-books, and inclusion as one of “20 Memoirs About Transformation” in a MORE Magazine online article, 1550 Kindle copies were sold. And in December, Amazon sent out a mailing: Year End Deals with the cover of, “How to Succeed—“ representing the category of Unusual & Eclectic. Bingo. The week before Christmas, the hardcover edition of “How to Succeed—“ sold out. Amazon shipped more than 440, and more than 100 people were waitlisted. Courtesy of POD, over 250 copies were sold and shipped in the second week of January.
     
    My book was an ”overnight success.” Not because it was prominently displayed on a table in a bookstore, or because it won critical acclaim from esteemed journals or because it was touted by established book distributors. Aside from a few hundred books I signed at readings and appearances, “How to Succeed at Aging Without Really Dying” was pictured, described, promoted and sold purely and simply online.
     
    I’m sorry for the plight of the independent bookseller, and I hope they will have a continuing role in the sale of books. But for me and thousands of other authors whose sole purpose is to have our work published and read by as many people as possible, this new technology has created a greater market for books than the publishing world has ever known. And I think it’s time we stopped apologizing for it.
     

  • Jo Vandewall

    Amazon is just a step in the evolution of the book industry. If you look at economic history, you’ll see that single companies often rise to the top. FREX, IBM used to be the gold standard of personal computers, but no one buys IBM computers any more. Why? Because IBM became complacent while others innovated. If Amazon were to become a monopoly and start abusing writers and/or consumers, someone would innovate them out of the marketplace. When you look at history, that’s how it’s been always been done.

  • http://www.facebook.com/jimkukral Jim Kukral

    My advice? Quit worrying about monopolies and all these things you can’t control and get back to writing and figuring out how to best sell/market your books.

    • E573311

      Trouble is, part B of that suggestion will change depending on who’s the bigger player and who the author is FORCED to do business with.

      I’ve almost given up on my (stalled) writing career because I want to boycott e-books entirely. I’m not having whatever project I labored a decade over put up there — and trounced — by some POS “next big thing” that reads like a keyword heavy blog post written by a sex-crazed fanfic “author.” I wouldn’t even want my name up there on the same digital shelves.

      The saddest thing is that the author has to sell him/herself regardless of how s/he pursues publishing. Amazon has all but forced (hopefully) agented writers to prostitute themselves in hopes of so much as breaking even or turning a profit that’s enough to buy groceries. Actually, a brothel is arguably a more lucrative workplace than the KDP sh*tcan, and equally as respectable.

      • Asdf

         If you labored a decade over your product and people don’t buy it. You’re doing it wrong. Your product probably sucks. No offense. Innovate or die. That’s the industry now and the future. Its not “the next big thing” If you do boycott e-books, no one will know you or your work. lol…

  • Piera

    I am not an Author, I am just a reader. As a reader, I love Amazon. And I think you are missing at least some of the advantages you are already deriving from them.
    1. The kindle is an amazingly convenient way not only of reading, but of getting books. I live one hour drive away from the closest bookstore, but I can get any book I wish in a few seconds. As a result, I have bought a lot more books than in the past, simply because now it is easy.
    2. Not all independent booksellers are as great as you make them sound. I have had my share of not-knowledgeable or indifferent sellers. True, that has been more common in large chain stores. 
    2. Amazon usually has great prices. You may not like low prices, but us consumers certainly do. Call them ‘predatory’ if you want, I call them affordable. I used to get my books at the library, and buy most of my books used, because that allowed me to get more reading for my  bucks. If I’m not mistaken, Authors make no money on the secondary market. But now, if an e-book I want is reasonably priced, I will buy a copy. So you make money you would not have made otherwise.
    3. There are a lot of new writers on Amazon. Not all of them are good, but I suspect that some of the good ones would never have made it past the Publisher ‘gatekeepers’. So at least some Authors benefit from having easier access to the public.
    4. From a consumer standpoint, Amazon is a very good company to deal with. They go out of their way to make their customers happy. I’m well aware that they don’t do this out of the goodness of their hearts, but for business reasons. Be that as it may, the result is lots of happy customers. Happy customers buy more products (books, in this case)
    5. In my opinion, if Amazon has a dominant position in the book selling area, they have earned it. Believe me, consumers would abandon Amazon very quickly if they were doing a bad job. I would probably be first in line.
    6. Do I like that the kindle is a proprietary format? No, just as I dislike DRM and region encoding, which make legitimate use of my media more difficult that it should be. But what is the difference between the kindle format, and, for instance, the E-pub format of Barnes and Nobles, which is DRMed, and can’t be read on any other device?
    I can, and do, read Kindle books on the kindle, the ipad, and my computer. While a universal, open format would be my ideal, I recognize that in this, the initial phase of a new industry, companies will try to protect their own turf. If they did not, they would probably not last long.

    I thought your article was a bit on the whiny side, and it seems to lack, at least in part, understanding on why us lowly readers, ‘consumers’ of the written word, like Amazon.

    Please note: I’m not in any way associated with Amazon, except as a buyer. I don’t work for them, I don’t own stock, I don’t derive any advantage from them, other than good service.

    • Keltora

      1) Nook books can be read on other devices. I have the app for Nook on my phone.

      2) Nook owners can buy away from the store. Nook is wireless.

      • Piera

        On the Nook: I did not express myself clearly. I was not trying to disparage the Nook in any way.  What I meant to say is that the Nook (and probably the Sony reader) is no different than the Kindle when it comes to proprietary format. The fact that their format is E-pub does not mean that it is ‘transportable’. Also, there are many, many books on the Kindle that are not DRMed. Probably true for the Nook as well.

        • Agathis

           Uh … no. The epub format isn’t proprietary at all. It’s not a format created by Barnes & Noble. It’s readable on just about every other eBook device out there. It is a free, open standard created by the International Digital Publishing Forum. The format is completely transportable. That’s the whole point of having an open format.

          You clearly have no idea what you’re talking about.

          • FuckAmazon

            Piera got owned. And stop trying to pretend you don’t work for Amazon. That shit had sales pitch written all over it. You twat.

  • http://www.facebook.com/people/Elizabeth-Anderson/1446466872 Elizabeth Anderson

    Frankly, I’m peeved with Amazon right now anyway.  After several semesters of being a loyal customer, I opened a seller account, and now they’ve shut it down because my roommate (who of COURSE lives at the same address as me) has a previously shut-down seller account, so they think we’re the same person and won’t listen to me…plus they took money out of her checking account for a refund several MONTHS after she shut down her account when their own policy says refunds are given within thirty days of ordering.  I am quite displeased with them just now.

  • Howard

    A sadly nonsensical article.

    “Amazon’s reward should not have included being able to combine its wireless e-reader, deep pockets, and an existing dominant position in a related, but separate, market — the online market for physical books — to prevent other vendors from entering the e-book market.”

    Amazon has never prevented anyone from getting into the market. It simply delivered a far superior service to the customers than anyone else.

    Using it’s buy button removal is no different from a corner shop removing books from it’s shelves relating to dealers it falls out with. To label it anticompetitive is to turn the english language on it’s head. In fact no industry has behaved in a more anti competitive manner over the last 50 years than the Publishing industy. None. Meanwhile Amazon pays self publish authors far far more than the existing publishers and the future for authors is rosy.

    On the other hand the fixing of eBook prices by the Big Publishers is thoroughly, deeply and illegally anticompetitive. Yet we don’t hear anything but praise for them by the AG. I 
    wonder why ?

    The Author’s Guild have clearly taken agains Amazon because it has been far too successful for it’s own liking and it cannot exert any control over Amazon. Not one single action set out in this rant qualifies as anything remotely resembling anti competitiveness.

    The internet is an open and unlimited global marketplace. There is absolutely no barrier to entry and the cost of entry is extremely low. Any publisher, any eBook seller, any group of such organisations are completely free to establish an online market for their titles. Some have done so, but have failed because they have employed pitifully poor marketing strategies, they have stuck with the anti consumer DRM, they have alienated customers with regional restrictions, they have failed to deliver quality products in the format that readers want, they have delivered P poor customer services. That is the bottom line of all of this.

    Amazon will continue to dominate the market if no one stands up and competes. Instead of bitching about amazon, the AG should spend it’s time asking the publishers of this world, who rode high on the hog for the last 50 years why they have failed so utterly to react to the digital transition, despite being warned years ago that it was coming. It might ask them why they haven’t entered the market themselves and delivered what the customer wants instead of what they want. 

    “We’re talking about it because someone has to.” I’m afraid the whole world is talking about so actually you don’t have to. 

    “Many people, inside and outside the industry, are working on that. Good solutions are hard to come by.” Actually they’re not. The capitalist marketplace has been going for more than a century. Businesses succeed when they give the customer what they want in the manner in which they want it. Too many publishers and old world retailers have been trying to hammer customers into accepting what they think they should have. Amazon cam along and did business the old fashioned way. If the publishers and old world retailers want to avoid being sidelines even further then they need to start catching up with the rest of business. They have made too much money too easily for too long by ignoring the customer. The party is over. Those with vision have been telling them for several years now but they won’t listen. There are none so blind as those who refuse to see.

    • Guest

      “There is absolutely no barrier to entry and the cost of entry is extremely low.”

      Read my post above for why this is a VERY BAD THING.

      Madonna never put up such a barrier to entry — and oh, you know what, I bet she self-pubbed her dirty book way back in ’90 when computers were still the realm of Devo fans.

  • Evance

    New literary voices are not waiting to be discovered. They are posting their work to Amazon and letting consumers discover them. The Authors Guild has made it very clear it does not want them. They are not waiting for an invitation.

    • Guest

      You seriously think KDP crap is “literary”? Maybe the AG doesn’t want that sh*t because that invitation was written in Twtspk. Oh, and by the way there’s an at symbol in there somewhere.

  • The Authors Guild

    I won’t try to respond to all of these points, but I will address the issue of why we’re repeating this theme of Amazon’s dominance and how it chooses to exercise its power: Amazon is, for better or worse, shaping the book industry for years to come.  When a single company does that, it naturally works to create the most favorable environment for itself. We’d better all know what that’s likely to mean.

    We’re talking about it because someone has to. People in the industry are, for the most part, afraid to speak about it out loud, and that’s not healthy. We’re providing more detail on it (and we’ll continue to do so), because it’s a big subject, and it will affect all of us.

    LitBiz: Agreed, we have to come up with solutions, not just point out the problems. Many people, inside and outside the industry, are working on that. Good solutions are hard to come by.

    Ira Stoll: You’re probably right about Apple/iPad/iPhone, but for books, Amazon is steering the ship.

    Clyde W. Burleson, Linda Pendleton: Our argument isn’t with new means of publishing or new business models — finding new ways for authors to reach readers is in everyone’s interest.  But these new means can (and should) co-exist with an environment that has a place for physical bookstores. Unfortunately, that may not be where we’re headed, and it sure doesn’t seem to be purely a matter of consumer choice.

    Thanks, all of you, for the comments.

    Paul Aiken
    Executive Director

    • http://profiles.google.com/kelly.mcclymer kelly McClymer

      I think you get Amazon’s innovation completely wrong. Amazon’s innovation is in engineering its model to serve the customer. Customer service sells. Amazon managed to figure out how to pay attention to customer service electronically (which means, unlike the bookstore, when employees leave, the customer preference history remains). As a reader, Amazon gets me. As a writer, Amazon is listening to me — and helping me find my readers and my readers find me.

      Amazon is steering the book buyer ship for one simple reason: it is the only one who cares about the customer (case in point the big argument by trad publishers and authors that publishers offer quality control…that’s about the publisher and the product but it is *not* about the customer). It frustrates me as a writer who intends to stay away from traditional publishers until they get a clue (not to mention respect for writers). The reader is the customer. We don’t tell them what they want. They tell us. By buying — a title, a genre, a price point. Amazon’s algorithms already know that. Big Brother scares me, Orwell saw to that — but I’d rather a Big Brother who knows me and wants to please me than a Big Brother who tries to tell me to want what they think I should want.

      • Surprise

        “Amazon’s innovation is in engineering its model to serve the customer.”   Perhaps.    But a very specific type of customer: a customer who is primarily interested in the cheapest price for commodities;  unconcerned about the loss of book ownership rights to the tenuous ebooks leasing model; nonplussed at the thought that bookstores, and especially independent bookstores, may go out of business; or unaware that any enterprise (whether it be Amazon.com, publishers,or a chain bookstore) seeking monopoly status is very kind to customers in the short term (and little author-suppliers as well), but once the competition is wiped out, has very  little reason to treat them well in the long run.   Remember, it’s maximum short term profit for unaccountable shareholders that matters.

        Yep, Amazon serves this type of customer very well…in the short run.   

      • Guest

        “Amazon’s innovation is in engineering its model to serve the customer.”

        No, Amazon’s model is in engineering, period. It has nothing to do with quality or respect. It has to do with market economics and programming algorithms as well as that decidedly Orwellian tactic, “marketing algorithms.”

        If Big Brother scares you that much you should buy from an indie shop, with cash. Too bad Bradbury just died, because he’d certainly have seen the irony of his iconic novel about book-burning made available on a… Kindle Fire.

        Now all we’re left with are the “new” voices who try to market their Great American Novel to fit the model of a damn App.

  • http://www.facebook.com/people/Linda-Pendleton/100001577230783 Linda Pendleton

    Not only do I self-publish a number of books with Amazon, I am also an Amazon customer for numerous items in addition to books, and have been for years.  I applaude Jeff Bezos’ for his vision and accomplishments!  I have published ebooks for a decade now, in addition to print, and I find the opportunities that Amazon has given us, including decent and fair royalty rates, something the Big Six have refused to do, is even more reason to support Amazon.  I do and I will, because I love the freedom.  I’ve been a member of the Guild since 1990, and my husband was a member since the early 1970s,  when Rex Stout was president.  Authors have come a long way during these years, and the direction of publishing is changing, and I’m loving the changes.   

    • Guest

      You are a writer, and yet you “applaude” Jeff Bezos?

      Or, as the almighty G might say, “did you mean” Dan “Quayl”?

  • Clyde W. Burleson

    This is a nice bit of research, all be it damn one sided and a tad inflamitory, without purpose. Quit hunting bugga bears and things that go bump in the night. Emotional statements  like “eager to use its musscle to rip up” serve no purpose. The reality is simple. The old business model for boopk publishing is dead. This is the new one. Like it or do not continuie to write books. It is that simple. If the reading public did not accept and embrace this new direction it would, Amazon or no Aamzon, fail. 

    I havbe been a member of the Author’s Guild since the 1970s and have written many published books. I have also done a book through Amazon. It is a new and very interesting process. One I intend to learn. Just as I learned my how to deal with agents and publishers.The Guild has done some fine work in the past to help authors. This current lament over change and venting fruustration with Amazon is, at very best, non-productive. Quit it. Find something popsitive and worth wile to blog.

  • http://twitter.com/mikecane Mike Cane

    What anonymous coward writes these laughable screeds?  Where is your bleating about B&N removing DC Comics from its shelves in retaliation for DC being on the Kindle Fire?  Where have you been when Apple ejected eBooks from the iBookstore, which included one political satire digital book from some who had won the Pulizer?  Suddenly you have a stake in all of this?  Why should you?  You tried to give away every orphan work to Google!

    And Sony losing to Amazon is its own damn fault.  Those inside the company who understood the market better pleaded for wireless to be in the initial release of the Reader.  They were overruled.  And the rest is history.

    • Guest

      DC Comics does not publish “books.” They publish comics, and comics are not books unless you’re in sixth grade procrastinating your English homework.

      The exception is Peanuts, which is charming, witty, and philosophical.

      Tripe about a Christlike extraterrestrial in blue Spandex who gets a job at a 24/7 news organization… is not.

  • Kathleen

    When my publisher shut down, I bought all inventory-becoming sole distributor of my (now out of print) book–great edge on Amazon–until 2 yrs ago when they undercut my list price (without inventory to fill orders) and my seller account mysteriously ‘broke’ – my inventory still listed-but I can fulfill or remove…their ‘solution’?  stock my books with them — and let them fulfill my orders.  They wouldn’t buy inventory, have not removed their sale listings –effectively taking my book off the market-US and international.  One book, one author–not big news…unless I am not alone in this? A pirate that loots one or one hundred ships…is still a pirate.

    • Guest

      “A pirate that loots one or one hundred ships…is still a pirate.”

      At least someone has qualms about the mighty scarlet “A.”

      Because where do you think e-books eventually end up if not the zero-dollar discount bin of a popular Swedish warez site? (So long and thanks for all the phishing!) :-)

  • Anonymous

    I am a member of the Author’s Guild and a professional writer.  Maybe it’s just me, but every time I get an email or newsletter from the Guild it’s little more than a well worded whine about Amazon or Google.

    We need to stop saying ‘people should go to bookstores’ and ‘Amazon is mean’.  How about instead of spending all this time whining about how terrible these business are we focus our creative minds on innovating the process?  How about we conceive better, more innovative, ways “for new literary voices to be discovered”?

    How about the Guild forms a committee to come up with solutions instead of endlessly rehashing the problem?

    • Monica Burns

      I don’t belong to the Author’s Guild, but the post above does touch on my objections to Amazon from a consumer point of view. Amazon is creating a monopoly and the law is supposed to prevent that from happening (although it didn’t do a good job when it comes to Microsoft).

      I don’t think Amazon should be put out of business, but the minute a corporation eliminates its competition, that’s bad for the consumer. Microsoft is a great example of this, they pretty much annihilated Word Perfect and Netscape. They created a platform that everyone now is pretty much required to use. Sure you can go rogue and get Open Office or small 3rd party, but it’s a PITA to deal with others if you don’t use Microsoft. While I confess a standard platform is convenient, it doesn’t always prove advantageous for consumers. Especially when one looks at software prices. 

      When a corporation gains an unfair advantage over it’s competitors it essentially becomes another robber baron. That’s definitely not good for the consumer. When you only have one source for buying something, the monopoly drives price; not the consumer. The same will eventually apply to royalty rates as well. I’m still waiting for Amazon to drop that 70% rate on their self-pub royalties. The question isn’t if, it’s when they’re the only game in town. Not good for authors either.

      It’s just as much a consumer issue as an author one.

  • kaol

    Parispaula_2000: If I understand you this means they’re giving away your book without your permission, which is theft under any definition. Are you sure it’s not just a glitch? B&N has a lot of these and their customer service is creaky at best.

    • Parispaula_2000

      If a glitch, its timing is suspect — and I have tried repeatedly to get someone to respond to emails, instant messaging,  phone calls, and I get zilch. A few months ago, I was actually trying to get my book to be offered (temporarily) for free on Nook as part of a promotional blast coordinated by another company, and I was told by both B & N and Amazon that it was not possible, and that 99 cents is a low as the system can go.  The day after my book gets accepted in the KDP program, my book is suddenly “free” on B & N (and again, there is no mechanism inside the system that lets authors do this themselves) and I am, even more amazingly, totally blocked from accessing my account. I can only frame this as retaliation.  And, unless I am mistaken, as long as the book is up at B & N, Amazon will not pay me for any sales incurred at the Kindle site. So it too has no incentive to fix the problem. It is surreal, and I want to laugh, but the reality is that I am getting stomped.

  • Neil Myers

    I appreciate this summary of events. However, it appears to me that Amazon is doing what other businesses have done in the past; attempting to create a monopoly.

    As far as I can tell Amazon has no real interest in books other than as a commodity it can monopolize because of weak competition, and suppliers who are willing to be treated like dirt. Only the realization that it will destroy the very market it is attempting to monopolize will stop it. However, this realization will only come after this has happened.

    Amazon is driven by its stock price, not profit, not books, not publishers and certainly not authors. It wants to please customers. It disdains suppliers.

    It has a serious weakness though. It is the ultimate middleman. It needs the products of others to survive.

    Authors have little voice in this battle of the corporations, but there is something that publishers, especially the largest can do.

    Stop selling to Amazon.

    Is this too radical? If a distributor is literally destroying your business through its business practices why continue to supply it with product?

    Amazon’s lifeblood is product. It knows this. That is why it is trying to create it’s own product and it’s own exclusive distribution system via the Kindle. It doesn’t care about profit, only share price. Amazon’s profit dropped 57% last quarter as it’s revenue rose 35%. The forecast of  revenues falls short of analysts hopes by $1 billion for the current period and it could even show a loss for this quarter.

    It is spending more, to sell more at a lower and lower profit. How long could this strategy work for a private company? Only a public corporation could continue with such a model.

    Publishers are now scared of Amazon, because they have let it dictate to them for too long. Amazon should be viewed as a flawed and rogue distributor. Shun them.

    Publishers should be more careful as to who they allow to sell their product. No law forces them to sell to distributors who have no regard for their product or business. If the big publishing houses just refused to sell to Amazon, then this would end their dominance. Period. The Kindle would be a useless piece of plastic if you could not download the books.

    Amazon cannot be reasoned with. It must be fought in the most aggressive fashion. It has no interest in the free market, competition, or product quality. When is the book industry going to wake up to this fact?

    Starve Amazon of product, create alternative distribution channels for books, and establish a universal electronic platform for e-books before Amazon can cripple the business to such a degree that no author or publisher will be able to make money by creating a decent product.

    • Agathis

      Amazon’s power comes from the fact that it makes consumers very happy. There’s no doubt that it does. Publishers are scared of Amazon because it’s doing things right that the publishing industry hasn’t done. What the industry should be doing is innovating. Instead, they’re complaining. There’s nothing stopping the publishing industry from innovating on its own. Instead you’re suggesting they pull their products? That’s no different from Amazon refusing to sell their products. It gets us nowhere. The publishing industry no longer has any ideas. If they’d listened to their readers (and writers) then Amazon would never have emerged as it has.

      Publishers are middlemen as well, you know. Amazon basically gets out of our way as writers. We put our books up there and make money. Can the same be said of most publishers? Of course not. The lesson to be learned is flexibility and transparency. But the publishing industry hasn’t figured that out yet. When they do–and stop complaining about Amazon–maybe they’ll start innovating again.

      The idea that getting rid of Amazon as a competitor is somehow good for the industry is insane. This is what competition looks like. Deal with it.

      • Guest

        “Amazon basically gets out of our way as writers. We put our books up there and make money.”

        You make it sound so damn simple. Why not talk about how Amazon and the e-age in general have all but squeezed aspiring authors, including trad. pub. hopefuls, into the rigorous marketing torture that is “platform”?

        Actually, getting rid of the internet as distraction would be a MIRACLE for the writer. And shunning direct-pub in favor of quality would be a real slap in the face for E.L. James and the lolcats at FanFiction.net.

  • Anonymous

    I am a published author and a member of The Authors Guild. I do not have a problem with Amazon (or Apple, Google et al) using its market power to agressively compete. I also do not have an issue with “predatory pricing”, which (at least for a period of time) provides the consumer with low prices. No company can sustain itself as a monopoly (unless granted that status by the government) over an extended period of time, unless they are satisfying customer needs (e.g., Microsoft, AOL et al). By all means let all of the stakeholders (consumers,  authors et al) use their market clout and public voices to advocate for their interests. I’m not sure exactly what this blog post is advocating for, but I hope the industry will avoid devoting time and money to antitrust-related lawsuits.

    • Neil Myers

       The public is interested in low prices. Amazon is interested in boosting its share price and monopolizing it’s market. It produces nothing, except devices to read other people’s work. You are witnessing it stomp over authors and publishers with scant regard.

      Why exactly do you want this type of distributor selling your product?

      • Anonymous

        It produces nothing? In my particular case, my publisher does not work under the consignment model. So none of the chain bookstores (B&N, Borders) would stock my book. Until Amazon came along, my book only had visibility and distribution though the publisher’s mail-order catalog and sales to libraries. The bulk of my sales and royalties have been because of Amazon.

      • Lyla Ward

        Amazon is also a publisher..and as one of their authors I can tell you they have a wonderful support team and offer a great contract. In additiion they market books most effectively and the people in the book department are literate and very concerned with books.

  • http://www.facebook.com/profile.php?id=31333 Ira Stoll

    How is the statement above about how limits on the duration of patent protections encourage innovation and free markets consistent or inconsistent with the AG position on limits for the duration of copyright protections?

    Also why doesn’t the post mention Apple/Ipad? Compared to Apple/Ipad/Iphone, Amazon/Kindle looks like a small fish — not in book publishing marketshare, but overall.

  • Parispaula_2000

    As an experiment, I joined the Amazon Kindle Prime program for self published authors, and boop! Barnes & Noble blocked me from accessing my own account with PubIt/Nook and dropped the price of my Nook Book to “free.” They will not respond to me. I am dismayed by this behavior, which seems illegal to me.  Any advice would be appreciated.

    • Jasen Cooper

      It sounds like you are talking about the KDP Select program.  If so, Barnes & Noble was responding to this action, which looks like it violated the KDP Select terms and conditions.   According to those terms:

      “When you choose KDP Select for a book, you’re committing to make the digital format of that book available exclusively through KDP. During the 90-day period of exclusivity, you cannot distribute your book digitally anywhere else, including on your website, blogs, etc. However, you can continue to distribute your book in physical format, or in any format other than digital.”

      In other words, you must cease distribution of your book anywhere else while you’re enrolled in the program.  It’s a gamble, because you are cutting off distribution links for the book, but in return you gain additional royalties from the program, as well as the ability for greater promotion on Amazon.

      Hope that helps.

      • Parispaula_2000

        Thanks, Jasen, I understand this — which is why I was trying to access my account with B & N in order to remove my book from their site. Unfortunately, I waited to do this until after my book was accepted into the KDP Select program. Because I am now BLOCKED from accessing the B & N account, and thus unable to remove my book from their site, I am indeed violating the terms of KDP Select. And I can’t do anything about it. The book is still being distibuted by B & N, it’s just being distributed for free, which I did not authorize.

        • Guest

          Well, you should have known better than to bother with either of them. Go write something worthy of real publication and stay away from these illiterate computer nerds at Spamazon.