Apple, Amazon, and the Amazing Agency Model: Publishing in the twilight of the printed word

by John MacBeath Watkins

In keeping with our concern with writing about publishing in the twilight of the printed word, I must comment on the kerfuffle about Apple, Amazon, and the Amazing Agency Model, which is supposed to make the iPad into the white knight that rescues the publishing industry.

First, full disclosure. I have family and friends working for Amazon, and I both buy and sell books through Amazon. I like Amazon. It is also a local company, with offices not far from the Center for Wooden Boats, where I do a lot of my sailing.

This does not obligate me to approve of everything they do.

Amazon reportedly controls about 55% of the e-book market. We are assured by the experts at the Justice Department that this is not a problem, they won't have anything like monopoly control of the e-book market until they control 70% of it.

Which they could, given current trends. And as a bookseller, a human being and a mammal, I have to say, anyone who controls 55% of the money I need to eat does not merely have me by the short hairs, they have me by the family jewels.

Anyway, how could they get to 70%? Gee, that seems impossible, unless they engaged in predatory pricing.

Predatory pricing is selling goods at a loss to drive the competition out of business. It can also be used to grab enough market share to make it possible to drive the competition out of business.

That's the problem with this analysis, which claims that the goal of the Justice Department should not be to protect small companies, but to protect consumers. A company does not sell a product at a loss without a clear idea of why they must do this.

For example, if Amazon's warehouse was bulging at the seams with e-books, and they were starting to smell like last week's fish offal, they might be selling the e-books at a loss because the choice was to do that, or see the things become overripe, turn black, and spoil, leading them to be worth nothing.

But wait, it costs next to nothing to store e-books, you can produce a copy almost instantly, and they can be stored almost indefinitely on the right media. So that can't be it.

Or, they could be trying to sell as many of their very expensive, highly profitable Kindle readers. Except that those seem to be falling rapidly in price, as the company tries to get as many people as possible to adopt their technology instead of the competition's.

So it seems quite possible that Amazon is willing to sell some of its e-books at a loss because they wish to gain market power, which would give them pricing power. That power would apply not only to buyers, it would apply to sellers, as well.

The publishing industry has already seen what happens when one company dominates sales of their products. Barnes & Noble was able in its heyday to negotiate far more favorable terms than its competitors, because they sold so many more books. The result was that many of their competitors failed, leaving them with something like monopsony power over the publishers, leading to better deals, leading to more independent bookstores failing.

So outfits like MacMillan have seen this movie before. Having seen the loss of power relative to those who controlled their sales channels for dead-tree books, they are inclined to take the same view of matters as Barry Lynn did in his Slate piece on the topic, so instead of settling, they are preparing to fight the Justice Department on this.

Having seen what happens when one large vendor controls the sales channel for their product is why they want to treat their vendors as agents, setting the price and having all vendors charge the same amount for it. The desired result would be that no vendor could have monopsony power over the publishers, and in theory, they would have equal difficulty establishing monopoly power over the buyers of books.

One would think this would be a desirable result, but I am not a lawyer, and the lawyers at the Justice Department disagree with me. It strikes me that this case is different from the paper companies that compete in most ways with each other to produce a commodity product they wholesale to a variety of vendors, but too often are caught colluding on prices.

Books are not commodities. Each story is hand-crafted by a writer, written with the genius or awkwardness each writer possesses. An economic regime which treats books like toilet paper (as many an outhouse once did, at least with perishable books like the almanac) will eventually produce a literature of about that quality. We need to prevent too much consolidation in the publishing industry, because it would mean too much consolidation in what we may learn from books. Free speech would mean nothing if there are too few voices, which is why small publishers are not like small toilet paper makers.

We can't know how the publishing industry will adapt to the changes in technology we're seeing. Perhaps Matthew Yglesias is right, the world of e-publishing is too unpredictable for the efforts of Amazon or MacMillan to control it to matter. But we shape our future, however imperfectly, and it matters how we perceive our options and which ones we pursue.

Edited to add:

The problem is not that Amazon is evil. The problem is that when one channel controls too much of what we read, it becomes a target that people try to control. When the fatwa came out against The Satanic Verses, Barnes & Noble stopped carrying the book. This was not because Barnes & Noble was evil, it was because they were a big target. It's just harder to intimidate 1,000 independent book sellers than it is to intimidate one company.

More on publishing in the twilight of the printed word: 


  1. nice opinion.. thanks for sharing..

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