Fast Company

Amazon Revealed: It Hates You, and It Hates Publishers

AmazonThere's one clear conclusion falling out of the ridiculous Amazon versus Macmillan books debacle that played out this weekend: Amazon really doesn't care about you, in fact it kinda hates you--pretty much whoever you are.

If you're still playing catch-up on the news, this is what happened. Amazon and Macmillan books entered into discussions about the prices Amazon charges for e-books from the publisher, with Macmillan pressuring for a higher price--perhaps around $15, which is much more than Amazon's strict $9.99 limit. It's clear the move was inspired by Apple's iPad and simultaneous iBooks launch event, which promises a fairer share, more favorable terms and conditions than Amazon, and higher price points. (It's also akin to iTunes takeover of the music industry, a similarity Fast Company's Adam Penenberg called out back in our June '09 issue.) Amazon, of course, operates something like a supermarket giant does in the food industry--leveraging its huge size to force suppliers to sell to it at wholesale prices. This tactic has caused issues in the food market, and now its doing the same in the books market: Amazon refused, and without warning pulled all Macmillan books from its store. That's one of the "big six" U.S. publishers, mind you. Macmillan's CEO stood his ground, and explained his thinking in an open letter, and Amazon was forced to "capitulate" and return Macmillan books to the store.

Simple, eh? Cut-throat business politics played out in public, and swiftly concluded? Yes. But reading into the matter, it's clear that Amazon really cares nothing about the publishing industry, about authors, about the book-buying public and about any other book seller it knocks out of business.

This much is clear from the way Amazon comported itself during the last several days. Firstly it refused to see eye to eye with a key publisher--one of its major suppliers--and preferred to stick to its bullying tactic that eats into the revenue of the publisher, and subsequently authors themselves, by basically insisting that it decide how much to pay them for their product. Then it petulantly pulled stock from the Amazon store without warning--meaning the book-buying public was denied access to around one-sixth of titles published in the U.S., with no explanation.

Then, when Amazon reversed its decision, it announced the news with a blog posting from anonymous Amazon spokespersons that contains some extremely twisty language. Firstly it paints itself as the victim, having to "capitulate" to demands that it clearly wishes the public to think of as unreasonable. Then it explains that it has to capitulate because Macmillan has a monopoly over its titles. Finally it suggests that Macmillan's prices are unreasonably high for e-books, and it believes other publishers will think differently to Macmillan.

Hmmm. A "monopoly over their own titles" is the absolute key phrase here, because it's plain dumb. It's like complaining that Van Gogh has a monopoly over paintings painted by Van Gogh. Amazon here is revealing that it doesn't care how publishers actually work (a vast and complex system that's evolved over time, and which really seems to function pretty well) and only cares about getting the right price it wants--which will then earn it huge profits from the average consumer who sees merely a lower store price. It doesn't care about the fleet of editors that a publisher has to maintain to shepherd books from author's minds into reality, about reviewers who sample thousands of submitted manuscripts from wannabe authors, about artwork, marketing, and the designers involved in creating a final finished copy of a book--whether paper or digital.

Perhaps worst of all, Amazon clearly doesn't care what its customers think (despite thanking them in the blog post) because it acted to axe Macmillan's texts without explaining why or giving any warning. And though it tries to portray itself as championing customer rights, what its actually doing is trying to manipulate an entire industry to working how it wants everything to work, squeezing everybody from authors to other booksellers.

And the final, most fascinating twist of all this, is that there's likely to be one main beneficiary of Amazon's shenanigans, and it's one Amazon will deeply resent over the next year or so: Apple, with its new iPad.

[Via Amazon, TechCrunch]

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70 Comments

  • Raymond Durrant

    My comments on this article:
    Paragraph 1: Large corporations experience emotions? I don't think so.
    Paragraph 2: This starts off saying the dispute was about how much Amazon would charge its customers (a price fixing agreement) but the rest of the article is written as if the dispute was about how much Amazon would pay Macmillan, which is not the same thing at all. Now I have to look for another article to clarify the issue.
    Paragraph 5: It's not surprising that someone in business would be aggrieved if they could not use lower pricing to give them a competitive edge over less cost-effective competitors because their supplier had them over a barrel, and forced them into a price fixing policy.
    Paragraph 6: "... it doesn't care how publishers actually work (a vast and complex system that's evolved over time, and which really seems to function pretty well)" Substitute the word 'weavers' for 'publishers' and this could be a pronouncement from the Luddites. The whole paragraph can be summed up in a less biased fashion as follows: Publishing is a business sector with overhead costs and requiring non-recurring expenditure for product development, marketing and promotion, as is the case with many other. Amazon takes care of its own business and leaves it up to other organizations and individuals to take care of theirs - a statement which could be made about pretty much any business.
    Paragraph 7: I doubt Amazon would have reached its current position in the market if this was true.
    Paragraph 8: The whole article is so heavily biased, I can't give any credibility to a conclusion derived from it.

  • David Blackstone

    so, let me get this straight: Amazon is a black hat because it wants more of your money, and Macmillan is a white hat because it wants more of your money.

    Amazon has saved me probably thousands of dollars over the years compared to retail prices (I buy books and cds, often used. I buy software. I buy mp3 albums which are commonly $1 cheaper than itunes)and will continue to do so. If it became cheaper to buy from somewhere else, say, direct from the content creators, I would do that. Like any smart consumer I vote with my wallet.

  • Kamel Takla

    Good Article, semi-bias towards generalizing based on one dispute, that have yet to be proven. This story based on unreliable reference (anonymous blog)
    My person experience as customer, and as merchant- launching ltbcards.com & adaprint.com has been responsive, in both setting up the account resolving tech issues. So they have been fair so far with 24 response time. This is all created to make both customers and merchant happy. Now authors I am sure has a different view. This exploration to a different business model, modeled after music industry, and like every new direction, there is level of trial and error. I think taking sides on this subject is premature. With hundreds of returning daily purchasers from amazon website, amazon consumers vote every day with their quick checkout.

  • Joe Murphy

    If the publisher is a middle man between the author and the public (and find me a serious published author who thinks so), that what is Amazon? An additional and by definition even more unnecessary layer. If we're going to e-books, then publishers first, and smartest, innovation would be cutting Amazon out of the process altogether.

  • JR Johnson

    This article is just plain ridiculous. The comments have covered it for the most part. The author sounds like a hired schill to advocate for an industry in trouble.

    It doesn't care about the fleet of editors that a publisher has to maintain to shepherd books from author's minds into reality, about reviewers who sample thousands of submitted manuscripts from wannabe authors, about artwork, marketing, and the designers involved in creating a final finished copy of a book--whether paper or digital."

    So find another way. Record companies used to have A&R guys running around the country to check out local concerts so they could snag the Next Big Thing. A band's only hope was that a record exec would come to their show and sign them to a fat deal. Now MySpace lets bands make the music more widely available so A&R's don't necessarily have to see them live or hunt down a demo. In addition, thanks to the "number of plays" statistics, the work of seeing what will be popular is crowd-sourced. Should MySpace apologize for this?

    Find a new way to do business; innovate. There are thousands, probably tens of thousands of readers out there who would gladly read manuscripts for fun (read:free) and give them a rating to help an editor see which one rises to the top. The publisher is a middle man, an antiquated, greedy one at that.

    The authors underlying contention is, because this how we've always done it, this is how we should continue to do it.

    And congratulations on your article if your advertisers pay by the impression.

  • Joe Murphy

    Indeed. Best looked at in these terms: exactly what service IS Amazon offering the pubs in return for its cut? Now their cut is for shipping and warehousing books. That I understand. But now they want to dictate terms to do what, file transference? Let me get this straight: the publishers pay for the authors, agents, rights, marketing, etc., and Amazon...pushes a button. For which they want 45-50%. If they're the consumer advocates they claim (hilarious), they can take all the customer savings out of their end. 10 cents a unit sounds about fair for what they're offering, and actually profitable, too, given how little is required of them.

  • Joe Murphy

    Indeed. Best looked at in these terms: exactly what service IS Amazon offering the pubs in return for its cut? Now their cut is for shipping and warehousing books. That I understand. But now they want to dictate terms to do what, file transference? Let me get this straight: the publishers pay for the authors, agents, rights, marketing, etc., and Amazon...pushes a button. For which they want 45-50%. If they're the consumer advocates they claim (hilarious), they can take all the customer savings out of their end. 10 cents a unit sounds about fair for what they're offering, and actually profitable, too, given how little is required of them.

  • Anand Nadar

    Amazon is used to taking the king's cut. I have had amazon ads in my website for 10 years. The same revenue was generated by a month of Google ads.

  • Angela Hoy

    We understand first-hand what it feels like to be on the receiving end of Amazon's threats. They threatened to remove our "buy it now" buttons awhile back unless we agreed to pay them to print our books. We responded by suing them, alleging federal anti-trust violations. After almost two years of legal wrangling, and the federal judge, in a 26-page order, refusing their motion to dismiss, they recently settled with us.

    The entire experience was a nightmare. We blogged throughout the process, and posted the actual settlement here: http://antitrust.booklocker.co...

    Angela Hoy, Publisher
    Booklocker.com

  • Joe Murphy

    Okay, a better question: if ebooks are the way to go, and cheaper is better, why should publishers include Amazon in the equation at all? Once physical books are eliminated, why deal with something so antiquated as a middle man? If publishers are indeed going to move to ebooks, they indeed should sell direct to customers. They even could do a hell of a lot better the $9.99 if Amazon doesn't get its cut. Sell its books elsewhere indeed. Makes even more sense in the face of multiple formats. You go to the pub's website and they can offer it for Apple, Sony, Nook, and Kindle...all in one spot, and no Amazon mark-up.

    By the way, Amazon's wanting to set the price it pays is no reflection of where the price to consumers will stay once at has the market control it wants. It sells books at a loss every day for one of two reasons: to eliminate competition and/or as a loss leader to sell widgets. Either way, it won't last. Remember the deep discounts at B&N and Borders when they were trying to get rid of all the independents in your town? Yeah, those are long gone.

    Two final notes: I don't see anyone speaking to the dystopian control of information this involves. And to all the remarks that this is "just business": the fact that we've all just accepted that business is entirely unmoored from any ethical implications, or even thoughts of future implications, is entirely indicative of how we've arrived at the (possbily terminal) economic station we have. Absurdly quaint, I know, but there it is.

    As to where I'd buy my books if they're more expensive:

    -Somewhere I can actually examine a copy of the book
    -Somewhere where I can receive customer service
    -Somewhere where my tax dollars, and indeed my money spent, go to support my community (and by the way, Amazon's sales tax-exempt status is the very definition of totally unfair competition and utterly ridiculous in the face of about 50 state budget crises).

  • Scott Black

    Are you kidding me? Ebooks should much CHEAPER than printed ones because they are not, well, printed. No paper, no distribution, no overstocks, no returns. As a consumer, I feel like Apple sold me out. I will not pay more for an Ebook than a printed book. This is as much about publishing company greed as it is about Amazon's tactics. And many of the publishing houses are trying to coerce writers into signing away their rights perpetually because the book will be in printed electronically forever.

    If a product costs less to produce and offer, why should I pay more? For a publication that champions doing things more efficiently to gain an edge, this perspective on Ebooks by Fast Company is surprising. You would slam a car maker or computer manufacturer for such a tactic.

  • Tyler Adams

    @Joe, you've got to be kidding. I don't like to see publisher and authors getting pushed around. I don't necessarily think what Amazon is doing is good for the industry as a whole. However, if Macmillan doesn't like it, it is free to sell it's books elsewhere. They don't have to sell their books on Amazon. But if Amazon is selling it for $9.99 and someone else is selling it for $15...where are you going to buy your copy?

    And justifying paying $20-$30 for a book (because you get 20+ hours of use) by comparing it to current movie ticket prices is absurd. By that logic, I should have paid about $1000 for my baseball glove and ball when I was a kid--endless hours of use.

  • Joe Murphy

    Indeed. Best looked at in these terms: exactly what service IS Amazon offering the pubs in return for its cut? Now their cut is for shipping and warehousing books. That I understand. But now they want to dictate terms to do what, file transference? Let me get this straight: the publishers pay for the authors, agents, rights, marketing, etc., and Amazon...pushes a button. For which they want 45-50%. If they're the consumer advocates they claim (hilarious), they can take all the customer savings out of their end. 10 cents a unit sounds about fair for what they're offering, and actually profitable, too, given how little is required of them.

  • Roger Theriault

    Wow. Either April 1 came sooner than I thought, or this article belongs not in the magazine I love to read called Fast Company, but the one nobody smart reads called Dead Company. The bias in this story against smart and progressive business practices are astounding.

  • Joe Murphy

    This article has it pretty much exactly right. Every counter-argument I've read here has been from a strickly knee-jerk "cheaper must be better" viewpoint.
    The price of printing and shipping books has little to do with it. This may come as a revelation, but authors and editors don't actually work for free (although I imagine the latter, especially, are underpaid). If books don't make a certain amount of sales, you can't pay the author, or sign him/her in the future. That usually means a somewhat higher price per unit. It's the reason books come out in hardback first...

    Amazon is not just looking for a good deal for its customers--it's looking for total market control, and by the way, you're kidding yourself if you don't think it's trying to force publishers out of the print industry, and quickly. Clearly Amazon panicked this week when it saw that slipping from its grasp, with Apple introducing a far superior product. Then it resorted to this amazing bullying tactic--bullying to its suppliers, and yes, bullying to its customers.

    By the way, does anyone seriously believe that censorship isn't censorship because it's based on economics rather than content? This weekend signaled Amazon's intent to decide what the American public will read based on the extent to which it can intimidate its suppliers.

    If your only interest is cheap books, I refer you to Amazon's (petulant) statement of this weekend, stating what an opportunity this is for self-published authors. Really--enjoy reading some of those fine quality masterworks and then get back to me on whether it's worth paying authors and publishers the (quite reasonable) price they need.

    And for crying out loud, compare to the movie industry! $10-14 for 80 to 120 minutes of entertainment versus $20-$30 (in hardback) for as much as 20+ hours worth. Plus you get to keep it afterwards.

    If we keep devaluing books like this, we'll get the Amazon dream-world, where all words are equal units and War and Peace is on the same level as the blog that some dude writes in his mom's basement. Let's not destroy the primary form of communication for the last several hundred years just so Jeff Bezos can lay off his warehouse staff.

  • Meir Deutsch

    "...reading into the matter, it's clear that Amazon really cares nothing about the publishing industry, about authors, about the book-buying public and about any other book seller it knocks out of business."

    First, the author must think Amazon's a non-profit organization. That they should have qualms about knocking another book seller out of business, or better, that they should be *faulted* for that, in a free-market capitalist society, is absolutely absurd.

    Second, this is not personal, there is no hatred or love. It's just business, and customers are the lifeblood of it. I purchased a product from Amazon just today and the purchase process, as always, was polished and tremendously easy. I appreciate that, but as a rational consumer I know it has nothing to do with Amazon's emotional attachment to me. They are a company trying to keep as much of the market as they can, otherwise they go out of business. Amazon's paying a fleet of usability experts to craft them an easy-to-use website because that keeps market share. And they're using their considerable clout to keep prices low for the same reason.

    Hazlitt's Economics in One Lesson in the flesh. The additional cost paid for a Macmillan Kindle edition means less available money to purchase the next Kindle edition. Same money spent, less product received. So the consumer, who is not an idiot, and who has neither an emotional attachment nor obligation to buying from Amazon, just goes and finds a cheaper edition at B+N so they can afford more books. No love, Kit, and no hate. This is about $5 as far as the consumer is concerned.

    But it's worth more than that to Amazon, because the Kindle platform's viability is riding on that $9.99 price point. Amazon should rightly be fighting tooth and nail to keep those prices as low as they can, otherwise they lose big time. And they *apologized* because they know the consumer, already jumping ship, only sees the extra five bucks.

  • Dennis VanLiere

    Second thoughts: Fast Company, you used to refer to Social-Capitalism. The thing that irks many people is the (apparent)lack of conscience in many/most business decisions. This feeling is exacerbated when there is a revolution driving the business decision. This can be in the cost to the consumer, the impact on the existing infrastructure and all the people who make up the 'system' infrastructure supporting the existing business model, or even the tax base that supports the local school system that will go away in the revolution (see the US Textile industry or the furniture industry in the South). I was reminded by an economist that all of that is interesting, but the job of the business decision maker in capitalism is to make the best profit possible. His take was that decisions on where and how to make and distribute products should be made with that and that only in mind. I disagreed with him in much of our discussion, only because the business model that takes care of employees, that cares that the consumer get the best product for the price possible, that is aware of its impact on society around it and on the environment is so attractive and so intuitive when you see it really working. A purely economic model without respect for societal impact is ultimately not very appealing, unless you like a purely economic world to live in. What we are seeing played out in the article's focus, and in the reaction of commentators to this article, is the entire range of reactions to this scenario, from 'It's just business,' to 'What about the poor artist?' Notice that even that is slanted to a particular viewpoint...almost no one used 'author' to describe the contributor...'artist' is much more appealing. Anyone who plays a tune or writes a sentence is now an artist or craftsman.
    Ultimately, there are no 'rules' and the 'business model' will drive the end result, but you can end up with those who try to be aware of the impact and to be 'socially responsible' with the decisions made...but the more revolutionary the revolution at hand is, the harder it is to do that...it usually involves trying to hold on to the 'system' that has been built up over many years, even while realizing things are changing and if you are going to succeed, you need to be part of change. Good luck all of you business decision makers...and heaven help you if a bunch of people decide Congress needs to help you through the transition!

  • Darek Miles

    Yes, someone needs to stick up for publishers that want to charge $15.99 for an 800kb file of a book that sells for $18.99 in printed form, which can then be resold, lent, or given away to a library.

    If they haven't been paying attention to the news, eBook readers have rekindled (no pun, honest!) people's interest in reading. And with the steep price of entry (~$300 for a reader) the publishers want to charge the same price for printed and electronic? Talk about wanting to destroy the eBook side of their business.

    Ebooks are a rental scheme, pure and simple. You cannot resell the book, lend it, or give it away. So why would you pay the same price? More likely people will just pirate them, out of spite alone, and the more angry eReader owners there are, the quicker the warez side of ebooks will take off. These guys really have no idea about their industry and are simply trying to keep their fat selves well fed.

  • Eugene Cantera

    I can sorta-kinda empathize with Amazon though I do not condone their tactics. Publishers need to embrace new technologies fairly and promptly. My colleagues and I develop content/software that is web-based in music education. Publishers in our industry have for years had a strangle hold on everyone from the content providers through to the printing and even delivery (snail mail) process. Now they have their heads in the sand and their days could be numbered as advances in technology dooms 'sheet music' to garage sales. We have tried nudging some of the biggest publishers toward the internet for year with no success. Finally we decided to simply develop content for the web and damn the torpedoes. The iPad and like devices are what an entire generation will prefer to use to get their fix of books, magazines, music, newspapers and yes...printed music as well. With stubborn old-school decision makers in place it's hard to move ahead. While other publishers find a way to compensate new young talent and at the same time provide e-content for Kindle, iPad and the like, Macmillan will be left to changing cartridges on their printers.

  • Eugene Cantera

    I can sorta-kinda empathize with Amazon though I do not condone their tactics. Publishers need to embrace new technologies fairly and promptly. My colleagues and I develop content/software that is web-based in music education. Publishers in our industry have for years had a strangle hold on everyone from the content providers through to the printing and even delivery (snail mail) process. Now they have their heads in the sand and their days could be numbered as advances in technology dooms 'sheet music' to garage sales. We have tried nudging some of the biggest publishers toward the internet for year with no success. Finally we decided to simply develop content for the web and damn the torpedoes. The iPad and like devices are what an entire generation will prefer to use to get their fix of books, magazines, music, newspapers and yes...printed music as well. With stubborn old-school decision makers in place it's hard to move ahead. While other publishers find a way to compensate new young talent and at the same time provide e-content for Kindle, iPad and the like, Macmillan will be left to changing cartridges on their printers.