An American Editor

February 23, 2012

Breaking News: Amazon vs. IPG

In today’s business section of the New York Times, I read “Amazon Pulls Thousands of E-Books in Dispute.” Then, at Nate Hoffelder’s The Digital Reader blog, I found a link in his “Morning Coffee” column to an article at PaidContent about the controversy, “Update: Amazon Yanks 5,000 Kindle Titles In Fight Over Terms.” Page 2 of the PaidContent article reprints a memo IPG sent to its publishers about the controversy. Both articles are worth reading and thinking about.

As you know, it is not my habit to run more than two articles (plus an occasional Worth Noting) each week, but this is an exception.

Recent news from and about Amazon has been disturbing. (Watch for tomorrow’s article, Worth Noting: Amazon is an Author’s Friend — Or Maybe Not, and for Priming the Pump: Amazon’s Prime Program, which is scheduled for March 5.) For quite sometime, I’ve been saying that the rosy picture painted of Amazon can’t last, and I think we are beginning to see that prediction come true.

I think the New York Times sums up the dilemma neatly: “Amazon is under pressure from Wall Street to improve its anemic margins. At the same time, it is committed to selling e-books as cheaply as possible as a way to preserve the dominance of its Kindle devices.” These are two conflicting goals and there are limited ways available to Amazon to meet them.

Exclusivity is one way. If consumers want certain books, make them available only on Amazon and ebookers will come. Most ebookers will buy a Kindle because they do not want to deal with stripping DRM (Digital Rights Management) and the conversion process, not matter how easy to do; most consumers want to buy and go.

The second available method is putting the squeeze on distributors and publishers, then authors, then consumers. The lost agency fight (remember how quickly Amazon capitulated?) demonstrated that as powerful as Amazon was, it wasn’t yet powerful enough to win a battle with the Big 6 publishers (Penguin, Macmillan, Simon & Schuster, Random House, Hachette, HarperCollins). Amazon has begun striking back at the Big 6 with the establishment of its own publishing arm and its exclusivity deals.

But Amazon is probably powerful enough to win the fight against the mid-tier and low-tier distributors and publishers. It is testing the waters with the battle with IPG. If Amazon wins, especially if you combine the win with how cavalier Amazon is in its dealings with exclusive authors (see tomorrow’s Worth Noting), Amazon will not only dominate the ebook marketplace but be in a position to squeeze lower-tier publishers and distributors, and, ultimately, perhaps the Big 6’s margins to the point that they will not be able to survive. When that squeezing is done, the next in line has to be the authors, followed by the ebookers.

A monopolist is not anyone’s friend. The ebooker mantra that “Amazon is my friend and will do me no harm” is as false today as it was yesterday and as it will be tomorrow. Amazon is not anyone’s friend — it is a business that has to ultimately satisfy its investors by giving an acceptable return. There is nothing wrong with Amazon being a business; what is wrong is that so many ebookers are lulled by the way things are today and fail to look at the long-term implications of Amazon’s success in moving toward becoming a monopoly.

I am aware that many ebookers would be happy to see every publisher and distributor disappear, thinking that when that happens authors will flourish by directly dealing with megacorporations like Amazon and that the consumer will benefit from even lower prices. Unfortunately, history proves that such expectations, in the absence of government price regulation, simply do not come to fruition. Monopolies ultimately result in price rises for consumers and the continual squeezing of suppliers.

Once authors have to fend for themselves, they will be even more susceptible to being squeezed because they will have to stand alone against the 800-lb behemoth. I hope IPG stands firm; I hope it can stand firm. Other small distributors, like Publisher’s Group West, should think about their own vulnerabilities. Will they be next if IPG fails? Should they support IPG?

My questions are these: Once Amazon has squeezed the publishers and distributors dry, and once many authors have decided that they are better off self-publishing and dealing directly with Amazon, how long will it be before Amazon starts squeezing authors dry? And once authors are squeezed dry, how long will it be before Amazon starts squeezing consumers?

Contrary to ebooker belief, neither a monopolist nor a wannabe-monopolist like Amazon is the consumer’s friend.

2 Comments »

  1. I am the CEO, Executive Editor, and founder of an indie distributed by IPG. My bottom line just took a gut punch. You have laid out the case masterfully. Gratz. Very insightful.

    Comment by Helen A Rosburg — February 23, 2012 @ 1:07 pm | Reply

  2. [...] weeks ago, I wrote Breaking News: Amazon vs. IPG, which was followed by Worth Noting: Amazon is an Author’s Friend — Or Maybe Not. The first [...]

    Pingback by Amazon’s Assault on Intellectual Freedom | Ebooks on Crack — March 14, 2012 @ 9:52 am | Reply


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