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.

May 12, 2010

Judging Quality in the Internet Age

As a reader of An American Editor, you know that one of my concerns is what will happen if no one is willing to pay for news (see Is Rupert Right? Newspapers & the Paywall). Compounding my anxiety over this issue is a recent The Economist article, The Rise of Content Farms: Emperors and Beggars, which notes that “[n]ewspaper articles are expensive to produce but usually cost nothing to read online and do not command high advertising rates, since there is almost unlimited inventory.” The article goes on to discuss content farms like Demand Media and Associated Content, which use software to figure out what Internet users are interested in and how much advertising revenue a particular topic can support.

These content providers then send the results to freelance writers who are paid as little as $5 to write an article, which then is published on various websites, including that of USA Today. As The Economist notes, “[t]he problem with content farms is that they swamp the Internet with mediocre material. To earn a decent living, freelancers have to work at a breakneck pace, which has an obvious impact on quality.” One supporter of content farming is Ben Elowitz, CEO of Wetpaint.

In his article at, “Traditional Ways Of Judging ‘Quality’ In Published Content Are Now Useless”, Elowitz identifies 4 criteria of “old media” quality — credential (i.e., reputation of the media), correctness (i.e., fact verification), objectivity (i.e., not pushing a particular agenda), and craftsmanship (i.e., in-depth reporting) — and then relates how they are irrelevant in the Internet Age because:

The audience doesn’t care where the content comes from as long as it meets their needs. Decisions of what content is trustworthy are made by referral endorsements from our friends and colleagues on the social networks, and by the algorithms of search that help weigh authority vs. relevance. In the abundant world of content, consumers know to apply their own sniff tests — and with myriad sources, they develop their own loyalties and reputations. The brand’s stamp isn’t the point anymore — the consumer’s nose is.

He has it right that the audience doesn’t care about the source of the content so long as the content meets the audience’s need, but that is nothing to boast about. That the audience determines whether something is trustworthy is not something to praise but something to worry about, and to worry about greatly.

Essentially, content farmers and supporters leave the question of truth/fact to each reader — either the reader believes or the reader doesn’t. If a favored website repeatedly writes that the Earth is flat and 10 million people visit that website and agree, then, according to Elowitz’s standard, it must be true or that website wouldn’t have 10 million visitors. The reasoning isn’t sound — either the Earth is flat or it is round, regardless of what 10 million persons believe. Fact by definition is not belief, it is actual being or what we used to call truth.

There is a lot of distance between ease of access, which the Internet provides, and truth/fact, which neither the Internet nor mass belief can provide. This is and has been my problem with the current view of some in the Internet Age that news sources that want to go behind paywalls can be ignored because information is so readily available free. There is rarely a discussion of the credibility of the free information or how high factual standards will be maintained in the age of free.

How many Photoshopped images have you seen; if a photograph is so easily faked, why should we assume that a news story isn’t also faked? How many times have you read a press release from a repressive government that complaints of police brutality are untrue, that no one is starving in Darfur, that the Iranian elections weren’t rigged, that North Korea is paradise on Earth? And have we so quickly forgotten the few instances when “old media” found reporters faking news and the outrage it caused because of the “old media’s” credibility? Have we forgotten how quickly sound bites that were factually false (e.g., “death panels”) became believed by millions because of the viral reporting of the “new media”?

Elowitz goes on to say:

Without a staff of old-school journalists, Gawker has managed to rack up over 10 million visitors a month who come because the rumors and snark meet their definition of quality — without any of the institutional qualities of old media.

The flaw is the equating of numbers of readers with quality. The rumor that Ben Elowitz is a robot may make interesting reading but doesn’t equate with quality (or necessarily reality), and because a million people read that rumor doesn’t make the source trustworthy, the rumor true, or do away with the need for “old media” quality.

Somewhere, somehow, we all need a fact baseline against which to judge the quality of website — and government — pronouncements. In past generations, that fact baseline was provided by “old media”; in the Internet Age, if the content farmers are correct, there is no provider of that baseline — there are simply websites that agree with me and websites that disagree with me, no matter how far-fetched or absurd my beliefs are.

Elowitz and the content farmers tackle the problem from the economic perspective — “old media” qualities are bad because they are unprofitable, and therefore irrelevant, in the Internet Age. But that skirts the fundamental question of whether the only thing that matters in any decision-making process is profitability. It also ignores how businesses that are profitable make their daily business decisions; don’t they rely on truths rather than mass opinion? Additionally, if it is OK for the masses to be self-delusional, can we expect anything different from those who govern us?

We went to war in Iraq because “old media” qualities were ignored and the “new media” relevancy prevailed (remember the rumors of weapons of mass destruction?). Instead of applying the “old media” qualities of objectivity and correctness and being sure that the source of the rumor met “old media” credential standards, the “new media” qualities were used. How many more Iraqs must we suffer before we recognize that “old media” standards should be applied to the “new media” as well?

“Old media” standards aren’t irrelevant in the “new media”; rather, they are expensive and difficult to implement and thus the “new media” prefers to take the easy way out. The “new media” also tends to be more concerned with dollars than with accuracy or truth, and happily sacrifices accuracy and truth on the altar of greed — not caring about the subsequent consequences.

The danger of content farmers and of their supporters, like Elowitz, is that they believe there is wisdom in sheer numbers and that everything boils down to a popularity contest. Such thinking and believing doesn’t bode well for the future of civilization. With such reasoning, it won’t be long before we truly do revert back to the standards of the Dark Ages. In this regard, Rupert Murdoch is right and the Elowitzes of the world are wrong.

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