Amazon has been accused of bullying Hachette, the smallest of the so-called "Big Five" publishers. There has been lots of mainstream coverage of the issue, but what this situation really highlights is the stupidity of Eric Holder's Department of Justice and its campaign against Apple's iBooks Store.
The New York Times first shined a spotlight on the issue when David Streitfeld reported on May 9th that Amazon was using a variety of passive-aggressive bullying tactics to force Hachette Book Group to give the retail giant better terms.
"Most of the time," Mr. Streitfeld wrote, "[Amazon] has all sorts of ways to encourage you to buy a book: faster shipping, cheaper shipping, a discount, a cheap copy from a third party who was cleaning out his closet. Now, like a river reversing its flow, it is using all sorts of ways to get people not to buy Hachette titles: more expensive, slower shipping, pitching something else instead."
Those tactics listing shipping times at 2-3 weeks for physical Hachette-published books when Hachette says that Amazon has the books in stock; ending or greatly lowering the discounts Amazon is so (in)famous for; and even recommending that users by other books through banners displayed above some Hachette titles.
Here's a great tweet from @JamieFord on the topic.
He's looking at you, Amazon. http://t.co/dwmyaz8j2u pic.twitter.com/h2AFy3h1QI
— Jamie Ford (@JamieFord) May 10, 2014
Amazon's goal is to force Hachette to give it better terms for ebooks so that Amazon can either lower its prices even more or eke a little profit out of its books. In the process, These moves have hurt authors and small imprints distributed by Hachette, and most likely Hachette itself, and it's made possible by Amazon's enormous share of the book retail market.
Coverage on the topic has included stories about how Wall Street has finally gotten tired of Amazon not making a profit on its tens of billions in annual sales. In this line of reasoning, Amazon is finally getting motivated to do something about its lack of profit, and it wants those profits to come at the expense of Hachette, and eventually other publishers.
Other articles have looked at how these moves have affected authors, who have seen sales of their Hachette-published titles plummet.
"Amazon removed virtually all the discounts from Hachette titles starting on Feb 7, 2014," author Michael Sullivan told The Times. "Books in pre-orders or VERY recently released books, still have discounts, but all the other books (both print and ebook) are being sold at full price."
Some have speculated that Amazon hopes these authors will turn on Hachette and force the company to meet Amazon's terms.
Another article that was picked up in the comic community is the effect Amazon's bullying is having on comic books and manga. ICv2 reported, "All [Hachette-owned Manga imprint] Yen Press titles we checked were being sold at full MSRP, a rare occurrence in Amazon book retailing."
Next: The Apple Shaped Elephant in the Room
The Apple Shaped Elephant in the Room
What no one has mentioned is the DOJ's antitrust campaign against Apple for its iBooks Store. In 2012, the DOJ sued Apple for orchestrating a conspiracy to raise prices in the ebooks market. Apple was convicted in that trial, though the company is appealing, but it always struck me as utterly bizarre that Apple was the defender, rather than Amazon.
Amazon is the company that had 90 percent share in the ebook market before Apple came along, and Amazon is the company with between 30-50 percent of the physical book market. The DOJ went after a competitor with no share—Apple—that was bringing innovation to the ebook experience and preventing the monopolist from dumping ebooks below cost.
What's worse is that this isn't the first Amazon has used its enormous retailing power to try and punish a publisher. In 2010, Amazon removed the "Buy" buttons for MacMillan books to try and force that publisher to meet its terms. To be fair, MacMillan reportedly won that standoff, but that doesn't change the fact that Amazon's power is a serious issue.
In this passive-aggressive fight with Hachette, authors, small imprints, their employees, Hachette's shareholders, and readers are losing out, but there are even bigger stakes.
I noted above that Amazon doesn't make money doing what it does. Amazon has enormous share in a variety of retailing markets, but the firm doesn't make much profit. In 2012, Amazon lost US$39 million, and the company earned $274 million in 2013.
This company ruthlessly sucks all of the profit out of any market it touches. That's great for customers in the short term, but in the long term no profits inevitably leads to lower quality and less innovation.
I love high quality books. I love great writers. If Amazon lowers Hachette's margins, fewer books will be published, and those that are published will have less editing, oversight, and marketing. If it happens at Hachette, it will then happen at the other publishers, and ten years from now, reading will be less awesome.
This behavior isn't limited to Amazon. Every retailer seeks to get the best terms that it can, but few retailers have as much power as Amazon in the publishing world. There are no real checks on that power, making the company's passive-aggressive bullying dangerous.
Despite all that, however, it was Apple that was sued for antitrust violations, and it's Apple that has a DOJ watchdog making sure the company doesn't err in its ways any further.
It's bizarre.
Some images made with help from Shutterstock.