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April 2012
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Thoughts on Amazon, the Kindle Platform, and the Anti-Amazon Publisher Defense

The ongoing conversation regarding the DOJ suit against five of the Big 6 publishers and Apple has at times been even more interesting than the case itself in what it says about the publishing industry and those who have a stake in it.  I won’t deny for a moment that I’m a fan of the Kindle or that I regularly enjoy many facets of Amazon’s business, so feel free to call me out for being biased, but I think that there are a few strange assumptions being made in some of the more popular Pro-Publisher arguments lately that need to be addressed.

The most popular justification of the Agency Model by far seems to be that without it Amazon would simply have too much control over prices and undermine competition since they could use books as loss-leaders to sell other products.  The underlying assumption here is that there was literally no other option available to prevent Amazon from offhandedly destroying a whole industry.  This ignores the process that allowed the Agency Model to be imposed on the Kindle Store in the first place, of course.

In early 2010, the publishers dictated their terms to Amazon and a brief conflict ensued.  When Amazon resisted raising their prices, Macmillan pulled their titles.  It worked, and Amazon caved.  Publishers are not, in this case, the helpless bystanders trying to scrape by that they make themselves out to be.  They have the choice to leave at any time, and allow Amazon to find their own way to fill Kindles with eBooks.  This is exactly what happened recently when IPG was unwilling to agree to Amazon’s contract renewal terms.

The problem is that publishers don’t want Amazon out of the game.  Amazon does exactly what they want a retailer to do.  The store makes suggestions, up-sells, promotes, and opens the doors to customers anywhere.  The problem wasn’t the potential for anti-competitive control; it was that publishers were unwilling to lose access to the channel.  It is also why the collusion was necessary.  Without that collusion, Amazon could presumably have done without any member of the Big 6 and they would have been left with only comparably inferior vendors to sell their books through.

The other really fun argument is the devaluation of eBooks.  Basically that by selling Kindle Editions cheaply, Amazon is making customers expect affordable books and publishers will make less money.  This is often tied to the idea that Amazon is trying to sell cheaply enough to get a monopoly, after which they will screw their customers and raise prices.  Personally, I see the arguments as contradictory.

If Amazon’s whole Kindle sales model is designed to lower customer expectations in terms of pricing, publishers retail the previously mentioned option of removing their content.  Unlike with paper books, there is no possibility of a secondary market.  To me this is basically an assertion that the content offered by these publishers is less important to customers than the fact that they can get it on a Kindle.  If that is so, then the need for publisher as gatekeeper is a thing of the past anyway.

Let’s assume that Amazon does accomplish lowering expectations, though.  How would raising prices on eBooks after driving out the competition work to their advantage?  We are talking about digital products, presumably now in a publisher-free world since Amazon ruined them all.  In what way would self-publishing authors have trouble selling outside of the Kindle Store?  And if that were an option, why would customers pay Amazon’s presumably higher prices after having been acclimated to cheap eBooks over the course of years?  I’m not one to say that the free market will solve all your problems, but what incentive does Amazon have to dominate a market and immediately destroy their most profitable approach to it?

Basically, I can’t help but feel that redirecting the issue of Agency Model price fixing to make it appear as if the DOJ is out to appoint Amazon king of publishing is a sign that people know something illegal was done and are now out to justify it.  The Kindle may be the best eReading platform out there, but it is far from the only one.  Publishers had other options they could have gone with; they simply couldn’t see a legal way to get the higher profits they wanted without losing access to customers who love their Kindles.

2 comments to Thoughts on Amazon, the Kindle Platform, and the Anti-Amazon Publisher Defense

  • JPB

    Excellent commentary. The problem is that publishers seem to view profits as a right. No one is entitled to a profit, even the one they have enjoyed over the past 100 years.

    Publishers are yet another middleman job being lost to the internet, like travel agents. If you have a job or business that gets between people and information, your job/profits is likely endangered as well.

  • J. J. Markin

    On the contrary, publishers have as much right to profit as any other business. What they do not have is the right to greed.

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