Thursday, August 02, 2012

Amazon The Monopoly

Re-post from March 28,2008

Trouble at Mill. Manufacturing of old had it that the mill owner owned the means of production and the mill workers toiled within an inch of their lives, lived in company barracks, spent scrip at the company store and if they had anything left they banked at the company bank. Amazon is a latter day mill owner. The company is attempting to tie their client/POD publishers to them to the exclusion of other relationships the client publishers may have through Amazon's web of administrative, financial, distribution and content tools. As a practical matter, it is becoming harder (and may be financially impossible for many small POD publishers) to maintain separate relationships with Amazon and all the rest of the publishing community.

The blog world is enraged at the moment over Amazon's new policy on POD. The company is effectively telling POD customers that if you want to sell your POD products via the Amazon store you need to be on our platform using our tools. If that means all your titles need to be converted then that's your problem. This is not a situation where these POD publishers can say 'I'll just go some place else'. Amazon has sucked them in because of all the wonderful tools they offer the publishers and of course the sales penetration. In announcing the Booksurge/ CreateSpace merge in August 2007, Amazon's senior v-p, North American retail, Jeff Wilke said, "The new CreateSpace Books on Demand service removes substantial economic barriers and makes it really easy for authors who want to self-publish their books and distribute them on" As it turns out this is true, but there are some significant caveats.

The Wall Street Journal was kind (and misleading) in its assessment of this Amazon initiative:
" Inc., flexing its muscles as a major book retailer, notified publishers who print books on demand that they will have to use its on-demand printing facilities if they want their books directly sold on Amazon's Web site. The move signals that Amazon is intent on using its position as the premier online bookseller to strengthen its presence in other phases of bookselling and manufacturing.
Amazon hasn't been merely a book retailer for some time. While many in the industry - PND included - can't help but have admiration for this company they have amassed a level of market influence across the publishing value chain that should concern everyone. Today, the issue is focused on a small (ardent and vocal) minority of POD publishers who's entire livelihood in many cases is dependent on the Amazon retail expanse. The WSJ should know better. Without being too dramatic, the release of Windows 3.1 heralded a period of intense exclusion at Microsoft: If you didn't play ball with them you essentially had no marketplace. Perhaps at first blush the publishing industry doesn't appear to have any correlation to the software world but with the migration to 'platform' based publishing (a publishing version of iTunes for example) we are seeing the germination of a world where there are only one or two legitimate channels to the consumer. If their actions in the POD world over these past two months are anything to go by then Amazon definitely has monopolistic tendencies.


Eugene G. Schwartz said...

Good points.

Amazon may be the purest play to date (beyond even Microsoft)of how to lock in a market by horizontal as well as vertical consolidation by simply exploiting economic and distributive power without forcing or defrauding anyone.

Pure laissaiz faire Capitalism says that momopolies arrived at without force or fraud will be self-correcting if they fail to offer competitive value. Competition will arise and customers will shift to the better choice.

Anti-trust legislation came about because lassaiz faire advocates could not show any such self-correcting mechanism at work that might change things in any one's lifetime.

So, we have built up in the last century both legal constraints and trade customs that balance the right of a manufacturer or vendor to decide who they will do business with on the one hand, but having made that choice, requiring that they provide a level playing field among their customers.

Bundling service features for competitive advantage is a fair and valuable strategy, since in a competitive environment everyone benefits who chooses to do business with a particular vendor or use a particular product.

The problem that Microsoft raised with its browser bundling strategy, more sharply demonstrated by the Amazon play,is that it also served to block equal access to the distribution channel controlled by Microsoft.

Amazon is trying to have it both ways. BookSurge is a printer that serves the wider market with a variety of services. So is Lightning Source, ColorCentric, IBT and a few other substantial one-off printers.

Until now, Amazon was favoring Lightning Source - but because they were a third party vendor and there wasn't really anyone prepared to commit to Amazon the same level of service, it became an acceptable benefit.

Now Amazon is choosing to favor the customers of one printer over another -- and the favored printer is the one it owns.

Foul play, it seems to me.

I'm waiting to hear what further Amazon has to say by this Monday, after which I may do a little blogging blast on the subject myself.

Gene Schwartz, Editor at Large
ForeWord Magazine

Roger Sterling said...

Interesting that you've worked for Bowker, and now complain that Amazon is a monopoly. I've just had my first experience with Bowker, a company that seems to have a monopoly on selling ISBN numbers, and Bowker acts like a Monopoly in a different way than Amazon -- that is, Bowker, having no competition, offers extremely poor technical tools and customer service, since there are no competitors. For example, the company's site, been non-functional in offering access to customer ISBN numbers for at least 3 or 4 days, with no messaging on the website, and no technical support response to customer querries. At least Amazon provides a competitive servoce, even though there's no competition.

PersonaNonData said...

Roger, you have some things correct in that I was President of Bowker up until 2006 but you missed that I was also Chairman of the International ISBN organization. Having said that I am way past defending either as I have more interesting things to do. Sorry about myidentifiers- not done under my watch. The notion that anyone would want to personally identify themselves with their identifiers seems a bit of a stretch to me.