[ed. Bezos should chill. There's no reason to push so hard. This isn't Apple fighting some monolithic competitor, Amazon already owns the market.]
In the mid-1990s, when Amazon emerged as an online bookseller, publishers welcomed the company as a “savior” that could provide an alternative to the stifling market power of that era’s dominant chain stores, Barnes & Noble and Borders. Book publishers with exceptional foresight may have understood that they “had to view Amazon as both an empowering retail partner and a dangerous competitor,” as Brad Stone puts it in The Everything Store, his deeply reported, fiercely independent-minded account of Amazon’s rise.
Yet at first, Amazon seemed innovative and supportive. The company’s founder, Jeff Bezos, a Princeton- educated computer scientist and former Wall Street hedge fund strategist, had married a novelist; he often expressed a passionate devotion to books, particularly science fiction and management guides. In its early days of creative chaos, Amazon seemed to want to use the Internet to expand the potential of readers and publishers alike. Bezos hired writers and editors who supplied critical advice about books and tried to emulate on Amazon’s website “the trustworthy atmosphere of a quirky independent bookstore with refined literary tastes,” as Stone puts it.
Among the management books Bezos read devotedly were ones by and about Walmart executives. He became inspired by Walmart’s example of delivering low prices to customers and profits to shareholders by wringing every dime possible out of suppliers. By 2004, Amazon had acquired significant market power. It then began to squeeze publishers for more favorable financial terms. If a book publisher did not capitulate to Amazon, it would modify its algorithms to reduce the visibility of the offending publisher’s books; within a month, “the publisher’s sales usually fell by as much as 40 percent,” Stone reports, and the chastened victim typically returned to the negotiating table.
“Bezos kept pushing for more” and suggested that Amazon should negotiate with small publishers “the way a cheetah would pursue a sickly gazelle.” This remark—a joke, one of Bezos’s lieutenants insisted—yielded a negotiating program that Amazon executives referred to as “the Gazelle Project,” under which the company pressured the most vulnerable publishers for concessions. Amazon’s lawyers, presumably nervous that such a direct name might attract an antitrust complaint, insisted that it be recast as the Small Publisher Negotiation Program.
Around this time, Amazon also jettisoned its in-house writers and editors and replaced them with an algorithm, Amabot, that relied on customer data rather than editorial judgment to recommend books. The spread of aggression and automation within Amazon as the company grew larger and larger echoed classics of the science fiction genre to which Bezos was devoted. An anonymous employee bought an ad in a Seattle newspaper to protest the change. “DEAREST AMABOT,” the ad began. “If you only had a heart to absorb our hatred… Thanks for nothing, you jury-rigged rust bucket. The gorgeous messiness of flesh and blood will prevail!”
Will it, though? Over the last decade, Amazon’s growing market share and persistent bullying, particularly in the realm of digital books, where it now controls about two thirds of the market, raise the question of how well competition and antitrust law can protect diverse authors and publishers. Amazon has become a powerful distribution bottleneck for books at the same time that it is also moving to create its own books, in competition with the very publishers it is squeezing.
The evidence to date is that Amazon and the attorneys that advise it do not fear antitrust enforcement. You might suppose, for example, that the publication of Stone’s book, which contains extensive on-the-record interviews with former Amazon executives describing the company’s most dubious practices, would have chastened it and caused it to pull back from strong-arming publishers—to avoid bad publicity, if for no other reason. Yet that has not proved to be the case.
This spring, Amazon has again launched a negotiating campaign to force publishers to accept concessions on the percentage of revenue it takes from e-book sales. And Amazon has again punished those who resist. Its most prominent target has been Hachette, the French publishing group, which will bring out The Everything Store in paperback in October. As of early June, as part of its pressure tactics, Amazon had removed the link on its website that would allow customers to preorder the paperback edition of Stone’s book, as well as links that would facilitate other preorders of Hachette books.
Jeff Bezos’s conceit is that Amazon is merely an instrument of an inevitable digital disruption in the book industry, that the company is clearing away the rust and cobwebs created by inefficient analog-era “gatekeepers”—i.e., editors, diverse small publishers, independent bookstores, and the writers this system has long supported. In Bezos’s implied argument, Amazon’s catalytic “creative destruction,” in the economist Joseph Schumpeter’s phrase, will clarify who will prosper in an unstoppably faster, more interconnected economy.
“Amazon is not happening to book selling,” Bezos once told Charlie Rose. “The future is happening to book selling.” Yet the more Amazon uses its vertically integrated corporate power to squeeze publishers who are also competitors, the more Bezos’s claim looks like a smokescreen. And the more Amazon uses coercion and retaliation as means of negotiation, the more it looks to be restraining competition.
Toward the end of his account, Stone asks the essential question: “Will antitrust authorities eventually come to scrutinize Amazon and its market power?” His answer: “Yes, I believe that is likely.” It is “clear that Amazon has helped damage or destroy competitors small and large,” in Stone’s judgment.
In view of Amazon’s recent treatment of The Everything Store, Stone may now end up as a courtroom witness. Yet there are reasons to be wary about who will prevail in such a contest, if it ever takes place. As Stone notes, “Amazon is a masterly navigator of the law.” And crucially, as in so many other fields of economic policy, antitrust law has been reshaped in recent decades by the spread of free-market fundamentalism. Judges and legislators have reinterpreted antitrust law to emphasize above all the promotion of low prices for consumers, which Amazon delivers, rather than the interests of producers—whether these are authors, book publishers, or mom-and-pop grocery stores—that are threatened by giants.
In the mid-1990s, when Amazon emerged as an online bookseller, publishers welcomed the company as a “savior” that could provide an alternative to the stifling market power of that era’s dominant chain stores, Barnes & Noble and Borders. Book publishers with exceptional foresight may have understood that they “had to view Amazon as both an empowering retail partner and a dangerous competitor,” as Brad Stone puts it in The Everything Store, his deeply reported, fiercely independent-minded account of Amazon’s rise.
Yet at first, Amazon seemed innovative and supportive. The company’s founder, Jeff Bezos, a Princeton- educated computer scientist and former Wall Street hedge fund strategist, had married a novelist; he often expressed a passionate devotion to books, particularly science fiction and management guides. In its early days of creative chaos, Amazon seemed to want to use the Internet to expand the potential of readers and publishers alike. Bezos hired writers and editors who supplied critical advice about books and tried to emulate on Amazon’s website “the trustworthy atmosphere of a quirky independent bookstore with refined literary tastes,” as Stone puts it.Among the management books Bezos read devotedly were ones by and about Walmart executives. He became inspired by Walmart’s example of delivering low prices to customers and profits to shareholders by wringing every dime possible out of suppliers. By 2004, Amazon had acquired significant market power. It then began to squeeze publishers for more favorable financial terms. If a book publisher did not capitulate to Amazon, it would modify its algorithms to reduce the visibility of the offending publisher’s books; within a month, “the publisher’s sales usually fell by as much as 40 percent,” Stone reports, and the chastened victim typically returned to the negotiating table.
“Bezos kept pushing for more” and suggested that Amazon should negotiate with small publishers “the way a cheetah would pursue a sickly gazelle.” This remark—a joke, one of Bezos’s lieutenants insisted—yielded a negotiating program that Amazon executives referred to as “the Gazelle Project,” under which the company pressured the most vulnerable publishers for concessions. Amazon’s lawyers, presumably nervous that such a direct name might attract an antitrust complaint, insisted that it be recast as the Small Publisher Negotiation Program.
Around this time, Amazon also jettisoned its in-house writers and editors and replaced them with an algorithm, Amabot, that relied on customer data rather than editorial judgment to recommend books. The spread of aggression and automation within Amazon as the company grew larger and larger echoed classics of the science fiction genre to which Bezos was devoted. An anonymous employee bought an ad in a Seattle newspaper to protest the change. “DEAREST AMABOT,” the ad began. “If you only had a heart to absorb our hatred… Thanks for nothing, you jury-rigged rust bucket. The gorgeous messiness of flesh and blood will prevail!”
Will it, though? Over the last decade, Amazon’s growing market share and persistent bullying, particularly in the realm of digital books, where it now controls about two thirds of the market, raise the question of how well competition and antitrust law can protect diverse authors and publishers. Amazon has become a powerful distribution bottleneck for books at the same time that it is also moving to create its own books, in competition with the very publishers it is squeezing.
The evidence to date is that Amazon and the attorneys that advise it do not fear antitrust enforcement. You might suppose, for example, that the publication of Stone’s book, which contains extensive on-the-record interviews with former Amazon executives describing the company’s most dubious practices, would have chastened it and caused it to pull back from strong-arming publishers—to avoid bad publicity, if for no other reason. Yet that has not proved to be the case.
This spring, Amazon has again launched a negotiating campaign to force publishers to accept concessions on the percentage of revenue it takes from e-book sales. And Amazon has again punished those who resist. Its most prominent target has been Hachette, the French publishing group, which will bring out The Everything Store in paperback in October. As of early June, as part of its pressure tactics, Amazon had removed the link on its website that would allow customers to preorder the paperback edition of Stone’s book, as well as links that would facilitate other preorders of Hachette books.
Jeff Bezos’s conceit is that Amazon is merely an instrument of an inevitable digital disruption in the book industry, that the company is clearing away the rust and cobwebs created by inefficient analog-era “gatekeepers”—i.e., editors, diverse small publishers, independent bookstores, and the writers this system has long supported. In Bezos’s implied argument, Amazon’s catalytic “creative destruction,” in the economist Joseph Schumpeter’s phrase, will clarify who will prosper in an unstoppably faster, more interconnected economy.
“Amazon is not happening to book selling,” Bezos once told Charlie Rose. “The future is happening to book selling.” Yet the more Amazon uses its vertically integrated corporate power to squeeze publishers who are also competitors, the more Bezos’s claim looks like a smokescreen. And the more Amazon uses coercion and retaliation as means of negotiation, the more it looks to be restraining competition.
Toward the end of his account, Stone asks the essential question: “Will antitrust authorities eventually come to scrutinize Amazon and its market power?” His answer: “Yes, I believe that is likely.” It is “clear that Amazon has helped damage or destroy competitors small and large,” in Stone’s judgment.
In view of Amazon’s recent treatment of The Everything Store, Stone may now end up as a courtroom witness. Yet there are reasons to be wary about who will prevail in such a contest, if it ever takes place. As Stone notes, “Amazon is a masterly navigator of the law.” And crucially, as in so many other fields of economic policy, antitrust law has been reshaped in recent decades by the spread of free-market fundamentalism. Judges and legislators have reinterpreted antitrust law to emphasize above all the promotion of low prices for consumers, which Amazon delivers, rather than the interests of producers—whether these are authors, book publishers, or mom-and-pop grocery stores—that are threatened by giants.
by Steve Coll, NY Review of Books | Read more:
Image: Nicolò Minerbi/LUZ/Redux
