
Big, bad Amazon - davidiach
http://www.economist.com/blogs/freeexchange/2014/10/market-power?fsrc=scn/fb/wl/bl/bigbadamazon
======
tokenadult
I see the previous submission[1] to Hacker News of Matthew Yglesias's _Vox_
essay, "Amazon is doing the world a favor by crushing book publishers,"[2]
didn't get much discussion here, but I think the essay supplements the
arguments in the _Economist_ blog post kindly submitted here very nicely from
the author's side. (The _Economist_ post mostly argues from the reader's
side.) I still have plenty to read, and I don't find that Hachette or the
other people whining about Amazon are doing as much as Amazon is to provide
you and me with more to read at a better price than ever before. As Yglesias
writes, "When all is said and done, the argument between Amazon and book
publishers is over the rather banal question of price. Amazon's view is that
since 'printing' an extra copy of an e-book is really cheap, e-books should be
really cheap. Publishers' view is that since 'printing' an extra copy of an
e-book is really cheap, e-books should offer enormous profit margins to book
publishers. If you care about reading or ideas or literature, the choice
between these visions is not a difficult one."

[1]
[https://news.ycombinator.com/item?id=8493736](https://news.ycombinator.com/item?id=8493736)

[2] [http://www.vox.com/2014/10/22/7016827/amazon-hachette-
monopo...](http://www.vox.com/2014/10/22/7016827/amazon-hachette-monopoly)

~~~
rayiner
It's an interesting narrative, but technology renders the cost of reproduction
irrelevant. Which is different from saying it's relevant that it's extremely
cheap.

Look at an area that "cheap" has destroyed: the Internet. The Internet is full
of crap. I had to censor the ads on a HuffPo article before printing and
sending it to someone the other day. That's journalism circa 2014 where there
is no money to pay for class.

Is that what we want to have happen to books too? Drive down the prices so the
only way to make any money off books is to plaster the end of every chapter
with full color ads of Kim Kardashian? Because that's the road Amazon is
taking us down, along with all the other companies who make money from
distributing rather than creating content.

~~~
mseebach
> Look at an area that "cheap" has destroyed: the Internet. The Internet is
> full of crap.

Ironically, people used the exact same argument against the printing press and
pretty much every single development in publishing. Remember when the
gramophone destroyed the live performance? When TV killed theatre?

All of those developments lowered the price of production and/or distribution
radically, and allowed the production of new cheap crap, but did not kill the
incumbent as predicted.

The same is true today. Before the Internet, you would probably be subscribing
to a newspaper, probably at quite high expense. If you limited yourself to
free reading, you would only get crap - as true then as now.

If the traditional newspaper is largely irrelevant, there's a large and
healthy selection of paid-for journalism out there, just get out your wallet.
I'm a fan of The Economist, but that's far from the only selection.

~~~
rayiner
That makes it seem like quality is a given in the face of market changes. I
don't think that's true. I remember back 10 years ago, the Internet was
actually useful. You could search for a product review and not get a bunch of
computer-generated crap SEO optimized to turn up at the top. That's not true
any longer.

Increased competition has had a negative effect on the media. Go watch CNN
clips from the 1980's and compare to today. Its a totally different product
than CNN today, and it was possible because they were insulated from the
degrading effects of market competition. They didn't have to plaster Kim
Kardashians rack over every piece in order to make money, like they do today.
And what's driving that competition? Lowest common denominator Internet media
like Huff Po that can churn out dreck at zero marginal cost.

~~~
mseebach
You're idealising CNN in the 80s. One important milestone in their early
history was broadcasting live the explosion of space shuttle Challenger.
During the first gulf war, we got live footage of missiles hitting their
targets. That's technologically fantastic, but in terms of journalistic value,
it's just one, small step above Kim Kardashian.

CNN is widely credited with inventing and pushing the 24 hour news cycle,
driving the subdivision of news into every smaller and ever less important
chunks, incessantly valuing speed over depth. "You heard it here first!" \-
well, who the h... cares?

Anyway, my point, which I don't feel you meaningfully addressed was that once
you get out your wallet, every newsstand out there are piled high with
magazines and weeklies dedicated to every conceivable topic, many of them high
quality (and many of them, admittedly, not!), plenty of them completely devoid
of Kardashian-themed content. Just go buy them instead of lamenting that your
free entertainment is worth exactly what you paid for it.

~~~
rayiner
I think coverage of the Challenger explosion is way above the Kardashians. And
I'm not idealizing it based on recollection. Try actually watching some old
broadcasts. It's the difference between the Internet circa 2001 and the
Internet circa 2014 (it's a lot easier to hide crap content beneath flash and
dynamic JS widgets than it is to do the same in plain text).

My point which you're ignoring is that the existence of competition from the
crap forces legitimate media down market. For the cost of a cable
subscription, CNN is a lot crappier than it was 20 years ago.

------
gutnor
> On the other hand, it is incredibly easy to go around Amazon.

It is tiring to hear that kind of argument all the time to determine if a
business is a monopoly ( monopsonist ) or not and then it is supposed to be
business 101 to know that people do not optimize their finance to the last
cent and can be hooked into a company by habit or convenience.

What matters is if amazon clients actually do go around Amazon or not and
based on what criteria. Google thinks of Amazon as a threat to their ads
business because people use Amazon as their search engine for stuff to buy. I
would say that a pretty good indication that the original author may have had
a point.

> Setting up online stores is not rocket science ( to compete with Amazon )

Sorry but I can't read past that. Beside being insulting for anybody that has
tried to put an online business together, can a economy journal be taken
seriously when publishing that kind of statement in 2014 ?

~~~
chatmasta
The author does have a point, though. He's not suggesting that the average
reader throw up an ecommerce site to compete with Amazon. He's suggesting that
Hachette, a 200 year old book publisher, should be able to compete with
Amazon, a 20 year old tech company.

It's Hachette's fault that they don't have an eReader to compete with the
Kindle, and it's Hachette's fault they don't have a storefront to sell
directly to consumers. The writing has been on the wall for almost a decade.
Any idiot could tell you that we were moving toward eReaders. A smart company
would see the trend and adapt. Nothing stopped Hachette from hiring engineers
and making a push into the future, except for their own 200-year-old
stubborness.

This is just another case of industry incumbents failing to keep up with
moving technology. For others, see MPAA, RIAA, Taxis, etc. I have no sympathy
for a company that could have entered the game five years ago, but failed to.
Hachette, if anything, was in a _better_ position, from a market/supply chain
standpoint, to develop eReaders. They just failed to.

~~~
justincormack
No one wants an eBook reader for each publishing company.

~~~
matwood
True, but without Amazon we likely would not have any eReaders with much
support. Any of the large publishers could have stepped up early on and became
the dominant e-reading platform. Instead they have fought e-reading every step
of the way. The publishers _hate_ e-reading. IMHO, the complicated rules
around DRM and ebooks is proof that publishers want to make it so complicated
to read an ebook that people simply give up.

~~~
ThomPete
Thats not an argument for Amazon though.

~~~
matwood
I agree, but lets not paint the publishers as innocent here.

~~~
ThomPete
Oh I wouldn't :)

------
Tyrannosaurs
Amazon vs. Hachette is increasingly one of those battles you'd like no-one to
win.

The discussions around the conflict have, to me at least, shown pretty clearly
that book publishing as it currently is isn't a model which stands up to too
much scrutiny when you look at how well it works for anyone outside it.

On the other hand I think we'd all rather it wasn't Amazon, a company who many
seem to like using but don't trust much further than they can comfortably spit
a dead rat, giving it a kicking. The old metaphor about frying pans and fires
springs to mind.

Maybe we just live in a more cynical time but it would be nice if our
disruption was something people generally felt optimistic about.

~~~
lmm
Disruption has always been the province of companies that played fast and
loose with the rules and were generally not very nice.

~~~
Tyrannosaurs
I disagree. Disruption involves change which is often stressful and yes, many
of those who are disruptive can play it fast and loose with the rules.

But being nice? I see no evidence that old businesses are nice (we're just
more used to their nastiness) and I certainly see no case that new, disruptive
businesses are any way worse. If anything I think back to the likes of Google
in the don't be evil days - young idealists who just wanted to make the world
better and would work out the money side of things later.

Even if that weren't true, I still want to be optimistic about change. I
accept that it's not all great, that everything comes with a cost, but if
you're doing something that's so obviously potentially positive, surely
something is wrong if people don't feel good about it?

~~~
obviouslygreen
I don't think it's useful or accurate to attempt a value judgment on
"disruption" in general. It means massive change, the results of which can and
likely will be good for some people, bad for others, and neutral for some as
well.

Being optimistic (or pessimistic, really) about such a broad concept doesn't
make sense. Could positive consequences come out of any massive change?
Depending on your point of view, perhaps, with exactly the same probability
(undefined) as negative consequences.

Current companies' and industries' goodness or badness are almost always a
matter of perspective (though some are easier to argue one way or the other,
again, depending on your point of view). Removing or stunting them with a new
paradigm certainly changes things, but rarely if ever in a black and white,
"things are universally [better|worse] now" way.

~~~
davidw
In other words: disruptive innovation is likely not strongly Pareto optimal in
most cases.

[http://en.wikipedia.org/wiki/Pareto_efficiency](http://en.wikipedia.org/wiki/Pareto_efficiency)

That's not to say it's not an overall improvement though.

~~~
Tloewald
Disruption is by definition not Pareto optimal since it is bad for those
disrupted. What's your point?

------
spindritf
Of course. It's so easy to use a different book store, even with kindle, that
this whole argument holds no water.

Since Amazon doesn't really carry Polish books, I get .mobis from random
e-stores all the time. It takes no effort. There is no barrier to entry. Well,
except actually having something in stock (easy enough when it's an infinitely
copyable file) and making your website/UI not atrocious (not that easy,
apparently).

Most will even email it and Amazon will deliver it straight to the device. No
need to look for the usb cable.

------
mattmanser
_But the biggest reason is that one simply cannot argue with any credibility
that Amazon has control over the market for buzz. My book buying habits may
not be representative of the public at large, but while I almost always buy my
books through Amazon I cannot remember the last time I discovered one there._

Yeah, appeal to the sample size of 1, great argument...

I _do_ use Amazon for discovering new books, now he has a sample size of 2 and
Amazon controls a massive 50% of the world's "buzz". That changed fast didn't
it.

I'm sure there are good responses to Krugman out there, but this isn't one.

~~~
mooreds
Here's a response to Krugman that I found far more thoughtful than this
Economist article, from Matt Ygleslias of Vox:
[http://www.vox.com/2014/10/22/7016827/amazon-hachette-
monopo...](http://www.vox.com/2014/10/22/7016827/amazon-hachette-monopoly)

And here's a response to his response:
[http://www.newrepublic.com/article/119977/what-matt-
yglesias...](http://www.newrepublic.com/article/119977/what-matt-yglesias-
doesnt-understand-about-book-publishing)

~~~
mcguire
" _In a system without the publisher operating as middleman, where the author
takes his life’s work and just posts it to Amazon, each book becomes a lonely
outpost in the stiff winds of the marketplace, a tiny business that must sell
or die...._

" _But I’m not sure that even Yglesias would want to live in the world he’s
envisioning. Mark Krotov, an editor at Melville House, points out on Twitter
that in posts like these two, Yglesias has often recommended 'good, unusual
books' such as Maxine Hong Kingston’s Tripmaster Monkey and Daniel Dennett’s
Consciousness Explained. 'I’m confident that none of these books, as different
and diverse as they are, could ever have found their audience without a
publisher,' Krotov writes._"

I'm rather suspecting that Evan Hughes could stand to be less ignorant of the
industry he's discussing.

For one thing, _Tripmaster Monkey_ is at least the fifth book that Kingston
has written (I can't find a complete bibliography.) and Dennett's _Content and
Consciousness_ was published in 1969, 22 years before _Consciousness
Explained_. Both of them had already "found their audiences" before those
books were written, much less published.

Further, Dennett has published many of his books with academic presses, where
advances are rare. (Anyone know if MIT Press pays them?)

------
pinkyand
The article ends in a non serious fashion.So the author discovers his books
outside of Amazon.Does this fact has any relevance to how people in general
discover books ?

On the other hand, Amazon is Google's biggest threat in general product
search(and probably discovery). So surely Amazon is even stronger in books.

And i'm sure Amazon does play with search/recommendation ranking, and
publishers see the effect on sales, or else they wouldn't have bothered with
this fight.

~~~
spydum
And just about every retailer does the same with their planograms/floor
layout.

~~~
josefresco
Agreed. Amazon is not required to give equal promotion to every product it
sells, and neither is any other retailer. Retailers will promote what sells,
not what's fair.

------
toolz
So the argument against Amazon is that it is has the potential to do bad
things, so they should have restrictions? Surely Krugmen's argument isn't so
shallow and petty.

~~~
nl
Many criticisms of Krugman are valid, but he is rarely shallow or petty.

OTOH, the Economist article isn't petty, but it doesn't seem to make any
particular groundbreaking point.

~~~
zo1
And these criticisms are what? Besides what the OP mentioned... Can you point
us to his arguments/points?

~~~
nl
The article links to Krugman's post. One point Krugman makes that isn't
discussed at all is that Amazon uses its market power to keep book prices low.
That makes the article's points about it being easy to setup an online store
somewhat moot: What point is an online store if no one buys from it because
prices are dramatically lower elsewhere.

Krugman also makes the point that Amazon is a (and perhaps the dominant)
discovery mechanism for books. Of course, if you aren't in Amazon you miss
that mechanism. Combine these two things, and it makes creating a competitor
very, very hard. That's doesn't make it illegal, but it's a very big
concentration of market power. Edit: notably, this makes it difficult for even
publishers to compete: if the dominant discovery mechanism for your items
excludes you, then it's a problem. Note the similarities to Google here, and
how careful Google is to emphasise the algorithmic nature of their search
ranking. Amazon can't use that defense.

I'm not sure I totally buy Krugman's argument that Amazon is actually _using_
its power in ways that "hurt America". But, I am more amenable to his argument
that it has too much market power in the book market as outlined above - not
totally convinced, but I think his points in that area are much stronger than
the Economist makes them out to be.

~~~
russell_h
But publishers control the supply, so unless Amazon is willing to subsidize
the difference (and purchase books through unexpected channels) they really
can't undercut prices.

What's going on here is that publishers want to use Amazon's platform, but
they want to dictate the terms of that usage.

------
robomartin
The equation is somewhat complex. eBooks don't cost zero to deliver. In other
words, the infrastructure required to deliver them (which includes people, not
just servers) at a place like Amazon isn't trivial in cost.

And then there's the author's need to earn a respectable living. Obviously
that equation produces different numbers based on whether the product (the
book being the product) sells a thousand vs. a million copies per year.

If a publisher is in the middle then they need to make money to offset their
fixed and variable costs. The presumption is that they provide the author with
valuable services.

I've paid up to $200 for privately published eBooks on very specific subjects
from authors with deep expertise in the matter. In this case the authors
undertake the entire task of producing the book, often hiring people to help
edit, format, illustrate, etc. I wonder how the economics of such ventures
works out. In all cases the books have always been worth every penny.

One of my pet peeves with Amazon is that they don't offer eBooks in PDF
format. I hate the Kindle experience, even on their PC application. I far
prefer PDF documents everywhere.

------
at-fates-hands
The fatal flaw in the article is this:

>> _On the other hand, it is incredibly easy to go around Amazon. One of the
works Amazon is supposedly dooming, according to Mr Krugman, is a book called
"Sons of Wichita". But if one googles "Sons of Wichita", then one of the first
results is the book's page at the website of Barnes & Noble, a rival online
bookseller. Barnes & Noble offers a competitive price and 24-hour delivery
(same day delivery in Manhattan!)._

There is a fundamental difference in how people search for books compared to
other items. Since people know Amazon has such a huge inventory, they go to
Amazon and THEN search for their title. 99% of people I know do not simply
Google a book title and then select the first result they get in Google, it
just doesn't happen that way.

This is an important fact which undermines the idea it's "easy" for consumers
to selectively use another vendor to get their books from. It also gives a lot
more weight to the fact Amazon really is a monopsony.

~~~
mcguire
So you're saying that if Hachette pulled David Baldacci titles from Amazon,
everyone would just give up on buying his books?

------
davidf18
I live in Manhattan and love both Amazon's and Barnes & Noble's same day
service as well as Amazon Prime's free 2 day and low cost overnight shipping.
I have also had great customer service with Amazon.

I don't understand why Krugman wrote a column about a firm which offers great
selection at low cost with rapid low-cost or free shipping. Customer service
is great as well. If only all firms aspired to be Amazon!

------
dewarrn1
This may be a silly question, but could publishers simply set up their own
Amazon storefronts? That is, could I buy a book from "Hachette, fulfilled by
Amazon" if Hachette was willing to set things up on their end? I'm sure that
the current dispute would make this approach untenable, but I have to wonder
why publishers aren't using Amazon services to sell books at their preferred
prices.

------
patsplat
The notion that Amazon is a book store is the most flawed aspect of this
article.

~~~
aet
They are more than just a book store, but they do sell 40% of all new books
with no competitor in sight. I can't see how any bookstore can't afford to be
online. Even small independent book stores do sales online.

~~~
saalweachter
I also suspect that books is the only market in which they can act like a
monopsony.

------
surement
From the first sentence:

>LAST week, the Nobel prize in economics was awarded to Jean Tirole

There is no such thing as the Nobel prize in economics. The prize's real name
is the Sveriges Riksbank Prize in Economic Sciences in Memory of Alfred Nobel.
It's not a Nobel prize.

