
Amazon’s Monopsony Is Not O.K. - constantinum
http://www.nytimes.com/2014/10/20/opinion/paul-krugman-amazons-monopsony-is-not-ok.html?mabReward=RI%3A7&action=click&pgtype=Homepage&region=CColumn&module=Recommendation&src=rechp&WT.nav=RecEngine
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gadders
It looks like Hachette's PR department has stepped up a gear. This subject has
been covered several times before and I think this comment [1] did a good job
of explaining Hachette and Amazon's positions. To summarise:

When Hachette's contract with Amazon expired, Amazon (rightfully) stopped
ordering advance inventory for stocking, but continued taking orders for
available titles and transmitted those orders to Hachette as they arrived.
From there, it's Hachette's responsibility to deliver the orders to an Amazon
distribution center. Once the books arrive, Amazon packs & ships them to
purchasing customers as normal.

That's why, when Hachette's contract expired, all of their books were listed
as "Out of stock: ships in 1 to 6 weeks" \- that's how long it takes Hachette
to deliver stock. That's slow as hell.

Amazon didn't "boycott" or "drop" or "betray" authors or "discourage" readers
from buying their books - it ceased offering retail inventory management
services to a supplier whose contract had expired, and made a rational and
defensible business decision when it became clear that the supplier was not
negotiating in good faith to establish a new agreement.

[1]
[https://news.ycombinator.com/item?id=8151181#up_8151480](https://news.ycombinator.com/item?id=8151181#up_8151480)

~~~
Tyrannosaurs
Are you suggesting that Nobel Prize Winner Paul Krugman is speaking out
against Amazon because Hachette have drafted him for some sort of PR campaign?

~~~
_almosnow
Yes he is, and it looks like that to me as well. What's the deal with Paul
Krugman being a Nobel Prize winner? [1]

[1]:
[http://en.wikipedia.org/wiki/Appeal_to_accomplishment](http://en.wikipedia.org/wiki/Appeal_to_accomplishment)

~~~
Tyrannosaurs
It's not intended as an appeal to accomplishment, more as a suggestion that he
would have as much to lose in reputation than to gain by getting involved in
such a thing if he didn't genuinely believe his position.

EDIT: I'd also suggest that as a default with the participants in this
particular disagreement, anyone with self interest at heart should probably
think about siding with Amazon. Jeff Bezos doesn't lose too many fights.

~~~
josu
In the academic world Krugman-the-journalist has never had that much
reputation. It was Krugman-the-academic the one who won the Nobel Memorial
Prize.

You can check out some of Krugman-the-journalist's most notorious
contradictions here:
[http://wiki.mises.org/wiki/Paul_Krugman#Contradictions](http://wiki.mises.org/wiki/Paul_Krugman#Contradictions)

~~~
Tyrannosaurs
Clearly we don't expect his journalism to have the same level of rigour as his
academic work.

That's a very different thing to any suggestion he might be part of an
orchestrated PR move by Hachette which was the original implication.

~~~
josu
You are completely right, sorry about that.

------
ajross
I normally love Krugman, but it seems like he skipped a step here. Amazon is
squeezing publishers to push prices down, which is bad becuase... why?

I mean, the apocalyptic end game here is that publishers are forced out of
business entirely and Amazon ends up buying content directly from authors, I
guess. That doesn't sound so bad to me, nor like something that's going to
"hurt America". Maybe then they might squeeze authors too, though that seems
like something publishers are already able to do today, no?

What's the critical function provided by publishing houses that Amazon is in
danger of disrupting?

~~~
raverbashing
> What's the critical function provided by publishing houses that Amazon is in
> danger of disrupting?

Editors

Having a "everybody can publish anything" model is great. But it doesn't fit
all cases.

Yes, an editor is really helpful. Revision, pagesetting, etc, as well.

~~~
JumpCrisscross
> _an editor is really helpful. Revision, pagesetting, etc, as well._

At what point could this function be largely automated? At what point fully?

Algorithmic editing brings up novel possibilities. You could have footnotes
added as information is corroborated or countered. Editions could be instantly
localised for almost every language and cultures. One may even get to on-the-
go re-editing for individual readers (for example, I may prefer a punchier
writing style with non-referential footnotes inserted in-line). This changes
what a "book" is, but so did paperback publishing and the Kindle.

~~~
MereInterest
>At what point could this function be largely automated? At what point fully?

Once we have strong AI capable of analyzing semantic content, determining
which passages most strongly support the intended message, determining which
unwritten passages could be written to more strongly support the intended
message, determining the semantic linkings between different sections as the
message is built up and optimizing the order of those sections.

In other words, never.

------
nabla9
This years Nobel price in Economics was given to Jean Tirole whose field this
is. [http://www.nobelprize.org/nobel_prizes/economic-
sciences/lau...](http://www.nobelprize.org/nobel_prizes/economic-
sciences/laureates/2014/advanced-economicsciences2014.pdf)

Industrial organization is very interesting and important field to follow even
if you are a layman interested in game theory, mechanism design and
implementation theory. Market structure is big important part of efficiently
working free markets.

------
davidf18
The publishers are taking a far greater proportion of profits leaving authors
a far less proportion of the profits with e-books compared with hardcopy
books. Amazon is attempting to increase the author's share of profits on
e-books while reducing the publisher's share. This is what Krugman is
criticizing.

From the article linked below: $27.99 hardcover generates $5.67 profit to
publisher and $4.20 royalty to author

$14.99 agency priced e-book generates $7.87 profit to publisher and $2.62
royalty to author.

Hardcopy: $9.87 total profit: approx 57.8% to publisher

e-book: $10.49 total profit: 75% to publisher

[https://web.archive.org/web/20130713080118/http://aardvarkno...](https://web.archive.org/web/20130713080118/http://aardvarknow.us/2013/06/04/e-books-
and-profitability-what-weve-always-said-and-publishers-have-always-denied/)

~~~
wiredfool
There's a difference between profit and revenue.

------
lotsofmangos
Monopoly usually follows monopsony. I do not expect book prices to be kept low
by Amazon, if Amazon manage to kill off the major publishing houses. And their
willingness to make exceptions for politician's books in their corporate spats
is outrageous.

~~~
icebraining
_Monopoly usually follows monopsony._

Does it? For a business with a low barrier to entry like selling books? I'd
like to see some examples.

The reason Amazon can have a monopsony is _because_ it keeps prices low. It
retains customers and forces publishers to go through them. If they raised
prices, they'd lose their advantage, and there are plenty of competitors ready
to take the market, including well funded companies (e.g. Apple and Google).

If this was what's usually called a "natural monopoly", maybe that could be
argued, but book selling - and especially ebook selling - is anything but.

~~~
lotsofmangos
Hmm, you have a very good point. Amazon are sitting pretty at the moment, but
if something like crowdfunding authors became popular, Amazon could lose
market pretty quickly.

That said, if you look at the big 4, they largely consist of mergers of very
old companies, and Amazon is really the only successful ebook seller in
english at the moment, even Google seems to have problems getting far in that
market. So the barriers to entry may be higher than you think.

~~~
monkeyprojects
The barrier to entry against the Kindle that is on my bedside cabinet and many
others is virtually impossible to remove.

Amazon offer a painless way of adding books to the device. Buying a book takes
seconds and it magically appears on the front page of the device waiting to be
read. Its one reason why book piracy didn't go as insane as music piracy, the
means of adding books was easier than the device

~~~
fpgeek
Yes, but the Kindles on bedside cabinets are a rounding error compared to the
smartphones and tablets in use today (let alone in a few years). I know there
are people who prefer e-ink readers, but they're a small and shrinking slice
of the market (at least if the pace of new e-reader releases is anything to go
by).

~~~
monkeyprojects
True but once you've got that original library of books on your reading device
on what app are you going to purchase additional books on?

On my ipad I have iBooks, Marvin and Kindle. The first app I open is the
Kindle due to the 180+ books that already sit on Kindle's cloud. And I doubt
that is going to change.

As an utter aside I do have an e-ink reader. I went from an ipad and kindle to
an ipad mini and then back to the former. Reading on an e-ink device a fall
asleep reading on an ipad mini the light kept me awake...

~~~
fpgeek
> once you've got that original library of books on your reading device on
> what app are you going to purchase additional books on?

My answer is: it depends. My wife and I have well over a thousand books on
Kindle, but I've got a growing library of Kobo books (from taking advantage of
some impressive discount coupons) and almost everything DRM-free I get outside
a major ebookstore (e.g. books bought directly from publishers or authors)
goes straight into Google Books (they're the best with uploads).

Yes, having books scattered across multiple apps isn't perfect, but it isn't
that big a deal, either. Amazon has a significant edge (especially with
customer service), but it is nowhere near insurmountable.

------
mikeash
Monopolies and monopsonies only matter when they're difficult to overcome
because their size gives them an insurmountable competitive advantage. Absent
that, they only exist as long as people are happy with them.

Amazon is easy to bypass. The major publishers could set up their own online
stores tomorrow if they wanted to. Authors could set up their own stores too.
There are a ton of viable alternatives.

~~~
chc
It seems like you're using a very liberal sense of the word "viable" if
"Authors could set up their own stores" is considered a viable alternative to
selling on Amazon.

~~~
WalterBright
I've bought books from authors who set up their own web sites to sell their
own ebooks.

~~~
chc
I'm not sure I see the relevance. Lots of people do lots of different things.
Some people juggle geese. Does you having bought books from authors who set up
their own websites mean that bespoke websites are a viable alternative to
Amazon for the majority of authors?

~~~
WalterBright
Of course they are viable. The ones I bought from were set up because the
author didn't want to deal with Amazon.

It's never been easier for an author who wants to sell his own books to do so.
It also isn't hard for like-minded authors to pool their resources and set up
their own sales site.

~~~
chc
Maybe this is true, but I hope you'll forgive me if I do not take your totally
unsubstantiated word for it. Is there actually a good reason I should believe
this is viable? Because I have seen no evidence of that whatsoever and a lot
of evidence to the contrary (chiefly, the paucity of authors succeeding using
this supposedly viable option when compared to other avenues).

~~~
WalterBright
Few authors sell enough books to make a living at it, and this is true whether
they sell through publishers, Amazon, or on their own.

As with any business, how well they do with their own site is strongly
dependent on:

1\. the quality of the book

2\. the promotion and marketing

3\. customer service

4\. price

None of this is trivial, but it is certainly doable. Small businesses thrive
(and fail) all over the internet, selling books is hardly any different.

And, of course, the 100% failure rate happens only when you quit before you
start.

------
fraserharris
A simpler explanation for Amazon offering 2 - 3 day shipping for Paul Ryan's
book is that Amazon purposely avoided aggravating an influential Congressman.
This is a much lesser accusation than systematically favoring books of a
certain political bias with quicker shipping times.

------
amrrs
So apart from stop buying from Amazon, what else one common citizen of
Internet can do?

~~~
raverbashing
Yeah, we can buy elsewhere, but they charge more for shipping and oh yeah,
your CC is not working here...

~~~
mironathetin
Shipping costs dont't matter, do they? Reading a book takes a while. Why do I
care whether it comes free of charge or costs a few cents? Books still are
great value for the money. I can read 2 or three a month, maximum. Shipping
cost for books are really a negligible point in my total budget. Finally, you
always pay for shipping. Either with cash or, as we see, by amazon squeezing
the price from someone else. It is not free.

~~~
davidw
If they don't matter to you, perhaps you'd be willing to pay mine. I'd gladly
buy paper books from [http://www.powells.com/](http://www.powells.com/) and
have them shipped here to Italy, but it's expensive and slow.

~~~
eru
Have you tried bookdepository? They are slow, but cheap.

~~~
fpgeek
They're also owned by Amazon. I don't have a problem with that, but I imagine
someone trying to get away from Amazon would.

~~~
eru
Didn't know that. Thanks!

------
vertex-four
Entirely ignoring whether or not a monopsony is OK or a good thing, or the
exact details of this situation - are there any retail book sellers organised
as co-ops operated by authors or independent publishers themselves?

Even if the co-op doesn't actually do any of the technical side itself, and
outsources that, they could easily retain control over the code and the
customer base, which would be a good thing for them.

------
raverbashing
Distribution channels are important, and editors will have to adapt to these
new means.

I wonder if there was a way of cutting the middle man and selling the books
directly from their website in a way that is readable in all e-book readers,
hummm

~~~
ianlevesque
EPUB, PDF, the web. All good options.

~~~
amrrs
Why not an open-source one something like where everyone has power? something
like Reddit or Bitcoin?

~~~
cbd1984
PDF is fully open. I know some people believe otherwise, but they're wrong.

I say this because it appears to be a middling-common belief.

------
Houshalter
He compares it to standard oil. But Standard Oil drove down prices, and prices
went up after they were broken up. They never abused their monopoly powers, in
fact they were never a complete monopoly.

------
nateabele
> _[A]nd in case you’re wondering, yes, I have Amazon Prime and use it a lot.
> But again, so what?_

Translation: I absolve myself of all responsibility as a consumer for the
business I choose to conduct.

------
__Joker
Little tangential but Amazon is expecting this and preparing for antitrust
lawsuits. [1][2]

[1][http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/06/h...](http://www.washingtonpost.com/blogs/wonkblog/wp/2013/08/06/heres-
what-amazon-lobbies-for-in-d-c/)

[2][https://www.opensecrets.org/orgs/summary.php?id=D000023883](https://www.opensecrets.org/orgs/summary.php?id=D000023883)

------
teslaberry
krugman cannot be trusted. everything he writes is with the angle of getting a
job as federal reserve chair or treasury head.

economics is not a science and his nobel prize is on par with obama's nobel
piece prize, given for every piece of the middle east he was about to surge
with troops.

------
kuni-toko-tachi
Paul Krugman is a foam at the mouth kook. He's consistently wrong, and only
continues to be "relevant" because he promotes a particular view of the world,
which is both absurd and popular because it is based on feelings and not
reality.

Capitalism is based on grow and destruction. It is just as absurd to argue
against Amazon as it would have been to argue for Blockbuster. Netflix comes
along, and Blockbuster disappears. Markets are brutally efficient, and crying
over the losers is a waste of time at best, and if this bleating results in
government regulation, harmful.

~~~
seanflyon
You second paragraph is reasonable, but you have not supported your claim that
"Paul Krugman is a foam at the mouth kook". Statements like that should not be
made without justification.

~~~
kuni-toko-tachi
I should have toned down that statement. The main disagreement that many
people have with Paul Krugman is that he is a central planner, he believes
that the state should be an economic actor. That premise is fundamentally
flawed.

