
Amazon Flexes Its Muscles in Fight Against Publishers - kjhughes
http://bits.blogs.nytimes.com/2014/05/23/amazon-escalates-its-battle-against-hachette/
======
incision
Honest questions here...

What is _supposed_ to happen here? This article and each of the others linked
don't offer much beyond jabs at Amazon.

As far as I can tell, publishers are unhappy with Amazon - period. Two years
ago the hot news was about Amazon pricing books too low [1]. Now at least part
of the complaint is that Amazon isn't discounting enough and allowing prices
to approach list price - which I assume is set by the publisher. Isn't that a
publisher problem?

Also, this all reminds me of what we used to hear in the music industry -
creators hurting because the label (publisher) they're contracted with is
feuding and refusing to eat whatever compromise rather than pass it on
directly or indirectly.

Would it be a terrible thing if Amazon pressured books into changing the same
way iTunes changed music?

1: [http://www.cnn.com/2012/04/11/tech/web/apple-lawsuit-
cheaper...](http://www.cnn.com/2012/04/11/tech/web/apple-lawsuit-cheaper-
ebooks/)

~~~
justizin
to be clear, the lawsuit was against apple and the publishers, who were
accused of price fixing by refusing to participate in under-pricing books, but
also refusing to price ebooks as high as ~$25.

it was a really odd application of antitrust law at the time, since Amazon is
the one with monopoly power, and price fixing typically means competitors
agreeing to price things higher than the market would otherwise bear.

antitrust has never been reasonably applied to tech, going as far back as DOJ
going after microsoft for bundling IE, not for leveraging the Office team's
relationship with the Windows team to push out competitors like Corel.

now you're seeing amazon flex that monopoly power - hey buddy, you had to pay
a fine to the DOJ for refusing to participate in our monopoly, and we were
able to hurt apple's book-selling business, and now we're shutting you off
entirely unless you agree to our terms.

~~~
richdougherty
I have the different view: that the Apple/publisher case is a pretty
straightforward case of a price fixing conspiracy.

Publishers are certainly allowed to, as you put it, "refuse to participate in
under-pricing books". The problem occurs when they decide to act in concert.

I agree with your points about DOJ and the tech industry, and maybe there's
something that needs to be done about Amazon right now. I'm not sure. But
definitely the wrong thing to do would be to allow a cartel of publishers have
any influence over the price structure of the market.

------
revelation
These articles can really go either way, but NYT seems to continuously go the
publisher side. Theres not a single Amazon statement in this article.

Remember that the majority of publishers just recently colluded with Apple to
essentially fuck over Amazon. Why would we afford them the presumption of
goodwill here?

~~~
eridius
> Remember that the majority of publishers just recently colluded with Apple
> to essentially fuck over Amazon.

Well, that's certainly how the Justice Department chose to see it. That
doesn't make that statement the objective truth.

I still don't see how anyone can say with a straight face that the new entrant
in a market is "fuck[ing] over" the dominant player. Especially when countless
economists have weighed in saying that the kind of corrective measures
employed by Apple and the publishers are not (and should not be) illegal and
that the Justice Department basically got everything wrong.

(Google is failing me here for finding these economist opinions that I've seen
in the past, but amusingly, my search is chock full of articles from before
the ruling saying that economists think the DOJ is going to lose the case)

~~~
chrismcb
"corrective measures employed by Apple" what were the measures and what were
they correcting? And how did the Justice Department get it wrong. Apple
colluded with the publishers to set the price, and forced Amazon to sell for
the same price. With mainly the people being screwed (well in some cases the
publishers actually lost money too) Unfortunately the corrective measures
taken SINCE the ruling having really made much of a change.

~~~
eridius
> Apple colluded with the publishers to set the price, and forced Amazon to
> sell for the same price

Apple gave the publishers leverage to use with Amazon, which is a wee bit
different. But I'll give you "colluded", because it doesn't really matter.

I wish Google would actually find the various articles I've read in the past
about this, but my recollection is that various economists have explained that
this sort of "corrective measure" is actually legal and the right course of
action under certain circumstances, and the ebook market (with Amazon's near-
total dominance) qualifies.

You say "mainly the people being screwed", but that's not true. Amazon tried
to claim that prices were lower before Apple came along, but that's actually
only true for some (admittedly popular) books. Prices on other books were
higher before Apple. Not only that, but the low prices that Amazon was talking
about was not actually a sustainable market, but instead was Amazon engaging
in predatory pricing. And predatory pricing is not something that the DOJ is
supposed to be in the business of defending.

Basically, many people have looked at the overall book market both before and
Apple entered it, and found that, when looking at the entire market instead of
just e.g. the NYT bestsellers list, prices were not higher after Apple showed
up.

It's also worth pointing out that Apple was being accused of violating
antitrust laws, which are essentially laws designed to prevent unfair
monopolistic practices. It seems rather ridiculous to claim that a minority
player in a market could be guilty of monopolistic practices, since that
generally requires being a monopoly. It's even more absurd when one of the
main goals of antitrust is to promote fair competition, and yet it was used to
punish the only real competition that Amazon had in the market. Basically, the
DOJ used fair competition laws to hand a government-sanctioned monopoly to a
single company.

\---

I did a bit more digging, and what Apple was found guilty of was a "per se"
violation of a horizontal price-fixing conspiracy using a series of vertical
agreements. I've found a MacObserver article[1] that talks about a 30-page
amici curiae brief filed by two economists explaining why Judge Cote's ruling
was wrong.

[1]: [http://www.macobserver.com/tmo/article/economists-on-
apple-e...](http://www.macobserver.com/tmo/article/economists-on-apple-ebook-
antitrust-case-judge-cote-got-it-wrong)

There's a 3-paragraph summary at that article, which should give you a good
idea of what was wrong with the ruling.

I've seen a number of other articles since the ruling where other economists
weigh in and say essentially the same thing, but Google is still being
difficult.

\---

Edit: One comment about this brief says that the DOJ didn't make these
considerations because it found Apple to be _per se_ liable, which is to say,
the DOJ considered the actions to be illegal regardless of any possible
motivation. Some of the other economists I've referred to argued specifically
against this point, saying that these kinds of vertical agreements are _not_ a
violation of the per se rule and that Judge Cote royally screwed up in
applying it. Of course, Judge Cote's ruling also said she would consider Apple
to have been guilty under a rule of reason as well, but I find it hard to
believe given how much evidence there is that Apple's actions were indeed in
its own independent business interest, and that these kinds of vertical
agreements and the provisions they contained are not in fact illegal under
these circumstances (my understanding is basically that they can be illegal
when used by a dominant player in a market, because it's anti-competitive, but
when used by a new entrant in a market with an existing dominant player, they
are ok, but IANAL).

~~~
Oletros
> Basically, many people have looked at the overall book market both before
> and Apple entered it, and found that, when looking at the entire market
> instead of just e.g. the NYT bestsellers list, prices were not higher after
> Apple showed up.

Basically, many people have looked at the 5 publishers accused of collusion
and have seen that prices were higher AFTER the collusion

~~~
eridius
Are you trying to claim that somehow this whole affair affected book prices
for the smaller publishers that didn't have agreements with Apple? Because for
both of us to be right, all the smaller publishers must have dropped their
prices _precipitously_ to offset this supposed increase across the board in
the prices of the 5 big publishers.

~~~
Oletros
I'm trying to say that ebook prices from publishers other than the 5 accused
are irrelevant.

The fact is that the ebook average price from the accused publishers went up,
it is irrelevant for that case that the total market average prices were down.

~~~
eridius
Ok, so you _are_ saying that the price of the other publishers went down, and
apparently dropped enough to offset the fact that they're, well, smaller
publishers, and therefore a smaller part of the book market.

I don't think that's true. I have never heard that the smaller publishers kept
dropping their prices.

~~~
Oletros
[http://www.justice.gov/atr/cases/f298700/298794.pdf#page=1](http://www.justice.gov/atr/cases/f298700/298794.pdf#page=1)

~~~
eridius
Yeah, that's just a graph with no data behind it, and it comes from a biased
source. Do you have anything actually _usable_?

~~~
Oletros
Are you saying that DoJ lied with this graph?

If so, can you post a single proof of that.

You're asking for "usable" sources and in fact you don't have provided a
single one.

It is clear that you won't believe any source so, have a good day

~~~
eridius
The graph said "weighted". Weighted by what? I'm saying the DoJ produced a
graph that would back up their narrative, but didn't provide the actual raw
data, or an explanation of how the graph was produced. That makes it useless.

> It is clear that you won't believe any source

I won't believe obviously-biased "sources" that have no real data.

In any case, I think focusing on the current prices of eBooks is not actually
very helpful. Amazon has the power to set prices at whatever the heck they
want. And the publishers had no recourse, because not selling on Amazon meant
not selling, period. But the artificially-low prices Amazon was using for e.g.
bestsellers was _not sustainable_ for the publishers. It was not a healthy
market, and there was zero reason to believe, had Apple not entered the
market, that Amazon would continue selling at those prices indefinitely.

Artificially low prices are usually assumed to be good for consumers, and the
DOJ certainly made that claim, but that's not true. Consumers do not benefit
in the long-term from an unsustainable market. They also don't benefit from a
market with no competition. The latter is what Amazon was trying to create, by
keeping prices artificially low on bestsellers. This is predatory pricing, and
their goal was to control the entire eBook market. Once they had complete
dominance, it's reasonable to expect that they would have raised prices so
they would stop taking a loss on all these $9.99 books (in case you aren't
aware, Amazon was actually paying the publishers more than $9.99 for the
bestsellers they were selling at that price). And in a market without
competition it's very likely that Amazon would be selling books at prices
higher than a healthy competitive market (like the one Apple was creating with
their entry). Here's an article from a year ago with evidence that Amazon was
already starting to raise prices:
[http://www.nytimes.com/2013/07/05/business/as-competition-
wa...](http://www.nytimes.com/2013/07/05/business/as-competition-wanes-amazon-
cuts-back-its-
discounts.html?pagewanted=all&_r=0&gwh=6C43B94F37871245E11C270408988C54&gwt=pay)

~~~
Oletros
> The graph said "weighted". Weighted by what? I'm saying the DoJ produced a
> graph that would back up their narrative >I won't believe obviously-biased
> "sources" that have no real data.

Perhaps Eddy Cue is not a biased source and he admitted in the trial that
ebook prices raise

[http://www.cnet.com/news/apples-eddy-cue-yep-we-caused-e-
boo...](http://www.cnet.com/news/apples-eddy-cue-yep-we-caused-e-book-pricing-
to-rise/)

> But the artificially-low prices Amazon was using for e.g. bestsellers was
> not sustainable for the publishers.

Why not? Publishers were paid full price. In facts publishers earned LESS
money with the agency model than with the wholesale model.

> This is predatory pricing, and their goal was to control the entire eBook
> market.

Any proof of that? Do you also believe that DoJ lied when its investigation of
Amazon found no predatory pricing?

> Once they had complete dominance, it's reasonable to expect that they would
> have raised prices

I think that precog police still don't exists >And in a market without
competition it's very likely that Amazon would be selling books at prices
higher than a healthy competitive market (like the one Apple was creating with
their entry)

A competitive market where ALL the stores must sell the ebook for the same
price? Where the heck is the competition?

Is this your definition of competition, fixing the prices for all the stores
and books?

------
paulgb
> The paperback edition of Brad Stone’s “The Everything Store: Jeff Bezos and
> the Age of Amazon” — a book Amazon disliked so much it denounced it — is
> suddenly listed as “unavailable.”

I like a conspiracy theory as much as the next guy but couldn't the book just
be... unavailable? If they wanted to impede its distribution why are they
still selling the Kindle, Hardcover, and Audio versions?

~~~
dragonwriter
> I like a conspiracy theory as much as the next guy but couldn't the book
> just be... unavailable?

Its unavailable in the sense that Amazon doesn't make it available -- so it
is, literally, unavailable _from Amazon_. Strictly speaking, this is not
inaccurate, it just doesn't mean what people who trust Amazon's
comprehensiveness are likely to think it means, as its not unavailable from
the publisher, which is why its also not unavailable through other retailers.

~~~
waveman2
It's unavailable in the sense that you can actually buy it now. I just did.
That is, in the sense that it is _available_. And right now the claim made is
demonstrably false, if not a deliberate lie.

Seriously people you need to confirm your facts. _Not everything you read in
the papers is true_.

~~~
dap
It's definitely unavailable right now, for me. Glad you were able to order it,
but your ability to do so once doesn't mean many people aren't prevented.

------
chimeracoder
> “I have supported Amazon for as long as Amazon has existed. I’ve been
> published for 20 years now and you have sold so many of my books,” she wrote
> in a Facebook posting she also sent to the retailer.

Why does she not blame her publisher for setting the price of her books to be
too high[0]? This seems to be a regular merchant/vendor price dispute -
nothing new about it.

The publisher is just a middleman here[1] - if she were trying to sell
directly to Amazon at the same price, Amazon's reaction (presumably) would be
to refuse to sell the book based on the prices she set. At that point, she'd
have two options: (1) Lower the price of the book, or (2) Accept that the book
won't be available on Amazon.

> “Your actions to raise the prices of our books, place banners touting books
> that ‘are similar but lower in price’ and saying that our books will ship in
> 3-5 weeks when they are in stock is not only a disgusting negotiation
> practice, but it has made me tell my readers to shop elsewhere — and they
> are and will,” she wrote.

This is a minor point, but for what it's worth, it appears that Amazon is
saying that the books are "unavailable", not "out of stock", from the
screenshot. Amazon _does_ sometimes say that items are "out of stock" instead
of "unavailable", so it's not that they're trying to imply any reason for the
lack of availability - they're just saying that they are not available and not
specifying the reason.

[0] This is mostly rhetorical - I can understand why she may not want to lower
her price - but that's the way supply and demand works in a supply chain (ie,
when you're not selling direct-to-consumer).

[1] As is Amazon, for that matter! She always has the option of selling the
e-books herself, if she decides that that's a worthwhile endeavor.

~~~
dap
> Why does she not blame her publisher for setting the price of her books to
> be too high[0]? This seems to be a regular merchant/vendor price dispute -
> nothing new about it.

Because Amazon's the one making it hard for her readers to get their hands on
her books. We don't know it has anything to do with the prices they want for
her books.

------
umsm
Does this article still make sense if you click on this:

[http://www.amazon.com/The-Everything-Store-Bezos-
Amazon/dp/0...](http://www.amazon.com/The-Everything-Store-Bezos-
Amazon/dp/0316219266)

And notice that the book IS AVAILABLE?

~~~
leoc
Was that the case when the article was written though?

------
smackfu
The main reason this is getting publicity is that the authors are getting
punished but they have no power. Otherwise it's just a standard
retailer/supplier conflict.

Also, note that Hachette is one of the publishers involved in the e-book suit
who settled, so not exactly a great history with Amazon.

~~~
dragonwriter
Another major reason is suggested in the earlier article -- Amazon's market
power in the book retailing business (particularly if online book retailing is
regarded as a distinct market) is so great that a lot of commenters have
raised antitrust concerns about that power being applied as leverage for
better terms in the e-book market (developing market power isn't illegal by
itself, but applying it to use dominance in one market to acheive dominance in
another can be an antitrust violation.)

~~~
dublinben
The publishers are completely free to sell DRM-free ebooks directly to
consumers that can be enjoyed on their Kindle or whatever. They insist on
relying on greedy middlemen like Apple and are shocked when Amazon doesn't
fall in line.

I have no sympathy for complaining publishers that refuse to actually
circumvent these "bully" distributors.

~~~
makomk
They're also completely free to sell DRM-free paperbacks, and all of them do,
but that's never helped them much when Amazon lists their paperbacks as "out
of stock" as leverage tactics over physical book pricing because most people
assume that if Amazon don't have it, it's out of print and there's no point
looking elsewhere.

------
chris_mahan
Why don't the publishers make it easy to buy books from them, instead of all
this rigamarole about rights and regions? I want to go to your website, pay
with a credit card, and you ship it to me, anywhere in the world, and fast.

No, instead, I go to a local bookstore, they don't have it.

I go to Amazon, they have it. I order it, two days later it's at my door, for
30% off the price on the back of the book.

So everybody does the same as me, and now Amazon is the 800-lbs gorilla in the
room, throwing its weight around, and you're complaining?

You had the opportunity, 10 years ago, to kill Amazon, and you didn't, because
you wanted to keep charging us more for less service.

Tough.

~~~
dap
... and since many people did the same thing, and many of the local bookstores
have closed (particularly those with large selections), Amazon effectively has
considerable influence over what kinds of things most of us read. Tough
indeed. For _us_.

------
seacious
What practice of Hachette is amazon objecting to? The article doesn't specify
the cause of the conflict.

~~~
dragonwriter
> What practice of Hachette is amazon objecting to?

Amazon isn't publicly objecting to any Hachette practice. Per the earlier
article on the dispute linked from the source article, [1] Amazon is seeking
more favorable contract terms with Hachette (and neither side seems to be
disclosing what particular terms are at issue), and is working to discourage
sales of their books -- and promote alternatives to people specifically
seaching for Hachette books -- to force Hachette to agree to Amazon's
preferred terms.

[1] The earlier article:
[http://www.nytimes.com/2014/05/10/technology/writers-feel-
an...](http://www.nytimes.com/2014/05/10/technology/writers-feel-an-amazon-
hachette-spat.html)

~~~
waterlesscloud
Yes, of course the publishers wouldn't want authors to see the details of
their Amazon deals.

------
mmed
That's a vulgar way of demonstrating Amazon's muscle power.

------
btrombley
The article is short on details, but I'm not clear why Amazon is obligated to
sell a publisher's books, much less at the publisher's desired prices. Wal-
mart is famous for using its size to lean on suppliers ensuring "everyday low
prices." Why is publishing different?

I sympathize with authors that are hurt by this battle, but it just shows that
Amazon's marketplace is becoming more important to their sales than their
publisher is.

~~~
dragonwriter
> but I'm not clear why Amazon is obligated to sell a publisher's books, much
> less at the publisher's desired prices.

No one has said that they are. Likewise, the affected publisher, and the news
media, are not obligated to fail to inform the public of Amazon's tactics so
that they are aware that Amazon having smaller-than-usual discounts, "not
available" notices, and long shipping times may well be a sign not of any
issue with the availability of the book, but of Amazon's disputes with the
publisher, and that therefore if they are encountered when looking for a
particular book, a consumer would be well advised to look at other online
retailers, who, while their usual discounts may be lower, may have better
discounts for the book at issue or have it available when Amazon says its
unavailable, or have it with a more reasonable shipping time when Amazon does
not.

Amazon is essentially leveraging the trust that consumers have in them as
presenting a seemingly comprehensive catalog and best terms in the online book
retailing business to selectively pressure publishers, and its completely fair
to inform consumers that, in the particular case of these kinds of disputes,
that trust may, however well earned it was previously, not be warranted -- and
what the particular symptoms are that such a dispute is affecting the book you
are looking for.

~~~
a3n
Amazon lying to customers - there's a winning strategy.

------
davidw
[http://www.powells.com/](http://www.powells.com/) \- this is a great place to
get books, although the best thing of all is to go there in person and wander
around. I generally like Amazon, by and large, and I love my Kindle, but
wandering around looking at that many books in person is great too.

------
bhewes
I have started two publishing companies over the last two years. What I can
say on the economics of print is that the margins are not good compared to
ebooks. What this article misses is the fight is not really between publishers
and Amazon, but between printers and Amazon. Printers and their distribution
system are getting squeezed.

------
IBM
Looks like the publishing industry needs to consolidate further.

------
mpweiher
Boy, aren't we all glad the DOJ protected poor little Amazon from the evil and
all-powerful Apple e-book conspiracy and monopoly.

~~~
smackfu
OK, so in this case, Amazon wants better terms than Hachette will give, so
Amazon plays hardball.

In the e-book conspiracy, all the publishers wanted better terms than Amazon
would give, and they didn't want to give Amazon the chance to play hardball,
so they banded together and forced Amazon's hand.

Not really sure how the second is better. It's certainly way more illegal.

~~~
dragonwriter
Assuming the first player has monopoly power (which its tactics wouldn't have
any effect if it didn't) both are equally illegal.

~~~
smackfu
You don't need a monopoly to have enough power to push around your suppliers.

~~~
dragonwriter
You have to have monopoly power to do so by the tactics at issue (limiting
consumer availability and manipulating retail prices) since in a market with
effective competition that does more to direct sales of the product to
competing retailers than to hurt the total volume sold by the publisher.

~~~
jack-r-abbit
You just need more loyal customers. My first stop is Amazon. But I would not
say I am loyal to Amazon above all else. If I really wanted something and they
didn't have it, then I'd move on the next stop. In this case (that book about
Amazon) I'd head on over to Barnes & Noble and pay just $0.31 more to order it
there. No big deal.

