From The Atlantic:
Over the past several months, what started as a quiet trade dispute has intensified and become public as the largest bookseller in the world, Amazon, and one of the biggest publishers, Hachette, battle over their next contract.
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Why? A contract negotiation between a supplier and a retailer rarely makes it into the press, and the specifics of this one—e-book discounting and Hachette’s profit margin—are no more interesting or significant than many others that garner far less attention. But in this case, it’s not the price of flat-screen televisions or how they’re displayed in stores that’s at stake—it’s the future of ideas in America.
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By some estimates, today Amazon controls around 50 percent of all book sales—physical and electronic—in the U.S. In the past decade, the company has steadily grown that market share, taking it from Barnes & Noble (shrinking), Borders (bankrupt since 2011), and independent bookstores (around 2,000 remain today out of the nearly 7,000 there were in the mid-1990s). It also built most of the e-book business in the U.S. following the successful launch of the Kindle e-reader in 2007. It wasn’t the first e-reader on the market, but by allowing customers to download e-books over a private, customized network built for the purpose, as opposed to making them connect their e-readers to a desktop or laptop computer connected to the Internet, it quickly became the most popular. In 2010, Amazon was estimated to control 90 percent of the growing e-book business. That’s when Apple, with the support of five of the world’s six largest publishers, launched iBooks, a main feature on its brand new iPad. Within two years, Amazon’s market share in the now much larger e-book business was thought to dip to around 65 percent, with Apple at around 10 percent and Barnes & Noble’s Nook business, launched in 2009, at about 25 percent.
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Fast-forward to 2014 and Hachette’s contract with Amazon is up again. It’s been nearly two years since Amazon regained control of the prices of many of the e-books it sells, and prices for best-selling e-books have plummeted, with Amazon leading the way when it comes to discounting; the consequences to its competitors have been predictable.
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Amazon is willing to go so far as to push customers to its competitors to win this battle. There are two major issues at play. The first is the price of books, particularly e-books. Amazon wants to continue to control it and to offer any discount it chooses to consumers; Hachette, on the other hand, likely wants to leave an opening for the possibility of going back to its previous pricing scheme in 2015. If it can set the prices across retailers, it can do a little to help protect its other trading partners, most importantly Apple and Barnes & Noble. Amazon, unlike Barnes & Noble, for instance, doesn’t need to make money on books to be profitable. It can theoretically lose money on each sale of an e-book if it makes up the difference when it sells a garden rake or a package of diapers. Trying to compete on e-book prices with Amazon has been a major factor in driving Sony and Kobo out of the U.S. e-book market.
The second issue in the negotiation is what’s known in the book publishing industry as “co-op.” It’s a form of marketing: Publishers pay retailers to ensure customers see their books in stores. For instance, when you see a cover of a book displayed on a bookstore shelf and not its spine, that’s no accident. A publisher paid for that special billing. Amazon wants Hachette to pay more for placement on its website. By paying a higher rate of co-op, Hachette would essentially be transferring some of its profit margin to Amazon.
Like nearly every business dispute, this one is about money.
But, ultimately, it’s about so much more than that.
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Think of book publishers like venture capital firms. They invest in individual titles in the form of advances and the sunk costs of editing, packaging and distributing a book. Most of those bets lose money. Some make a lot of money (for every Fifty Shades of Grey there are dozens of money-losing duds). It all evens out to an industry where a strong year is one where a publisher clears a 10 percent profit margin.
As more book sales flowed through Amazon, it would have even more direct control over what people read. The company would have little incentive, for instance, to surface books readers are less likely to buy. If The Hunger Games is all the rage, then the company is best served pushing that title toward its readers at the expense of other books. Or, much more nefariously, it could discourage readers from buying books with a point of view it doesn’t agree with.
Jeff Bezos, Amazon’s founder and CEO, and the company’s stockholders, have so far shown little or no bias toward political ideas or pushing one book over another for any reason but profitability, but that’s not to say that someday that won’t change.
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Amazon has so much control over what it surfaces. Even if Amazon doesn’t do anything overtly to prevent certain books from being published, they would have so much control over what you’re likely to see or buy, it’s not good for democracy.
Link to the rest at The Atlantic and thanks to Patricia for the tip.
Because who could be better for democracy than a small number of huge international media conglomerates controlling the future of ideas?
What could be better for democracy than an inbred group of gatekeepers who decide what appears in bookstores and what does not?
What could be better for democracy than contracts that control and restrict what authors are permitted to write?
PG submits that Amazon is far more egalitarian and pro-democratic than big corporate publishing is.
Want to write about your personal philosophy? Want to push the boundaries of the literary form?
Don’t go to New York. For all their pretense (read the entire Atlantic article), they’re cogs in a corporate world that’s cramped by convention and quarterly profit requirements, pretenders striking poses for one another.
This is the group that has presided over a long decline in American reading, questing for short-term gain by pushing book prices ever higher while paying authors less and less and transforming them from independent artists into anxiety-ridden grist for a soul-destroying mill.
Literature in the United States was doing just fine before the industrial literary era dawned, killing dozens of small publishers and thousands of independent bookstores.
Make no mistake about it, today’s traditional publishing establishment is the product of decades of consolidation, concentrating more and more power over what is published into fewer and fewer hands. The latest and largest example of this trend is the merger of Random House and Penguin to create the largest publisher in the world.
As independent authors arise, empowered by Amazon’s democratic commons of ideas, PG says we’re looking at a renaissance of American literature, an upheaval that is shoving the suits out and putting authors back in charge of the art they create.
Despite the dying spasms of Big Publishing, the wall between writers and readers is coming down. Uncontrolled and unmediated ideas are being released into the wild, giving readers the opportunity to decide which will flourish.
Whether the path out of corporate serfdom comes via Amazon or someone else, authors who have discovered the freedom that comes with owning and controlling the fruits of their labors are not going back to the plantation.
As Passive Guy has read the tsunami of screeds that have erupted from various participants in the legacy publishing world, he has noted a common subtext: “Big Publishing is the devil we know. It gives me enough gruel to survive. Don’t mess with my gruel!”
PG and many independent authors agree in part. We do know that devil and believe it’s time for that devil to go. Whether a new devil arises or not, we know the old one is beyond redemption. We’ve found a better way.