From veteran publishing consultant Mike Shatzkin:
Ever since Amazon arrived in the “book business” 20 years ago, each year the “book business” has become less and less of a stand-alone industry. Of course, the only part that ever really was a stand-alone was the trade business, where the entire ecosystem: authors and their agents, publishers, booksellers, and even — for the most part — the printers lived in a world of mutual dependency but pretty much standing apart from what went on in the rest of the world.
Amazon actually took advantage of that industry insularity. They developed a business model that used books as a customer-recruitment tool but with the intention of making their profits elsewhere. In ways that were not understood at the time, that strategy was both viable (the book publishing world didn’t believe Wall Street would fund a company nearly indefinitely with current losses to build a future position of strength, but they did) and impossible for a book-dependent business to compete with. (Barnes & Noble and Borders had to make money selling books; Amazon didn’t.)
By the latter part of the first decade of this century, a Big Five CEO in the US delivered this observation to me. “I used to be able to get the CEO of my biggest accounts on the phone if there was something to discuss.” That was no longer possible with Amazon. And, in fact, if he could have gotten Jeff Bezos on the phone, there would have been very little to talk about.
. . . .
This year when we met with our Conference Council to plan the next DBW, they told us our business needed to hear more about the big tech companies. That reflected the reality the CEO observed nearly ten years ago. Our world is being shaped by the big tech companies. And that doesn’t just mean the obvious one, Amazon, which is almost every book publisher’s biggest trading partner. It means Facebook and Google, which have become perhaps our primary marketing mechanisms. And, of course, it also means Apple, which has become the second-leading ebook provider to Amazon.
. . . .
Indeed, we have reached a point where every trade publisher needs a strategy for its company’s dealings with the tech giants. And the forces that might affect the growth, stability, or strategies of the big tech companies, including anti-competition actions by and within the European Union, now call for attention and understanding from publishers in the US who could be affected by these changes.
. . . .
[From Mike’s discussion of a list of speakers for DBW]
Jonathan Kanter is an antitrust attorney at Cadwalader, Wickersham & Taft and co-head of the firm’s technology group. Jonathan represents both tech companies and content providers. He is totally familiar with the business models of the major tech companies, including Amazon, Apple, Facebook, and Google. This includes both the benefits they provide and concerns that some of these companies use their position in the market to distort competition to the detriment of content providers. At DBW, Kanter will focus on how book publishers interact with the big tech platforms. He will explain the current antitrust actions pending against big tech companies and the potential impact on US-based book publishers.
We’ve also asked Kanter to talk about what remedies might be applicable here in the longer term to preserve the important services that big tech companies offer to consumers while at the same time protecting the rights and businesses of content creators. Could the government impose rigorous but intelligent remedies that address concerns without destroying the value that these tech companies create? Kanter will spell out how things could get worse for the content industries if there are no controls and explore how government agencies could use enforcement action or regulation.
And we’re working on more. There are anti-monopoly legal actions taking place in Europe against the both Amazon and Google. While Kanter will include those in his analysis, we are also talking to our European friends, looking for the right person to bring us a report from the front on these as well.
Link to the rest at The Shatzkin Files
PG says it’s nice that publishing has discovered Apple, Google and Amazon are important in a digital world.
But here comes antitrust. Again.
All but one of the largest publishers in the United States have recently settled illegal price-fixing charges filed against them by the Justice Department. The collusion was so amateurish and overt that PG concluded that either the CEOs of Big Publishing were total idiots or they had never learned anything about antitrust law.
PG will note that, many years ago, before he went to law school, at his first job out of college, he was required to attend a briefing on antitrust law as part of new employee orientation for a big financial services firm. The type of antitrust violations committed by the Price-fix Six were discussed during that briefing.
Evidently, Big Publishing doesn’t have briefings about antitrust law. Perhaps they don’t have briefings about any kind of law.
Cadwalader, Wickersham & Taft is an ancient and venerable New York law firm with a reputation for being very profit-driven. The Cadwalader attorney will give a fine presentation on antitrust law. Lawyers do this sort of thing in order to attract clients.
One does not attract clients by telling them their legal dreams are hogwash. In a perfect Cadwalader world, every publisher in attendance would hire Cadwalader as its antitrust counsel and illustrious Cadwalader partners would explore a wide variety of antitrust possibilities at close to $2,000 per hour. Publishers would move from not knowing anything about antitrust to learning nearly everything about antitrust . . . and legal billing.
Even with Cadwalader’s help, PG doesn’t think the government is going to save Big Publishing.
PG is pretty sure that Jeff Bezos knows about antitrust law. He understands that being the largest bookstore is not a violation of antitrust law. Selling books at low prices is not a violation of antitrust law. Even upsetting big publishers is not a violation of antitrust law.
At its root, much of antitrust law is designed to protect consumers. It would be hard to find a better friend to consumers than Amazon.
Mike describes the publishing business as a stand-alone industry. PG agrees, although he would use terms like insular, parochial and out-of-touch.