Amazon

Point-Counterpoint: Amazon Responds at Length to a New York Times Critique

25 June 2019

From Publishing Perspectives:

A robust response has been created by Amazon to David Streitfeld’s extensive examination of counterfeit books on the retail platform, an article published on Sunday (June 23) at The New York Times.

Streitfeld is an experienced observer of Amazon, and his Sunday article asserts, in part, that the retailer “takes a hands-off approach to what goes on in its bookstore, never checking the authenticity, much less the quality, of what it sells. It does not oversee the sellers who have flocked to its site in any organized way. That has resulted in a kind of lawlessness,” Streitfeld writes.

“Publishers, writers and groups such as the Authors Guild said counterfeiting of books on Amazon had surged. The company has been reactive rather than proactive in dealing with the issue, they said, often taking action only when a buyer complains. Many times, they added, there is nowhere to appeal and their only recourse is to integrate even more closely with Amazon.”

Amazon’s retort—which we’ll explain more fully below—is summed up in this sentence: “Nothing could be further from the truth.”

Nevertheless, a growing level of concern among some in the publishing community was confirmed a bit more than a year ago, when the Authors Guild—the United States’ chief advocacy organization for writers (both trade and independent)—announced it had arranged “a procedure with Amazon for resolving authors’ complaints with their Amazon book listings.” Even then, the Guild made a reference to counterfeit books as one of the hurdles it might handle, writing to its membership, “It is especially important that you let Amazon know when resellers are marking books as new that do not qualify as new under Amazon’s definition, or when you see infringing or counterfeit copies of books being sold on Amazon.”

. . . .

“While Amazon publicly says it has a ‘zero tolerance’ policy for counterfeit products and has built new technology to deal with the problem, its marketplace that allows third-party merchants [to] sell goods continues to be plagued by knockoffs.”

In short, the presence of third-party sellers on the retailer’s platform carries with it a serious challenge in quality control, and anecdotal incidents of wrongdoing such as those cited by Streitfeld tend to loom large when an operation is as vast as Seattle’s.

And the context in which the discussion now is taking place is worth considering. As recently announced, the Federal Trade Commission is to look at Amazon and Facebook, while the Justice Department is to examine Apple and Google, investigating practices that could potentially be ruled anti-competitive.

. . . .

Since the appearance of the Streitfeld article, Amazon has issued a lengthy statement of its own, “Our Response to The New York Times’ Story on Book Counterfeiting,” also dated June 23. Written without a byline, it’s on the company’s DayOne blog site in the “Books and Authors” category. At several points, it directly counters certain parts of the Times article.

One of the Amazon statement’s last points is a response to what the retailer says is the Times piece’s “inaccurate claims about competition among booksellers (a claim the Midwest Independent Booksellers disputed with the Times last year). There is widespread competition among booksellers, from major retailers to independent booksellers to grocery [stores] and drugstores. In fact, according to the American Booksellers Association (a trade group representing independent booksellers), the number of independent booksellers in the US has grown over 50 percent over the last 10 years.”

. . . .

“A recent New York Times article,” the Amazon statement opens, “claims that Amazon doesn’t care about counterfeits and takes a hands-off approach to what is sold in our stores. Nothing could be further from the truth.

“We invest substantial amounts of time and resources to protect our customers from counterfeit products, including books. We also stand behind every product sold in our stores with our A-to-z Guarantee [which promises consumers full refunds for products not received or not as advertised].

“Amazon strictly prohibits the sale of counterfeit products,” the statement says. “We invest heavily in prevention and take proactive steps to drive counterfeits in our stores to zero. In 2018 alone, we invested over $400 million in personnel and tools built on machine learning and data science to protect our customers from fraud and abuse in our stores.

“From the moment a third party attempts to register a selling account, our proprietary technology begins screening and analyzing during the account set-up process, blocking suspicious bad actors before they are able to register or publish a listing. In 2018, we stopped over a million suspected bad actors from opening Amazon selling accounts before they published a single listing for sale, and we blocked more than 3 billion suspected bad listings before they were published to our stores.”

The statement adds, “We provided many of these details to the Times and they chose not to include these facts in their story.”

And Amazon’s article then goes on to respond directly at several levels to Streitfeld’s story. For example, the Times piece looks at a case in which The Sanford Guide to Antimicrobial Therapy, a medical handbook, was so ineptly counterfeited that some of its information—important to medical practitioners’ treatment of patients—became hard to read.

“We’ve worked closely with Sanford Publishing,” the Amazon statement reads, “and took additional action in November 2018 to address their concerns. Since these measures were put into place, the publisher has not submitted any further notices of infringement.”

. . . .

And it highlights four programs as part of its consumer protection activity:

  • Brand Registry, Amazon says, has a membership of more than 130,000 brands and has seen a 99-percent drop in suspected infringements
  • Transparency, the program that uses a mobile app to scan a code for product authenticity, has more than 2,000 enrollees, says Amazon
  • Project Zero is a “self-service counterfeit removal tool” from which, Amazon says, its own systems learn to prevent new infractions
  • And the A-to-z Guarantee is the refund promise the retailer offers its consumers

Of course, Streitfeld’s accounts of counterfeited writings are compelling, particularly a case in which a book about Atari technology of the 1980s was stolen, given a new cover, title, and a fake author’s name—though the counterfeiter kept the actual author’s “biographical details about being the editor of ExtremeTech.com and writing for PC Magazine and Popular Science.”

. . . .

The original article is a deep, layered essay. And the retailer’s retort is a full-throated defense of itself. The company is speaking its corporate mind, just as Streitfeld and authors and publishers speak theirs. A debate in the open beats snarls in the shadows every time.

Link to the rest at Publishing Perspectives

Goodness!

“Atari technology of the 1980s”!!!

“The Guide to Antimicrobial Therapy”!!!!

Piracy on Amazon is costing publishers billions of dollars every minute!!

Where will this ever end?!?!

PG did note one item in the OP that he thought required a bit of editing for accuracy (he’s noted his changes):

The original article is a deep, layered essay. And the retailer’s [Amazon’s] retort is a full-throated defense of itself. The company is speaking its corporate mind, just as The New York Times Company (see below), Streitfeld, and authors and publishers who regularly purchase advertising in The New York Times, speak theirs. A debate in the open beats snarls in the shadows every time.

Fixed it!

In case you were wondering, following is a list of assets owned by The [completely unbiased] New York Times Company (per Wikipedia)

Media Properties

  • The New York Times
  • The New York Times International Edition
  • The New York Times International Weekly
  • T: The New York Times Style Magazine
  • The New York Times Book Review
  • The New York Times Magazine
  • The New York Times News Service & Syndicate
  • NYTimes.com
  • TimesDigest

Other Properties (related to The New York Times brand)

  • Times Books
  • T Brand StudioThe New York Times Idea Lab
  • Times Wine Club
  • Times Film Club
  • Times Journeys
  • NYTLiveThe New York Times Thought Leadership Conferences
  • The New York Times Travel Show
  • TimesTalks
  • Live Read
  • The School of The New York Times
  • The New York Times Store
  • TheTimesCenter

Other Assets

  • Wirecutter
  • HelloSociety
  • Fake Love
  • Blogrunner
  • Abuzz Technologies
  • Joint Ventures
  • Donohue Malbaie, Inc. (49%) with Abitibi-Consolidated
  • The New York Times Building (58%) with Forest City Ratner Companies

Investments

Investment portfolio as of January 2017:

  • Atlas Obscura
  • Automattic
  • Betaworks
  • Blendle
  • Dynamic Yield
  • Enigma
  • Federated Media Publishing (FMP)
  • Heleo
  • The History Project
  • Keep Holdings
  • Keywee
  • Panjo
  • Seen
  • theSkimm

And let’s not forget the largest shareholder of The New York Times Company, Carlos Slim, according to Forbes, the fifth richest person in the world (per Wikipedia):

On January 20, 2009, The New York Times reported that its parent company, The New York Times Company, had reached an agreement to borrow $250 million from Carlos Slim, a Mexican billionaire “to help the newspaper company finance its businesses”. The New York Times Company later repaid that loan ahead of schedule. Since then, Slim has bought large quantities of the company’s Class A shares, which are available for purchase by the public and offer less control over the company than Class B shares, which are privately held. Slim’s investments in the company included large purchases of Class A shares in 2011, when he increased his stake in the company to 8.1% of Class A shares, and again in 2015, when he exercised stock options—acquired as part of a repayment plan on the 2009 loan—to purchase 15.9 million Class A shares, making him the largest shareholder. As of March 7, 2016, Slim owned 17.4% of the company’s Class A shares, according to annual filings submitted by the company. While Slim is the largest shareholder in the company, his investment only allows him to vote only for Class A directors, a third of the company’s board.

Here’s what a newspaper not owned by Carlos Slim wrote about him in January, 2019.

From The Guardian:

While every lurid revelation of the [Joaquín] Guzmán [the Sinaloa cartel boss] trial has been breathlessly noted, the power of this mafia [the political and economic elite, which he {Mexican President López Obrador} calls “la mafia del poder” – the power mafia] has gone largely unremarked. The group is dominated by a dozen or so oligarchs and their families, who have a lock on such key economic sectors as telecommunications, media, mining and banking. Repeated forecasts of rapid development for Mexico have come to naught due to the suffocating hold that this small circle of super-connected individuals continues to have over its economy; by eliminating competition, they can keep prices high and profits surging.

At the center of the power elite is Carlos Slim. His estimated net worth of about $60bn places him seventh on Forbes’s international rich list. This one man’s wealth is equivalent to more than 5% of Mexico’s GDP. The core of his empire is América Móvil, Latin America’s largest mobile phone company; its longtime domination of Mexico’s telecommunications industry has kept the nation’s phone rates among the highest in the world, costing the economy an estimated $25bn a year.

Slim also owns nearly 17% of the New York Times, making him its largest shareholder. Like other American news organizations, the Times rarely writes about him and the ways in which he and other Mexican oligarchs have used their power to stymie the tax policies, public investments and income transfers needed to enable more Mexicans to enjoy the type of comfortable middle-class life depicted in Roma, the recent acclaimed film set in Mexico City in the early 1970s.

Link to the rest at The Guardian

In case you were wondering about the largest shareholders of Amazon, this is from Investopedia:

Jeff Bezos

The number-one shareholder in the company is Amazon’s chief executive officer (CEO) and founder, Jeff Bezos. Bezos was born in 1964 in Albuquerque, New Mexico and studied computer science and electrical engineering at Princeton University. Upon graduating, Bezos went to work for the Wall Street firm D.E. Shaw, becoming the youngest senior vice president in its history. He left the company and started Amazon in 1994, initially setting up the company in his garage in Seattle. After Bezos and a few employees wrote the software for Amazon, the company began to make $20,000 per week, selling products in 45 different countries. As of Bezos’ most recent filing with the SEC on August 14, 2018, the Amazon CEO owned 78.88 million shares of the company.

In September 2000, Bezos founded an aerospace manufacturer and spaceflight company called Blue Origin. In 2013, Bezos paid $250 million for the Washington Post. On July 27, 2017, Jeff Bezos surpassed Bill Gates as the world’s richest man with a net worth of over $124 billion. As of early 2019, he is worth $131.4 billion according to Forbes.

Andrew R. Jassy

Andrew R. Jassy is the CEO of Amazon Web Services, a subsidiary of Amazon that offers various cloud computing services across the globe. Before Jassy became the CEO of Amazon Web Services on April 13, 2016, he served as senior vice president of the group. With a team of 57 people, Jassy founded Amazon Web Services in 2003. According to an August 15, 2018 filing with the SEC, Andrew R. Jassy is Amazon’s second-largest individual shareholder, with a reported 91,231 shares of the company.

Jassy attended Harvard University, earning a bachelor’s degree and master’s of business administration (MBA). Prior to joining Amazon, Jassy worked at Coupa Software Inc. and founded a marketing consulting company, serving as its manager.

Jeffrey Wilke

Jeffrey Wilke has been the CEO Worldwide Consumer for Amazon since April 2016. Wilke joined Amazon in 1999 as vice-president and general manager and served as the senior vice-president for the consumer business prior to his current role. Wilke’s 60,040 shares of Amazon make him the company’s third-largest shareholder, according to an SEC filing on September 12, 2018. The CEO Worldwide Consumer holds 50,040 of those shares indirectly through a trust.

Wilke holds a BSE degree in Chemical Engineering from Princeton University and underwent graduate studies at MIT’s Leaders for Global Operations (formerly Leaders for Manufacturing) program.

Jeffrey M. Blackburn

Jeffrey M. Blackburn is the senior vice president of business development and digital entertainment of Amazon.com and has been at the company since 1998. Blackburn is also the head of Amazon’s M&A, investments and strategic business development worldwide. Prior to joining Amazon, he was an associate at both Deutsche Bank and Morgan Stanley in Silicon Valley. At Deutsche, he worked on Amazon’s IPO. Blackburn holds 62,874 shares of Amazon according to an August 29, 2018 filing with the SEC. Of those shares, 42,874 are held directly and 20,000 are held indirectly through a trust.

Wilke earned his undergraduate degree from Dartmouth College and his MBA from Stanford University.

PG notes a distinct lack of any express or implied connection to la mafia del poder, Carlos Slim or the Sinaloa cartel among Amazon’s largest shareholders.

Google’s Enemies Gear up to Make Antitrust Case

24 June 2019

From The Wall Street Journal:

As U.S. officials prepare an antitrust probe of Alphabet Inc.’s Google and possibly other Silicon Valley giants, a loose-knit crew of its rivals is gearing up to help.

In industries from news to travel to online shopping, competitors of Google are readying documents and data in anticipation of meetings with the Justice Department, according to industry representatives.

Many of these companies have long argued that Big Tech platforms illegally abuse their market power. In recent years some of them have found a receptive audience in Europe, where authorities have thrice fined Google for alleged monopolistic practices. Google has paid the fines but is challenging them in court.

Now rivals are stepping up their advocacy in the U.S., where antitrust enforcers recently divvied up the job of examining antitrust concerns at large tech platforms, with the Justice Department preparing a Google probe. The Wall Street Journal reported on the potential probes by the department and the Federal Trade Commission earlier this month, citing people familiar with the matter.

Antitrust lawyers say any probe could take years to complete. Battle lines are already forming. Google is preparing its own data and arguments, the Journal has reported. It also recently overhauled its Washington lobbying operation with an eye toward amplifying the message that its products promote competition and benefit consumers.

. . . .

News Corp, which owns The Wall Street Journal, and other publishers say Google and other tech platforms siphon ad revenue away from content creators.

. . . .

Still more firms haven’t criticized Google publicly, but privately stand ready to provide information to U.S. authorities about practices they view as potentially anticompetitive, according to industry representatives.

“There is a lot more concern that you hear behind closed doors,” said Jason Kint, chief executive of Digital Content Next, a trade association for online publishers that has argued online tech platforms are harming competition and consumers.

. . . .

“We need to assume that internet giants, like any other big companies, will use their assets to maximize profit and strategic value,” said Brian O’Kelley, former chief executive of AppNexus, an advertising technology firm bought by AT&TInc. last year after what he says was an unsuccessful attempt to compete with “the Google Super-monopoly.”

“Either break up the internet giants or force them to treat their component parts at arm’s-length,” he said.

Link to the rest at The Wall Street Journal (Sorry if you encounter a paywall)

From the Journal of Antitrust Enforcement (Oxford University, footnotes omitted):

‘Predatory Pricing’ is a legal concept that refers to business strategies, which are designed to stifle competition within markets by driving prices below cost.

In the economic context, this work argues that the current perception of recoupment is too limited and that it can occur without raising prices post-predation. In particular, it demonstrates that recoupment can be achieved in the post-predation stage by achieving greater technological or volume efficiencies that enable the attainment of a previously unattainable ‘break-even threshold’. Accordingly, this article suggests that in certain circumstances, predatory pricing is a sound business decision with a high probability of successful recoupment.

In the legal context, this work seeks to emphasize that under the Sherman Act, a plaintiff must only establish an injury that resulted from a rival’s below-cost pricing and demonstrate ‘a dangerous probability’ that the competitor will recoup his investment in implementing below-cost prices.2 Legally, price predation is inherently injurious and the plaintiff does not have to demonstrate any implication of the act of predation upon consumer welfare.

. . . .

The last section of this work is an attempt to apply these theoretical insights to Amazon’s current business strategy. First, it is argued that theoretically, it is entirely possible that Amazon is engaging in short-, medium-, or even long-term phases of below average variable cost (AVC) price predation as part of its overall expansion strategy. Secondly, the article maintains that if such predation occurs, it is subsidized by short- and medium-term borrowing. Thirdly, it argues that in the long run, recoupment will occur once Amazon achieves its ‘break-even threshold’ and that this type of recoupment will not necessitate any rise in average prices.

. . . .

The test as proposed by Areeda and Turner is composed of two distinct prongs, which must be satisfied to demonstrate predation.

Under the first prong, the plaintiff has to demonstrate that given the nature and condition of the market in which the alleged predator operates, it was rational for the alleged predator to predict that price predation would prove a profitable strategy. This is not a subjective test that requires evidence of the alleged predator’s intent but rather an objective test that involves a demonstration of objective facts that rendered predation a viable business decision. To satisfy this objective test, the plaintiff must prove the likelihood of recoupment at the onset of the predation campaign. In other words, it must be contended that the present costs of predation at the beginning of predation would have been more than offset by the present value of anticipated future profits.

Under the second prong of the test, the plaintiff needs to demonstrate that in a great share of its sales, the alleged predator’s prices were below an applicable measure of cost. This measure of cost is less rigid and depends on the nature of the alleged predator’s market. In some cases, the AVC will serve as an adequate measure, and in other cases that involve short-run price reduction, marginal costs will become a more reliable indicator.

. . . .

However, unlike Areeda and Turner, who assumed that in some particular cases price predation was a rational business decision, (Robert) Bork dismissed the feasibility of predatory pricing in any and all circumstances. In fact, Bork deemed the entire practice as completely irrational and insisted that the reason for the lack of any palpable proof of price predation in the historical cases of antitrust stemmed from the fact that the practice, for practical reasons, was fundamentally financial suicide.

. . . .

Most importantly, Bork defined Areeda and Turner’s theoretical stage of recoupment as the stage in which a firm would raise its prices in the period that follows predation. This narrow definition of recoupment effectively barred other potential strategies that might still ensure ‘that the losses he [the predator] incurs in the predatory campaign will be exceeded by the profits to be earned after his rivals have been destroyed’. And although Areeda and Turner did not articulate all of the ways in which recoupment can occur, it is clear that they did not construe the term as only encompassing raising prices after the goal of monopolization was achieved.

The first major Supreme Court decision that integrated some elements of the Areeda and Turner test was Matsushita. In the decision, the Court determined that the plaintiff was unable to demonstrate that price predation was a rational decision given the nature of the market in question and that the probability of recoupment was non-existent. Notably, however, this was also the first time that the Court cited Bork’s treatise approvingly on the matter as part of its decision. It can be said that the Court adopted the recoupment requirement from Areeda and Turner, but it also embraced Bork’s unsubstantiated rhetoric regarding the overall likelihood of the phenomena in any and all markets.

. . . .

[Critics of Bork contend] that certain markets may induce predation and render recoupment possible.

. . . .

In other words, both Hovenkamp and Bork’s more vocal critics essentially accept, albeit reluctantly, that recoupment can occur only via a rise in prices. To this date, no scholar in the field of antitrust has openly questioned the assertion that recoupment occurs only when the predator raises his prices in the post-predation period.

. . . .

Bork’s limiting interpretation of the term recoupment that ultimately came to be understood as the term’s sole acceptable construction. Only a rise in prices after predation qualified in his view as a business practice that harms both consumers and the competition. The second reason for this limitation was derived from Bork’s rather practical assumption that only a rise in prices in the post-predation period will render predation itself economically sustainable and therefore rational.

To better understand the difference between the definition of recoupment under the original Areeda–Turner test and Bork’s own understanding, the two definitions must be contrasted. Under the Areeda–Turner test, recoupment can be any corporate action that allows a firm to offset the losses it incurred during the predation period. The recoupment act itself does not need to be harmful to consumers. In other words, according to the Areeda–Turner test that harm does not flow from the act recoupment but rather from the entire practice of price predation that always does.

In contrast, Bork’s view of recoupment was composed of two distinct elements. The first was similar to the one articulated in the Areeda–Turner test. But the second required that the act of recoupment harms itself would harm consumers by the rise in prices. According to Bork, predatory pricing is only harmful to consumers if, and only if, its recoupment phase will also be harmful to consumers.

Link to the rest at Journal of Antitrust Enforcement

For the benefit of anyone who has made it through the typically-legalese sentence construction and paragraph structures of either of the two OP’s, PG will attempt to be simple and direct about his explanations and opinions on the subject, particularly as they apply to Amazon:

  1. As a general proposition, any action by a company that offers consumers lower prices for goods and services (or more valuable goods and services without increasing prices) is beneficial.
  2. The primary object of antitrust laws and regulations should be the protection of competition, not the protection of any particular competitor no matter how large or long-established.
  3. Individuals and organizations that attempt to approach the business of providing goods and/or services to others in an innovative manner (for which customers demonstrate their preference by their patronage) should not be limited or restrained because regulators and judges (who are highly unlikely to be competent to judge the virtues or drawbacks of disruptive technology or business innovations) cannot foresee how the innovative party will be able to harvest value from its innovations in the future. Today’s “cut-throat competition” may be tomorrow’s ordinary method of commercial operation.
  4. The ultimate validity of antitrust regulation lies in protecting competition and the opportunity of those inside and outside various businesses to compete with established participants by offering lower prices or other innovations to consumers (individual or business).
  5. The largest danger of the improper use of antitrust regulations lie in the potential for it to be misused to protect business incumbents when their customers demonstrate their preference for better prices or other benefits customers value which are offered by a competitor.

Amazon is clapping back at politicians on Twitter

19 June 2019

From The Washington Post:

Amazon’s public relations Twitter account is starting to look a lot more like a political rapid response unit as the retailer increasingly becomes a punching bag for Democrats.

The company clapped back yesterday at Rep. Alexandria Ocasio-Cortez (D-N.Y.) and defended its $15 minimum wage for workers after she criticized Amazon chief executive and Washington Post owner Jeff Bezos for paying people “starvation wages” in an interview over the weekend.

. . . .

That’s part of a broader pattern: The company has also sought to fact-check statements from 2020 hopefuls in between tweets promoting one-day shipping and its Kindle devices. It disputed former vice president Joe Biden’s comments last week about how much it pays in taxes and pushed back in April on Sen. Elizabeth Warren’s criticism of its treatment of competing sellers on its platform.

. . . .

This is a marked change from the traditional tech industry strategy to keep an arms-length from the daily political debate and wait out 24-hour news cycles. But Amazon appears to be realizing that a quiet playbook doesn’t work as the concentration of corporate power becomes a key 2020 issue for Democrats on the campaign trail — who have no qualms with singling out specific companies.

“[Amazon] can’t afford to be passive about it,” said Larry Parnell, an associate professor of strategic public relations at George Washington University. “Corporate America is finding that engaging in the political process — like it or not — is part of doing business.”

. . . .

For Amazon, Twitter could be an avenue to quickly set the record straight when they feel prominent politicians are spreading false information about the company.

“Amazon is simply correcting the record when high-profile candidates or elected officials make statements about the company that are either incorrect or misleading,” said a person familiar with the company’s thinking. “Errors and misunderstandings become accepted truths if they go uncorrected.”

Link to the rest at The Washington Post

PG says this is (or should be) basic corporate public relations in 2019. He understands that a great many large well-known business organizations besides Amazon have rapid response teams that operate 24/7 to reply to and/or rebut social media criticism as quickly as possible.

PG would not be surprised if at least some of these teams include both official company spokespeople and those not formally associated with the company but who can also quickly act to generate additional online rebuttal messages. If you’re worried about potentially damaging effects from a Twitter mob, you might want to have your own Twitter mob on call.

Like him and the tone of his communications or not, Donald Trump works social media in a manner that PG thinks is effective (if not tasteful, dignified or suited to the office of the President). His tweets are eminently quotable, make news and frame political discussions. In the online universe, he can’t be ignored or overwhelmed by a digital mob.

Like it or not, Amazon is a large target for criticism from a wide variety of individuals and organizations. It can’t prevent criticism, justified or not, but a rapid response can help prevent an online assault from breaking out into the rest of the world with a lot of momentum.

Anyone who asks, “What does Amazon say about this?” should be able to obtain a quick answer. If Amazon doesn’t have an answer, human nature and mob psychology will assume the company is hiding something that reflects badly upon it.

 

Fedex Reduces Amazon Ties as Retailer Flexes Delivery Muscles

10 June 2019

From Yahoo Finance:

FedEx Corp. said it wouldn’t renew its U.S. air-delivery contract with Amazon.com Inc., paring a key customer relationship as the largest online retailer deepens its foray into freight transportation.

The delivery giant will instead focus on “serving the broader e-commerce market” with U.S. package volume from online shopping expected to double by 2026, according to a FedEx statement Friday. The Amazon contract expires at the end of this month, and doesn’t cover international services or domestic operations at other units such as FedEx’s ground deliveries.

FedEx’s surprise move signals that the No. 2 U.S. courier will bank on smaller e-commerce customers that lack Amazon’s bargaining power for big volume discounts. Amazon’s emergence as a logistics giant is piling pressure on FedEx and United Parcel Service Inc. for cheaper and speedier deliveries, as the e-commerce powerhouse builds its own aircraft fleet and delivery capabilities.

“They know their Amazon business is going to continue to shrink,” said Satish Jindel, founder of SJ Consulting Group, referring to FedEx. “Why have your capacity be used up by a customer that’s going to continue to chip away? They’d rather use that capacity for other customers.”

Link to the rest at Yahoo Finance

Barnes & Noble, with Sales Falling, Is Sold to Hedge Fund

9 June 2019

From AP Wire via Fox4KC.com

Barnes & Noble is being acquired by a hedge fund for $476 million and will be taken private.

The national chain that many blamed for the demise of independent bookstores has been ravaged by Amazon.com and other online sellers, but remains a critical outlet for publishers.

On Friday, it was acquired by Elliott Management and, in a twist, will likely become a national chain with a business model more akin to that of a local bookstore.

Elliott bought Waterstones one year ago, a national U.K. book chain that has successfully navigated through the online/e-reader revolution by returning a lot of autonomy to the managers of its nearly 300 stores, who can select books that they believe local readers want.

The man who runs that U.K. chain, who will become CEO of Barnes & Noble, said that is what he has in mind for Barnes & Noble.

Leonard Riggio acquired the century old Barnes & Noble in the 1970s, including its flagship Manhattan store, in the 1970s. He pursued aggressive expansion throughout the 1980s and established Barnes & Noble as a national phenomenon with the acquisition of B. Dalton Bookseller and its 797 locations in 1987. It became the nation’s second-largest bookseller and began selling books online in partnership with IBM and Sears.

The company continued to gobble up other larger booksellers like Doubleday Book Shops and also BookStop, which ran discount superstores in Texas.

By 1993, Barnes & Noble was a publicly traded company that was upending the publishing industry.

. . . .

Last year, Riggio was brought on stage [at] BookExpo 2018 in New York City.

. . . .

“Today, we stand together in common cause to promote and support bricks-and-mortar bookstores,” said Teicher. “I’ve been quoted as saying that it’s in the long-term interest of the overall book business that Barnes & Noble not just survive but grow and prosper.”

But Barnes & Noble has suffered.

With about 630 retail stores in the U.S. as of last year, it is smaller than when it acquired of B. Dalton Bookseller in the late 1980s. Its revenue peaked in 2012, and it has fallen every year since.

. . . .

“In chain bookselling, you need to try and get the best store for each location,” [new Barnes & Noble CEO James] Daunt told The Associated Press. “What works in Jacksonville, Florida, isn’t necessarily going to work in Hawaii.”

. . . .

Waterstones organizes multiple, simultaneous events at its stores, making them “a “fun place to discover books and enjoy the particularities of a bookstore.”

. . . .

Some industry watchers are skeptical, including Mike Shatzkin, the CEO of Idea Logical Company, a book-industry consulting company.

He called the entire large-store model for any retail chain “a 20th century concept” extinguished by the internet.

“It doesn’t surprise me that Barnes and Noble’s management never came to that conclusion because they built their fortune building bigger stores,” he said. “And I’m not sure Waterstone’s is going to lead them to a different approach.”

Link to the rest at AP Wire via Fox4KC.com

Latest Amazon Robots

7 June 2019


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Jeff Bezos Buys Fifth Avenue Condo Spread for Around $80 Million

4 June 2019

From The Wall Street Journal:

Amazon Chief Executive Jeff Bezos is set to finalize the purchase of three New York apartments Tuesday in a deal valued at around $80 million, according to people familiar with the transaction.

Mr. Bezos is buying a penthouse and two units directly beneath it at 212 Fifth Avenue, located near Madison Square Park, these people said. The main penthouse alone spans three floors, with a private elevator and large terraces, according to StreetEasy. If turned into a single-family home the three units would total more than 17,000 square feet, with 12 bedrooms.

. . . .

The deal comes almost four months after Mr. Bezos’s company ditched plans for a corporate headquarters in the Long Island City area of New York, and amid his divorcefrom longtime wife MacKenzie Bezos. Bloomberg Billionaire’s Index pegs his net worth at $106 billion. A spokesman for Mr. Bezos did not immediately respond to a request for comment.

. . . .

Mr. Bezos also has homes in Beverly Hills, Calif., Washington, D.C., West Texas and Medina, Washington.

Link to the rest at The Wall Street Journal (Sorry if you encounter a paywall)

Nobody has asked PG’s opinion about this report.

But he does have the password for TPV.

PG fears this may be an indicator that Bezos will be taking his eye off the Amazon ball or focusing on Amazon less adroitly than he has in the past.

PG is aware of all the powerful communications systems Mr. Bezos can utilize to be virtually face-to-face with any Amazonian in the world from wherever Jeff is at a particular moment. PG is also aware that Mr. Bezos has access to a fleet of private jets that can take him across the country or around the world wherever duty might call. If Mr. Bezos wants to stay where he is, those same jets can bring as many Amazon executives as Jeff desires to meet with to him.

However, if this purchase means that Jeff is going to be spending a lot more time in New York City while the Amazon mothership remains in Seattle, PG is concerned. Part of his concern arises from experiences as an executive who didn’t live close to corporate headquarters earlier in his career.

Nobody in Seattle will be able to bump into him the hall or casually drop in on Jeff for a talk while Jeff is in New York. Various and sundry small signals that Jeff may be about to make a mistake will not be as easily discerned as they would be if Jeff were physically located closer to where his key executives spend most of their days.

PG is not an expert on society in either Medina, Washington, or in New York City, but he suspects Jeff will receive more invitations to social events with fellow billionaires in New York than he would in suburban Seattle. (Bill Gates also lives in Medina, but PG doesn’t think he throws a lot of parties with major media stars.)

Perhaps, Jeff is capable of keeping his eye firmly on Amazon’s ball in Seattle from 2900 miles away, but PG worries that such may not be the case.

Whenever Bezos retired, CEO succession at Amazon was going to be worrying for those who had emotional or financial investments in the company. However, a semi-retirement by Jeff is even more concerning for PG than a full retirement with a carefully-selected replacement ready to step into command would be.

A Worthy Guide to the Publishing Industry

4 June 2019

From Nathan Bransford:

Mike Shatzkin is one of the most knowledgeable people in the entire publishing industry, and when I saw that he had written a book on the book biz with the late Robert Riger, this was an insta-buy.

The Book Business: What Everyone Needs to Know did not disappoint my expectations. Everyone has something to learn from this helpful guide, whether you’re a publishing newbie or a seasoned veteran. It’s organized in a very readable Q&A format and has everything from an overview of the major players to a history of the industry to the latest trends shaping the business.

I especially learned a ton about the ways in which the current e-book era resembles past publishing industry disruptions, especially the advent of mass market paperback books, which were initially very popular among readers of pulp/genre fiction and were disdained by the publishing establishment of the time. Sound familiar?

Link to the rest at Nathan Bransford

PG thinks a good question to ask in 2019 is why traditional publishing is entitled to such a large share of the revenue a book generates when, for most traditionally-published books, Amazon is the largest seller of those books.

He suggests that if you look at the legacy publishing chain of organizations and individuals who are taking a piece of the revenue the book generates either directly or indirectly, it doesn’t seem like a terribly efficient system of marketing and distribution for the book as a product, especially a printed book.

Here’s an overview:

ᶑ Author creates a manuscript

ᶑ Agent pitches manuscript and finds a publisher

ᶑ Publisher edits the manuscript (or perhaps hires a freelance editor to do that job)

ᶑ Publisher arranges for formatting of the manuscript and hires a cover designer to create the cover

ᶑ Publisher sends files of the manuscript to a book manufacturer (formerly called a printer), perhaps through a middleman.

ᶑ The book manufacturer may print the book itself or have the book printed offshore, often in China

ᶑ Finished hardcovers arrive on a container ship from China and are shipped to a wholesaler/distributor – usually Ingram

ᶑ The Publisher’s sales reps are pitching the book to bookstores in advance of its release. They’re usually paid a salary plus commission. Generally, a bachelor’s degree is required. Most don’t make a lot of money.

ᶑ The physical bookstore generally buys its books from Ingram or a smaller wholesaler at a discount from list price – 50% is the most common discount, although that may vary. To clarify, the bookstore usually pays $10 for a book that has a list price of $20.

ᶑ Ingram sends a portion of the money it receives to the Publisher.

ᶑ The Publisher then sends a royalty check to the Author twice a year. The Author’s check may be reduced by a reserve for returns, part of the royalties due to the Author, ostensibly designed to cover the Author’s royalties which will not be payable because of books sold to bookstores during one royalty period that the bookstore returns unsold for a credit during a following royalty period.

Each of these steps has a cost. Somebody is being paid to execute each of these steps. Ultimately, directly or indirectly the Author pays all or most of that cost as deductions against the Author’s royalty payment. The Author receives what’s left over after everyone else takes his/her/its slice of the pie.

If the supply chain costs were lower, traditional publishers might feel more inclined to compete for Authors by offering higher royalties. (Or not, but we’re talking the potential for economically rational decisions here.)

On the other hand, here’s the distribution system of an indie Author selling through Amazon:

ø Author creates a manuscript

ø Author formats manuscript or hires a formatter to do the job

ø Author uploads manuscript to Amazon and selects ebook only or ebook plus POD

ø Amazon stores the manuscript in digital form, offers the book for sale on a world-wide basis if the Author selects that option, processes credit card payments from readers and sends monthly a monthly payment directly to the Author’s bank account. For books priced within Amazon’s preferred pricing stratum, Author receives 70% of the price paid by the reader.

Amazon is the only intermediary between the Author and the reader. Once the Author uploads a manuscript, all steps necessary to place a book into a reader’s hands are performed by Amazon, utilizing the world’s most sophisticated and efficient selling platform.

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