Putting All Your Eggs in One Basket: Amazon Edition

by
This content has been archived. It may no longer be accurate or relevant.

From Kristine Kathryn Rusch:

I’m putting up this post in the middle of the fear sequence as it appears on my website, not because the post fits in the fear cycle, but because I don’t want to monitor the news for weeks to see what, if anything, has changed.

On June 9, here in the States, Democrats in the House of Representatives introduced a package of five bills which theoretically have bipartisan support. In a nutshell, the bills are aimed at stopping anti-competitive practices among the tech giants. Some of the provisions could even force companies like Amazon to break apart into smaller units.

Now, realize, that here in the U.S., just because a bill gets introduced doesn’t mean it will pass. It needs to pass both houses of Congress, and then the President must sign the bill into law. If the President refuses, Congress can override his veto…with enough votes.

In other words, there’s many a slip twixt cup and lip.

. . . .

For a decade now, I’ve been railing against writers who go exclusively to Amazon. I’ve been say, as clearly as I can, that as a business person, you should never, ever, ever put all your eggs in one basket.

Back in the early days of the new world of publishing, indies from the Kindle Boards would screech over to my website (usually on a Saturday) to call me stupid and ignorant, especially when I “attacked” Amazon.

Amazon is too big to fail, they said. Amazon will be around forever, they said.

And it didn’t matter how many examples I gave them of too-big-to-fail companies that did, indeed, disappear, they didn’t listen.

Those indies are mostly gone now, not because Amazon failed, but because they burned out or didn’t understand what kind of success they actually had and therefore gave up.

But for every screamer who left, another took their place. Usually quieter, and often just as dismissive. They’ve now moved to other places to share information because they know I’m inhospitable to exclusivity and Kindle-only. They’re stuck in Amazon’s algorithms, believing their writing careers are safe.

When these writers “go wide” as they call it, selling their books on sites other than Amazon, and lose Amazon’s exclusivity and “page reads” and deals, their income goes way down. Because these writers don’t understand that they need to build a new audience on each platform.

Building audiences takes time, but it protects against the eggs-in-one-basket problem.

. . . .

When a company gets hit with antitrust violations, there are a lot of remedies. Breaking up the company is one. Forcing the company to divest itself of parts of its business that help it create a monopoly is another. And there are so many more.

. . . .

“For Amazon,” [Michael Cader at Publisher’s Marketplace] writes, “that would likely mean divesting most arms of their publishing octopus, including much if not all of Audible, plus Brilliance, Amazon Publishing, Kindle Direct Publishing, and probably CreateSpace. It might apply to divesting AbeBooks as well.”

Sit with that for a moment. Amazon might have to get rid of everything that makes their indie publishing arm possible. Amazon could do a few things with it. They might sell the pieces. If those arms aren’t making a lot of money (in corporate terms), they might simply shut them down.

That’s not a big deal for people who are wide. They’ll still be able to publish.

But indies whose entire career is based on Amazon’s ecosystem? Those indies will go through a year or more of turmoil—if Amazon sells those pieces. If Amazon shuts those pieces down, the indies will lose their careers overnight.

. . . .

I’m just going to use Cader’s pull quotes here, since he really does very little editorializing, except at the end. (Although the choice of quotes is instructive.)

Here’s how he describes that Act:

The Act “prohibits discriminatory conduct by dominant platforms, including a ban on self-preferencing and picking winners and losers online.” In particular, it prohibits conduct that “advantages the covered platform operator’s own products, services, or lines of business over those of another business user.”

Significantly, covered companies may not “interfere or restrict a business user’s pricing of its goods or services.”

It blocks the use of “non-public data obtained from or generated on the platform by the activities of a business user or its customers that is generated through an interaction with the business user’s products or services to offer or support the offering of the covered platform operator’s own products or services.”

And it would keep Amazon from putting its thumb on the scale of their various promotional levers, blocking, “in connection with any user interfaces, including search or ranking functionality offered by the covered platform, treat the covered platform operator’s own products, services, or lines of business more favorably than another business user.”

There’s so much to unpack here. Note that this act covers pricing and promotion and, once again, competition. Instead of the Amazon ecosystem favoring Amazon, it would have to level the playing field in all areas.

That would mean, indies, there’s no competitive advantage to being Amazon-only.

. . . .

Amazon itself would survive. If the American Innovation and Choice Online Act is the only one that passes, then all those publishing services would remain intact, but the promotional deals that favor only Amazon products—and yes, your exclusive book is an Amazon product—would disappear.

All the advantages you have at Amazon would disappear if either of these two Acts pass in the current form.

They won’t. They’ll be different, if they ever make it out of committee. They’ll be significantly different after random House members get to put their imprint on the bills. They’ll be even more different after the Senate messes with it.

. . . .

Eventually, the U.S. government will take apart Amazon and the other tech giants. In the 1920s, the U.S. government took apart the tech giants of the late 19th century. When the tech giants’ power rivals the U.S. government and/or trumps the government (pun intended), the U.S. government—in a bipartisan way—will defang a tech giant. It sometimes takes years. But it will happen.

What do I recommend for those of you who are Amazon exclusive? I recommend that you watch this legislation for one thing. For another, I would start—slowly—divesting yourself of the exclusivity at Amazon.

I’d take my lowest performing works and pull them out of the exclusive ecosystem, going wide with them. I’d focus on promotions outside of Amazon for those particular products. I’d learn how to be a business person without Amazon, so when the Amazon ecosystem changes—and it will—you will be prepared.

. . . .

I have watched countless writers go under when the book publisher goes bankrupt. I  have watched non-publishing businesses go down because they have, essentially, one client and either that client stops paying or that client goes out of business.

See this as the shot across the bow that it is. The changes might not happen in 2021 (most certainly they won’t). They might not happen in 2022. But by mid-decade? Maybe.

. . . .

The system Amazon built that has—as a sideline—benefitted some exclusive indie writers will change in the next five years. I can guarantee that.

It might change sooner.

The indies who act now to slowly go wide will survive.

Those who cling to the old ways of doing things—exclusive, through Amazon—will lose their entire business, maybe sooner rather than later.

Link to the rest at Kristine Kathryn Rusch

Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.

PG shares some of Kris’s concerns but doesn’t think some of her concerns, while legitimate, are as serious as she does.

PG also thinks other factors Kris doesn’t mention may impact Amazon’s future.

When a strong personality steers a large company, there are upsides and downsides.

Even though the company becomes very large, the strong personality can make the ship turn more rapidly than a similar company under more conventional corporate governance could. Bezos and Amazon have demonstrated the benefits of this agility and willingness to take risks on more than one occasion. Steve Jobs and Apple are another example.

Sometimes, when there’s a strong personality at the top of an organization, the organization develops responsively to their leadership style. A new leader with a different style can lead to organizational stumbles. Organizations governed by several strong leaders acting in various roles may transition to new leadership more easily than single-leader organizations.

Another potential drawback of strong personality leadership is that subordinates with similar talents and personalities will go elsewhere instead of remaining in the organization. Would a clone of Jeff Bezos go to work at Amazon today? Suppose a clone of Jeff Bezos was an Amazon vice-president. Would they stick around to see how the CEO-successor game played out or jump to a leadership role in a different company when a head-hunter called with a good opportunity elsewhere?

The problem of a Big Tree CEO stunting the growth of smaller trees in the lower ranks is a real possibility. Some CEOs deal with that problem better than other CEOs do.

Amazon today is two large businesses – The Everything Store, where zillions of people go to buy stuff, and Amazon Web Services.

Of the two, Amazon Web Services earns the most money and is the most valuable. At root, The Everything Store is a retailer, and retailers, large and small, almost always operate on tight margins. AWS is a money machine.

Perhaps he has missed it, but he hasn’t seen anything that suggests that AWS is the focus of any serious antitrust scrutiny. Most of the public heat is focused on The Everything Store because it competes effectively with all sorts of retailers and touches on the distribution and sales operations of a whole bunch of manufacturers and suppliers of goods.

The Everything Store also competes with lots and lots of other retailers. Its enormous success in this sphere has gained the company a lot of enemies, including dedicated Amazon-haters. Most of traditional publishing falls into this segment. So do the many culturally influential individuals who are hopelessly in love with the idea of the little bookshop on the corner.

PG opines that most middle-class people in the US have no beef with Amazon and are happy to continue buying all sorts of things from the company.

For politicians, all the potential glory lies in attacking The Everything Store.

That’s the background as PG sees it.

What’s the future of legal attacks on Amazon?

PG thinks the timeline of any antitrust litigation against Amazon is very long.

He’ll summarize the timeline of the Microsoft antitrust of the last century:

  • Serious investigations began in the early 1990’s
  • Suit was filed by the Justice Department in 1998 after Netscape lost the browser wars to Internet Explorer
  • In mid-2000, the trial judge handed down his verdict. Microsoft appealed.
  • In mid-2001, The Court of Appeals acted rather quickly, reversed the trial court’s decision, and sent the case back down for a brand-new trial with a different judge.
  • At this point, the US Department of Justice got serious about settling the case instead of going through the trial-and-appeal process again. Microsoft exited the antitrust litigation in November, 2001, almost unscathed.

So, Microsoft’s antitrust litigation problems lasted over ten years from the beginning of serious investigations until the case was resolved. Today, Microsoft is the second most valuable company in the US by market capitalization.

In 1969, following a comprehensive investigation, the Justice Department filed an antitrust suit against IBM for monopolizing the personal computer market. That case lasted 13 years and IBM survived, remaining in the top ten of the Fortune 500 until 2006.

So, PG’s bottom line on Amazon is that, unless the company does something truly stupid, antitrust problems are, at most, a distant cloud on the horizon.

As far as harmful new legislation impacting Amazon, there is less predictability, but Amazon is #2 on Fortune Magazines list of the World’s Most Admired Companies.

Amazon is a very popular company with a great many American voters. Amazon has an estimated 147 Prime members in the United States. PG speculates that a letter to its customers asking them to contact their congressional representatives to head off anti-Amazon legislation might be quite effective.

PG is not aware of any law that would prevent Amazon from sending an email to each of its Prime members (or each of its customers) in the United States (or anywhere else) asking them to send a letter or email to their Congressional Representative and each of their two Senators.

Typically, Amazon’s customers provide a physical address to which purchases of non-digital goods should be sent, so the company has a very good idea of which state and congressional district in which a customer lives and/or does business. With that information, Amazon could provide relevant names, offices and email addresses, etc., for the relevant representative/senator.

Amazon’s letter or email to its customers could encourage customers to contact their representatives to tell them not to do anything that would harm Zon, including voting for any legislation that would force Amazon to change its business or stop selling popular products to individuals.

There would be a huge uproar by the anti-Zon press and other of the usual suspects, but PG thinks congressional representatives would get the message that their constituents like Amazon just the way it is and don’t want anybody voting for laws that would prevent them from buying whatever they want from Amazon.

Click to Tweet/Email/Share This Post

26 thoughts on “Putting All Your Eggs in One Basket: Amazon Edition”

  1. She’s been dead wrong for the last ten years, and now sees a glimmer of doom from a bill introduced in Congress. I suspect in another ten years she will still screeching and screaming. Because she’s a business person.

    • Not exactly wrong.
      Just focused. Incomplete.
      Her views work. For her. For many.
      Not everybody, not in every case, not forever.
      Publishing is a world in flux, under ongoing disruption, with no end in sight.
      Like the world outside survival requires clear vision, lots of information from *all* sides, willingness to turn on a dime.

      Shakespeare got it right:
      “There are more things in heaven and earth, Horatio,
      Than are dreamt of in your philosophy. ”

      Any philosophy.

    • I follow KKR primarily for her views on rights, licensing, etc. And she’s solid in this area. I do not currently agree with her on the “wide” issue, but am open-minded about it. She’s a “business person” because that’s what all Indies are (or should be if they’re interested in income). And I agree with PG on the long time frame of any legal issues facing Amazon and KDP. With only so many more orbits around the sun left for me, this is way down my list of concerns.

  2. After what Amazon did with my space marine book, I’m sorry to say I will never be on board with the gung ho Amazon-is-great crowd.

    I use them, yes. Trust them, no. Give them everything and hope it turns out all right? Never.

      • Short form: Games Workshop has a habit of using spurious legal pressure on smaller entities to see if they can get them to back down. They tried it with me, by telling Amazon they owned the trademark for the term ‘space marine’ and my book was violating it by having the words in the title. Amazon de-listed my book, and when I objected, said that it was between me and GW and they would be happy to re-instate it once GW rescinded their claim.

        So it was lawyer-less single author against litigious company with experience bullying people using backdoors like this. And Amazon wanted nothing to do with it, no matter what I said to them.

        People who hear me talk about this think I’m upset that Amazon didn’t take my part. I’m not. It’s obviously not in their best interests to take sides in what they perceive as a third party’s legal dispute. But the fact that it happened, and got my book delisted from the marketplace where most ebooks are sold, and that it privileged (as usual) companies over individuals, has solidified my belief that Amazon is not anyone’s friend, and crusading on their behalf because of all the things they do for indies is misplaced ardor. If you’re useful to them, they’ll ignore you. If you irritate them, they will destroy you. If one or two people complain, they will de-list you. If a tiny internet mob decides your politics or your beliefs are wrong, they will stop selling your book.

        They are due suspicion, not praise. I’m all for business, but I am not a corporatist. And Amazon is too big. That puts me at odds with a lot of the people here. So be it. I will be one of the few saying ‘that tiger you’re petting is not your friend, and one day it will be your hand it bites off.’ :,

        Tiny summary:
        https://en.wikipedia.org/wiki/Space_marine#Trademark_controversy

        • Well, this is interesting. And scary (about the internet mob). Glad you were re-instated. And pretty cool that you’re on Wikipedia and listed with Orson Scott Card. Thank you.

        • Suspicion is simply good business sense even without getting burned.
          In the business world there are but three kind of players: the suspicious, those that have been burned, and those that will be burned.

          The Hollywood meme, “its not personal, it’s only business” isn’t wrong by itself, just in how they present it.

    • Sensible and unavoidable attitude.
      The business world is transactional.
      Your “partner” is only as good as what you can get from them.
      That applies to Amazon for indies as much as indies to Amazon.
      The relationship is one-sided in pretty much all cases, unavoidably so. There are hordes of Indies out therr each contributing miniscule amounts to Amazon while Amazon is (for most) the entire market and not necessarily by choice.

      What proponents of going wide gloss over is that there are costs to going wide that don’t pay off for everybody. Or even most. Theoretically going wide gets you sales from the 40% of the market Amazon doesn’t reach. Theoretically.

      Reality begs to differ.
      Going wide, properly exploting the non-Amazon world works if you’re a legacy author with decades of output and fans the world over behind you. But a newcomer with a bare handful of titles? Somebody who can’t craft a half dozen or more each year? Somebody with a day job and a life outside writing? It takes all kinds. And there is no single path for everybody. People can only do what *they* can do.

      Like it or not, for many (newcomers in particular) digital is *all* their potential market. No amount of marketing or promotion is going to get their pbook shelved anywhere. That is their reality.

      A reality where the trickle of reads on KU do more to build a fanbase than a hundred ads or getting listed by Ingram or Apple or Kobo or B&N.

      Paraphrasing from the tech world: for most publishers, indie and tradpub, Amazon “isn’t a player, they are the playfield”. Everybody else lives off them.

      Its not a fun reality but its the world the tradpubs created and Amazon “competitors” fostered through inaction. There is no room for dreamers blindly following anybody, not tradpubs, not agents, not Amazon, and not pundits.

      Everybody has their own reality.
      Everybody has their own views.
      Listen, consider, forge your own.
      Evolve across time, act accordingly.

      Its the only rational choice: you are at the center of your operation. Do what you can do, what you need to do. What other choice?
      “Whining is not a plan.”

      • And some of us think that a single retailer being the playfield isn’t great. It might be how things are now, but I have no trust that it will remain so in the future, or that it should.

        I’ll concede that wide is an investment in a future that can’t happen unless there’s investment in it. I don’t mind losing money in the short-term in order to open opportunities in the future. I think of it as insurance against things like Amazon de-listing more of my books for spurious or whimsical reasons. They’ve done it once. I’m not going to go through the ‘shame on me’ sequence because I was too stupid to draw conclusions.

        Thinking of retailers as the only source of income for authors is last decade, anyway. Patreon, Locals, Substack, and other subscription services are pulling in big money for a lot of us. The next big thing is always already coming. Which is great. 🙂

        • Definitely not good.

          But the problem is that without a multi-vendor standard *consumer level* format, network effects rule the market. The culprits are easy to finger but the problem has no viable fix. Who bells the cat? Investing in alternatives is wise if, (big if) you can afford it. Too many indies can’t.

          Network effects are powerful mojo and making net income supercedes ideology for most who choose to grin and bear it, hoping they might eventually be able to afford alternatives.

          It all goes back to the birth of epub and compounded by agency and the neutering (and effective death) of interoperable ePub. Amazon inherited control of the ebook segment which they cemented with KU.

          They won’t rule forever but baring a royal screw-up their empire is unassailable as long as (ironically) print persists. That is, indefinitely. I figure a minimum of one, possibly two decades.

          • … I figure a minimum of one, possibly two decades.

            And that is the issue (for me). As I say somewhere here—and I like the imagery so I’ll repeat it—I have only so many orbits around the sun left. KDP/KU is working just fine for me. Sure, I also have my email list, my website, my socials, et al. but the real action is with KDP/KU (again, for me). If it ain’t broke… blah blah.

            • FWIW, I didn’t pick those numbers out of thin air. There’s a history to work with.

              When companies are gifted domination of a market through competitor incompetence or indifference it is typically a generational lead (IBM in Mainframes, MS in PCs, WalMart in retail) that requires a market disruption to end, if that.

              IBM dominated for three decades, survived an antitrust fight, and was on its way to surviving a disruption and dominating it until a plane crash killed the architect of their survival plan. And tbdy still prospered for two more decades.
              .
              MS learned account control from IBM and has dominated enterprise computing for 30 years with no end in sight. They survived a trumped up antitrust case and two disruptions and are *leading* a third disruption.

              For all the whining over Amazon’s online retail prowess, WalMart still outranks them in the retail world and are belatedly growing their online operations by leveraging tbeir own logistics. Those hoping to destroy Amazon’s online retail business had better be prepared to see WalMart take their place.

              Now compare books to all those cases.
              Where is the disruption that will end Kindle?
              Who is prepared to oust to Amazon?
              As long as book sales are splintered among new print, used print, and digital (text and audio), no existing player (or combination of players) is positioned to credibly disrupt Amazon.

              There was a time to stop Amazon (2011) when the BPHs, taking a page from Hollywood, could have thrown their power behind interoperable epub and a dozen different ADEPT retailers. Instead they bought Apple’s agency story and killed aborning the very answer to Amazon.

              Amazon’s power over consumers is actually understated because the ADSers only focus on new book sales and digital. Nobody breaths a word about Audible’s dominion, ABEbooks, or all the books new and old that move via their merchant services.

              As I said, they are the environment.

              The world might be a better place if they weren’t but that’s not the world we live in. People who choose to go Amazon exclusive aren’t necessarily doing it to favor Amazon but almost certainly to favor themselves. And while some can buck Amazon and make it work for *them* that is not something everybody can do.

              It takes all kinds.

              (And those worrying about Amazon, watch out. There’s two more giants starting to flex their muscles and an ignored Empire is becoming too big to ignore. Excellence is still rewarded. For now.)

          • It is a fair point. All of us have to decide at what point we trade conviction for income. (I am mindful particularly of the guy from Mumford & Sons who was just in the news.) “Don’t give Amazon and its affiliates everything” is worth money to me. I won’t argue with other people who feel differently, unless it looks to me like they haven’t thought through the cost/benefit analysis for themselves. Then I just want to point out ‘hey, this is a way that I’ve been burned. I hated it. I don’t want anyone to go through it again. Plug this into your equation.’

  4. As to AWS and government antimonopoly efforts: They aren’t always visible. They sometimes show up in contract awards, such as the DoD’s award of its massive cloud-computing contract — something that seemed “perfectly suited” to AWS — to Microsoft.

    OK, that’s not exactly an anti-oligopoly position.

    But it is consistent with the grand tradition in defense contracting, all the way back to the ill-fated decision to buy the F-4 for both the Air Force and Navy — and the direction of that contract (and many, many others) to the “second place” competitor in terms of size, so long as the actual product was relatively close in quality to the “best” one. There are so, so many other examples (both well-known because they’re “big weapons systems” and otherwise because they’re for things like jump boots)…

    One wonders what will happen with the inevitable eventual outsourcing of IRS and SSA functions and data to a private cloud vendor. “I’m not a cynic. I’m a realist.”

    • Don’t need to go far back to see Federal procurement games at work.

      Three examples in the last two weeks, all about the ARTEMIS Lunar Lander contract:

      1- The powers of congress don’t like that NASA prefers cheaper, more efficient systems to bloated, pork driven contracts:
      https://arstechnica.com/science/2021/06/nasa-administrator-to-defend-lunar-budget-before-a-skeptical-congress/

      2- So congress intentionally underfunds NASA programs so they can kill them before they produce results so they can restart with more pork. (Constellation first, now Artemis). NASA outsmarted them on HLS by choosing a system that fits the budget they were given to ensure failure. As a result, the Senator from Boeing got the almost-winners an unfunded mandate bailout for the crappy chimera designed to maximize pork instead of success. They might still get the HLS program killed.

      3- Last week, the house had a hearing on SpaceX practices and issues with the FAA. Instead of inviting SpaceX to present their side of the allegations, they invited their biggest cometitor and the source of the charges. The FAA ended up taking the side of SpaceX. Oh, and the congressmen behind the hearing? From the districts in Washington and Oregon housing ULA facilities. (And providing campaign contributions and kickbacks.)

      Lost to the anti-SpaceX crowd, Musk is preparing to launch his megarocket from converted oil platforms in international waters by next year. And his prototype factory is right next to the Mexican border. He could easily move his operation there, where pols are cheaper. Or Indonesia, who are lobbying him.

      Squirm as they may, he is going to overturn their cozy decades old club.
      Again.
      Because he is going to build a slightly different version of the lunar spaceship on his dime anyway. It won’t fit NASA guidelines but it will fly, not matter what pork politicians want. This is one advance they can’t stop.

  5. Going exclusive versus wide is a decision for each author. I’ve done the experiment three times – going wide that is and it has never worked for me financially. Do I like having all my eggs in one basket? No.
    That said, my measure of success is book income and I’m most successful being exclusive.

Comments are closed.