From Publishing Perspectives:
In a letter provided to Publishing Perspectives this morning (August 17), three leading American publishing industry professional organizations tell the House of Representatives’ Antitrust Subcommittee that “a few tech platforms in the digital marketplace” wield “extraordinary leverage over their competitors, suppliers, customers, the government, and the public.
“Regrettably,” they write, “as the subcommittee’s hearings have laid bare, the competitive framework of the publishing industry has been fundamentally altered in recent years—and remains at serious risk of further diminishment—because of the concentrated power and influence of one company in particular: Amazon.”
The letter is written to Rep. David Cicilline, Democrat of Rhode Island, who chairs the subcommittee, which is housed under the House Judiciary Committee.
The hearings referenced in the letter brought Amazon’s Jeff Bezos, Apple’s Tim Cook, Facebook’s Mark Zuckerberg, and Google’s Sundar Pichai into the line of fire. And as Joe Nocera wrote in his commentary for Bloomberg on the hearings, “Preventing abusive monopoly practices by today’s dominant technology companies has proved to be difficult in part because antitrust law never anticipated the business models that have made Google, Facebook and others so powerful.” And Amazon, which of course famously based some of its retail development originally in book sales, has been the main target for years of many in publishing.
“Together,” the letter dated today reads, “our organizations—the Association of American Publishers, the Authors Guild, and the American Booksellers Association—represent thousands of authors, publishers, and booksellers in the United States who serve the democratic exchange of ideas by creating, publishing, and selling books. Our members rely upon a level playing field in the marketplace of ideas to reach, inform, and transact with customers for the delivery of books, whether in physical or digital form.”
. . . .
The Seattle-based giant sells more books than any other single retail outlet in history. In December, analyst Benedict Evans saw Amazon controlling some 35 percent of US e-commerce. But in adding in the fact that the company competes with physical retailers, not just with online rivals, he wrote, “Amazon’s real market share of its real target market is closer to 6 percent.”
In print books, however, Amazon has a generally recognized 50 percent or more of the American market “and at least three quarters of publishers’ ebook sales,” Evans wrote.
In ebooks, it sells “at least three-quarters of publishers’ ebooks” and “also has its own ebook publishing business, for which it has never disclosed any data.”
. . . .
[from the letter]
“Amazon’s scale of operation and share of the market for book distribution has reached the point that no publisher can afford to be absent from its online store.
“A year ago, The New York Times reported that Amazon controlled 50 percent of all book distribution, but for some industry suppliers, the actual figure may be much higher, with Amazon accounting for more than 70 or 80 percent of sales. Whether it is the negative impact on booksellers of Amazon forcing publishers to predominantly use its platform, the hostile environment for booksellers on Amazon who see no choice but to sell there, or Amazon’s predatory pricing, the point is that Amazon’s concomitant market dominance allows it to engage in systematic below-cost pricing of books to squash competition in the book selling industry as a whole.
“Remarkably, what this means is that even booksellers that avoid selling on Amazon cannot avoid suffering the consequences of Amazon’s market dominance.
“The ongoing COVID-19 crisis is exacerbating the problem: it continues to threaten the financial well-being of authors, publishers, and booksellers, some of whom will not survive the year.
“Amazon, by contrast, with its ever-extensive operation and data network, has grown only more dominant, enjoying its largest-ever quarterly profits during April, May and June.”
The organizations go on to criticize “the astonishing level of data that it collects across its entire platform,” writing. “The result is that Amazon no longer competes on a level playing field when it comes to book distribution, but, rather, owns and manipulates the playing field, leveraging practices from across its platform that appear to be well outside of fair and transparent competition.”
. . . .
“Amazon employs non-transparent data algorithms and recommendation engines to steer consumers toward Amazon’s own products, or even toward infringing products without disclosing to consumers that it is doing so. It has required suppliers to agree to most-favored-nation provisions (MFNs) that stifle the emergence and growth of competitive alternatives in the book distribution marketplace. And it manipulates suppliers and rivals by tying the purchase of distribution services to the purchase of its advertising services.”
. . . .
- Prohibit Amazon from leveraging data from the operation of its online platform to compete with and disadvantage the suppliers doing business there
- Prohibit Amazon from tying distribution services to the purchase of advertising services
- Prohibit Amazon from imposing Most Favored Nation and other parity provisions
- Prohibit Amazon from using loss-leader pricing to harm competition
Link to the rest at Publishing Perspectives
PG will summarize/criticize the OP:
- Amazon has disrupted the traditional publishing establishment and caused problems for publishers, bookstores, agents, associations comprised of the aforementioned parties and various other hangers-on. Amazon has disrupted the world of physical retailing as well. You can add competitive cloud computing companies to this group (although they’re not psychotic about Amazon). These people don’t like Amazon because, in the form of a question, “Whose goose is Amazon cooking?”
- Other than those people and compulsive cranks, everybody else loves, loves, loves Amazon.
- Particularly when things get tough because of Covid, everybody loves Amazon because they can shelter in place and still get the stuff they want, including, in many places, food.
- Per the OP, English majors are complaining because Amazon uses math. That’s inherently unfair. If English majors understood how good cloud computing is at math, they’d complain about that, too.
- Is there any retailer on the planet that does not watch the sales of its goods, note purchaser behavior and adjust placement and pricing based upon the behavior of its customers? Does Random House keep track of what books Barnes & Noble is buying? (Note that PG did not ask, “Does Random House do a good job of keeping track of what Barnes & Noble is buying?)
- Is there any retailer or manufacturer that doesn’t offer some of its products below cost in order to incentivize prospective purchasers to acquire them? See Remaindered Book, Barnes & Noble Seasonal Promotions and 50% Off Thousands of Items in Stores.
- See also, Loss Leader Strategy and Customer Lifetime Value, but those are business school strategies which constitute unfair competition when used to harm English majors.
- It’s not antitrust, but, in 2020, the overall quality (and social virtue) of a business organization usually includes an assessment of how it treats its employees, particularly those on the lower rungs of the organization chart.
- Amazon starts its warehouse workers at $15 per hour with fringe benefits, including “comprehensive healthcare from day one, 401(k) with 50 percent match, up to 20 weeks paid parental leave, and a flexible Ramp Back Program and Leave Share Program that allows employees to share their paid leave with their spouse or partner. For associates reaching their one-year employment mark, Amazon offers warehouse employees a Career Choice Program, which pre-pays 95 percent of tuition for courses in high-demand fields.
- What’s the starting salary of worker bees at a publisher? Do those stats include unpaid interns?What are their fringe benefits? Ditto for a bookstore?
Let’s take a moment to consider the underlying memes that pop up in complaints from traditional publishing and its enablers, outliers and posse members.
!!!!Evil Big Company!!!!
Amazon is a really big company. However, such was not always the case.
Concerning evil and illegal behavior, eight years ago, in 2012, when Amazon was a little fish who wasn’t behaving itself, most prominently, by selling ebooks at way too low a price, and discounting printed books, five evil big publishers and Apple got together to force Amazon out of the ebook business.
Starting some time in 2011, the CEO’s of Random House, Hachette, HarperCollins, Macmillan, Penguin and Simon & Schuster, had been secretly meeting for dinner on a regular basis in a private dining room in Manhattan to discuss a common problem: Amazon. Amazon’s sin was selling books to readers at a price that was too low. Readers loved Amazon’s prices and were buying more and more books. Barnes & Noble and other bookstores were complaining that readers were buying too many books from Amazon.
Apple was getting ready to introduce a new iPad with a new feature, iBooks, an online bookstore.
Apple didn’t like it when anyone tried to discount its products and kept a tight rein on non-Apple retailers and anyone else to prevent price discounts. Steve Jobs and his executives did not like Amazon’s discounting of ebooks because discounts were not the Apple Way. Premium prices for premium products was the Apple Way and Apple had made a lot of money with this policy.
Jobs sent Eddy Cue, his right-hand guy, to New York City, to take care of the Amazon pricing problem. After meetings with Cue and (PG thinks) one or two more private dinners between the publishing bigshots, the deal was made. The publishers would use a joint boycott to force Amazon to raise its prices for their books to the suggested retail price, the same price Apple would charge on iBooks.
After the launch of the new iPad and iBooks, a Wall Street Journal reporter asked Jobs how Apple was going to deal with the lower prices Amazon was charging for ebooks. Jobs gave a short answer to the effect that there wouldn’t be a problem because ebook prices on iBooks and Amazon would be the same.
Apple and the Price-Fix Five were guilty as hell. This was not a gray area in the antitrust and related laws. It was straight-out price-fixing, a criminal offense under Section 1 of the Sherman Antitrust Act.
Amazon’s net sales for F2011 were $48 billion, but its net income was only $631 million.
Apple’s net sales for F2011 were $108 billion and its net income was $25 billion, almost 400 times the size of Amazon’s net income at the time. There was no question which company was financially more powerful.
The United States Department of Justice sued Apple and the five large publishers for illegally conspiring to fix prices for ebooks. At the time the suit was filed, the US Attorney General said, “As a result of this alleged conspiracy, we believe that consumers paid millions of dollars more for some of the most popular titles.”
Each of the publishers fessed up to violating the law and paid a big fine. Apple appealed its losses all the way the the U.S Supreme Court, lost and paid a $450 million fine.
PG concludes in the Evil Big Companies competition, Big Publishing has admitted to being far more evil than Amazon.
Speaking of Big Companies
Big Amazon vs. little New York publishers is not quite right, either.
Each of the current five largest trade publishers in New York is owned by a very large parent company with deep pockets.
| Publisher | Owner | Owner’s Annual Revenue (most recent year available) | Owner’s Annual Profit (most recent year available) |
| Penguin Random House | Bertelsmann | Privately held. In 2019, the company reported “Revenues exceed €18 billion” – approximately $21.41 billion | Privately held. In 2019, the company reported “€1.1 billion” in Group profit. |
| Hachette Book Group | Lagardère Publishing | €6.936 billion in 2019 – approximately $8.251 billion | Profit before finance costs and tax was €411 million |
| Harper Collins | News Corp, | $10.07 billion in 2019 | 2019 Net Income – $228 million |
| Simon& Schuster | ViacomCBS Corporation | $27.812 billion in 2019 | 2019 Operating Income – $4.273 billion |
| Macmillan | Georg von Holtzbrinck GmbH & Co. | Privately held. Releases almost no financial data. 2005 estimate of €2.1 billion – approximately $2.48 billion – by an unrelated third party. 2018 estimate of €1.494 billion – approximately $1.79 billion – by an unrelated third party | Privately held. Releases almost no financial data. |
Amazon is a Big Bully That Exploits the Peons
As long as we are discussing allegedly shameful corporate behavior, let us consider the way the major publishers (which effectively control the Association of American Publishers) treat their small independent contractors AKA authors as compared with Amazon’s treatment of this same group. PG posits that Amazon treats 99.9% of authors much better than traditional publishers do. (James Patterson is a special case.)
| Big Publishing | Amazon | |
| Royalty Calculations | Opaque to the max. You have to hire an accountant to conduct an audit if you have any concerns or even want to find out what’s really going on. If the principal publisher has entered into agreements for the publication of the book in other countries, opacity is doubled (at least, sometimes tripled or quadrupled). | Straightforward and easy to understand. Calculations are laid out in detail in online terms and conditions. Author Dashboard shows daily reports of units ordered overall and as broken down by 13 different country sites. For ebooks enrolled in KU (Kindle Unlimited) and KOLL (Kindle Owners’ Lending Library), the author can see how many pages were read each day. (This is for the legacy dashboard. The beta version of the new dashboard is even more informative and easier to understand.) |
| Royalty Payments | Two times per year with payments delayed for a period of time following the close of the 6-month period for which royalties are to be paid. Amount of payment may be reduced by a reserve for returned books as determined solely by the publisher and calculated in a manner unknown to the author. The size of the royalty payment is always a surprise to the author. No interest is paid to the author to compensate for the use of funds belonging to the author for a half-year. | Monthly. The Author Dashboard shows how much the payment will be. |
| Costs Deducted from Author’s Royalties | 15% (occasionally higher) for an agent’s fee. Submission of a manuscript without an agent means a virtually certain rejection. | No agency fee. Plus, no lost time waiting for traditional publishing contracts, production, etc. When you finish your book, format it yourself or hire someone to format it, the book goes up to Amazon and is on sale worldwide within a day or two. |
| How Often Can You Publish? | Unless you are James Patterson, likely no more than one book every year or two. | No lost time waiting for traditional publishing contracts, production, etc. When you finish your book, format it yourself or hire someone to format it for you, and get a cover, the book goes up to Amazon and is on sale worldwide within a day or two. |
| Ebook Royalties | 25% of publisher’s net receipts | 70% of list price if price is $2.99-9.99 in a long list of countries, including all major English-speaking countries. 35% of list price is price is below $2.99 or above $9.99. For 70% royalty, a small digital delivery fee is subtracted from royalty (PG thinks it’s usually 10-25 cents, but the size of the ebook will impact that.) Amazon ebooks can also participate in other Amazon programs that will pay the author and provide additional online promotion tools under KDP Select. |
| Trade Paperback | 7.5% of cover price (may vary, but almost never over 10%) | 60% of the list price for books sold on Amazon, less printing costs (which depend upon the number of pages in the book, the market in which it is sold and whether colored inks are necessary). Amazon offers an online calculator to determine actual royalties paid based upon the number of pages in the book. Suffice to say, PG has never seen Amazon POD royalties as low as those paid by traditional publishers. |
“as the subcommittee’s hearings have laid bare, the competitive framework of the publishing industry has been fundamentally altered in recent years—and remains at serious risk of further diminishment—because of the concentrated power and influence of one company in particular: Amazon.”
Of course the competitive framework has been fundamentally altered, and will no doubt be further diminished. So what? That just means the new competitive framework doesn’t work for the folks who comfortably enjoyed the old one.
Once again, we see Progressive economics from the early 1900s rising up to protect the entrenched players at the expense of consumers and new market entrants. However, now they call themselves the Neo-Brandeis movement, but it’s the same stuff, named after a Progressive hero from the early 1900s. Think Franklin Foer and the guy from Smashbooks for today’s heros.
The contemporary framework of publishing was in the process of fundamental alteration before Bezos sold his first book, E.
Big publishers were sucking up small and mid-sized publishers like minnows on a trout farm. In the 1950’s and 60’s, there were dozens of independent publishers in New York and elsewhere, some of which were discovering important authors and different voices.
Here are a handful of books published by organizations no longer in existence:
Catcher in the Rye was first published by Little, Brown
Fahrenheit 451 – Ballantine Books
Lord of the Flies – Faber and Faber
Lolita – Olympia Press – in French (after being turned down by Viking, Simon & Schuster, New Directions, Farrar, Straus, and Doubleday)
The Lion, The Witch and The Wardrobe – Geoffrey Bles (UK)
On the Road – Viking Press
To Kill a Mockingbird – J. B. Lippincott & Co.
Slaughterhouse-Five – Delacorte
One Flew Over the Cuckoo’s Nest – Viking Press & Signet Books
The Bell Jar – Heinemann
A Wrinkle in Time – Ariel Books
The Godfather – G. P. Putnam’s Sons
Do Androids Dream of Electric Sheep? (Blade Runner, #1) – Doubleday
Dune – Chilton Book Company
That last one is a lesson for the ages.
The origin of Frank Herbert’s DUNE. is a story worth remembering. One of maybe five novels that can credibly vie for the title of best 20th Century Science Fiction novel it is also one of the best sellers ever, if not still the all time best.
It also illustrates vividly why the DOJ considers US publishing a single market, regardless of corporate pigeonholes.
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https://en.m.wikipedia.org/wiki/Dune_(novel)
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Dune is a 1965 science fiction novel by American author Frank Herbert, originally published as two separate serials in Analog magazine. It tied with Roger Zelazny’s This Immortal for the Hugo Award in 1966,[2] and it won the inaugural Nebula Award for Best Novel.[3] It is the first installment of the Dune saga, and in 2003 was cited as the world’s best-selling science fiction novel.[4][5]
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After his novel The Dragon in the Sea was published in 1957, Herbert traveled to Florence, Oregon, at the north end of the Oregon Dunes. Here, the United States Department of Agriculture was attempting to use poverty grasses to stabilize the sand dunes. Herbert claimed in a letter to his literary agent, Lurton Blassingame, that the moving dunes could “swallow whole cities, lakes, rivers, highways.”[12] Herbert’s article on the dunes, “They Stopped the Moving Sands”, was never completed (and only published decades later in The Road to Dune) but its research sparked Herbert’s interest in ecology.
Herbert spent the next five years researching, writing, and revising. He published a three-part serial Dune World in the monthly Analog, from December 1963 to February 1964. The serial was accompanied by several illustrations that were not published again. After an interval of a year, he published the much slower-paced five-part The Prophet of Dune in the January – May 1965 issues.[13][14] The first serial became “Book 1: Dune” in the final published Dune novel, and the second serial was divided into “Book Two: Muad’dib” and “Book Three: The Prophet”.
The serialized version was expanded, reworked, and submitted to more than twenty publishers, each of whom rejected it. The novel, Dune, was finally accepted and published in August 1965 by Chilton Books, a printing house better known for publishing auto repair manuals.[15]
Herbert dedicated his work “to the people whose labors go beyond ideas into the realm of ‘real materials’—to the dry-land ecologists, wherever they may be, in whatever time they work, this effort at prediction is dedicated in humility and admiration.”[16]
Not much to be said after that.
Except, maybe, that when it comes to publishing, the DOJ has historically looked at the *entire* US publishing market–all $27B of it–including in tbeir analyses *all* kinds of publishing, not just consumer entertainment books, aka Trade Publishing, which is less than half. (The sector being stagnant, it rarely sells more than $11B a year.) That is why the Penguin/Random House merger giving the randy Penguin 50% share of the trade sector sailed through all regulatory bodies unchallenged. It wasn’t big enough to matter.
Amazon being merely one of many retailers, handling maybe half of trade books, puts them at well under a quarter of the DOJ’s historical market definition and more typically around $17%. So, barring some politically motivated assault by levellers, Amazon is far from legally questionable territory.
What the complainers intentionally forget is that the real cause of their “problems” comes from the publishers’ volume discount practices, not Amazon. In the 90’s they knew that and sued the right people. Today they conveniently forget their own history.
Good points, Felix.
(1) “Trade publishing” isn’t a coherent market definition (or “industry”) either. Trade fiction and trade nonfiction are noncomparable.
There are thirteen offspring of a three-century-long orgy among licensed printers forming the Company of Stationers in the City (and that’s not New York City, you narcissistic maroons) that are each “publishing industries.” Each one meets the antitrust law definition of a “market,” because there is no cross-fungibility: Someone looking for a children’s instructional text will not find a better-valued adult murder mystery an adequate substitute. (And hopefully vice-versa, but one never knows.)
The fundamental problem is that the Department of Justice is relying on both flawed ideology and a flawed analytical approach in determining whether a merger or acquisition creates overconcentration in a market. But that’s a law journal article with about 250 footnotes (so far) that various Life issues have prevented me from completing. And I haven’t even drafted the “what about the First Amendment implications?” section yet.
(2) PG’s chart is instructive, but doesn’t go high enough. For example, it doesn’t look at the parent of Lagardère Publishing; neither does it consider the common control of Viacom; nor does it delve into the skullduggery in characterizing Holtzbrinck as merely “privately held.” In short, asking the next question makes things look worse. Much worse, in the case of Lagardère… and Viacom… and almost incomprehensibly so for Holtzbrinck. Care for some small arms with that mass-market paperback?
And there’s one ambiguity that may be due to screen resolution — in the owner’s annual profit column, I can’t tell whether those are dashes or minus signs for NewsCorp and Viacom (don’t appear to be from other reports, but I don’t know what PG is relying upon).
Well, well, PG, you have outdone yourself with this one. Bravo!
My retort to the OP was a simple “Oh, boo hoo; give me a break,” but yours is better and full of interesting tidbits.
Thanks, Harald.