Friday, August 16, 2013

Monopoly, Abundance and Fulfillment for Jeff Bezos and Amazon with Help from DOJ

The US Department of Justice has announced that it will block a huge proposed merger deal between American Airlines and US Airways that would have given them almost a monopoly in the country, free to do what they want with prices and services. In this case, there’s no doubt that Attorney General Eric Holden is acting to protect the consumer. 

But it’s not always so simple. A month ago the Department of Justice took on and won against Apple and five of the largest publishers for colluding to keep book prices higher. In this case, publishers, including giant Barnes and Noble, weren’t colluding to screw the consumer, they were desperately trying to stay alive. It’s no news to anybody that publishers are struggling to compete against the ebook industry, and in particular against Amazon. Barnes and Noble recently lost its CEO who it isn’t going to replace. Pretty soon it will probably break up. 

There’s only one winner and that’s Amazon. Anybody who reads loves Amazon. It’s fabulous that they drive prices down so you can have a whole library and pay very little for it. What people who read but don’t write don’t know about Amazon is that as a writer you get your biggest royalty – 70% - if you keep your price below $9.99. Anything above that and you only get 35%.

Everybody knows about books like Shades of WTF as a friend of mine called it. The author could have sold them for a few bucks apiece and still made a fortune, and that’s Amazon’s argument for keeping prices low. You sell more and there are no big megalomaniac control freak publishers telling you your book isn’t good enough. It costs you nothing to format it and load it onto Amazon. Anything you sell is money for jam. 

But here’s the real catch; Amazon doesn’t market your books. They leave that to the authors. Who, because they make so little per book, are desperate to make something. And bingo, Amazon has free marketing. No wonder Jeff Bezos has such a huge fortune.

Most writers who start out think that marketing on the internet will be a breeze but it isn’t, because there’s no barrier to entry and you’re literally competing against millions trying to sell something. Most people who have succeeded with selling ebooks advise writers to give their first one away for free. So what, you say? It didn’t cost you anything. Apart from the time that it took you to write. Very few non-writers who love to read take that into account. That writers often have to work for nothing so that readers can read.

So from the writer’s side of the fence, for once the big giants colluding was a good thing. It helped to stabilise prices for writers and keep some reality alive. Ebooks are always cheaper than paper books, but at least there’s something to correlate prices against. If paper books disappear Amazon will have total control over the whole book industry. World-wide. Scary thought.

Harder for writers? Definitely. Pretty good for people who know how to manipulate the internet marketing-wise, regardless of the quality of what they’ve written – which actually is nothing new, so it’s barely worth mentioning. Great for readers? Maybe. For now. Until Jeff Bezos’ lust for power consumes him. Who knows what he’ll do with prices then. Wonderful for Amazon shareholders? Oh yes. For now. Until the book industry or Amazon implodes. So the Justice Department’s decision in this case actually worked to enable a monopoly that will become a stranglehold in the book industry.

Consumer protection is supposed to protect the consumer in the short and the long term. But if it leaves the manufacturer so exposed that manufacturing either stops or produces worse and worse quality, then nobody is protected. Writers need to live, a fact that anybody who doesn’t write but loves to read happily ignores. The harder it gets for writers to earn, the more they’re forced to write highly marketable but utterly unoriginal crap.  And that's good for readers how?

Amazon’s global monopoly doesn’t bode well in the long term for readers, and for writers it spells slave labor on a global scale.Thanks a lot, Jeff. BTW, have fun with the Washington Post.