Rocket Bomber - article - publishing - business - Amazon's Monopoly isn't Books.


Amazon's Monopoly isn't Books.

filed under , 24 October 2014, 18:52 by

Amazon has a monopoly — but their monopoly power is not a stranglehold on books.

Amazon owns the customer base for books. Amazon owns the readers.

And now you’re about to object to my stark declaration, for obvious reasons: that’s not the way markets work. Customers are the free-est of free agents, and no one (except the government) can force you to spend money if you don’t want to. Companies don’t own customers, they are earned through competitive pricing and excellent customer service.

Customers are usually happy to be associated with a company — maybe just as a satisfied end-user, but perhaps also as a genuine fan of the product, or a smiling repeat customer at a store or restaurant, or an advocate for the brand online (through glowing reviews) — in the best/worst case: maybe you just can’t shut up about how great the damn thing is to friends, family, strangers, the internet, and even—in quiet moments alone—to yourself. A chunk of your personal identity may be tied up in the product. “Guinness Drinker”, “Steelers Fan”, “Apple User”, “Amazon Kindle Author”, Whatever. Who am I to judge? After all, your enthusiasm—no matter how fierce—is dependent on the product continuing to meet your expectations. Loyalty earned can be banked but also just as quickly frittered away; no company can coast on past accomplishments for long.

Unhappy customers are the ‘canary in the coalmine’ for emergent monopolies, in fact. When you find yourself grudgingly paying money for something, maybe even something you hate, that’s generally when we know something other than ‘free markets’ are at work. Cable companies, I am looking directly at you.

So it is impossible to say that Amazon owns readers, because no one owns a customer. Except, of course, that Amazon kinda does own us.

Not all readers: there are folks who are definitely book customers, but only buy one or two books a year. There are plenty of people who borrow books from the library, dutifully adding their name to the waiting list instead of rushing out to buy the latest bestseller. There is a small contingent of Amazon haters, an even smaller group that shops online from Powells (and others), and a number employed as booksellers who can pay less than Amazon asks by using their employee discount — well, about half the time. (Amazon prices are really hard to beat.)

So not all readers. But the most avid readers? People who buy more than one book a month (or a week)? Folks who not only buy books the day they come out, but preorder them? The unlucky (or is that lucky?) few who have literally run out of space for books — every shelf is full and every flat surface has a stack of books on it? Oh yeah, these are the Amazon customers I’m talking about.

Amazon owns you. It’s not outright deed-and-title ownership, of course, because free markets etc. etc., but Amazon has your credit card on file—and the fancy one-click patent—so it is so often so much more convenient to just buy stuff there. Pre-orders are even easier, and your card isn’t charged till it ships. Amazon makes suggestions — kind, neighborly suggestions — because it knows you, everything you’ve bought or even just looked for on the site. And, since Amazon had the first ereader device worth owning, Amazon is likely your supplier of choice for your digital library, too.

You could leave Amazon. Indeed, to prove some snarky blogger wrong, you could likely go to your shelf (or lean over and pick one off the table) and hold up a book and say, “See this? This book I bought in a store! I didn’t get it from Amazon. Stuff it, Matt, you’re over-exaggerating again,” and I’d have to sit here and lump it, because even Amazon Prime subscribers and the most avid of readers will have at least one book like that.

Of course. But, he asked with a smile and a glint in his eye, did you find out about that book (or discover the author) through Amazon? Or maybe Goodreads?

Oh yeah, Amazon owns your ass.

##

Amazon, even at 20 years old, is a new business, and a new way of doing business. We can point out parallels to the past (and I have) but even after taking into account the ‘internet’ part, Amazon is still running a business quite unlike anything that has come before.

Monopoly (or monopsony) doesn’t quite fit as a description for what Amazon is doing — obviously, because from 1890 (or maybe 1911) most companies have been very circumspect about even looking like a monopoly.

So maybe we need a new word. Amazonification of a market, “related to or resembling Amazon’s transformation of book markets from 1998 to 2011” — or maybe “bezopoly” would be better. ‘Monopsony’ (currently much in vogue in this discussion) wasn’t coined until 1933, so there’s certainly a precedent for it: new vocabulary for new realities. Ignoring for a moment whatever term we’ll use for what it is – it’s easier to describe what Amazon isn’t, and Amazon is not a book monopoly.

Amazon will likely always face competition — at the very least, the indy bookstores as a group, and Apple in ebooks, and whatever-fills-the-barnes-and-noble-sized-hole that seems inevitable at this point. Outside of the book market, the two other large e-tailer competitors (eBay and Rakuten) are joined by at least two huge competitors for digital content sales (Apple iTunes and Google Play) and three huge competitors for digital services (IBM, Google, and Microsoft). Smaller competitors are also constantly nibbling around the edges, either selling their own product online or completely inhabiting a niche (think ThinkGeek, in this case, or direct-from-manufacturer sales).

In a world where Walmart is still seven times as big as Amazon, it’s kind of hard to make the argument that Bezos runs a monopoly (monopsony, bezopoly, whatever).

but what Amazon will never face off against is another ‘Amazon’ — the barriers to entry are too high: you can’t build a billion-dollar distribution operation overnight. While eBay and Rakuten are both huge online retailers, neither can assail Amazon in the book market. Barnes and Noble still sells $6 Billion in books (and assorted non-book cruft) but their website is a small fraction of that and nowhere on the scale of Amazon.

Amazon’s ‘lock’ on the avid readers can be seen as even more important

Amazon doesn’t have 100% control but it has enough:

  • and when Amazon stopped acting like Amazon (for example) in the Hachette dispute, where Amazon stopped taking preorders, stopped discounting, and shifted from two-day delivery to taking a week or two (or more), both Hachette and other trad-publishing stalwarts cried foul, saying that for Amazon to stop pleasing readers on their behalf was unfair and somehow anti-competitive. The unstated admission is that Amazon owns the readers — or at least, there was no easy way to reach Amazon’s readers without Amazon.

Amazon has the book business locked up, not through a monopoly on books but by focusing on readers. Amazon is the single biggest bookstore and likely always will be. Amazon is more than that, of course, but a huge portion of their public image is invested in books (…and specifically targeting readers as customers is also good business). It would be hard to argue that a company as customer-focused as Amazon would do anything to make anyone (any customer, anyway) unhappy — at least while Bezos is in charge. But Amazon still ‘owns’ us in ways we tend to forget about.

Is Amazon’s monopoly on the readership bad? Let me be the first to welcome our new benevolent book overlords. But the key phrase is still, “at least while Bezos is in charge” — at some point, the company will change. If you’re an Amazon customer (we’re all Amazon customers, including Kindle-published authors) my best advice is to enjoy it while you can, but keep an exit in view (or at least, in the back of your mind).

From post-World-War-II until the mid-1970s the Book-of-the-Month Club was the ‘best thing ever’ for readers. Then in the 1980s the mall bookstore chains were the ‘best thing’; in the 1990s and early aughts it was the Big Box Book Superstore. Prices have gone down, selection has gone up, and customers were happy — until the next big thing came along.

If Amazon lets it.

The best thing we could hope for, in my opinion, is Amazon as a “common carrier” for books, where publishers and authors get to compete with each other while having equal access to Amazon’s locked-in base of rabid readers. The reader becomes the product that Amazon then ‘sells’ to publishers — well, I suppose it would be more accurate to describe it as access to readers, since even after the door is open you still have to convince the readers to buy from you as opposed to buying literally any other book on the planet.

It’s not in Amazon’s interest to do this, at least not for free — but we can see hints of how it might work just by noting how Amazon treats its large network of 3rd party sellers (for everything other than new books or ebooks). We should shift our thinking away from Amazon-as-retailer and toward Amazon-as-network-provider. Instead of acting like a wholesaler and ‘making’ Amazon buy the books from you for resale, petition for access to the Amazon’s ‘network’ and sell your books directly to Amazon’s readers. If Amazon will let you — my whole point is that Amazon’s real monopoly is on the readers — and I think Amazon will always want to stand in that final space between reader and seller, no matter what the rest of the book industry looks like or how we get there.



Comment

  1. extended aside: The historic model to study for Amazon is not Standard Oil of the 1890s but AT&T and the Bell System from 1934 to 1984 — not that Amazon is a monopoly or anything. But I think an analysis of competition in long distance phone service that followed the consent decree of 1984 (which followed the antitrust case against AT&T begun in 1982) is more enlightening than rehashing the 1911 Rockefeller case.

    Comment by Matt Blind — 24 October 2014, 18:54 #

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