Amazon Attempts a Monopolsts’s Squeze


Amazon is attempting to own the book business by exercising control of the small fast growing independent end of the market. Ultimately having done much good for book buyers and helped publishers, Amazon is now in danger of squeezing the small houses they have helped encourage. Book publishing is in danger of having a very significant element of control levied by Amazon which will profit Messrs Bezos and Company in the short term but not in any way assist the development or innovation in the publishing business. In the long term Amazon will see their catalogue shrink. Their market share will decline and they will stifle the growth of the book publishing business. Make no mistake, this is a very very bad day for technological innovators, small businesses and publishing as an industry. For Amazon, it is a foolish plodding play of a monopolist which plainly has lost sight of the fact that treating suppliers with disdain will create a backlash. Finally expect higher book prices too!


For the record (and so readers can understand why an expert in financial market structures and complex products is posting on this story, my expertise here goes back a decade or more…) Amongst my various corporate interests, I own a small book publishing imprint. I set the company up to use the “new” Print on Demand (POD) technology.

POD is a great way to publish books and avoid being stuck with the stodgy, highly inefficient old fashioned legacy publishing houses which stifle competition and profit while authors get squeezed.

With my current POD model I can pay authors a higher royalty than the general publishing market and also make a healthy margin. In fact the entire finances of publishing books can be rewritten.

Now, in what strikes me as a desperate measure to improve their own margins at the onset of a recession, Amazon wish to cut my provider (for the record: Lightning Source) out. Small houses such as my own would be forced under this proposal to use a monopoly supplier owned by Amazon. Moreover, the terms I have seen are significantly worse for my business – higher fees and worse margins. Let’s not trifle with all that relationship bulding cost etc (and believe me Lightning Source do a terrific job, I do not under any circumstances want to change from using them currently).

It is a fact of life that large companies can become arrogant and develop monopolistic tendencies.

Alas, in this instance, Amazon are effectively creating a programme to help the large leviathans of publishing (with all their inefficiencies) and squeeze out of business the innovative new companies that have created the POD culture the world over.

This as a concept makes as much sense as getting pregnant and then feeding your children as infants to the elderly and infirm.

Amazon have done many great things for book retailing and that must be applauded. However, this policy develops clear evidence that they are succumbing to short term thinking to create a monopolistic profit (and subsidise a subsidiary) which will ultimately be detrimental to the entire book publishing industry, hurting consumer choice in the process.

I suppose there are free speech implications here too but I am focusing on the business issues here, although I suppose in the litigious USA there may be legal challenges?

Amazon needs to keep growing the book industry. By demanding cuts n margin and forcing higher costs and bureaucratic duplication on small publishers, they are only going to stall growth in the industry.

Or maybe, just maybe, they may start unpicking their business model and lead to alternative sales channels becoming more competitive.

Confidence in Amazon has been shaken by this announcement and even if they succeed, the trust of the publishing industry in Amazon will take a considerable time to rebuild, at best.

Barnes & Noble may not see tis as a major “gift horse” but having built their business model on the comprehensive nature of their offering, Amazon is now explicitly encouraging smaller publishers to concentrate on other channels. That is a very arrogant position to be in given the fluidity of customer loyalty that is possible in the modern internet market.

At the onset of an economic slowdown, it may even be a first sign of suicidal tendencies.


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