Sep
19

Amazon is Nobody’s Friend, Part One

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The following article was written by Alan Beatts and first ran in the Borderlands Books September Newsletter. It is provided here courtesy of Borderlands Books. Since the majority of Hellnotes visitors are avid readers, we believe it’s important to stay informed about the world of books and publishing, and we offer this article in that spirit. Enjoy …

Amazon is Nobody’s Friend, Part One
Alan Beatts

In all the years that I’ve been writing articles for this newsletter, I’ve never made a habit of “Amazon-bashing.” Sure there have been a few times that I’ve made little comments about some of their poor choices and ethical screw-ups, but over all I’ve pretty much left them alone.

This article will be a change from that relative silence.

The reason that I’m finally being truly critical about Amazon is two-fold. First, at this moment a huge number of book buyers are facing a choice. All the former Borders customers out there have to decide where they are going to get their books now that Borders is closed. There are three choices: 1) Barnes and Noble. 2) Amazon. 3) An independent bookstore. At first glance, it will seem that I’m trying to deter customers from shopping at Amazon (and, it won’t break my heart at all if you choose to avoid Amazon after reading this). But what is more important to me is that I provide you with information so you make as informed a choice as possible. Your dollars are your economic votes. Where, how and with whom you spend your money determines what businesses survive and thrive. Just like any election, I think an informed group tends to makes wiser choices.

Second, I was talking to a few friends about Amazon and I realized that my opinion of them has shifted in the past ten years. When they started up, my attitude was very much live and let live. They had their business ideas and I had mine. I figured there was room enough for both of us. But, as I’ve watched them grow, seen their business choices and their effect on my field, I’ve come to the conclusion that they are not a positive influence on the business of words & stories. During that same conversation with my friends, I also realized that there is a long list of things that they’ve done and attitudes that they have that I think are pretty lousy, either because I think that they are not ethical or just not … nice. Once I considered the totality of my opinion about Amazon, I decided it was time to say something.

Bear in mind that I’ve made a considerable effort to look at Amazon from the standpoint of someone who loves books and reading. Though driven by ideas and opinions informed by my experience as a bookseller, what you’ll find below is not the ranting of a bookseller outraged at the competition. It is instead my complaints against Amazon as a reader and booklover.

Amazon has -

(A) Been a deceptive and pervasive influence on ecommerce.

(B) Consistently tried to eliminate other businesses to increase their hold on the book market.

(C) Engaged in pricing designed to cripple competition and manipulate its suppliers and customers

(D) Made avoiding sales tax a cardinal part of their business model.

(E) Chosen an ebook business model and format that’s bad for the consumer.

In addition, I just don’t believe that they play nicely or fairly, even by our admittedly lax standards of corporate citizenship. In many ways, Amazon is the very model of an unethical, ruthless corporation that cares about nothing other than growing and making a profit.

And here’s why …

(A) “Been a deceptive and pervasive influence on ecommerce.”

Amazon is much bigger and more pervasive than one might think. They have a fondness for buying companies in fields that they are interested in and then continuing to operate them under their original names while changing the back-end and fulfillment over to Amazon’s systems. Notable web-retailers that they own are: Zappos.com, Diapers.com, Soap.com, Pets.com.

All of those companies are big retailers in their specialties and, by buying them out and keeping the names, Amazon eliminates competition while maintaining the illusion of consumer choice in the marketplace.

Another ubiquitous company that has Amazon hiding behind the curtain is The Internet Movie Database (IMDb). IMDb is an interesting property since it gives Amazon two things. First, if and when they want to do this, it’s a built-in market to sell movie downloads, video streaming, or regular DVD sales. It would be easy as pie to set up a sidebar that incorporates one-click purchasing of any movie right from the information page of IMDb. But the second benefit is harder to see. Amazon is constantly working on improving the recommendations that appear whenever you search for something on their site. By looking at data about what movies individual users look up at IMDb, they can gather tons of information along the lines of “people who look at movie A go on to look at movie B 73% of the time, that means that there is a common interest between those two movies”.

Another hidden Amazon property is of one of the best ebook reader applications for EPUB format files. (EPUB is the free and open-sourced ebook format supported by many publishers. It is not the format Amazon uses for the Kindle nor is it one that is very easy to read on the Kindle.) Lexcycle makes Stanza, which is a great program that I used to use all the time. It’s simple, clean, fast and works on Mac, Windows, and iPhone/iPad. Now it’s 100% owned by Amazon and still the top EPUB reader. As in the case of companies like pets.com and soap.com, Amazon maintains the illusion of consumer choice while actually owning their own business and their seeming competition.

In a slight variation from their usual habits, Shelfari.com is an interesting case in that here Amazon lets their name be seen associated with the site. My bet on the reason is that, if you click on a book, you end up on a page with exactly the sort of “buy-now” feature I suggested would work on IMDb. Hard to hide the company’s involvement with that sort of connection. Though it is nice and provides some sense of impartiality that Shelfari also provides a link to Abebooks.com, a major used bookselling site with an excellent reputation among collectors . . . or at least it looks impartial. By owning Shelfari Amazon is also getting one of the benefits that I suggested relative to the IMDb, since Shelfari is all about book recommendations and making connections between books, it’s a hugely valuable source of data for Amazon’s marketing.

Returning to Amazon’s more usual habits — Abebooks.com, the original on-line listing and sales service for used and OP books, has been owned by Amazon since 2008 . . . so perhaps it wasn’t impartial for Shelfari to give them a link, eh? Thousands and thousands of small, independent bookshops list their inventory at Abebooks and many even use inventory software created by them. And all the while, they’re contributing to Amazon’s success. And customers who don’t like the way that Amazon sells used books have an alternative. At least it seems that way.

It’s gets better, though. Abebooks had a 40% stake in Library Thing, which was passed along to Amazon. Library Thing is generally viewed as the alternative / competitor to Shelfari. It’s interesting to note that, at Library Thing (where this is no sign of Amazon’s relationship), as opposed to Shelfari, clicking on a specific book takes you to a page where Amazon is listed as a seller, along with Abebooks, but they also list Google Books and Project Gutenberg (a world-wide free electronic library). And, if you click on the “Local Book Search” link, you’ll even find a listing for Barnes & Noble’s web-site. Of course, even once B&N shows up, the listing is alphabetical so they’re after Amazon and Abebooks. Tricksey, aren’t they?

For more information about Amazon’s extensive influence on ecommerce, I highly recommend this presentation from FaberNovel http://techcrunch.com/2011/05/11/how-amazon-controls-ecommerce-slides/

(B) “Consistently tried to eliminate other businesses to increase their hold on the book market.”

If the foregoing wasn’t a clear enough indication that Amazon is interested in controlling all the good parts of on-line bookselling and ecommerce in general, the pattern of Amazon’s business expansion also indicates that they are trying to fill all the niches in the book business, from publishing all the way down to selling. There hasn’t been any sign that they are going into the writing business, thank goodness, but there really isn’t any conceivable reason that they would want to do that. (It’s always been best for publishers to let anyone try to be a writer who wants to and then pick and choose what they want to pay for).

When Amazon started, they used the Ingram Book company as their major supplier. Ingram is one of the two national book distributors in the US. They buy books in large quantities from publishers and then sell them to bookstores. One of Amazon’s early moves was to kick Ingram to the curb and start running their own distribution centers and warehouses. At that point, the sales chain went from the publishers to Amazon to the customers.

But over the past few years, Amazon has been working to cut the publishers out of the loop as well. One of the first steps was with independent publishers using print on demand technology (POD). POD is a system in which individual books are printed when there is an order for them. This saves a smaller publisher the cost of large print runs and the storage expense that goes with them. For years the leading company in POD production has been LightingSource, which was used by probably 75% of the small, POD publishers.

In March 2008, Amazon informed many small and medium sized presses using POD that, if they wanted their books listed and sold through Amazon, they would have to use a company called BookSurge for their printing. It’s probably no surprise that BookSurge had been purchased by Amazon in 2005. The initial communication from Amazon was though highly deniable channels, phone calls, mostly, and some carefully phrased emails. When word of it got out, there was a huge outcry on the part of publishers and authors. Federal anti-trust agencies got involved and there was a major lawsuit that dragged on for years. The end result was that Amazon backed off (though they continued to hold people to contracts that had been signed because of their threats), the suit was settled out of court, and things were back to normal. Oh, and Amazon changed the name from BookSurge to CreateSpace to get away from the bad publicity. (1, 2)

Also in 2008 Amazon bought Audible.com, which is the major player in the market for down-loadable audiobooks, which gave them another position as a publisher and allowed them to cut other publishers out of the audiobook market (which is rapidly moving towards all down-load, rather than being sold on CD).

Subsequent moves on the part of Amazon to build a bigger place in publishing have included starting their own publishing arm, aggressively buying up the ebook and POD rights to out-of-print backlist titles from almost any author who will hold still long enough to sign a contract, and by tying ebook distribution to POD publishing contracts (in a not-going-to-get-the-Feds-on-our-backs-again sort of way).

But the biggest piece of integration has been the Kindle. If you own one, Amazon is not quite your only possible bookseller (there are some work-arounds) but it’s darn close to being that way. And if you’ve bought books in Kindle format, you’re going to be an Amazon customer, in one way or another, until you’re willing to “throw” those books away. Or until you die, I suppose. No wonder that they’re quite happy to sell the devices at a loss.

(C) “Pricing designed to cripple competition and manipulate its suppliers and customers”

Pricing products is a complex process and the ethics of it are even more complex. The idea of having “loss leaders” in business (i.e. items that are sold at below cost to attract customers who, one hopes, will buy other items as well) is a well established practice. I think it falls into a sort of grey area in terms of ethics, though there are places where it’s prohibited – for example, in France is it illegal to sell books, specifically, for less than cost.

However, when a business engages in pricing with the intention of manipulating the market for their long term benefit, when pricing is used to eliminate competition and therefore consumer choice, or when prices are fixed to manipulate suppliers — to my mind, all those cases slip from the soft, dove-gray of well-it’s-probably-alright into the more charcoal-gray of I-don’t-think-that’s-OK-at-all.

Amazon has a big vested interest in moving the reading public towards ebooks. Aside from the obvious reasons (the size of their market share and so forth) there is a bigger and more compelling one. Regardless of its advantages, Amazon labors under a huge handicap compared to physical bookstores. For many readers there is no possible substitute for looking at actual books on an actual bookshelf, just browsing along and looking at whatever catches your eye. But when it comes to ebooks, there is no difference between looking at them on Amazon’s website and looking at them on any other website. So, the move towards ebooks eliminates Amazon’s handicap versus physical bookstores. The other big advantage for Amazon is that ebooks take up no space and they require no investment in inventory. All you have to have are some big computers and some good data connections, both of which Amazon has more than they know what to do with.

Kindle ebook readers are sold at a loss and always have been. I honestly wonder if they were ever meant to make money; I’m betting not. But the Kindle has done exactly what Amazon planned. It’s caused ebooks to take off in a major way and it’s changing the behavior of consumers. That’s perhaps not an unethical way to do business but it certainly is ruthless and profoundly manipulative.

Also on the topic of pricing at a loss: Amazon was so committed to building its business that for years and years they lost money at a awe-inspiring rate. Between 1993 and 2003 they lost 3 billion dollars. In fact, in 2001 alone they lost 1.4 billion. But during that time they set a permanent expectation in the minds of consumers that they always had the lowest price. And during that same period Amazon was responsible for countless independent bookstore going out of business. And the real reason that those stores closed wasn’t that Amazon was doing a better job at bookselling than they — it was just because they couldn’t afford to lose as much money as Amazon. It’s interesting to notice that Amazon’s discounts from retail are much smaller and less universal than they used to be. The preceding is a textbook example of predatory pricing: “predatory pricing is the practice of selling a product or service at a very low price, intending to drive competitors out of the market, or create barriers to entry for potential new competitors”. (3)

$9.99 is a magic number in retail. It’s a price that makes people think, “That’s cheap, it’s not even ten bucks!” So it’s no wonder that Amazon decided that was the right price for ebooks. For quite a while, that was the price that an ebook at Amazon sold for, regardless what it cost Amazon (often, much more than $9.99). Publishers became concerned that Amazon’s pricing of ebooks was causing a perception on the part of the public that any other price was inflated and unfair. The question of what an ebook actually costs, compared to a physical book, is a topic for another time, but certainly there are some novel length works of fiction that cost the publishers more than that to produce. But more importantly, it is the right of the publisher to set the price of their books. They can blow it, set it too high, and the book won’t sell. In which case they learn better the next time. But the publisher is the entity “making” the book. They can set their costs, decide what sort of quality is needed for what elements (editing, cover art, and so on), estimate what the market will pay and so forth. They control the process of “manufacture”, if you will, and that means they get to set the price.

But it’s certainly not Amazon’s place to set the price that publishers can charge for books, electronic or not. They have the right not to buy something if they think it’s overpriced and won’t sell, but that’s about it. And in this case, Amazon wasn’t trying to set the price for one book or even all the books from one publisher. They were trying to set the price for _all_ ebooks. Based on the specific laws regarding price fixing, what Amazon was doing wasn’t illegal since they weren’t collaborating with any other sellers. But, since they represented around 80% of the ebook market at the time, they really didn’t need to collaborate with anyone.

Regardless of the legality of it, thanks to a risky action on the part of John Sargent, the CEO of Macmillan (one of the six major US publishers), at the beginning of last year, Amazon doesn’t get to set ebook prices for the big publishers at all anymore and neither does any other retailer. The short version is that Sargent went to Washington state to meet with the folks at Amazon to talk to them about ebook pricing. After months of discussions regarding publisher concerns that Amazon’s low prices were damaging the public perception of the value of ebooks, Sargent had come with an ultimatum. He told them that Macmillan was switching to the “agency model” for ebook sales. What it meant was that publishers would set the price and retailers would take a commission on the sale to readers rather than the old model in which publishers sell to retailers, who then sell to readers at a price that the retailer determines.

The folks at Amazon, including Jeff Bezos, were not pleased at all. They refused and Sargent got on a plane home. It a remarkable fit of petulance, while Sargent was still in flight, almost every single one of Macmillan’s books, physical and electronic, were removed from Amazon’s web site. A few days later, Amazon agreed to the agency model with Macmillan and shortly thereafter, accepted the same terms from four of the other five major publishers (the one hold-out, Random House, went to the agency model in February of this year).

For more details about what happened, I’d suggest you look at this article in the NY Times http://www.nytimes.com/2010/01/30/technology/30amazon.html and this blog post from John Sargent himself http://blog.macmillanspeaks.com/macmillan-ceo-john-sargent-on-the-agency-model-availability-and-price/.

(D) “Avoiding sales tax a cardinal part of their business model”

I don’t like to pay taxes and I understand that other people don’t like to either. But if I am going to have to pay them, it’s important to me that they’re applied equally and fairly across the board. Amazon has made part of their business model the avoidance of sales tax practically from day one. Jeff Bezos, the founder, has even stated publicly that reducing sales tax was on the forefront of his mind, both when planning the company and when choosing Washington state as a location. In fact, their systematic avoidance of sales taxes has been so aggressive that employees traveling to California have been issued business cards reading “Amazon Digital Services” (an Amazon subsidiary that doesn’t sell physical products) rather than “Amazon.com” to reduce the threat of California arguing that they were conducting business in the state. Other tricks have included identifying states that were risky as “red” states and requiring staff to consult with corporate lawyers before traveling there on business as well as conducting employment interviews via video conference rather than in person so that the Amazon representatives weren’t actually in the state in question. (4)

The theory of sales tax is that it needs to be collected and remitted by businesses that are active in a state. The usual test for this is whether the business has a “nexus” within the state. “Nexus” has been traditionally proven by having physical locations or sales staff within a state. But there are two other underlying parts of the sales tax theory that have been conveniently ignored during the rise of ecommerce.

The first part is that the requirement of “nexus” was originally put in place based on the assumption that a business that is not located in a state won’t be conducting very much business there. Granted, there have been catalog retailers for well over 100 years but purchasing items through a catalog was always a second-best choice when you couldn’t get something locally and the prices were usually higher (when shipping was factored in) than buying from a local merchant. But now, that underlying assumption is deeply flawed because of the number of purchases made over the internet and the way that buying on-line is progressively becoming the preferred choice.

The second part is that, in most states (California for one), sales tax is _still due_ even when the purchase was from an out-of-state company. It’s just that the burden of paying it falls on the buyer rather than the seller (and here, at least, they call it “use tax” rather than “sales tax”). Granted, enforcement of that tax is awe-inspiringly lax but the principal is still there. So really, the bottom line question is not whether the tax is due but whether the business has to collect it and send it to the state or if that burden is on the consumer. Either way, the tax is due.

And that brings us around to the principal of sales tax. It’s there to support the costs of running the state government. Which is going to cost just as much regardless of whether Amazon has to collect tax or not. Moreso, as residents in the state, we’re going to have to come up with the money to pay for that government or the state will go broke. What’s really happening here is that, to drive sales to their business, Amazon is fighting really hard to maintain their ability to look like they’re giving the average San Franciscan, for example, a 8.5% discount as compared to a local business.

A local business which, I should point out, contributes much more to the state and local economy than Amazon ever will (via property taxes, payroll taxes, re-spending of profit in state, and so on).

Oh, and before you think to yourself, “But the state doesn’t ever try to collect that use tax from me,” let me point out that California is broke as hell, all your Amazon purchases were probably made with a credit card, and the state tax board has every legal right to subpoena Amazon’s records. And then assess every single Amazon customer in California with a special tax bill (including interest and penalties). They can even garnish your paycheck to cover it.

Given it’s been estimated that California alone stands to lose 1.9 _billion_ dollars (yep, I did say “billion”) due to Amazon not collecting sales tax, it sure might be worth the time and trouble to do just that. (5)

So, how hard will Amazon fight to avoid collecting sales tax? In July they won permission to start collecting signatures for a referendum making them (and probably all web-based businesses) exempt from collecting California sales tax. To date they’ve spent over 5 million dollars promoting it and gathering signatures. And in the past they’ve cut their affiliate partners loose in entire states (New York and North Carolina being to cases in point) when laws have been passed to make them collect and remit sales tax. They also took the state of New York to court over it, and lost.

And all of this is happening while many other web retailers are voluntarily starting to collect sales tax.

Updated – After the preceding was written, Amazon cut a deal with California state legislative leaders that gives Amazon one more year of operating without collecting sales tax in exchange for ceasing their referendum. (6)

(E) “An ebook business model and format that’s bad for the consumer”

Amazon is the most successful ebook retailer in the world, by a fair margin. Depending on whose figures you believe, they sell in-between 60 and 80% of the ebooks in the US (the percentage in the UK is even higher). They also produce the most popular ebook reader, the Kindle. That they are doing so well with ebooks really isn’t a surprise. They have the best on-line store, their software gives what is arguably the best reading experience, they’ve been in the business the longest, and, perhaps most importantly, they have their existing market position as the second largest seller of physical books in the world (Barnes and Noble is still #1).

What disturbs me and what I think should bother my fellow readers, is that their ebook format is completely unique and proprietary. The problem there is that you cannot read an ebook that you bought from Amazon on anything other than a Kindle or a device that has a Kindle application available for it. Granted, as of now, there are Kindle apps for Mac, Windows, iPad/iPhone, and Android. But there’s no guarantee that Amazon will keep making them or supporting them. Given Amazon’s fondness for competition, it wouldn’t surprise me if, at some point in the future, the Kindle apps for the iPad/iPhone vanished. At that point, all the people out there who bought ebooks and want to use those devices are going to be pretty much out of luck . . . at least until they buy a Kindle.

On the other hand, the three other major ebook retailers – Apple, Barnes & Noble, and Google (plus all the independent booksellers Google partners with) – use some variation of EPUB format which is device agnostic and can be used with all the ebook readers, computers, and smart phones out there (except for the Kindle). Granted, all three of them use their own sort of copy protection but, each for specific reasons, it is much less likely that ebooks purchased through any of those companies will force you to adopt a new device if you want to keep reading your books. Also, none of those businesses are as savage about trying to dominate their industry.

Another deeply disturbing thing about Amazon’s ebook model is that they maintain and have used the ability to remotely wipe purchased books from customers’ devices. The most notable case of this was when, in July of 2009, copies of “1984″ and “Animal Farm” were deleted from Kindle readers throughout the US, despite wording in Amazon’s purchase agreement that specifically granted the right to keep a permanent copy of the applicable digital content? One of the most notable things about this event — Other than the titles affected … 1984? You’ve got to be kidding! I couldn’t make this stuff up. – was that a 17 year old student, Justin Gawronski, found that his study notes had also been deleted. He later sued Amazon, who settled out of court. There have been other incidents of this sort, involving works by Ayn Rand, among others. This type of action is possible due to the Kindle’s semi-constant wireless connection to Amazon’s servers. It would probably also work on non-Kindle devices that use the Kindle reader application, though only for ebooks purchased from Amazon.

Conclusion

Whether you agree with me that Amazon is a tax-dodging, price-fixing, dishonest, predatory, and greedy corporation (OK, I’m exaggerating a little here – I don’t think they’re greedy, they lost too much money in the beginning for _that_ to be true) or whether you think I’m a complete crack-pot, touchy-feely, post-hippie loser who doesn’t understand the realities of business in the 21st century, thank you for reading. I know this was an awfully long, dense bit of writing. In fact, it’s so long that I’ve decided to save the second half for next month. If you’ve the patience, in the October newsletter we’ll go for round two and I’ll explain some of the ways Amazon just doesn’t play nice. That is much more subjective but I think it’s also much more illustrative of the character of the company that is trying to get a complete lock on the books you buy.

Citations
1 http://antitrust.booklocker.com/amazon-backs-down-settles-antitrust-lawsuit-by-booklocker

2 http://www.internetnews.com/ec-news/article.php/3494946/Amazon+Buys+On+Demand+Player+BookSurge.htm

3 http://en.wikipedia.org/wiki/Predatory_pricing

4 http://www.retailgeeks.com/wp-content/uploads/2011/08/2011_0803_AMZN.pdf

5 http://articles.latimes.com/2011/jul/20/opinion/la-oe-0720-rutten-20110720

6 http://www.latimes.com/business/la-fi-amazon-tax-20110908,0,5065691.story

Categories : Bookstore News

Comments

  1. Sam M-B says:

    Also, Amazon.com as of 2007 owns Brilliance Audio, an audiobook publisher:

    http://news.cnet.com/Amazon-acquires-Brilliance-Audio/2110-1030_3-6185975.html

  2. Philip Weiss says:

    Although Amazon indirectly has a minority stake in LibraryThing, they really are separate businesses and LibraryThing doesn’t operate under the direction of Amazon. It isn’t “tricksey”. The disagreements between LibraryThing and Amazon are multiple and public. Amazon has actively prevented LibraryThing from doing things that they allowed GoodReads and Shelfari to do. There’s a reason why the LibraryThing mobile application doesn’t give people access to their own book catalogs and it has to do with Amazon essentially kneecapping LibraryThing.

  3. Alan,
    You definitely wrote a long and detailed arguement concerning the negative aspects of Amazon.com. To tell you the truth, some of it was way above my head. I only know Amazon as a seller of books, DVDs, and the publisher of many of my customer book and DVD reviews.

    I know from personal experience that if it wasn’t for Amazon, I’d no longer be able to buy books or movies in the quantities I do. I also know how Amazon has hurt the independent bookstores in our country. Still, I continue to purchase from them, not only because of their low prices on many items, but also because of the no tax and the free shipping. In some ways it’s a lot like Wal-mart. I shop with Amazon and Wal-mart because I’m in a very low income bracket. They help me to keep my head above water and to be able to afford cheap entertainment.

    Amazon is what keeps me reading and watching DVDs of movies I can’t afford to see at the theater. It may not be right, but I do what I have to do to survive and to ease the stress in my day-to-day life. I’ve been dealing with Amazon since 2000 as a paying customer and as a very satisfied customer. I will say, however, that you did make some valid points in your discussion here.

  4. Michele Lee says:

    I’ve been debating this a lot lately too, and please allow me to add in some tl;dr comments for the sake of continuing the discussion.

    When it comes down to it publishers and physical bookstores aren’t exactly innocent either. I worked for Borders for some time and they time after time ignored market trends (like ebooks) and engaged in bad business themselves. For one as late as 2000 AMAZON ran Borders’ web store meaning Borders literally handed over their name recognition to help Amazon get established. Toys R Us did the same. Add to that Borders not offering ebooks until 2010, their pricing and sales practices (like deciding the key to staying afloat was sinking money into their Plus card program which we were pushed very hard to push very hard, even though anyone with access to PW knew Borders was going down. I held the record for selling those things in my store, which was in the first wave of liquidations and I hate that.) bad management (I mean, why did they need to spend a ton of money and time on their own unique inventory coding system when books already come with ISBNs?), corporate greed, etc. Borders practically handed amazon the win on this one.

    (Side note, our first weekend of liquidation when terms were 20% off everything in the store we tripled our normal weekend sales–on Saturday alone. Why could there have been a 2 day 20% off sale, a sort of Borders version of Victoria Secret’s Semi-Annual sale, to boost sales and bring customers back into stores away from Amazon?)

    Publishers aren’t much better off because for years they’ve engaged in anti-ebook maneuvers despite the market slowly growing for as long as I’ve been in this business. Publishers have delayed or denied the release of books as ebooks, only given access to badly formatted files, and in many, many cases priced ebook versions ABOVE hardback book versions all in an effort to squash ebooks. So who can blame readers for flocking to the one place that appeared to meet their needs as readers?

    Which brings me to my next point. After my store closed I was faced with the dilemma of where to buy my books. B&N has 2 stores in my city, the closest is almost 30 min. away. BAM is closest (at 19 min with good traffic) of the big box stores, but still managed to never have my books in stock whenever I drop by. We have second hand bookstores, awesome, but never any recent releases. I could shop at the other Borders, but well, I wasn’t ready to be back in those stores. We also are lucky enough to have a indy store. But and this is a huge but, the indy store (like many) has a long, frustrating reputation for mistreating local genre authors, not stocking genre books at all, or only award winners and these stores and I have direct bad blood because my DH once caught them telling patrons an event I organized was canceled…while I was setting it up! I’m not alone in this as other area romance, SF, Romance and fantasy authors in the area have experienced similar problems.

    I always try to give my patronage to the places that are friendly and supportive of me (before or in return) and not places that treat me ( and others) badly, and the sad fact is that the only bookstore represented in my area that actually sells my books (small press published) is Amazon.

    And finally the last time I was looking to pick up a new release I visited three area stores, each at least 20 min. from my house and none of them had the book I was looking for. So I don’t want to order from Amazon, but my alternatives are order it through a physical store and have to drive all the way back out to pick it up, order it online where BAM & B&N only give free shipping to people with their member cards (or at least it was like that last time I ordered), buy it as an ebook (and since I have a 3rd party ereader without license to the Android App Store, Amazon and B&N don’t allow me to have their apps on my ereader meaning I cannot read books I buy through them–legally–on my ereader) or just order through Amazon, pop on an extra book (it is almost Christmas shopping season) and get it shipped to my house for free.

    I’m not saying any of this in defense of Amazon because I’ve been the one in your position (telling people all the sneaky, gray ethics they use), just to show that the non-Amazon alternative isn’t perfect either. Clearly I always try not to buy from them if I can avoid it (legally, I mean I could always pirate, but where’s the ethics in that?). It’s just a crappy world out there for readers these days. My experiences with the bookselling/bookstore world have put some major wounds into my love of reading, which is tragic all on its own.

    And if you’ve made it this far–thanks for reading :)

  5. F.R. Savage says:

    Interesting post. Thank you.

    As an author and publisher making most of my sales (at the moment) through Amazon, I have a vested interest in their success. I also believe passionately in marketplace competition and want to see more of it. But I have to agree with Michele Lee, above, that a large part of Amazon’s success is due not to any sneakiness but to their competitors’ lack of attention to customer needs.

    Here’s one example. I am often out of the US. It is possible to purchase Kindle books while physically located outside the US or Canada, although they cost a couple of dollars more (it’s expensive to send all those bytes a few hundred miles further, don’t you know). Conversely, one CANNOT purchase NOOKbooks when outside the US and Canada. Simply isn’t allowed. If there’s some legal reason for this, I haven’t been able to discover it. Result: Amazon wins the entire frequent-flyer subcategory of the e-reading public, which is not small.

    I’m rooting for more independent online bookstores to wise up to the needs of the online bookbuyer. Blogs like yours help. Thank you again.

  6. You could have said “Amazon engages in typical predatory ‘dominate a market’ practices” and been done – except for the fine detail.

    The problem with this kind of thing is that, given our current business ‘culture’ in the US, this kind of thing is virtually unstoppable.

    Low prices (make consumers happy, built traffic), grab distribution (choke out the competition), squeeze suppliers (a la WalMart), offer your own brands and pretty soon everyone in the chain is dependent upon you – or driven out of business.

    With all due respect to those who are saying the fault lies (at least partially) elsewhere, this kind of “business model” is well-honed and inevitable if someone has the dollars and the will to implement it and the only way to compete is to do the same thing yourself.

    Now Amazon is closing in on the final goals – complete control of supply. Wait until they start offering their own publishing deals. They’ve already announced an entity for just that. The offer will appear lucrative and attractive to budding new authors and, before you know it, it will be direct from author to consumer – through Amazon, every step of the way. And THEN the authors will start getting squeezed….

  7. [...] The following article was written by Alan Beatts and first ran in the Borderlands Books September Newsletter. It is provided here courtesy of Borderlands Books. Since the majority of Hellnotes visitors are avid readers, we believe it’s important to stay informed about the world of books and publishing, and we offer this article in that spirit. Enjoy …  article [...]

  8. Can you really call it “Amazon bashing” when you’re just giving readers hard cold facts. And isn’t this an most important time to be doing this. Like you said, all these Borders customers now have to make a decision. This great article will certainly solidify some minds.

    The point I like to make on this matter — having worked in bookstores for over eight years — is that customers, most of the time, don’t really know what they’re looking for. This is where Amazon has no strong footing. You can kind of look through different covers and books through their site, but it in no way compares to walking leisurely through any bookstore, looking over tables, displays, endcaps, and even sweeping over the spined books on the shelves to discover something you didn’t know about — perhaps by an author you know or like — or even discover something completely new you never knew existed. This is where I think independents certainly have an upper hand over Amazon.

  9. Ann says:

    Don’t forget that Amazon recently bought The Book Depository. A biggie for those of us outside the US (even those just to the north) because it Amazon’s most viable competitor for non-US sales.

    Sigh.

  10. M. McVay says:

    I agree with much of what you said regarding business practices that are completely self-serving. However, that is the model of all extremely successful business. Microsoft comes to mind in the computer world. The Big 6 NY publishers did this for some time–completely controlled the gateway to books.

    Blame also lies in the arrogance of these same traditional publishers who put their head in the sand for the past ten years (or at least five) as ebooks became more viable. I can remember in 1998 when I published a textbook about online learning, I had to beg my publisher to even put up a website with links from the book. The publisher didn’t believe anyone would go there. I ended up building the site myself and hosting it myself. All along the way traditional publishers have mistakenly believed they were big enough, controlling enough, that they could quash the ebook revolution. They tried messaging against it, they tried the traditional approaches to controlling authors. Why? Not because a true belief in paper was the best for the consumer. It had everything to do with greed and not wanting to invest in the future.

    Sorry, but seeing the future and having a vision for where you fit in is exactly what makes businesses rise or fall. In the end, the consumer rules the day. Yes, Amazon buys up other companies. But they can’t do that unless those companies let them. Even B&N, who I have personally been loyal to from the beginning in both traditional and ebook buying, can’t seem to get it’s act together and decide who should run the company or how they should move forward.

    Did Amazon drive out Borders? No. It was Borders leadership who drove out Borders. It was financial mismanagement, not understanding the market, and building an environment that was not their core mission. Yes, I’m sorry to see Borders fail, but in no way do I believe Amazon caused it.

    In my mind, there are other players who can take on Amazon but so far they haven’t stepped up to the plate very well. Apple made a dent, but not enough. B&N has made the biggest dent but then was hampered by internal politics. Will the big 6 NY publishers find a way to make a dent? They could but can they get it together in time? Right now they are still between the cowering in the corner mode and complaining about having to invest in technology and why their pricing model has to be richer than everyone else.

    Amazon is VERY good at having a vision and aggressively moving it forward. They are very good at taking advantage of the marketplace when other forces falter. Personally, I don’t think asking consumers to forgo their pocketbook and “buy independent” will work on a large scale. For me, living in a small rural area where independent book stores support either best sellers or local writers and no one in-between doesn’t work. For me, the absence of ebook choice locally makes it untenable. Yes, I primarily buy B&N because I’ve liked them better from the beginning. I look the Nook better than the Kindle. I like the customer service. However, I’m concerned that the guys at the top are fighting and don’t know what in the heck they are doing. I’m concerned that they make it so difficult and time consuming to get print and ebooks on their site, that a lot of small publishers don’t bother. I’m concerned that they don’t understand the market and will see their 30% shrink. If that happens who will be left?

    Instead of asking the consumer to avoid Amazon, ask the other corporations to get their act together and compete. If someone will put together a viable plan and go for it, I’ll support them.

  11. Katy Loffman says:

    Wow – I had a bad feeling about Amazon, but it’s great to see a detailed analysis of exactly why.
    I think this is a difficult time for businesses to keep up with all the changes, and many publishers don’t have the money to make all their books available as ebooks or get the files right first time, but it’s like the man said – they can’t afford to lose as much money as Amazon in making that initial investment.

    I feel for Michele, because her experience is probably typical of many here in the UK too. However the parlous state of our bookselling trade just shows how successful Amazon’s tactics have been at decimating the competition. I too have been longing for independent bookshops to start selling ebooks. I buy ebooks from WHSmith whenever I can, but sometimes I can’t resist the convenience of the Kindle app.

    I really feel that a company with such a big dominance in the market should feel a sense of obligation and social responsibility in some way. Maybe one day??

  12. Marisa says:

    Only one comment. Perhaps you should have better informations in some points. If you’re a Borders customer you can have your bookshelf transferred to Kobo (as I’ve done), and you can buy at Kobo, Sony, Books On Boards, any Internet bookstore… There’s world outside the two biggest bookstores… in USA.

  13. As an author, I can’t, in good conscience, spend a penny at Amazon because of their callous treatment of authors and small publishers.

    The used book button on the same page as the new book means the author and publisher never see a penny from a used book sale, but Amazon makes a nice profit.

    For years, the small publishers who pioneered the ebook market were forced to take a very small percentage of whatever Amazon decided to sell the ebook at. If a book was given away, the publisher and author made nothing, and Amazon used the freebie to advertise themselves.

    Amazon has slyly acted as a censor to its catalog of books. Erotica and gay literature have vanished from its search engines more than once until a storm of protest hit, then the books would reappear only to disappear later.

    It’s almost impossible to remove cloned pirated books from their catalog, and ebooks whose author has changed publishers don’t go away despite numerous requests through their official channels.

    People, particularly authors, who only see the savings are fooling themselves if they think Amazon is on their side. Amazon will suck all the life and profit out of publishing with no regret because they only think of their bottom line, and, if they ever truly become a monopoly, the prices will rise.

    The only company that frightens me as much as Amazon is Google.

  14. jpatti says:

    I wanted to buy an in-print psychology book in 1998, and went to BOTH my local Borders and Barnes and Noble, and was told it could not be ordered as their distributor didn’t have it in the warehouse. There was nothing to be done about it, I simply could not buy the book. I had to drive to both stores to be told they couldn’t get me a book their own catalogs said was in print. That’s pretty lousy customer service towards a customer who has always spent most of her “mad money” on books… for decades.

    Having ordered a few books from Amazon the previous year (and gotten an Amazon coffee cup at Christmas as a thank you!) I checked their site, and they had the book I wanted. And I wrote all you guys off… for making me jump through hoops (you wouldn’t order books on the phone, made me drive in) in order to tell me no.

    Consistently, Amazon had what I wanted, and also had fantastic customer service. To the degree that when I mentioned jokingly in an email to customer service that I hadn’t gotten a coffee cup the second year, they sent me one!

    Whatever they’ve done to piss you off, what they’ve done for me, as a customer, was sell me the books I wanted as conveniently as possible for me. Borders and B&N didn’t do that, they REFUSED to sell to me even inconveniently!

    Now that I’m disabled and find it difficult to shop in person at all, I buy almost everything other than groceries from Amazon. Amazon began as my bookstore, and now is my mall.

    You guys lost because you didn’t give me what I wanted and Amazon did.

    And it sure wasn’t about sales tax. One cares about sales tax when one buys a home appliance, not a paperback. I could care less about a 25 cent difference in price.

    Amazon made it easy for me to buy from them and made customer service easy. That’s it.

    I admit I have some issues with the whole Kindle thing, but still… it’s better than any other choice out there.

    I don’t see HOW ebooks can be sold at a loss when so many of them have the same price as paperbacks, and sometimes even higher. It just doesn’t make sense that me downloading a file should cost more than printing, binding, warehousing, and then shipping a book. 9.99 is NOT cheap for a paperback, I don’t think that, I never have. And I’ve a bit of experience buying books… we have thousands of books here, not counting ebooks.

    The agency model actually hurts consumers. In the real world, a bookstore orders too many of something, and later marks it down. With the agency model, the books can never be marked down, so you get the upside down situation where the paperback is half of the ebook price. Fighting the agency model was to my benefit.

    What really makes me an Amazon customer is… they sell what I want as conveniently as I want.

  15. Laurie Mann says:

    Here’s another reason to avoid Amazon – conditions so bad at one of its warehouses that OSHA was called in:

    http://www.mcall.com/news/local/mc-allentown-amazon-complaints-20110917,0,7937001,full.story

  16. Michael Walsh says:

    “The used book button on the same page as the new book means the author and publisher never see a penny from a used book sale, but Amazon makes a nice profit.”

    Er … same situation with these things called “used bookstores.”

  17. Common Sense says:

    Sorry, you are just wrong about Amazon. Every action Amazon has taken is the hallmark of a well-run company that puts their customers first. A company needs to continue to grow and expand in order to keep providing a good return for investors. Try an Economics 101 class.

    Amazon makes a multitude of products available at a good price and also allows small sellers to take advantage of their business infrastructure for their own businesses. Amazon has a vast inventory of almost every book you can think of, far more than any physical bookstore can carry.

    Amazon also provides other services that save people and businesses a ton of money. The company I work for uses Amazon’s Cloud Services which saves us at least $15,000/month over what we paid at a data center. Besides the money savings, it’s also much more flexible since the servers are virtual, we can spin up a new one in minutes (or automatically) if need be. Try doing that with physical hardware.

    Bookstores are the victim of technological progress. It’s happened over and over again throughout history. It does hurt those immediately involved in the industry, but is a boon for the economy. Bookstores need to reinvent themselves or go out of business.

    As for Borders, the company made a number of poor business decisions long before ebooks were around. Ebooks were just the nail in the coffin.

    You are also wrong about where to obtain books now that Borders is gone. Frankly, I rarely shopped at Borders, there was something about the ambience and the prices that I just didn’t like, B&N was more my style. But I also purchased books at Sam’s Club, Target, and the grocery store. I got bags of books at our library’s used books sale twice a year.

    Of course, now that I have a Kindle, I don’t buy physical books at all, unless it’s a gift. Ebooks are one of the best inventions ever and Amazon does it the best. I can carry thousands of books with me in my own library. I can enjoy many great indie authors that couldn’t get past the publishers in their ivory towers in NYC. I get to read all kinds of books that I would have never come across in a bookstore since most bookstores only carry a limited inventory of the most popular or bestselling. And as of today, I can also check out ebooks from the library without ever leaving my house and I don’t need extra software like Adobe because the ebook is sent directly from Amazon, the same way I get any ebook.

    Amazon provides services and products that their customers want, with good prices and the best customer service in the world.

  18. Wow, this article sure generated a lot of comments, which is good!

  19. Michael said, ‘“The used book button on the same page as the new book means the author and publisher never see a penny from a used book sale, but Amazon makes a nice profit.”

    Er … same situation with these things called “used bookstores.”’

    Most bookstores don’t have the used copy right beside the new one, but that’s what Amazon does. At least with a used bookstore, the reader has to work to find the book.

    Amazon may just be doing business in the usual cut throat style as other businesses, but publishing can’t withstand its pressure. To cut costs, factories have moved to Third World countries with its cheap labor. Off-shoring the contents of a book isn’t feasible unless you want to read a novel that written as well as the average gibberish-filled installation manual.

    Some authors are willing to work for next to nothing, but most won’t if there’s no hope of income in the future.

    Meanwhile, Amazon with its own publishing program and the success of well-known authors being lured to self-publishing through the Kindle program is sucking income away.

    Unless big publishing can figure out a way out of this mess without screwing their authors, which is what is currently happening with the under reporting of royalties, etc., they are totally screwed, too.

  20. Michael Walsh says:

    “Most bookstores don’t have the used copy right beside the new one, but that’s what Amazon does.”

    I believe Powell’s does, tho. There maybe others.

  21. [...] – Hellnotes explains why Amazon is nobody’s friend [...]

  22. Kat says:

    I wish I could afford to hold every company to the standards I wish, but I cannot. Therefore, I have to pick and choose my battles. I already will not buy from companies such as Wal-Mart, Target, Nike, Black & Decker, Urban Outfitters.. (the list goes on and on, really) because they are not good corporate citizens. I will NOT be adding Amazon to the list. I am with Wayne C. Rogers, above – I could not enjoy as many different avenues of entertainment, particularly the number of books I go through as a voracious reader, without Amazon. I, too, read books in genres that my podunk public library (and even it’s lending partners) won’t purchase. My favorite local bookstore survived for many years alongside Amazon. It was when a B&N store came to town that it (and the only other indie) went out of business. So B&N will never get another penny from me, because that is a wound on a personal level, which Amazon has never inflicted. As for buying from indie publishers, I love to share books and will only buy ebooks that are lendable – the ones from publisher websites are not. If they make them lendable through Kindle, I’m happy to purchase them through Amazon, and will continue to do so as often as I can.

  23. David says:

    I don’t see much truth in the major points of this article or evil wrongdoing by Amazon. The long term implication of the successful Amazon model is that all the publishers are going to die along with most book stores that only sell paper copies. Good riddance.

  24. Em says:

    When you get this wrong: “On the other hand, the three other major ebook retailers – Apple, Barnes & Noble, and Google (plus all the independent booksellers Google partners with) – use some variation of EPUB format which is device agnostic and can be used with all the ebook readers, computers, and smart phones out there (except for the Kindle).”, it’s difficult for me to take the rest of it seriously. Try putting a Nook book on a Sony or Kobo reader without breaking B&N’s DRM. And if you can do that, you can put it on a Kindle – or a Kindle book on a Nook, for that matter. And try putting an iBooks book on ANY non-Apple device.

    Regarding the comment about used book sales on Amazon – most of those aren’t sold directly by Amazon, they’re sold through Amazon by other sellers, including Goodwill. So Amazon takes a piece, but not all, of that profit.

  25. [...] let’s not forget, though, that Amazon is nobody’s friend. For readers and booksellers more than writers, but still worth a [...]

  26. [...] Related posts:Amazon is Nobody’s Friend, Part One [...]

  27. T.Moore says:

    You all might be heartened to know I have taken the first steps toward divesting myself of Amazon association. Quite frankly, sales of my fiction books have been miserable for 3 years. In the last few weeks I have seen sales of the ebooks tank. It is due in part to the fact that Amazon is restructuring its site to slowly exclude indie bookselling authors in favor of the major publishers, and according to the complaints boards, Amazon’s customer service is shockingly arbitrary. To that end, I have withdrawn my fiction listings in print from Amazon. If I do not see an improvement in sales of the ebooks, I will withdraw those as well.

    It is true that Amazon is a zero-sum game. Even if you buy a Kindle Fire, it will never have the same features as an Apple tablet. When Amazon buys all the services it thinks it needs to succeed, and edges out all the independent booksellers online, it will have achieved monopoly status. I might as well get out soon than lose more sales to the inevitable.

  28. Andrys says:

    I’d never argue that a large company ever is out for anything but itself. And Amazon is pretty good at that and focused on only its own growth and and whatever makes its stockholders happy.

    However, your section on the 1984 deletion shows only a surface repeat of what you read from articles that were the most shallow and with no depth. Most do stop at recited “facts” – it seems to satisfy a hope for the worst, no need to look at the details.

    To see a bit more, here are those details (with references to other logs of what was happening at the time) involved with what was a stupid action on Amazon’s part but which has been simplified to a children’s story since then, with few facts noted.

    http://kindleworld.blogspot.com/2009/09/amazon-settles-lawsuit-over-remote.html

  29. Steven says:

    Amazon continues to be predatory in the book-space. Previously, their ownership of Stanza through Lexcycle was seen as benign and threatening. Now, with Apple’s release of iOS5, the axe has fallen and Stanza fails miserably.

    Amazon has killed Stanza as they have had months to make it compatible with iOS5, yet have chosen not to do so. That would put Amazon on the sh!tlist for about a million Stanza users. Given what Amazon can do to your library remotely, I would always look for an alternative. It’s bad for Apple as well as people refuse to upgrade to iOS5 (or downgrade to 4.x.x) so that they don’t lose the use of Stanza.

    Stanza: iOS 5 issues (“official support forum”)
    http://getsatisfaction.com/stanza/topics/ios_5_issues

    iOS5 kills Stanza!
    http://www.teleread.com/paul-biba/ios5-kills-stanza/

    Gah! The new iOS5 killed the main thing I use my iPhone for.
    http://bashinginminds.com/2011/10/13/gah-the-new-ios5-killed-the-main-thing-i-use-my-iphone-for-time-to-find-a-new-ereader/

    The Digital Reader blog
    http://www.the-digital-reader.com/2011/08/08/rip-stanza-2008-2011/

    Amazon’s Stanza app in limbo after iOS 5′s release
    http://www.pcadvisor.co.uk/news/mobile-phone/3315357/amazons-stanza-app-in-limbo-after-ios-5s-release/?olo=rss&mid=51?m=false

    Stanza in iOS5… dead…
    http://www.mobileread.com/forums/showthread.php?t=145767

    Facebook: Revive Stanza for iOS 5
    http://www.facebook.com/groups/230548790339245/

  30. [...] is Nobody’s Friend”, Part One Bear in mind that I’ve made a considerable effort to look at Amazon from the standpoint of [...]

  31. Bill Beatts says:

    We must be related…!!! Moreso when you realise my full name is William Alan Beatts…. Alan has appeared frequently in our family since 18th Century… in Scotland….thought I would say quick hi….!!

    Bill

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