Amazon will never monopolize the ebook market

I've been hearing a recurrent theme for some time now about Amazon and their market share. There are  a lot of people concerned that if Amazon ever got a big enough chunk of the ebook market, it would be able to charge whatever it wanted, and could demand whatever term it wanted from publishers. In fact, I'd say that this fear is most of the reason Agency pricing came about.  Greed wasn't the biggest spur; I think publishers feared Amazon (and still do). I believe the fear is misplaced. I really don't see how it's possible to effectively monopolize a digital market. No matter the market share, there will always be one competitor which won't go away: piracy.

Now, I want to first point out that i think it's possible to dominate a niche market and not be seriously affected by piracy. But that would only work if the niche is small enough that it doesn't attract the attention of a pirate.

In general, you can't effectively monopolize a digital market. At least, you can't do it in a way that will hurt the customer. Raise prices too much and you will simply drive people to piracy.

I also don't think it's possible for a middle man to dominate publishers (not anymore). It is simply too easy to create a new distribution channel these days. There are tools for making a webstore readily available online which range from moderately difficult to idiot proof. There's no reason publishers can't sell their own content.

If you're going to say that you can't get people to come to your store, then you need to take your store to them. OPDS now supports in-app sales of ebooks and digital content. You can even sell ebooks from inside other people's apps, not just your own. In fact, Aldiko already supports this.

image via Flickr

About Nate Hoffelder (11381 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader: "I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

11 Comments on Amazon will never monopolize the ebook market

  1. You definitely can’t monopolize a market when you sell something that can be used on only one device, even if that device is yours.

  2. Guess it depends on what you mean by monopoly. Is Apple’s dominant position atop the digital music market a monopoly? It is certainly overwhelmingly dominant.

    Interestingly enough it looks like B&N might have emerged the big winner due to agency pricing, see
    http://www.authorsguild.org/advocacy/articles/how-apple-saved-barnes–noble.html

    • Are they using their position to the detriment of music buyers and creators? If not, then i don’t see the problem.

    • Its too early to say Agency Pricing is going to “save” anybody. Or even that it has done anything to hurt Amazon; Amazon’s early market share only looked outrageous because the ADEPT epub “gang of five thousand” had barely opened its doors in 2009.
      All Agency Pricing has achieved, so far, is:
      1- provide a pricing umbrella for small and medium publishers to price *their* ebooks significantly lower than the Five Price-Fixers and gain exposure and market share.
      2- provide Amazon (which is happy with single-digit profit margins) extra revenue from Agency-priced ebooks to subsidize lower pricing on the Kindle readers and the non-agency-priced books.
      3- provide a baseline (the 70-30 split) for Amazon and B&N’s inhouse publishing efforts and for established authors willing to bypass publishers and go straight to the big retailers. It is no accident that the arguments between established authors and publishers over ebook royalty rates got really nasty right after the Agency Model was put in place.

      It is way too early to say Agency Pricing is good or bad in the long-term but I can’t see how giving Amazon extra money to play with is going to hurt them much. As things are going, Amazon will soon be able to give Kindles away for free and still come out ahead both short and long term. I suspect the only reason they don’t is that they are supply-constrained; they’re already selling all they can get their hands on. The moment they can boost Kindle supplies significantly, we’ll see another price cut and another wave of dedicated reader vendors drop out. As is, thanks to Agency pricing means Amazon gets to play the game both ways; they take a full 30% cut of agency-priced ebooks to balance out the minimal margins on other ebooks *and* they can be the “good guys” arguing for lower prices and the publishers get the blame for forcing higher prices on them.

      With enemies like that you’ll never have a shortage of friends.

      • It is too early in the Age of the Ebook to say anything really, but i do so love speculation…

        That said I’ve read rumours that B&N was struggling in the ebook wholesale wars before the age of agency. Other than helping B&N the consequences of the agency model seems to have been the following:
        1-Accelerating the trend towards towards lower priced ebooks gaining marketshare, both smaller publishers and especially selfpublished Indies.
        2-Changing the mix of retailers in the Agency 5, that is while Amazon was up to 90% of their ebook sales it has now dropped to 60% or less. This is while they have ceded market share but I suspect they accept the trade-off.
        3-Gave the Google wholesaler model a start. Without agency it was DOA.
        4-Made the Agency 5 as popular as George Bush amongst many readers.

        I don’t believe the Kindle (or Nook) are sold below cost at point of sale, though I concede the opposite view is widespread. Has iSuppli ever done a breakdown of the Kindle3?

        Also unlike many others I suspect that – unless legally challenged and overturned – agency is here to stay. Having acquired these powers the publishers will never relinquish them willingly.

        Pricing is another story though. Here is my prediction:Before the end of the year we will see not only price drops from the agency 5 but an actual price war as they get aggressive for market share. Irony of ironies…

        Sorry for the length, had a few too many lagers!

        • To an extent, there already is a price war betwen the oligarch BPHs; after all, Random House dropped out on the eve of the announcement and has benefited by sticking to competitive retail pricing.
          I would suggest that many of the “achievements” attributed to the price fix scheme were going to happen anyway. Also, I would caution against over-valueing market share; as Palm proved in the days of the PDA wars, a reckless pursuit can result in hollow sales.

  3. Baloney. There was Apple and Microsoft still got rightly reamed by the DoJ, the FTC, and the EC.

    >>> OPDS

    Yeah, until Apple notices and bans THAT.

  4. Defacto “monopolies” (from high market share) only matter if the barriers to entry are such that the dominant player can control pricing. This is not true about the current ebook business because the barriers to entry are low. Especially in the ADEPT DRM ecosystem.

    If Google can actually deliver on their Google Books model as, essentially “wholesalers” of epubs, pretty much anybody will be able to play at minimal investment and risk.

    Combine that with the Agency Model’s price fix scheme (which means it is the oligarch BPHs that control prices) and there is ample incentive for anybody with a recognizable name to set up an ebookstore. Wouldn’t surprise me to see WalMart, Target, *and* BestBuy get into the game some time this year.

  5. Mrawhimskell Klaar // 19 February, 2011 at 9:41 pm // Reply

    Just wondering why amazon doesn’t want us to know how much kindle’s they’ve actually sold? stragetic? or just so we don’t guess how big or small their hubris actually is.

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