Amazon vs. IPG

In today's business section of the New York Times, I read "Amazon Pulls Thousands of E-Books in Dispute." Then, this morning I found a link in the "Morning Coffee" column to an article at PaidContent about the controversy, "Update: Amazon Yanks 5,000 Kindle Titles In Fight Over Terms." Page 2 of the PaidContent article reprints a memo IPG sent to its publishers about the controversy. Both articles are worth reading and thinking about.Recent news from and about Amazon has been disturbing. (Watch for the coming article, Worth Noting: Amazon is an Author’s Friend — Or Maybe Not, and for Priming the Pump: Amazon’s Prime Program, which is scheduled for March.) For quite sometime, I've been saying that the rosy picture painted of Amazon can't last, and I think we are beginning to see that prediction come true.

I think the New York Times sums up the dilemma neatly: "Amazon is under pressure from Wall Street to improve its anemic margins. At the same time, it is committed to selling e-books as cheaply as possible as a way to preserve the dominance of its Kindle devices." These are two conflicting goals and there are limited ways available to Amazon to meet them.

Exclusivity is one way. If consumers want certain books, make them available only on Amazon and ebookers will come. Most ebookers will buy a Kindle because they do not want to deal with stripping DRM (Digital Rights Management) and the conversion process, not matter how easy to do; most consumers want to buy and go.

The second available method is putting the squeeze on distributors and publishers, then authors, then consumers. The lost agency fight (remember how quickly Amazon capitulated?) demonstrated that as powerful as Amazon was, it wasn't yet powerful enough to win a battle with the Big 6 publishers (Penguin, Macmillan, Simon & Schuster, Random House, Hachette, HarperCollins). Amazon has begun striking back at the Big 6 with the establishment of its own publishing arm and its exclusivity deals.

But Amazon is probably powerful enough to win the fight against the mid-tier and low-tier distributors and publishers. It is testing the waters with the battle with IPG. If Amazon wins, especially if you combine the win with how cavalier Amazon is in its dealings with exclusive authors, Amazon will not only dominate the ebook marketplace but be in a position to squeeze lower-tier publishers and distributors, and, ultimately, perhaps the Big 6's margins to the point that they will not be able to survive. When that squeezing is done, the next in line has to be the authors, followed by the ebookers.

A monopolist is not anyone's friend. The ebooker mantra that "Amazon is my friend and will do me no harm" is as false today as it was yesterday and as it will be tomorrow. Amazon is not anyone's friend -- it is a business that has to ultimately satisfy its investors by giving an acceptable return. There is nothing wrong with Amazon being a business; what is wrong is that so many ebookers are lulled by the way things are today and fail to look at the long-term implications of Amazon's success in moving toward becoming a monopoly.

I am aware that many ebookers would be happy to see every publisher and distributor disappear, thinking that when that happens authors will flourish by directly dealing with megacorporations like Amazon and that the consumer will benefit from even lower prices. Unfortunately, history proves that such expectations, in the absence of government price regulation, simply do not come to fruition. Monopolies ultimately result in price rises for consumers and the continual squeezing of suppliers.

Once authors have to fend for themselves, they will be even more susceptible to being squeezed because they will have to stand alone against the 800-lb behemoth. I hope IPG stands firm; I hope it can stand firm. Other small distributors, like Publisher's Group West, should think about their own vulnerabilities. Will they be next if IPG fails? Should they support IPG?

My questions are these: Once Amazon has squeezed the publishers and distributors dry, and once many authors have decided that they are better off self-publishing and dealing directly with Amazon, how long will it be before Amazon starts squeezing authors dry? And once authors are squeezed dry, how long will it be before Amazon starts squeezing consumers?

Contrary to ebooker belief, neither a monopolist nor a wannabe-monopolist like Amazon is the consumer’s friend.

reposted with permission from An American Editor

3 Comments on Amazon vs. IPG

  1. Worth thinking about is that Audible (another Amazon property) provides enormous advantages to publishers that sell on Audible exclusively. It’s like double the royalties. If Amazon did something like that with ebooks (and at this point, I think they probably can), then either 1)publishers should/will exit Amazon and sell from other channels and/or 2)Amazon will face antitrust challenges.

  2. As one of the affected publishers in this dispute (IPG distributes Wings Press) I have to say that Amazon’s intentions have been suspect for at least the last two years. It is increasingly obvious to independent publishers that Amazon intends to put us all out of business. Amazon apparently wants to kill off the distributors, then kill off the independent publishers and bookstores, and become the only link between reader and author. They offer exorbitant royalties to authors, mostly unsuspecting ones at this time, luring them away from the editors who would have helped them perfect their work, away from the publishers and designers and publicists and booksellers who have dedicated their lives to building the careers of authors, while themselves making a living from books. Even the lowly book reviewer has been replaced by semi-anonymous reader reviewers. All these are the people who sustain literary culture. Amazon’s purely capitalistic assessment of the book-as-widget will flood the world with poorly conceived, unedited PODs and ebooks. It will become increasingly difficult for authors to hone their craft outside of academia–and we know how well that has worked. But even the “good deals” that Amazon offers to authors won’t last. They will become worse and worse for authors as Amazon destroys its competition — the backbone of intellectual freedom in this country — under the guise of providing greater access. Eventually, the royalties Amazon offers will begin to plummet. Ebook sales have been a highly addictive drug to many smaller publishers. For one thing, there are no returns. And they allowed smaller presses to get a taste of the kind of money that online impulse buying can produce. Already ebook sales were underwriting the publication of paper books at this press. For Amazon to rip them away is a bait-and-switch tactic guaranteed to kill small publishers by the hundreds. Ah, but predatory business practices are so very American these days. There was a time not so long ago when “competition” was a healthy thing, not a synonym for “murder.” Amazon could have been a bright and shining star, lighting the way to increased literacy and improved access to alternative literatures. Alas, it looks more likely to be a large and deadly asteroid. We, the literary dinosaurs, are watching to see if this is a near miss or the beginning of extinction.

    • Hmm. Finally an IPG customer. So now we can finally ask the hard questions. Firstly why use them at all to distribute e-books to Amazon? It’s un-necessary – you could upload to Amazon just as easily as to IPG. They added no value at all to the author or the consumer. Were they paying you better than the 70% Amazon will pay you – or any author – for simply dealing with them directly? Were you passing that on to your suppliers? (No? In which case are you surprised when your suppliers, if they see tepid value-for-money in your services, simply opt for the 70%. Undoubtedly, Amazon will squeeze. But will it squeeze authors from 70 % to the 14.5% of gross they may be lucky to get from their Big 6 publisher (who have squeezed and gouged the midlist for decades) without someone stepping up to the plate? Yep. Amazon are big, but they tiny compared to those who want content, Apple and Google, just for starters.)

      And what was Amazon supposed to do – this one has me bollixed completely – when it could not agree to a new contract with IPG? If they kept the book up they’d be guilty of selling something to which they had no rights. You know, this ‘piracy’ thing, which is the same as publishers putting up books to which they do not have the rights – quite a common practice, I believe, but still illegal. If they take down the book (which as they have no contract, they are obliged to do) down you say they’re murdering you. You can’t have it both ways. You can refuse their terms, but if you do, they actually _have_ to de-list you. Your, and their choices. The books are still available elsewhere. If you take their customers, they’ll agree to terms. Otherwise accept 70% and list them on Amazon without IPG.

      The piece above starts from a false premise: that Amazon lost the agency fight to the big six. The Big Six have nearly as much clout with Amazon as IPG (ie none at all). Amazon lost the fight… when the Big Six’s authors called to arms the one force that matters to Amazon – its customers… most of whom have NO IDEA who publishes their favorite authors, but were really upset to see the authors hit. Amazon backed off really fast… and learned, and subverted the authors, with an offer 70% and bypass the publisher and distributor. In the meanwhile the big six told each other how tough and wonderful they were, and expressed their gratitude by screwing over the people who saved them. Because you can always shaft the authors a bit more, they have nowhere else to go… except now they do. I LOVE hearing authors’ royalties described as ‘exorbitant’… that’s quite a description from the people who left authors with 6% of the income to try and live on (which yes, is what I got as noob 12 years back, and I was lucky to get that much.) Yes, small publishers did far more of what publishing did 50 years ago – find, nurture and develop. But just how much value does that add? Take an e-book. You cannot say the book the author created is worth 14.5% of the total, and our editing and cover is worth 55.5%!!!! There is no way publishers input is worth MORE (in an e-book) than the author’s.

      So now we hear howls of outrage… (which were silent when Borders and B&N did precisely the same things and worse, destroyed the Indies, which have kept schtumm for years about the increasingly exploitative conditions for authors, and techniques which stifled creativity and destroyed the readership, and added less and less value) instead of seeing the only possible response to aggressive competition. Which is, you know, to compete. To sell from your own website, to offer better than Amazon rates and services packages to authors from those sales (in exchange for sending readers there, not to Amazon), to offer services and a market that are worth a lot of an author’s income, because he’ll still make more than the 70% he would on his own. That’s not hard. You simply have to bring him more customers. If you’re big 6 quit the ridiculous overheads of NY and bestseller gambling, and move to somewhere cheap, and do solid business.

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