The term “winner-take-all” was first coined in Robert Frank’s and Philip Cook’s book, The Winner-Take-All Society, and whether it’s Google ( search), or US Steel, or AT&T. aqor Facebook/Google (online ads), or Standard Oil, or Amazon (online retail), there are dozens of examples you can use to prove the point that one company can dominate a market or industry.
There’s even been some speculation that we would soon see the same effect in the ebook market as revenue concentrates among a handful of mega-hit best-sellers, leaving less popular authors high and dry.
As someone who would like to see authors maintain their independence and earn enough to be able to write full time, I thought this would be a terrible future.
Lately, though, I have come to worry about it less and less.
I was reading an article on The Spectator this afternoon which made me realize that the large-scale effect of winner-take-all doesn’t matter on the small scale.
Rory Sutherland tried to argue that the internet amplifies the winner-take-all effect, but in order to do so he first overlooked the fact that winner never actually took all.
In fact digital connectivity increases rather than reduces the drive towards urban concentration. By greatly extending the range, ease and frequency with which people can form networks, it increases the number of people who need to meet each other in person: such meetings increasingly concentrate in the world’s few megahub cities. So the draw of London is magnified still further.
This distortion happens at a smaller scale everywhere, of course. If you have two offices, with ten employees in Liverpool and six in Preston, you will find that over 90 per cent of all meetings take place in Liverpool. But at a larger scale things get more extreme.
When technology and globalisation break down the buffer of geography entirely, the winner-takes-all effect intensifies. An early manifestation of this came with the invention of the gramophone: in an era of live performance, there was a good living to be made as the fifth best tenor in Denmark; when the gramophone appeared, one man, Caruso, earned the lion’s share of worldwide royalties.
If you ever wondered why so many of the world’s packaged goods brands have their origins in the American Midwest of the late 19th century, it’s the same effect at work. Before the advent of the railways, the United States was home to thousands of smaller regional brands. The railways killed this diversity, with the winners overwhelmingly being manufacturers close to the rail hub in Chicago
The problem with Sutherland’s lamentations is that his facts don’t hold up to scrutiny.
He was wrong to claim that national distribution killed local brands, and furthermore, he is even more wrong on what market concentration really means in terms of consumer choice.
InBev may dominate the beer market, but there are also ten thousand craft brewers. A handful of companies make most of the packaged food you eat, but there are also thousands of local brands and niche food providers (and let’s not forget the tens of thousands of farmers selling direct).
And while the occasional Amazon AWS S3 outage can take down a lot of the internet, there are still hundreds of alternative hosting companies – including one just down the road from me here in Prince William county, VA.
And the same goes for ebooks.
In 2014 Marcello Vena argued that the ebook market would soon see the same winner-take-all effect as blockbuster ebook titles siphoned sales from the backlists, as mega authors occluded lesser-known authors.
Thankfully, the Big Five’s insistence on retail price maintenance in the ebook market has made that impossible, but even without agency, winner-takes-all will not have the expected destructive impact on the ebook market.
If there is anything we can learn from the study of market history, it is that no matter how concentrated the market might be, there will always be room for indies.
In fact, when it comes to content creators, the internet may have the exact opposite of the winner-take-all effect.
Take the music industry, for example.
Under the winner-take-all concept, the record labels should control the music industry even more so after the internet than before, but that has not happened. Instead, the internet has fragmented the market by creating an infinity of channels like Soundcloud, Youtube, etc which creators can use to route around the labels.
The same holds true for many other types of content, but alas, we don’t quite have that situation in the ebook market. The supply side of the ebook market shows no sign of market consolidation, but thanks to agency the retail side has been reduced to Amazon and a handful of large ebook retailers.
Does that consolidation still prove the point of the winner-take-all effect?
image by protohiro