The Authors Guild blog has an interesting piece looking at Amazon’s growth in light of a decline in antitrust enforcement. For background, it brings up the Bloomberg Businessweek story I covered the other day, it moves on to excerpt a piece in Harpers by Barry Lynn that compares Amazon to the current state of other monopolized markets, such as the chicken-raising industry:
Mr. Lynn makes the case that Amazon’s dominance isn’t just a story of an industry disrupted by online commerce and digital upheaval, it’s about the abandoning of New Deal era protections of retailers in 1975 (promoted by backers as a means to fight inflation, says Mr. Lynn) and what he portrays as a shift in 1981 in the Justice Department’s interpretation of antitrust law based on “Chicago School” theories of efficiency and consumer welfare. The upshot appears to be that non-consumer markets (business-to-business markets and labor markets) are often insufficiently protected from monopolies.
Chicken growers are largely at the mercy of the poultry processors who buy their adult birds, who have a number of means to dictate the growers’ business practices. In Silicon Valley, Google and Apple had a private agreement not to poach each others’ employees. Even the 1,750 beer microbrewers in the US mostly sell through two distributors that control 90% of the market.
Meanwhile, Amazon has such tight control over the lion’s share of the book and e-book market that even the publishers who are the most vehemently outspoken against it will not go on record with their comments. It regularly throws its weight (and the weight of its $6 billion in capital) around, and publishers who do things it doesn’t like are prone to have their “buy” buttons removed for a while.
Amazon has such a big chunk of the market, the Authors Guild notes, that even the disappearance of Borders did not drive as much traffic to remaining brick-and-mortar bookstores as one might have expected:
To understand just how precarious things are, realize that last year’s Borders’ bankruptcy represented an enormous reduction in browsing space, shuttering 650 stores. (B&N has about 700 stores.) One benefit of the loss of Borders should have been a short-term lift to B&N’s 700 stores and the 1,500 or so remaining independent bookstores. B&N’s sales were indeed up in the nine weeks before Christmas, Ms. Bosman reports. How much? Borders’ collapse led to a bounce of just four percent, compared to the prior Christmas. That’s what’s passing for good news in brick-and-mortar bookselling at the moment.
The Authors Guild paints Barnes & Noble as the one bright spot in the market, which has managed to claw its way up to a 27% share of the e-book market over the last two years (roughly half Amazon’s current 60% share) and, the AG argues, largely out-engineered Amazon in developing usable e-reader and inexpensive tablet technology.
As a number of comments below the article point out, the Authors Guild is not exactly an unbiased source, and that does show through in the slant from which the article is written. (For example, a claim that “Amazon wanted to price every Macmillan e-book, and indeed every e-book of every publisher, at $9.99 or less” is demonstrably untrue.)
But still, Amazon’s market dominance ought to be a little worrying even to those who currently like the company. Competition keeps companies honest—if Amazon does manage to kill off all its competition, it doesn’t have to be so nice to consumers anymore.
(Found via eBookNewser.)
Apparently, many feel that DRM favors Amazon over their competitors. I’d ilke to see a well-reasoned alanysis / explanation of this effect if, in fact, it is real.
Errr.. if Borders had that many customers that their collapse affected other bookstores so much.. they wouldn’t have collapsed would they?
Frank – DRM favours Amazon in the sense that it locks readers into Amazon platforms. If you buy a Kindle book, you can only read it on a Kindle device or app. Of course, Apple’s DRM favours Apple in the sense that it locks readers in to Apple platforms. So DRM in itself isn’t really favouring a particular company, but it does mean that the consumer either commits to a platform for the long term, or decides they don’t mind having a fragmented library.