Who knew that the cultured world of literary retailing could start to look so much like a soap opera, filled with accusations of betrayal, threats of divorce, and anguished sighs by innocent bystanders? And just like some long-running soaps, it gets hard to keep the list of characters—not to mention who is allying with whom and who is stabbing a former partner in the back—straight without paying close attention.

The role of the big, bad villain is mainly being played by Amazon these days. The retailing giant for years has been working to lower the prices on both hardbound and electronic versions of books for customers. That seems like a good thing, but according to its supply chain partners and competitors—namely, book publishers and independent booksellers—it’s actually harmful for the reading public. By undercutting prices and demanding price concessions by the publishers, Amazon leaves impossibly small margins for writers to earn profits on their intellectual labor, especially if they have not yet joined the ranks of bestselling authors. The publishers also argue that these slim margins make it impossible for them to provide intangible but ultimately valuable development services, such as finding new authors and voices, providing editorial services to them, and making sure niche genres have plenty of texts available.

A few publishers have stood firm against the pressure. In the United States, Hachette proclaimed that it would not grant Amazon the greater split of the profits earned on e-books that the retailer was demanding. In response, Amazon allegedly started holding small, insufficient stocks of Hachette titles, so that customers faced “out of stock” responses on many of the books they ordered. It also halted all preorders on popular titles that were about to be released, such as the latest book by Robert Galbraith, the well-known pseudonym of J.K. Rowling. When those moves were insufficient, it simply stopped taking orders for any Hachette books and made Kindle versions unavailable. In Germany, Amazon similarly delayed any deliveries of books published by Bonnier Publishers.

In the meantime, Hachette and several other companies ruled out the possibility of a new retail channel for book sales, through introductory subscription services. Similar to Netflix and GameFly, services such as Oyster and Scribd charge a monthly fee, in return for which subscribers may download as many books as they can read. Only a few publishers have signed on with these retail services, including Simon & Schuster most recently, but already the two providers claim they have hundreds of thousands of titles available. All of the books are those that were published more than a year ago, which represents an effort to avoid cannibalizing existing sales of new titles any further.

Amazon’s remarkable retail dominance in the book market also has led to allegations that its actions actually constitute illegal antitrust violations, not just aggressive competition.

Across all these developments, the character most commonly being threatened appears to be consumers. On one side, they face the threat of unavailable or more expensive books if Hachette and other publishers won’t come to terms with Amazon. But on the other side, there sits the possibility that the quantity or quality of available titles will suffer if Amazon has its way. Be sure to stay tuned for more. You won’t want to miss tomorrow’s exciting episode!

Discussion Question:

Do you believe Amazon is violating antitrust regulations?  Why or why not?

 

Sources: David Streitfeld and Melissa Eddy, The New York Times, May 23, 2014; Jeffrey A. Trachtenberg, “Simon & Schuster, E-Book Services Strike Deal,” The Wall Street Journal, May 20, 2014; Jeffrey A. Trachtenberg, “Amazon-Hachette Dispute Heats Up,” The Wall Street Journal, May 23, 2014