Amazon, Consumers, and Melting Polar Ice

I’m gonna wade into the Amazon/Hachette quagmire real quick, because I feel like there’s something obvious that’s not being said. I’m trusting you guys to let me out alive.

Background: Amazon.com and Hachette (one of the world’s big 5 publishers) have been bashing out the terms of their latest trade deal. Amazon have been playing hardball, stripping the buy buttons from Hachette author’s books and removing them from searches for leverage. Hachette’s been crying foul. (Full disclosure: Hachette recently bought my UK publisher Quercus, so there’s that.)

So, if your major interest in books is buying and reading them (and I don’t mind telling you that I love you), if you’ve noticed the kerfuffle at all, you may have thought something like this:

“My heart is a barren place where the fucks I gave once did grow/Amazon may be a ruthless profit-hungry corporation but surely Hachette is no less so?” *

And I wouldn’t blame you. Amazon is of course, considerably larger than Hachette, but Hachette is only a tiny piece of €8bn French megacorp Lagardere.   Seeing this fight play out can feel a bit like watching one of Michael Bay’s Transformers movies:  two colossal inhuman entities punch each other over and over again, making a huge amount of noise, and yet you just don’t care. Which is why I’d encourage you to stop thinking about the relationship Amazon has with Hachette, and start thinking about the relationship it has with us:  the people who buy, and read books.

At the moment that relationship is… pretty good, actually. Okay, they might not pay as much tax as we’d like, and there are some ugly stories going around about how they treat their employees, but still.  They’ve been really good to consumers. There’s a wide range of products (not just books) they’ve made it easier (and in some cases possible) to get access to. Most importantly, they give us what we want, they give it to us fast, and they give it to us cheap. For now. Why do I say ‘for now’, in that menacingly portentous way? Well, because of the following facts:

1)     Amazon has a huge market share. Around 30% of the total US book market, and judging by Hachette’s numbers, 60% of all ebooks sold in the US, 70% in the UK.

 

2)      Amazon benefits from market conditions that make it difficult for other companies to compete with them. One big one is DRM law. Cory Doctorow gives a good rundown on this here, but the gist is only Amazon can legally remove the software that locks kindle ebooks to your kindle.  If you switch to a Nook, or a Kobo so you can start buying e-books from someone else, you face either losing access to  the kindle library you’ve already built up, or breaking the law.

3)      Amazon is seeking to create more of these market conditions.  The deal it’s trying broker with Hachette apparently includes a ‘Most Favoured Nation’ clause, which would stop Hachette from allowing its books to be sold cheaper than on Amazon.  Anywhere.  No-one would be able to take customers away from Amazon by undercutting them.

4)      Amazon actually isn’t making as much money from us as they could be. Yet.  Believe it or not, Amazon actually reported a loss in 2012, and barely scraped a profit in 2013, because it’s kept its margins so low while it hoovered up the market. Even so, investors continue to pile money into its stock. The financial markets not being known for their altruism, those investors are presumably expecting (and will demand) that those margins eventually rise.

Taking all that together, you don’t need a degree in economics to see a future where Amazon can put the price of books up to pretty much whatever it likes, where it faces significant shareholder pressure to do so, and we just have to suck it up. This isn’t a moral statement. It’s just the economic reality: the more we buy from Amazon the more other book retailers go out of business, the greater Amazon’s power to set the range and price of books becomes.

If all this sounds to you like the paranoid ramblings of a fantasy author with an agenda, well, fair enough, but I’d point you back at one of the tactics Amazon’s been using in its scrap with Hachette – removing the ‘preorder’ buttons. The only way this exerts any leverage on the publisher is if there are people who want a book, and who would buy the book from Amazon, who won’t or can’t buy it from anyone else. That’s the definition of monopoly power, and Amazon is already using it.  So I guess the question is, in a future where they have more of it, why would you expect them to stop?

Let me be clear, this doesn’t mean Amazon is evil, it doesn’t mean that if a publisher was in a position of market dominance it wouldn’t behave exactly the same way.  Amazon’s just doing what big corps do, pursuing its own interests. Hitherto, those interests have aligned pretty closely with the consumer’s, but things change. The reason this is important though, I mean really important, isn’t actually about Amazon. Whisper who dares, but it might be even more important than books.

Here’s why: Consumers – i.e. we – wield a huge amount of power in today’s globalized economy.Look at it this way:  if you live in a democracy you probably get to vote for your government every four or five years, but in the meantime, every dollar you spend is a vote for more of what you spent that dollar on. It’s  a vote for more of the company that sold it to you, and for more companies to act the way that company did so they can get ahead. That’s just the way the world is now, we don’t get to choose whether we vote with our wallets, the only choice we have is whether or not we’re going to do it consciously and effectively. It’s maybe the single greatest source of power we have in the modern world and we have a tendency to be… a little short-termist with it.

Look at global warming. Every climate scientist under the sun is lining up to tell us that unchecked, the economic choices we’re making are going to end the world as we know it. I wish that was hyperbole but it’s not. The best experts we have on this stuff tell us were staring down the barrel of increasingly severe floods, droughts (and hence food shortages) and enforced mass migration, but we’re still flying, driving and burning as merrily as we ever have. Why? Because the worst of the problems are likely to fall a few decades into the future, while cutting back would cost us now.

I’m not saying Amazon’s dominance of the e-book market is a problem on that scale.  It might not even be a problem at all, I mean:  ‘available fast and cheap’ is pretty persuasive, as Amazon’s market share bears out. But I do think it’s important to take the power we have through and over markets seriously, and to get into the habit of considering the impact on the future of those markets when we buy. These kinds of decisions,  the ‘where should I buy my books ‘ and how ‘where should I get my fried chicken’  decisions, are the paddling pool where we can develop that habit,  before we launch into the full-on transatlantic swim of tackling climate change. Intuitively, I think most of us understand that trying to get as much as we can as cheap as we can right now  can endanger our ability to get what we need in years to come.  But we need to start buying like we understand it, and to be honest, I think we need to do it fast.

*Forsooth and verily, poetry is not my forte. +I know there’s a hefty whack of economic privilege inherent in this perspective, and it’s certainly true that for many people not choosing the cheapest, most immediate source of a good simply isn’t an option. But I don’t think that makes it any less of an imperative for those of who can afford to take a longer term view to do so. Quite the opposite.

CORRECTION:  31/7/14 Amazon didn’t remove buy buttons from Hachette physical books, but it did  remove the pre-order buttons from them, as well as not stocking them so they took longer to arrive.

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