Amazon destroys the book industry again

[Kali Yuga]

Predatory pricing to the point of establishing a monopoly is rare. Long story short, no one can afford to do it unless they already have a lock on production.

Standard Oil did not become a monopoly exclusively because of low prices, but also because they controlled so much of the production -- which is what allowed them, via economies of scale, to undercut pricing in the first place. Unlike Amazon, they also operated in an environment without antitrust regulation.

Originally Posted by SteveEisenberg

....you don't fly much, do you? Evidence of tremendous price increases when US Airways gets an exclusive route out of Philadelphia is overwhelming.

Sorry, that's not evidence of an abuse of monopoly pricing.

If US Airways is the only one running that route, then demand for that route is almost certainly low, which means the price will be high. That's not monopoly abuse, that's basic economics.

Originally Posted by SteveEisenberg

Best Buy, WalMart, B&N, etc. never got as big a market share as I think Amazon has the potential to get in books.

Erk?

B&N was the 800-pound gorilla of the book world before Amazon came on the scene. They spent years devastating the competition, especially the independent stores that couldn't possibly match B&N's volume. The industry was terrified when B&N announced it wanted to merge with Ingram, the biggest book distributor -- who distributed books to B&N's competitors.

They had every advantage, but belly-flopped when it came to online sales. They weren't willing to cannibalize store sales, and when they realized they had no choice, they didn't execute well. They were slow to put out the Nook, but even with a few glitches they've done much better with the ebook transition than they did with the online sales transition.

[sabredog]

Originally Posted by HarryT

But it took Amazon many years of investment and loss-making to put that infrastructure in place before they started to show a profit. Should they be "brought to their knees" because they've succeeded in creating a successful business?

We call that the tall poppy syndrome down under. Amazon succeeded by sensing the change in the way books and products were going to be marketed. Other, older companies, including the Agency 6, took quite some time to realise change was on the way and have tried since that point to stall those changes or to pretend they were not occurring.

Amazon is succeeding, the others not so. Lots of jealousy, envy and now fear/smear campaigns have begun.

Amazon is no white knight, but neither are any of the other big 6.

[stonetools]

The article raises two issues:
1. Whether B&M bookstores can survive in the coming era of ebook dominance.
2. What would be the effect of Amazon continuing to dominate the ebook market and maybe extending that dominance into monopoly control


With respect to (1), Mike Shatzkin argues( and I agree) that physical book stores are destined to go the way of record stores, regardless of Amazon's share of the ebook market. That will be incredibly disruptive for everyone in the book industry, but that's what will happen.

With respect to 2, I hope Amazon doesn't become the One Big Pipe. I think consumers always suffer in those situations. My experience dealing with Comcast just confirms this.
I hope that b&n survives and Apple does something amazing and magical in the ebook market but otherwise, Amazon's dominance in the ebook market looks inevitable.

[Prestidigitweeze]

Originally Posted by Ravensknight

As an American, I consider it my God given DUTY to give as little as possible to the government. So my sympathies lie with Amazon on this note.

As a world citizen, I consider it a point of honor for Amazon to respect the taxation structure of the country of the customers they happen to be serving.

As an American, I find it incredibly tedious when corporate libertarians confuse the advocacy of extreme political views (such as scenarios in which the government gets too little to provide infrastructure and social services) for the one acceptable expression of American patriotism. Martin Luther King, American and self-professed socialist, would have disagreed.

This isn't about politics. It's about the exclusion of fellow citizens whenever their opinions on government don't line up with one's own.

[rhadin]

Originally Posted by Kali Yuga

That's what people were saying about Barnes & Noble in 1994.

B&N had all the advantages against Amazon -- size, influence, relationships, capital, infrastructure, brand awareness and market dominance. Now, Amazon is on the verge of putting B&N out of business.

If a startup would have a tough time against Amazon, it's not solely because of those advantages. It's also because Amazon executes really well, and is unlikely to give anyone an opportunity. And again unless they're doing something illegal, and as long as those goods are available elsewhere (even with a handful of exclusives), I'm not sure why there's a problem.

Amazon really didn't start to beat up on B&N until Amazon began subsidizing its book losses with its profits from nonbook items. That was and is a key difference between Amazon and other ebooksellers -- the ability to absorb losses in books for years because other divisions are profitable and able to support the book losses.

[BeccaPrice]

one thing - it's fashionable to say that Amazon put Borders out of business. They may have dented Borders, but what put them out of business was years and years of truly stellarly bad management.

[stonetools]

Originally Posted by rhadin

Amazon really didn't start to beat up on B&N until Amazon began subsidizing its book losses with its profits from nonbook items. That was and is a key difference between Amazon and other ebooksellers -- the ability to absorb losses in books for years because other divisions are profitable and able to support the book losses.

Amazon is dominant not because of ONE advantage but because of many advantages, although that is the biggest stick in its arsenal. . In terms of importance, I would rank as follows:

1. Low prices/Ability to out discount everyone
2. Catalog size
3.Recommendation engine
4. Reviews
5. One-click buying
6. Great customer service
7. Device lock-in/DRM
8. Format lock-in

Techies tend to emphasize 7 and 8, but IMO you could toss out both of those and Amazon would still dominate. For example, I am an Amazon customer via the Kindle app. I don't own a Kindle and can shop at multiple bookstores. Moreover, I am aware of the threat of Amazon becoming a monopoly and try to spread my purchases among multiple stores. Despite that, more than half or my purchases are from Amazon.

[BeccaPrice]

Stonetools, don't forget Amazon's truly stellar customer service. They could have all the other advantages and lousy service and I'd be gone from them so fast you couldn't blink.

[CommonReader]

Originally Posted by Ravensknight

As an American, I consider it my God given DUTY to give as little as possible to the government. So my sympathies lie with Amazon on this note.

Eh? The US is one of only three countries (the other ones being Eritrea and the Philippines) that demand even from citizens that live and earn their money permanently abroad to file tax returns and to pay taxes. The US is going after its own citizens so hard that European banks increasingly refuse to open otherwise completely legitimate bank accounts for US citizens.

I don't see what's so patriotic about giving companies the opportunity to exploit tax loopholes that aren't available to companies that operate in the same line of business.

[stonetools]

Originally Posted by BeccaPrice

Stonetools, don't forget Amazon's truly stellar customer service. They could have all the other advantages and lousy service and I'd be gone from them so fast you couldn't blink.

That's number 6 on my list. I almost forgot to put it in. Thanks for highlighting it.

[Daithi]

Originally Posted by CommonReader

Eh? The US is one of only three countries (the other ones being Eritrea and the Philippines) that demand even from citizens that live and earn their money permanently abroad to file tax returns and to pay taxes. The US is going after its own citizens so hard that European banks increasingly refuse to open otherwise completely legitimate bank accounts for US citizens.

I don't see what's so patriotic about giving companies the opportunity to exploit tax loopholes that aren't available to companies that operate in the same line of business.

The reason Amazon pays less taxes (at least in the U.S.) has more to do with State tax laws than federal tax laws. If a business sets up in say, Kansas, and someone from California goes to their store in Kansas then the company only has to collect sales taxes for Kansas. Just because the customer was from California doesn't matter. The company is a Kansas company, and it would be completely unfair to make that company pay California taxes just because a Californian bought something from the company.

Before the internet, some companies were formed that sold items through catalogs. They were no different from brick and mortar businesses. Where their customers are from is not important. The thing that is important is where the business is located. California can't make a Kansas company collect and send it taxes just because a citizen of California is a customer. It doesn't matter if the Kansas company sells through a B&M, catalog, or website.

Amazon isn't exploiting anyone. States trying to force the company of another sovereign state to collect taxes for them are the ones doing the exploiting.

[kevinp]

Originally Posted by frahse

America should ask the Indians how that worked out. The Brits should ask the Irish, the Scots, the Anglos, the Saxons and the Picts, etc.

Here we go with the Indians. It was OK for them to murder the settlers just like it's OK for me to murder the Cubans, Puerto Ricans, Haitians, etc. that are moving into my country now. Right?

Anyway, I don't make much money (compared to some people anyway) and if I choose not to pay more for an item, why is it Amazon's fault? I could care less about the mom & pop shops, I'll always do what's best for my family. Most of the time I'll just do without, but I'm not going to deprive my family of food or clothes to help keep mom & pop in business. The government should put higher tariffs on imports to even the prices if they want to keep Americans in business. Just my two cents. I'm sure I'll get flamed for my view.

[SeaKing]

I can still go to the small book stores all the time these days.

I like to browse and see what I might like.
I go to Dollar General, Family Dollar, The Dollar Store. (from $1.00 to $1.50)
I go to Walmart, to Inglis, to C&S, etc. - nice discount price.

I order from Amazon's collection of used book stores that get books from libraries, from Thrift Stores, etc.
There are others as well.

There is even a Books A Million two towns away. A B&N 3 towns away.

Amazon isn't hurting these. The smaller ones will do better when BaM and B&N are gone.

[SteveEisenberg]

Originally Posted by ProfCrash

Today we laud the robber barons of the past because of the charitable foundations they developed (Rockefeller, Carnagy, and others) but in their time they were the ruthless Capitalists that drove others out of business and treated their workers poorly. Today their legacy is to give millions in charity and help all sorts of causes. Don't be surprised if 50-100 years from now people talk about Bill Gates, Steve Jobs, and Jeff Bezos in the same way.

These conflates rather different business leaders. While anti-union, Carnegie otherwise treated his employees well by standards of the time, and planned philanthropy from a young age. You could say much the same about Bill Gates. By contrast, Jobs was, and Bezos is, to put it politely, skeptical of philanthropy.

I think that in 100 years, Jeff Bezos will be talked about more in the way of Cornelius Vanderbilt than Andrew Carnegie or Bill Gates.

Originally Posted by kevinp

I'll always do what's best for my family. Most of the time I'll just do without, but I'm not going to deprive my family of food or clothes to help keep mom & pop in business.

Agreed. Anti-trust is the responsibility of government, not individuals. (And the purpose of anti-trust should not be to keep mom & pop in business, but to maintain sufficient competition so that prices will be long-term low.)

[BuddyBoy]

Originally Posted by HarryT

What the article strangely fails to mention is that Waterstones, by completely dominating the UK B&M book landscape, have themselves put countless small independent booksellers out of business.

Exactly. Amazon is doing to Waterstone's only what Waterstone's did to the small independent B&M stores.