Krugman wades into Amazon debate

The weekly flow of opinion editorials about Amazon and its row with Hachette shows no sign of abating. Nobel Prize winning economist, Paul Krugman, was the most recent commentator to be drawn in, writing a seemingly purposefully inflammatory article for his column in the New York Times about how Amazon had “too much power” which it uses to “hurt America”. He goes one further than claims of monpolistic practice however and draws parallels between Rockefeller owned Standard Oil, in the early 20th century and Amazon – This comparison may be going a bit too far, for all intents and purposes Amazon is still an online retailer, whereas Standard Oil gained a monopoly over transport of refined oil derivatives, which it then denied to competitors. Amazon has no such comparable vertical integration. Amazon is merely exploiting the online retail dominance which is its main area of business.

So what Krugman seems to be suggesting is that the Federal Government ultimately use anti-trust laws against Amazon to break it up, in the same way it broke up Standard Oil. Whether there is a legal case here depends upon what you ultimately define as the “book market”, but it’s unlikely to ever make it to an anti-trust suite for the simple reason that the US needs every major multinational business asset it can leverage to patch over its abysmal trade deficits (Amazon is a significant “service exporter” and a net-boon to US balance sheets).

What’s more important here for book publishers is that Amazon have been able to exploit their weaknesses with such apparent ease. It’s probably uncontestable at this point that Amazon have engaged in some shady, borderline illegal anti-competitive practices against Hachette, that much is true: Certainly the attempts to draw apparently interested customers away from Hachette books on Amazon.com is testament to this. However, why weren’t major publishers looking more seriously to reduce their dependence on this single revenue channel, that had become so vital in an age of decreasing print revenue? Perhaps more pertinently, why do book marketers still struggle to market less well known titles that cannot be pushed as part of a sort of author-centric franchise when self-published authors are finding success in exploiting traditional and social media channels with totally unknown titles?

Book publishers still have a place, as routes to market, providing marketing expertise and other value adds, but they need to think harder about what their business model means in the modern world. A key question that arises is how to innovate if you’re playing the role of a service-provider giving content creators a route to market – foundation-level stuff.

But there are ideas: More proactive engagement between publishers and young writers is a good first step for example. If nothing else, hopefully the Hachette-Amazon dispute will force book publishers to think about transforming into innovators and content creators in of themselves.

Categories: Industry opinion

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