Last updated: How Amazon loses even if it wins the Hatchette fight

How Amazon loses even if it wins the Hatchette fight

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By Daphne Howland 

For the first time in maybe ever, Amazon founder and CEO Jeff Bezos in his company’s contract fight with Hachette Book Group, seems to taking actions that aren’t just disrupting retailers and shippers, but also Amazon’s own customers. And that’s not like them.

Amazon, which is locked in an ebook pricing-contract dispute with Hatchette, one of the world’s largest book publishing houses, retaliated against the publisher by making its titles unavailable. The rub? Amazon wants to keep prices low, as it does with everything it sells. Hatchette, meanwhile, wants to make money, of course, and maintain a healthy ability to make and sell books.

In fact, the e-commerce giant took the unusual step last week of telling its customers that if they want any of the 1,000 books published each year by Hachette, they should look elsewhere to find them. Hatchette Book Group’s divisions include Grand Central Publishing, Little, Brown and Company, and Hyperion, among others. They have published many well known authors, including James Patterson, David Foster Wallace, David Sedaris, Malcolm Gladwell, and J.K. Rowling, among several others.

What the fight’s about

Last year, the U.S. Department of Justice won an antitrust suit against Apple. The government had also sued five major publishers (including Hatchette), but they settled. The judge ruled against the “agency model” the publishers and Apple had set up, with the goal to have publishers set ebook prices and give Apple — or other ebook sellers — a percentage.

That deal between publishers and Apple was born out of a fear of Amazon’s hardcore commitment to low book prices. And yet, many now argue Amazon was unfairly left unscathed by the lawsuit and the ruling, and is now free to play hardball with publishers as their contracts come up for renewal.

Is Amazon a “monopsony”?

While the Justice Department concerned itself with the collusion of producers that could have resulted in a situation akin to a monopoly, many during this Amazon-Hatchette dispute are saying that Amazon, by contrast, is a monopsony. In a monopsony, there are many producers, but only one buyer, a situation that can likewise impede competition and ultimately hurt consumers.

Indeed, Amazon sells 41% of the books sold in the U.S., and 67% of ebook sales. If Barnes & Noble’s Nook enjoys a resurgence thanks to the bookseller’s new deal with Samsung, that could change. But for now, Amazon is closing in on being the only buyer and seller of ebooks.

Other booksellers jump into the void

Books-A-Million, Barnes & Noble, and several independent booksellers have been advertising the availability of their Hachette titles during this time, discounting them as an added enticement.

Their efforts were aided last week by the actions of comedian Stephen Colbert, who compared Bezos to Harry Potter uber-villain Voldemort and egged his viewers to buy books at independent bookseller Powell’s, which also runs a major e-commerce site.

I’m not just mad at Amazon, I’m Mad Prime,” Colbert said, and provided a pdf with art saying “I didn’t by it at Amazon” that Colbert advocated sticking onto book jackets a la Oprah’s Book Club. It’s worth nothing that Colbert’s own three bookswere published by Hatchette and that Powell’s was inundated with orders as a result of Colbert’s diatribe.

The bigger picture

Highly respected authors are weighing in as well. J.K. Rowling, whose book The Silkworm under the pen name Robert Galbraith will soon be released by Hatchette, agreed with Amazon on Twitter that there are “lots of ways to order” the book “as Amazon kindly suggest.”

And John Green, whose young adult bestseller The Fault In Our Stars is getting special attention because of its movie premiere, got into the fray and called Amazon a “bully,” although his books aren’t even published by Hatchette.

Aside from its cold-shoulder treatment of customers, Amazon may have another problem emerging from this dispute, of which the ire of beloved authors is a part. The discussion has gone beyond talk of fair prices — where Amazon would like to keep it because that is its main offer to consumers — and moved on to other issues. These include talk of the health of the publishing industry, the availability of books, and the importance of books, literature, and idea-sharing in our culture. Hatchette’s announcement at the end of last week that it would be laying off 28 employees in the U.S., about 3% of its staff, only helped drive home the idea that Amazon is behaving like a bully.

Even as its dispute with Hatchette winds down, assuming it does, Amazon.com will soon have to negotiate new contracts with Simon & Schuster and HarperCollins, two major publishers that may fight the e-commerce giant in the same way Hatchette has. That will only keep all of these issues alive. So far, Amazon has uncharacteristically had little to say about it all.

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Photo: Frank Gaertner / Shutterstock.com

Editor’s Note: The following is a feature originally published on Retail Dive.  It is republished here with permission.

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