Dr. Evil of Amazon

I received the following cheery letter in my email the other day. Reading it chilled me to the bone

Dear Kindle Customer,

We have good news. You are entitled to a credit for some of your past e-book purchases as a result of legal settlements between several major e-book publishers and the Attorneys General of most U.S. states and territories, including yours. You do not need to do anything to receive this credit. We will contact you when the credit is applied to your Amazon.com account if the Court approves the settlements in February 2013.

Hachette, Harper Collins, and Simon & Schuster have settled an antitrust lawsuit about e-book prices. Under the proposed settlements, the publishers will provide funds for a credit that will be applied directly to your Amazon.com account. If the Court approves the settlements, the account credit will appear automatically and can be used to purchase Kindle books or print books. While we will not know the amount of your credit until the Court approves the settlements, the Attorneys General estimate that it will range from $0.30 to $1.32 for every eligible Kindle book that you purchased between April 2010 and May 2012. Alternatively, you may request a check in the amount of your credit by following the instructions included in the formal notice of the settlements, set forth below. You can learn more about the settlements here:
www.amazon.com/help/agencyebooksettlements

In addition to the account credit, the settlements impose limitations on the publishers’ ability to set e-book prices. We think these settlements are a big win for customers and look forward to lowering prices on more Kindle books in the future.

Thank you for being a Kindle customer.

The Amazon Kindle Team

Dr. Evil still lives and is apparently working at Amazon.com.

Why, you are probably asking right about now, was such a nice letter the cause for fright and revulsion? I mean, isn’t it nice that Amazon is helping me get my money back for overpayment of books?

Not when you realize what really happened. Not when you realize that Amazon has just simultaneously arranged for a huge windfall profit while sucking money directly from publishers it wanted to punish for questioning Amazon’s own predatory pricing practices. Not when you realize that Amazon is crushing the life out of literature under its own burgeoning bottom line.

As early as 2010 you can see the roots of these questions. In an article entitled ‘Is Amazon Evil?‘ by Onnesha Roychoudhuri, we already begin to see the concern of where Bezos is taking us in literature.

What happens when an industry concerned with the production of culture is beholden to a company with the sole goal of underselling competitors? Amazon is indisputably the king of books, but the issue remains, as Charlie Winton, CEO of the independent publisher Counterpoint Press puts it, “what kind of king they’re going to be.”

So what did Amazon do that has brought terror to me as I ponder weak and weary over this flotsam piece of email lore? Gather closer around the campfire, friends, and hear the tale…

Amazon.com decided in their marketing wisdom that no ebook should be more than $9.99 in price and that most of the backlist should be priced much lower. There is certainly prima facie arguments that would seem to logically support that conclusion: an ebook takes up no physical space, can be reproduced and distributed without significant cost and is stored only as data rather than cases of bound paper. Logic would seem to dictate that an ebook which does not require physical printing should be priced far less than a hardback book brick of bound paper.

Logical if you are a marketer with a product, that is. Logical if you assume that the value in the book is found in its paper, its ink and its leather binding.

But the real value in a book isn’t really found it its physical presentation. Sure, we pay more for a leather bound volume than a trade paperback — but the real value in the book is the craft of the writing that goes into producing it. The quality of the literature involved, however, is not Amazon’s concern. It deals in volume … and that is an important fact to remember in what happens hereafter.

Amazon, exerting considerable market-share muscle, decided that their pricing structure had to be the pricing structure for everyone. Amazon would determine the price charged for individual books — not the publishers or for that matter the independent authors who developed those works. Publishers wanted to set their own prices; Amazon wanted to fix those prices according to their marketing model regardless of what the publishers had put into a book. So publishers who paid large advances on books and were counting on big initial sales of hardbacks to help recover those advances saw their $29.00 hardback book being released on the same day as a $9.99 Kindle ebook of the same title.

Nice for Amazon whose only objective is to sell any book cheap but terrible for the publisher and the independent producer/author alike. Amazon was using their market-share weight to dictate pricing. In effect, Amazon was engaging in monopoly practices and price fixing. Of course, in some ways this is no different than complaining that Walmart, Sam’s Club or Costco is driving independent retailers out of business because their sheer size allows them to discount their prices. It is a market fact that when one business gets that much bigger than others in their field they tend to drive the competition out of existence simply through their economy of scale. Anyone remember B. Daltons, Walden Books or Borders?

What could the six big publishers in New York do about it? Stop selling to Amazon? So they decided that is exactly what they would do but, in making that decision, they also knew that they needed some avenue to distribute ebook copies of their publications — it was simply impossible to ignore such a market. So they entered into an agreement with Apple for exclusive distribution rights through their devices in order to keep the prices of ebooks more consistent with the price of physical books. At least, that was their argument

So what did Amazon do when challenged with their own attempts at price-fixing? They called up the United Stated Department of Justice … and complained that the big six publishers were engaging in a conspiracy with Apple to attempt price-fixing!

Read that again: the price-fixing Amazon blew the whistle on the big six publishers for price-fixing. And, according to the DOJ, that was exactly what the publishers and Apple were doing. Conspiracy to fix prices through a cartel is illegal; but fixing prices on your own because you’re bigger than everyone else in the marketplace apparently is not.

Now, since Amazon was trying to push prices LOWER (which the public would perceive as a good thing), no one wants to take Amazon to court over their predatory practices. But publishers and Apple trying to push prices HIGHER… well, that lawsuit works on the evening news.

So, the pirates turned in the privateers for piracy… but this is where the story takes a very strange turn.

This settlement provides for $69,000.000 (sixty-nine million dollars) to be set aside into a fund “for payment to consumers who purchased qualifying ebooks from April 1, 2010 through May 21, 2012. If the Court approves the Settlements, eligible consumers like you will receive automatic credits to your E-reader accounts. The credit can be used on any purchases of E-books or print books.”

What this means is that much of this “sixty-nine million dollars” (and please read that number in your best Dr. Evil voice) is going straight back to Amazon — that’s because this settlement is being administered as ‘credits’ to your account which means that when you buy an ebook with those credits, Amazon is going to keep their profit margin on THOSE sales as well as the original sales profit they made on those books effected by the settlement.

As an ebook reader, it sounds like a good deal: you’re getting ‘free books’ as part of the settlement. So what if Amazon played the system and robbed a bunch of publishers in the process?

You should care because there is more to the written word that paper, glue, binding and boards. Publishing isn’t just about printing; it’s about a group of creative, dedicated people who produced craft and quality in the books they produce. The real value is in the writing, it’s in the editing, it’s in the production, it’s in the layout, it’s in the process that insures the words that you see are polished to shine with meaning and impact. I have no object to you paying to read the ‘slush pile’ then by all means go ahead. But if you want a level of quality in what you read, you should expect to pay more for it than for what your neighbor just uploaded from his blog.

Two years ago, my wife and I started a serial novel project called ‘Dragon’s Bard.’ We offered an extremely exclusive, limited-edition production of a series of novels written in serial installments exclusively for our subscribers. Each subscriber then received a signed and numbered edition, each registered with us, of a hardback copy of the completed novel. These books are available in very limited quantities online currently for $93 US. Early subscriptions for our next book in the series go for around $53 US. Each one comes with ebook downloadable versions of the completed work in both mobi (kindle) and epub (Nook) formats. These books are at their best double the full price of a hardback novel — in some cases three times the price — but they are exclusive and rare treasures.

But Amazon wants you to believe that you should pay the same for this book as the pamphlet on Internet Gambling that some guy just cobbled together one afternoon from content stolen from other people’s websites.

Should ebook prices be lower than physical books? Absolutely… but that price should be determined by the market, the publisher and the writer — not Amazon. Until that changes, the tail is wagging the dog. By artificially limiting what publishers and independent authors can charge for ebooks, that limits what publishers can PAY you as an author can earn for your book. That dream you had of making it big with your best-selling novel whether through a traditional publisher or through your own independent press just had a very low an arbitrary ceiling placed over it.

So raise your goblet to Amazon! You’ve given us a chilling tale this Halloween … and made it look like a gift.

5 thoughts on “Dr. Evil of Amazon

  1. To sum up the ramblings from Twitter, I don’t really take issue with your views on Amazon. What I take issue with is your views on publishers.

    This is my understanding of what you’re saying, just to make sure we’re on the same page and operating from the same information:

    You’re saying you dislike Amazon in this particular regard because they’re trying to price-fix in respect to keeping prices of ebooks low. You’re saying that publishers should be able to charge whatever they wish because they put a lot of effort into a book… though there’s debate even on this topic, about the quality of publishers’ editing and services going down these days. The way I read it, it also sounds like you’re saying that someone must go through a traditional publisher if they want to make it as a writer.

    Setting Amazon to the side for a moment, Apple and publishers colluding together to price-fix their ebooks is simply wrong. The main or original motivation of the publishers to do such a thing may have been Amazon, but it effected more than just Amazon as those artificially inflated ebook prices also made it to Barnes and Noble, Kobo, etc.

    While I understand you feel that Amazon is trying to drive prices artificially low, that doesn’t justify Apple entering into a shady deal to keep prices artificially high.

    I also read that one of the goals of the publishers was to drive more people from ebooks to print books instead. Why would they do this? Because publishers have more power in the world of print books than the world of ebooks.

    I know you agree that ebook prices should be lower than their print counterparts. I think it’s silly when I see an ebook priced the same as the mass-market paperback. I even recently saw a paperback priced at the standard $7.99, with the ebook being $9.99.

    Also, when you get coupons at a website like Kobo, they don’t work on any of the books from any of the publishers that entered into the agreement with Apple. Only the indie or small press books. Coupons are a good thing. They could get someone interested in a book they wouldn’t have otherwise tried, which could then lead to more sales in that particular series, or from that particular author.

    I love print books. But I also love ebooks, and the power that it gives independent publishers and authors that want to publish their work directly.

    As I stated on Twitter, in recent times I’ve only purchased one book from a big publisher. Citadels of the Lost, by the way, which I finished reading last night. All of my other book purchases have been ebooks from small publishers and independent authors.

    When not everything is flowing through the vaunted gatekeepers are you going to get more poorly-edited clunkers? Of course you are. But you’re also going to get plenty of books that aren’t any less readable or enjoyable than the traditionally published books, and you’ll get some books that the publishers would turn up their collective noses at because they feel people wouldn’t be interested in a particular genre or type of story, or they wouldn’t be able to make enough money off of it.

    The line I take the most issue with from your post is the one that reads: “That dream you had of making it big with your best-selling novel just had a very low ceiling placed over it.”

    That line insinuates that you can only make it as an author if you bow and scrape to the mighty gatekeepers of traditional publishing. That only through them may you find success.

    More and more authors are making their dreams of writing come true through publishing their books themselves through all the various portals. Not just Amazon, but also Smashwords, Kobo, etc. And just because you publish through one portal doesn’t mean you have to be exclusive to it. Though Amazon offers exclusivity bonuses, you can still publish through as many portals as you like. You can even sell direct from your own website if that be your wish.

    I know you like ebooks and independent publishing. I know you have sections of your website in support of such things. I just get the impression that part of your mind-set is still stuck in the realm of traditional publishers. That you’ve sipped from their Kool-aid, or tasted of their horrid carrot, raisin, and turnip Jell-o (you live in Utah, right?) I can’t really blame you for that… after all you’ve been publishing now for what, two years? Okay maybe three. But traditional publishers are no longer the bastions of the literary world. Now they’re simply a business option and nothing more. Are you more comfortable getting an advance from a publisher and jumping through their hoops? Or do you feel you’d have more success if you skipped the advance, but also skipped the gate, and sold direct through a portal whilst taking a larger percentage of the sale, thereby being able to sell your books at a lower price but making more money off each one?

    While print book sales are still the majority, traditional publishers can see the growing ebook market, and recognize the power it gives to the authors themselves, and they’re scared. They don’t want to morph to embrace the new market. They instead, much like Hollywood, want to force the new market to dance to their tune. In turn, they try to scare other authors into thinking their way is the only way, when it’s just not true anymore. You don’t need a traditional publisher to succeed. You don’t need a traditional publisher to make money.

    And publishers certainly shouldn’t be entering into shady backroom deals with Apple just so they can keep prices artificially high. That’s not responding to market forces. That’s just plain dishonest.

    • Your observations are very compelling — so much so that I have reconsidered my words and changed the article somewhat as a result. Sections above in red reflect my additions, crossed out words in red reflect those I would delete or change. I wanted to alter the article in this way so that your comments would have context and readers could see for themselves how your comments caused me to reconsider my words.

      There is no greater champion of independent publishing for authors — but I think we need to also address the issue of quality in the craft. The one think that ‘big publishers’ did for us was to be the Guardians of the Written Word; they sifted out the badly written, the undeveloped ideas and the new writers who just needed a little more seasoning before their craft was ready to be seen in public. We have lost that filter (hence the ‘paying to read the slush pile’ comment) and I think the written word is poorer for it.

      • Interesting edits and additions.

        There’s one section I’m unclear on. You say: “Amazon would determine the price charged for individual books — not the publishers or for that matter the independent authors who developed those works.”

        Here, it sounds like you’re saying that Amazon will set the prices of all ebooks. While that may be true of ebooks from traditional publishers, I think if, as an independent author, you publish directly through their platform, you can still set your price yourself.

        At least according to this page, which is documentation for their Kindle Direct Publishing program, you can:

        https://kdp.amazon.com/self-publishing/help?topicId=A2MLJ06E7JKXLN

        According to that page, if you’re publishing directly through their Kindle Direct Publishing program you set which royalty percentage program you want to use, and what you want the list price of your ebook to be.

        If you use their 35% program, the minimum list price is $0.99, and the maximum is $200.00. If you use their 75% program, the minimum list price is $2.99 and the maximum is $9.99.

        So if you wanted to list a particular ebook at $53, as long as you owned all rights to it and published it yourself, and as long as you were okay with their 35% program, you could.

        Of course you can also set your prices at all the other various publishing portals too, but the focus here is on Amazon as they’re king of the ebook hill.

        I agree that quality in the craft is important. It’s a bummer to buy an ebook only to find out it’s garbage. Now to be fair, I’ve purchased plenty of print books from traditional publishers that I found to be unreadable too, and they were all more expensive and therefore a bigger waste of money.

        That’s where user reviews are essential though, to get an idea of if an ebook is garbage before you buy it. On the up-side, not only will the less savory ebooks often have reviews to reflect the quality of their content, but they’re also usually much less expensive… 99 cents or completely free… so it’s not as much a waste of money if you do bite.

        Now to assuage any other authors before they get irked, I’m not saying 99-cent or free ebooks are inherently bad. Just that some of the less well-polished ebooks do tend to bang around at that price point.

        I think ebooks can actually help some authors strive to improve their craft in ways that traditional publishers might not.

        For instance, with some people, they write their manuscript or query and have it rejected, which will only spur them on to try harder the next time. But for others, they may get so discouraged by that, that they just stop trying.

        More than that, we’ve all heard the stories of authors that had to submit their books again and again, to five, six, 10 different publishers before one would take it, and then the novel was a reasonable-to-great success, showing that sometimes traditional publishers will reject a story not because of its quality, but just because they don’t think it’s a viable business decision for them.

        With ebooks on the other hand, those whose quality isn’t where it should be, those that are just starting out and know they need more polishing, can write their stories and release them for free, and take the experience and feedback from that book to write their next story a little better, and the next a little better than that.

        And for the people whose quality and story is just fine but traditional publishers just aren’t interested, it’s a great way for them to get their work out there and to start building their name.

        So while you may have more quality issues with people publishing their work directly, you also tap into a polishing process for some, and some overlooked gems for others, that you wouldn’t otherwise get.

        Oh, and the real reason Borders closed was because of horrible, horrible mismanagement. I miss Borders. But I digress.

        • I maintain that Amazon’s pricing is still predatory. The ceiling may not be as hard but it is still a ceiling. Under the Amazon structure, then, if I do not comply with their $2.99 – $9.99 preferred pricing structure I’m penalized. That, in itself, is predatory.

          Here’s an example: If I publish an ebook on Amazon for $9.95 my 70% take on the book is $6.97. Now, let’s say I want to make three cents more on my book … an even $7. I now have to charge $20 for the book — more than twice the original price — in order to gain that three cents. What’s more, Amazon does nothing different either in the storage, production, distribution or in promoting my book at $9.95 than it does at $20 … it just takes a MUCH fatter cut.

          Can I sell my ebook for whatever I want? Sure … if I don’t mind working for Amazon and handing them the lion’s share of the profits from my work.

          Let’s not discuss the value of Amazon reviews. I recently got a 1 star review on a book because the posting reviewer didn’t like the price. They hadn’t bothered to read the book — they just trashed my rating because the PRICE was too high for them. Too often the reviews posted on Amazon remind me of an article headline from the Onion’s book: Our Dumb Century…

          UNEDUCATED FORKLIFT DRIVER TO ADDRESS NATION ON RUSH LIMBAUGH RADIO SHOW

          Call-in Address Scheduled for 1:11 to 1:14 pm EST

          Nation eagerly awaits Ohio Man’s Profound Insight into Current Events

          MY POINT: While there are my well-informed opinions expressed in these reviews — good and bad — these are entirely offset by uninformed criticism that is given equal weight. Some of these reviews even remind me of the woman who called into the radio talk show demanding that all those deer crossing signs be moved out of high traffic areas where the deer could cross far more safely — like school zones.

          We’re just going to have to disagree on this: Amazon.com does not care about the quality or content of what is published on their website so long as it (1) will not get them sued and (2) is making them money. We are being asked to pay to read the slush pile. Sure, new authors can put their book out there in its ‘raw’ and ‘unpolished’ state in the hopes of getting feedback and ‘doing better next time.’ That’s essentially what writers critique groups do in private and what we try to do on our forums here. However the reality is that nobody has time to keep reading an author in the hopes that they will ‘improve.’ If we don’t like their ‘rag shoes’ (first efforts) then we move on and don’t come back. Self-publishing just doesn’t work the way you are describing. It’s not a perfecting process — its being left behind. There are many things a self-published author can do to perfect their craft, gain their own audience and succeed outside of traditional publishing; but just throwing your first draft out there for the world is not among them.

          Are there gems in self-publishing? Absolutely and I do believe that the cream will rise to the top. That quality, however, is entirely the business of the self-publishing author — and nothing that Amazon considers to be its business at all.

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