Your Amazon Credit Hurts Publishing

Amazon is a really good deal, but it's still murder on publishers.

Getty Images / Adam Berry

If you’re among the many consumers who received either checks or credits today from Amazon, Apple, or any other ebook retailer, you have cause to celebrate.

Who doesn’t like free money that results from a mysterious lawsuit? But its not as though that money magically appeared from nowhere. It is, in fact, the result of a long and ugly antitrust suit pitting the Department of Justice against Apple and five major publishers – which actually, back when the suit began in 2012, were six publishers, Macmillan, Harper Collins, Penguin Group, Random House, Simon & Schuster and Hachette. Amazon wasn’t involved in that lawsuit, but by virtue of the fact it was influencing book prices, it was the elephant in the room. The reason the federal government went after the big six publishers was all about an accusation: that in an attempt to fight Amazon, the publishers colluded to fix prices on ebooks with Apple.

So, a bunch of big companies duked it out and now you’ve got free books, who cares? Well, the only entity benefiting from this is Amazon. And while they get to give out free book credits, they haven’t lost a dime.

Fish being sold at a market.

Understanding this situation means understanding the difference between Amazon being a retailer and publishers being companies that create books. Think about fish: the fish are the books, fisherman are the authors, and the fishmongers are the publishers. Anyone else — Barnes and Noble, Amazon, Kobo — are just a truckers who drive the fish out into the world so people can enjoy them. Amazon then, is a truck driver that sets the prices of how much people can sell their fish for. While both Amazon and Random House are in the book business, they do completely different things, meaning you wouldn’t think they’d be granted the same powers and responsibilities. And yet, Amazon gets to tell Random House and all the other publishers, exactly how to sell their books (fish) even though, really, they’re just the ones who are supposed to distribute the goods with the prices already set.

Because the big Department of Justice case eventually settled this can scan as the publishers and Apple admitting guilt of price-fixing, but, that’s not the whole picture. Amazon has a track record of aggressive price-gouging and also extremely predatory business practices

Essentially, Amazon is in control of ebook prices. If the publishers did under-the-letter-of-the-law, collude, they were doing so out of survival and to combat a monopoly, not create one. According to an article by Michael Hiltzik published in the LA Times earlier this year:

“Many in the publishing industry thought [the DOJ] had picked exactly the wrong targets: The publishers had desperately sought a way to break the near monopoly in ebooks held by Amazon, which had attained 90% of the market by systematically selling ebooks below cost — in fact, at least one publisher had pleaded with the DOJ to file suit against Amazon. Apple’s offer to let the publishers set their own prices (within limits) on its iBookstore was a lifeline, they argued.”

But all the publishers eventually lost, and even though they were technically fighting the Department of Justice, they were really fighting Amazon. The obvious results of this carnage are that Penguin and Random House voltroned to become Penguin Random House. Other fallout included a bitter battle in 2014 between Hachette specifically against Amazon to – you guessed it – control the prices of their own books. And while the two organizations have reached an agreement, Amazon employed all sorts of bullying tactics during the fight, at one point even pretending that it took longer to ship books published by Hachette.

So, today, you might have some extra money or a credit to buy a book. That’s great. But this money was largely extracted from organizations that create books at the benefit of an organization who traditionally, doesn’t. True, a lot of folks are getting credit from Apple, too, a company, who in contrast with the publishing industry, is in a better position to take the hit. In a battle between Amazon and Apple, you may think you’re in a Godzilla vs. King Kong situation: you don’t care who wins, they’re both huge.

But the people who are being smashed by those monsters? That’s the publishers. That’s where your books come from. And the money you got today came from them.

(Full disclosure: the author of this article has one book under contract with Penguin Random House and is a former employee of Macmillan.)