5 ms·

Krugman's point is summed up in another quote from the comment you linked to: "Hachette failed to come to mutually agreeable terms with [Amazon]. That's their m

by JackC 12y ago

Krugman's point is summed up in another quote from the comment you linked to: "Hachette failed to come to mutually agreeable terms with [Amazon]. That's their most important job as a publisher, and they blew it, to the tune of permanently costing their authors 50-60%+ of sales they'll never recover." When one buyer represents 50-60% of sales, the "most important job" of any seller is to come to "mutually agreeable terms" with that buyer. Is Amazon's "most important job" to come to terms with Hachette? Not even close. One party to the negotiation can walk away; the other cannot. So "mutually agreeable terms" is kind of a hilarious phrase meaning, "we will state the terms, and then you will agree to them. That is now your most important job." And Hachette is the largest publisher, with something like 16% market share (2010 numbers). That's why this negotiation is even happening. When Amazon talks to smaller publishers, this isn't even an issue. They are your boss; they tell you what to do; you do it. Except they're a little different from a normal boss, because they absolutely do not care about you; it is actively in their interest to see your business fail. People who survive in Amazon's buying department have to be OK with that -- the in-house name for Amazon's Small Publishers Negotiation Program was the "Gazelle Project," before the lawyers made them change it.[1] Support publishers, don't support publishers, whatever. If you think authors will be better off without publishers that's a separate conversation. But if there's any industry you do like, you should be very concerned about Amazon gaining market share in that industry. [1] http://bits.blogs.nytimes.com/2013/10/22/a-new-book-portrays-amazon-as-bully/ http://bits.blogs.nytimes.com/2013/10/22/a-new-book-portrays...

gadders 12y ago
They didn't come to terms, that's true, but unless we saw each side's balance sheet it's hard to know where the fault lies. Supposing Hachette gets a better price - how do we know this will get passed on to authors?
- ender7 12y ago
  This comment is still ignoring the main point. It shouldn't matter what Hachette's balance sheet currently is. The point is that Amazon appears to have complete control over it. Given that situation, it will inevitably reach zero.
msandford 12y ago
I would posit that Hachette failing to see the direction that the world was headed in is a large failing on their part. OK, it's too much to expect a publisher to see how the world will be in a decade and react accordingly. But the idea that they could see Amazon becoming a bigger and bigger buyer and fail to do anything to diversify their wholesale and retail outlets should also be a strike against Hachette.
jasode 12y ago
>When one buyer represents 50-60% of sales, ... One party to the negotiation can walk away; the other cannot. I don't follow the logic here. Your fatalistic assessment assumes Hachette (and other publishers) are paralyzed and cannot adapt. However, the business world isn't static therefore Hachette can walk away. (If not this particular contract renewal because of timing pressure then at least the next one -- if they have a smart strategy.) If amazon has 60% of sales, it was the book publishers who willingly signed previous business deals to allow amazon to become that dominant. Likewise, those book publishers can put on their business-thinking hats and figure out how to make amazon less powerful. Victim thinking: ok, amazon wants to pay us less for our books. Since we're helpless deer in the headlights, what do we do? Business thinking: ok, we got our executive team in a conference room here. The CEO says, "this is where all you vice presidents and MBAs earn your salaries. Give me a business plan to lessen amazon's pricing power over us." Options: 1) Rethink/reprioritize other reseller relationships and offer better terms to Barnes & Noble, Apple iBooks, etc 2) Open our own online book store. Talk to other publishers about starting a consortium or joint venture to create a new online book store to sell direct. 3) Maybe Google Inc is also interested in partnering with us to beat amazon. 4) Call CEO of Sony and tell him we want help his eReader beat Kindle by offering exclusive titles just for that device. 5) dozens of other creative business ideas... If all the big publishers want to, they can join forces and pull all their book titles from amazon. Amazon is then left with just the self-published CreateSpace titles. The book publishers made voluntary deals to get them into this position of weakness and likewise, they can start making voluntary strategic moves to get them out of it. Airlines used to pay a big commission to travel agents. The airlines used the emergence of the internet to reduce commissions to agents. In this case the vendor (airlines) got more leverage than the reseller (travel agents). However, cruise ships still rely on travel agents for the bulk of their bookings. Maybe the relative positions of market power will change. Maybe not. Businesses can adapt and change if they want to. All the articles from New York Times, salon.com, author blogs, etc sympathizing with the book publishers have not convinced me that Hachette is a helpless victim of amazon dominance.
- fleitz 12y ago
  Excellent points, whenever I read Krugman I always get the feeling that he wants everyone to be a victim so they'll support whatever government intervention he wants this week. Hachette is a major company that has no problem fighting back, problem is in the internet age they are incompetent, for that they deserve whatever the market is dishing out to their outdated business model.

by JackC 12y ago

gadders 12y ago

They didn't come to terms, that's true, but unless we saw each side's balance sheet it's hard to know where the fault lies. Supposing Hachette gets a better price - how do we know this will get passed on to authors?

ender7 12y ago
This comment is still ignoring the main point. It shouldn't matter what Hachette's balance sheet currently is. The point is that Amazon appears to have complete control over it. Given that situation, it will inevitably reach zero.

msandford 12y ago

I would posit that Hachette failing to see the direction that the world was headed in is a large failing on their part. OK, it's too much to expect a publisher to see how the world will be in a decade and react accordingly. But the idea that they could see Amazon becoming a bigger and bigger buyer and fail to do anything to diversify their wholesale and retail outlets should also be a strike against Hachette.

jasode 12y ago

>When one buyer represents 50-60% of sales, ... One party to the negotiation can walk away; the other cannot. I don't follow the logic here. Your fatalistic assessment assumes Hachette (and other publishers) are paralyzed and cannot adapt. However, the business world isn't static therefore Hachette can walk away. (If not this particular contract renewal because of timing pressure then at least the next one -- if they have a smart strategy.) If amazon has 60% of sales, it was the book publishers who willingly signed previous business deals to allow amazon to become that dominant. Likewise, those book publishers can put on their business-thinking hats and figure out how to make amazon less powerful. Victim thinking: ok, amazon wants to pay us less for our books. Since we're helpless deer in the headlights, what do we do? Business thinking: ok, we got our executive team in a conference room here. The CEO says, "this is where all you vice presidents and MBAs earn your salaries. Give me a business plan to lessen amazon's pricing power over us." Options: 1) Rethink/reprioritize other reseller relationships and offer better terms to Barnes & Noble, Apple iBooks, etc 2) Open our own online book store. Talk to other publishers about starting a consortium or joint venture to create a new online book store to sell direct. 3) Maybe Google Inc is also interested in partnering with us to beat amazon. 4) Call CEO of Sony and tell him we want help his eReader beat Kindle by offering exclusive titles just for that device. 5) dozens of other creative business ideas... If all the big publishers want to, they can join forces and pull all their book titles from amazon. Amazon is then left with just the self-published CreateSpace titles. The book publishers made voluntary deals to get them into this position of weakness and likewise, they can start making voluntary strategic moves to get them out of it. Airlines used to pay a big commission to travel agents. The airlines used the emergence of the internet to reduce commissions to agents. In this case the vendor (airlines) got more leverage than the reseller (travel agents). However, cruise ships still rely on travel agents for the bulk of their bookings. Maybe the relative positions of market power will change. Maybe not. Businesses can adapt and change if they want to. All the articles from New York Times, salon.com, author blogs, etc sympathizing with the book publishers have not convinced me that Hachette is a helpless victim of amazon dominance.

fleitz 12y ago
Excellent points, whenever I read Krugman I always get the feeling that he wants everyone to be a victim so they'll support whatever government intervention he wants this week. Hachette is a major company that has no problem fighting back, problem is in the internet age they are incompetent, for that they deserve whatever the market is dishing out to their outdated business model.