Amazon and HarperCollins strike deal to avoid “doomsday scenario”

April 15, 2015 by · Leave a Comment 

Amazon_logoAmazon, the world’s largest online book retailer, and HarperCollins, the second-largest of the so-called “big five” publishers in the U.S., have entered into a multiyear contract, avoiding a protracted battle over discounts and pricing. Bloomberg Business quotes Erin Crum, a spokesperson for HarperCollins, as saying, “HarperCollins has reached an agreement with Amazon and our books will continue to be available on the Amazon print and digital platforms.”

According to Engadget, the deal with HarperCollins is similar to deals struck last year with Simon & Schuster, Macmillan, and Hachette, in that it allows HarperCollins to set prices on e-books – long rumoured to be a point of contention with Amazon, which likes to keep prices artificially low. This is ironic, since it basically represents a capitulation to the agency pricing model that the retailer rejected several years ago, leading to a publisher revolt and accusations of collusion from the U.S. Department of Justice.

Earlier this year, Business Insider indicated that Amazon had reached an impasse in contract negotiations with HarperCollins, potentially paving the way for a protracted battle resembling the one the retailer engaged in with Hachette last year. That contretemps saw Amazon delay shipments of Hachette titles and remove buy buttons from the publisher’s books (something Amazon had previously done to Macmillan). The battle turned exceedingly ugly, with more than 900 authors eventually signing an open letter criticizing Amazon for its bullying tactics.

Following the Business Insider piece, a blog on the Melville House website asked whether Amazon might be preparing to engage in a “doomsday scenario” with HarperCollins, something the blog post suggested would be tantamount to an “apocalyptic development.”

HarperCollins_logoOverheated rhetoric aside, this never seemed like a very plausible scenario. HarperCollins is not Hachette: it has much more leverage over Amazon when negotiating terms. Its stable of authors – including Neil Gaiman, Dennis Lehane, and J.R.R. Tolkien – features big names that Amazon would not want to risk losing access to. Among the big names in HarperCollins’s stable, one looms larger than all the others this season. Harper Lee’s much ballyhooed second novel, Go Set a Watchman, is being published on July 14; there is no way Amazon would risk being the only online retailer in the U.S. not to feature that title.

But more that that, HarperCollins has been aggressively pursuing alternate avenues for distributing its wares online. It signed with the subscription services Oyster and Scribd, and last year revamped its website to include the ability to sell direct to consumers.

When Macmillan signed its contract with Amazon last year, CEO John Sargent stated that the retailer accounts for as much as sixty-four percent of the publisher’s revenue from e-books. HarperCollins has obviously taken measures to mitigate this market dominance, and – combined with its size and market clout – these seem to be working. Though with agreements already in place with three other big five publishers (Penguin Random House is now the lone holdout), Amazon had no real incentive not to agree to similar terms with HarperCollins.

Which in a way is disappointing. It would probably have been ugly, but a knock-down, drag-out, no-holds-barred battle between Jeff Bezos and Rupert Murdoch would surely have been entertaining.

The scorched earth society: The Everything Store by Brad Stone

September 4, 2014 by · Leave a Comment 

The Everything Store: Jeff Bezos and the Age of Amazon. Brad Stone; $20.00 paper 978-0-316-21928-0, 394 pp., Back Bay Books

The_Everything_StoreTry this: open a new window in your browser, and type in the URL Relentless.com. Note the website you are redirected to.

Relentless was one of the working names Jeff Bezos was toying with for what eventually became Amazon.com. Another potential name for the site was MakeItSo.com, a reference to the catch-phrase of Captain Jean-Luc Picard from Star Trek: The Next Generation. These two monikers are typical of the polarity that exists within the Amazon CEO, at least as he is portrayed in Brad Stone’s book about the internet giant’s “origin story.” Reading The Everything Store, the impression one gets of Bezos is one part cutthroat businessman, one part technogeek futurist.

Both aspects of Bezos’ personality have been important to Amazon’s survival, though it is the ruthlessness that cuts through Stone’s portrait most persistently. Bezos recognized earlier than most people the significance of the internet, and its potential as a disruptive force across a broad spectrum of industries. He chose books as a launching pad because books are “pure commodities,” though Stone points out that Amazon soon diversified, moving first into music and DVDs, then later into toys, jewellery, and other areas, each time with the same aggressive, take-no-prisoners approach to doing business.

During the 1999 Christmas shopping season, for example, one Amazon buyer discovered that stock of a particular Pokémon product, which was especially popular that year, had been depleted in the company’s warehouse; she sent employees out to buy up stock from their competitors, going so far as to avail themselves of the online Toys R Us free shipping offer. “Because they were so new to the e-commerce space,” Stone quotes the Amazon buyer as saying, “they really did not have the tools to alert them to us wiping out their inventory until it was too late.”

Years later, in an attempt to outbid Walmart in the sale of an internet company that owned the lucrative website Diapers.com, Amazon artificially drove down the price of diapers online, engaging in what Stone refers to as a “Khrushchev-like willingness to take the e-commerce equivalent of the thermonuclear option in the diaper price war.”

And when Bezos decided to dive into the choppy waters of e-reading by developing the first Kindle, he told the executive in charge to “proceed as if your goal is to put everyone selling physical books out of a job.”

That single-minded determination, coupled with an absolute refusal to countenance fools or naysayers, is responsible for much of Amazon’s success, including its ability to weather the financial storm created when the dot-com bubble burst in 2000. “They have an absolute willingness to torch the landscape around them to emerge the winner,” says one anonymous commenter quoted by Stone. Elsewhere, Rick Dalzell, one of Bezos’ key collaborators for much of Amazon’s history, says of the CEO, “What is amazing to me is that he is bound only by the laws of physics. He can’t change those. Everything else he views as open to discussion.”

Stone provides a remarkably even-handed overview of Amazon and its CEO, though he pulls no punches in describing a corporate culture that is frequently as remorseless with its own workers as with the industries it targets. Its owner, who Stone makes clear is inseparable from the ethos of the company he oversees, is so frugal that he famously posted ambulances outside his warehouses in the stiflingly oppressive heat of summer rather than pony up for air-conditioning. Stone describes the vein that pops out in Bezos’ forehead when he is about to launch into one of his volcanic rages (which Amazon employees have come to term “nutters”), and provides a list of “greatest hits” – the savage public putdowns he inflicts on his subordinates. (These include gems such as “If I hear that idea again, I’m gonna have to kill myself,” and “Are you a lazy or just incompetent?”)

People employed in book publishing – an industry Bezos takes great glee in disrupting (“eviscerating” might be a more accurate word) – will no doubt feel a large measure of satisfaction in reading Stone’s account, which depicts a company that is at best amoral, and callous about the collateral damage left in its wake, though this satisfaction should be tempered, at least somewhat, by a recognition of how slow they were to wake up to the existential threat Amazon posed to them.

Their willingness to jump on the digitization bandwagon by scrambling to meet Bezos’ blithely unrealistic demands for ebooks with which to stock his new Kindle store was predicated upon the notion that digital books would be the saviour of an industry that was feeling pinched by low profit margins and the steady erosion of sales from brick-and-mortar bookstores (due, in no small part, to the steep discounts negotiated by Amazon). They were astounded when Bezos then turned around and announced that he would be pricing digital new releases and bestsellers at a flat rate of $9.99.

A strong storyteller, Stone takes his readers through this material, and its fallout – the accusations of collusion on the part of the Big Six U.S. publishers; the American Department of Justice antitrust suit against those publishers and Apple – in a manner that reads more like a thriller than an economics text.

But there is also the inescapable reality that this story is still evolving, and Stone’s book ends just at the point when the narrative may be changing. Amazon’s recent contretemps with Hachette Book Group, putatively over ebook prices (once again), has resulted in pushback in the form of an open letter objecting to Amazon’s policies and practices. That letter, signed by more than 900 authors (including such brand names as Stephen King, John Grisham, James Patterson, Donna Tartt, and Nora Roberts), has proven troublesome for the company that built its reputation on the backs of those very authors.

One of the key ironies arising out of a reading of Stone’s book involves an early section describing a long-shot bet made by Bezos in the early days of the company. The brazen CEO decided to discount the fourth volume of J.K. Rowling’s massively popular Harry Potter series by 40 percent and to offer expedited delivery. The gamble paid off, and Amazon was rewarded with hefty media coverage and a slew of newly loyal customers. In the current farrago with Hachette, which involves heavy-handed tactics such as delaying shipping on the publisher’s titles and removing pre-order buttons in certain cases, one of the books affected is the new mystery by Robert Galbraith. Galbraith, you may recall, is the pseudonym of J.K. Rowling.

Goodreaders and Amazonians: monetizing online readership

April 1, 2013 by · 5 Comments 

When deep space exploration ramps up, it’ll be the corporations that name everything. The IBM Stellar Sphere. The Microsoft Galaxy. Planet Starbucks.

Fight Club

There’s a rule of thumb you can count on in each succeeding version of the web 2.0 movement: the more radical an online social experiment is claimed to be, the more conservative, nostalgic, and familiar the result will actually be.

– Jaron Lanier, You Are Not a Gadget

GoodreadsIn the distant reaches of historical memory, sometime around the mid-1990s, proponents of the developing Internet championed the new technology as a utopian tool capable of realizing the McLuhanesque vision of a global village and creating an egalitarian space (or non-space) in which individuals could interact and exchange ideas unfettered by political or corporate forces. In the areas of journalism and art, we were told, independent voices would be allowed to operate freely, without the shackles of government, big business, or advertising that had long dictated the terms of reference. It was to be democratic, anti-authoritarian, and open.

It didn’t turn out that way, and in retrospect it’s almost inconceivable that we could have been so naive. In the second decade of the 21st century, repressive political regimes have discovered that the online environment is infinitely superior to Jeremy Bentham’s Panopticon for keeping tabs on dissidents, and the free marketplace of ideas has turned into another, much more recognizably capitalistic marketplace. The Internet has become a nexus for buying and selling things, not least its users and their personal data.

When news broke last Thursday that Amazon had entered into an agreement to purchase the social media site Goodreads, many people reacted with surprise, although it’s difficult to see why. Amazon has made no secret of its ambition to control the trade in books online and, by extension, offline as well. The company’s practice of deep discounting has savaged publishers’ profit margins and enfeebled independent booksellers unable to compete on price. It has implemented questionable marketing schemes such as the 2011 mobile app that offered users a $5 rebate for scanning an item’s barcode in a bricks-and-mortar store then purchasing the item through Amazon. And it hired publishing veteran Larry Kirshbaum to run a publishing arm that, according to one anonymous insider quoted by tech columnist Sarah Lacy, overpays on advances as a way of driving conventional publishers out of business.

So the purchase of Goodreads makes perfect sense from a business perspective. It simultaneously removes a potential competitor from the field and allows Amazon, which has come under criticism for undisclosed conflict-of-interest in its user reviews, access to a peer-to-peer rating system that is more transparent and trusted. Financial details of the transaction have not been disclosed, but Forbes online suggests that the purchase price is “likely to have been in the low eight digits.”

On its blog, The Authors Guild in the U.S. was quick to condemn what it referred to as “a truly devastating act of vertical integration.” Guild president Scott Turow is quoted as saying, “Amazon’s acquisition of Goodreads is a textbook example of how modern Internet monopolies can be built.” On social media, Twitter users lined up quickly in declaring they were ready to delete their Goodreads accounts.

AmazonMeanwhile, in a breathlessly effusive blog post on the Goodreads site, co-founder Otis Chandler assures users that “Amazon supports us continuing to grow our vision as an independent entity, under the Goodreads brand and with our unique culture.” That may be, but Chandler also says that the deal will see Goodreads made available on “the most popular e-reader in the world, Kindle.” As Moby Lives points out, this synergy allows Goodreads users “to sync their accounts with Kindles, something users undoubtedly have been looking to do for some time now.” But the Kindle is a famously proprietary device, and Amazon is not subtle in its monopolistic desire to rid itself of competition; it seems only a matter of time before Goodreads’ attitude of vendor agnosticism disappears.

Moreover, whether or not Goodreads’ user reviews and rating systems or buy-button options remain untouched, the deal gives Amazon something far more valuable than the low eight figures they are rumoured to have paid: access to the raw data of the members on the social networking site. This includes users’ virtual bookshelves, the lists of books they have read and want to read, what they liked and disliked. From a marketing perspective, this is a treasure trove, but it also means that users who post reviews no longer have the luxury of doing so without a corporate Big Brother looking over their shoulder and employing the information to sell them other products. As Rob Spillman points out in an article on Salon: “even if Goodreads succeeds in keeping a semblance of independence, the era of naively posting one’s preferences is over. We collectively were under the delusion that Goodreads was different than the data-mining machine that is Facebook, when in fact we’re all just data waiting to be harvested.”

This was always the case, of course. In The Filter Bubble, Eli Pariser quotes Andrew Lewis as saying, “If you’re not paying for something, you’re not the customer; you’re the product being sold.” This was true of Goodreads long before Amazon appeared with its deep pockets and the promise “to build many new ways to delight readers and authors alike.” But the kind of data-mining that Amazon can now indulge in is not morally neutral, and has potential consequences not only for what we read, but for the way books get written.

It is no secret that the owners of e-book technology monitor the behaviour of readers: how much they read, how fast, what portions of a book they skip or reread, what they annotate, where they stop reading. All of this information can be used to artificially engineer books that the tech experts at e-reading companies think their users might prefer. As Stuart Kelly writes in the Guardian: “While the book’s relationship to the reader is one of privacy, with the e-book we are all part of an unacknowledged focus group.” As a result of Amazon’s most recent acquisition, its online focus group has grown exponentially: Goodreads currently boasts some 16 million members whose preferences, tastes, likes, and dislikes now become fodder for the company’s impersonal algorithms. Welcome to the machine.

Who knows what (and how and where) you’re reading?

December 16, 2010 by · Leave a Comment 

Back in July 2009, readers found that digital editions of two books they’d purchased from Amazon – George Orwell’s Nineteen Eighty-Four and Animal Farmhad mysteriously vanished from their Kindle e-readers. Although it turned out that Amazon removed the books (and credited the affected accounts) because the editions were unauthorized, this episode stands as a cautionary tale about the power e-book retailers have over e-book readers.

That power could be about to expand exponentially. Today, NPR published an article outlining the data that various manufacturers of e-reading devices collect about their users. If the irony of having Orwell’s books erased from Kindle readers is thick, imagine what the author would think of the following:

  • According to Cindy Cohn of the Electronic Frontier Foundation, Amazon can track how fast a person reads by the number of page clicks, and can tell where the reader stopped reading.
  • Bestselling author and president of the Authors Guild Scott Turow says of Amazon’s Kindle: “They could tell you with precision the age, the zip codes, gender, and other interests of the people who bought my books.”
  • Google stores pages from books a reader purchases through its eBooks store to keep track of where the buyer finished reading, but also for “security monitoring” and to police “abusive sharing” of titles.
  • Apple’s iBookstore sends “functional data” back to the company so that Apple can better “understand customers and customer behavior.”
  • Kindles and iPads are equipped with GPS software that allows their manufacturers to track not just what you’re reading, but where you’re reading it.

If all of this Big Brotherish activity strikes a cold note of fear in your heart, you’re not alone. Author Stephen King, who knows something about fear, told NPR, “Ultimately, this sort of thing scares the hell out of me.” And it should. The more society hands over its privacy and information to the digital machine – which increasingly means big corporations trying to sell people stuff – the closer we edge toward a precipice beyond which everything we do is monitored, crosschecked, analyzed, and monetized. Orwell feared that Big Brother would take the form of a totalitarian government; the truth is it may take the form of rapacious corporations collecting minute amounts of data on us to better understand how to enrich themselves at our expense.

Of course, it’s foolish to blame corporations and product manufacturers alone for the current state of affairs. The public at large seems all too eager to allow anyone and everyone access to every corner of their lives. Social media like Facebook and Twitter, and geolocation sites like Foursquare, provide constant updates about a person’s whereabouts, activities, and interests.

This has not gone unnoticed by the folks at Kobo, who are in the process of rolling out a Facebook-linked app called Reading Life, which will allow users to post reading lists to their Facebook pages, along with favourite passages, comments, and reading histories. What caught my eye, though, was a paragraph in Quill & Quire‘s report on the Kobo initiative:

The app isn’t just about cultural sharing, however – it also provides Kobo and other companies with new marketing opportunities. [Michael Serbinis, CEO of Kobo] gave this example: Kobo will be able, via the app, to detect if a particular user reads frequently at Starbucks. If that reader logs a certain number of reading hours at Starbucks, they could be offered a coupon on their next latte. If Kobo users don’t want Facebook to know what they’re reading or where they’re reading it, the app can be temporarily deactivated.

Kobo is quick to point out that Reading Life is an opt-in service – in other words, users have to consciously turn it on for it to work. This would likely be small comfort to the author of Nineteen Eighty-Four, or to the novelist Auldous Huxley, who, in Brave New World, predicted that humans would be all too willing to assist the forces desiring to subjugate them. The uncritical enthusiasm with which users have embraced Facebook, Foursquare, and other social media indicates that Huxley was right. Who can blame Kobo, Apple, and Amazon for wanting to profit off such consumer indifference? The problem is that by the time we realize we’ve relinquished our lives to the machine, it will be too late.

Consider this: in the movie Seven, detectives Somerset and Mills track down the serial killer John Doe by accessing his library records. In that movie, what the detectives do is clearly meant to appear unethical and underhanded. In today’s wireless world, it’s just business as usual.