July 30, 2015

Amazon convinced the New York City Department of Education to give it $30 million to sell ebooks


Amazon: "Needs more ebooks" (image via Wikipedia)

Amazon: “This is okay, but it needs more ebooks” (image via Wikipedia)

Amazon’s got a soft spot for New York in that empty Minion box it calls a heart. Late last year, they hinted that they might open up a store in Manhattan, though it turned out to mostly be offices. Soon after, they started offering one-hour delivery to nearby zip codes. And soon after that, Amazon was overheard at a loft party drinking a Sixpoint and remarking to an unsmiling woman that it heard Crown Heights was getting “super safe these days.”

Ha ha! I am just kidding, Amazon can’t talk. Though it can convince the City of New York to give it tens of millions of dollars, and not just in tax breaks.

Capitol New York reports that NYC’s Department of Education is about to approve a $30 million dollar contract with Amazon to create a single, massive ebook marketplace for the city’s 1,800 public schools.

The Amazon deal will be one of the D.O.E.’s most expensive contracts and one of the city’s few significant deals with a leading technology company. The contract will also create the department’s first unified e-book marketplace.

Schools chancellor Carmen Fariña has said she wants to boost the department’s technology credentials.

The pending contract will officially be voted on at a Panel for Educational Policy meeting in late August, but is likely to be approved.

The Amazon contract will last three years, with an option to renew for two additional years.

According to the DOE’s official request to contract with Amazon, this will confirm Amazon as NYC’s “primary distributor of electronic textbooks and related educational materials”, beating out Overdrive. This is ostensibly to allow the DOE to save money by buying ebooks in bulk, where they had previously been purchased by each separate school.

The marketplace, known as “Storefront“, will provide low-cost digital versions of textbooks and other assigned books that are accessible via a “variety of devices”. Purchased content will be made available on these devices via Amazon’s Whispercast platform. Along with having an unmarked panel van of a name, Whispercast was recently revamped with new features designed to make it K-12 school- and teacher-friendly, including the ability to buy digital content via purchase order and an allegedly more user-friendly setup wizard. It would seem that Amazon’s ambitions to integrate into your children’s academic lives don’t just end at the college level.

Ideally, the DOE’s contract with Amazon can address a growing consumer issue with textbooks, namely that they’re too fucking expensive. The growth in the ebooks market carried with it a promise of cheaper and easier-accessed textbooks, but so far this hasn’t come to pass, at least not on a broad scale. Federal efforts to jumpstart the process have stalled, and a colorful series of criminals have started reaping ill-gotten gains.

And while the DOE acknowledges that there are issues with physical textbooks, and claims that Storefront will reduce these issues, they believe it to be more a problem of efficiency and space rather than price.

“We’ve listened closely to educators and this new marketplace will address many of the major current concerns of our schools relating to school texts: not having enough space for textbooks and primary resources, the physical decay and loss of books, not being able to easily compare options and prices, and not being able to exchange book licenses with other classrooms and schools,” Devora Kaye, a D.O.E. spokeswoman, said in a statement.

So why are “technology credentials” worth $30 million to NYC, plus the guarantee that Amazon will be the only game in town for digital educational content? What’s actually being sold here?

The language of the request for contract is the expected level of eye-glazingly boring, but the $30 million boils down to two types of content: DOE-contracted (i.e. textbooks) and vendor-contracted (other assigned books and texts from trade publishers). A small portion of the $30 million accounts for DOE-contracted content, because Amazon will receive up to 15% commission for fulfillment on it. The rest goes to vendor-contracted content; if schools are purchasing, say, digital copies of Toni Morrison’s Beloved, then the school would purchase the ebooks from Amazon at a discounted rate equivalent to or lower than the rate available to consumers—plus an added commission. As each publisher holds their own contract with Amazon that dictates ebook discounting, there’s no flat discount for schools on vendor-contracted books.

And this doesn’t necessarily mean that NYC schools will be saving money on vendor-contracted books themselves, just that Amazon was able to successfully undercut Overdrive’s prices, as they’ve been doing for years. Amazon claims that the only cost to the city for actually setting up Storefront will be a few incidentals.

The whole $30 million number was calculated based on the estimated rate at which teachers will actually use Storefront, and the respective chunks of money in 2012’s fiscal year that went to textbooks and trade books. However, the DOE immediately admits their own shortcomings in this department.

Also using the DOE’s FY 2012 total textbook expenditures of $62.4 million, the contract estimates a similar adoption as that of the trade books. Since this is the first time this type of implementation has been proposed, the actual adoption rate of schools for digital content is difficult to estimate.

But multimillion dollar municipal contracts are boring, so let’s move on! (Sorry, True Detective Season 2.) Once the content is purchased, Storefront also offers up some unsettling features for schools and teachers, including the ability to “view and track the usage of content by students.” Your teacher will be able to know if you didn’t do your reading before he or she even leaves the house! How fun.

So in conclusion, the DOE has agreed that digital textbooks are good and necessary and should be made uniformly available across their entire bailiwick. And this is good news! (Unless you’re one of the millions of parents who doesn’t have Internet access or savvy.) However, the murkier issue is where these tax dollars will actually go. The language of the contract gives Amazon incentive to construct this workable and user-friendly marketplace using a platform for which they clearly recognize the revenue potential in public education, so NYC parents shouldn’t be worrying that Amazon will do shoddy work.

But with millions in commission on all purchased content, the percentage of which is based a fulfillment cost which the contract admits is “not defined and covers expenses such as data conversion, storage, maintenance, uploading, distribution and customer service”, will taxpayers really be getting their money’s worth, even if Storefront is adopted at the rate laid out by the DOE? And from an industry standpoint, will Amazon stepping neatly between a publisher and a towering set of accounts like the NYC school system increase sales any make everyone happy, or just give Amazon a city-sponsored piece of the action?

And does the DOE know that Amazon’s faced numerous criticisms and lawsuits over atrocious labor practices, tax dodges, and convincing children to steal their parents’ money? That question does have an answer, and the answer is that the DOE doesn’t care.

The DOE believes that none of these matters are out-of-the-ordinary for a company the size of Amazon (Amazon.com), which in fiscal year 2014 generated approximately $89 billion in revenue and had approximately 154,100 full-time and part-time employees. In light of the size of the parent entity and as none of the matters above directly concern the prime vendor, the DOE does not believe they preclude a determination that the vendor is responsible.

Sounds like Amazon’s too big to fail! Shouldn’t be a problem.


Liam O’Brien is the Senior Sales & Marketing Manager at Melville House, and a former bookseller.