July 3, 2014

Amazon speaks!


Stop the press: Amazon is speaking to the press.

Stop the press: Amazon is speaking to the press.

Amazon does not like to talk. And Amazon especially does not like to talk to the press—when the company felt it had to address its dispute with Hachette in late-May it avoided the media completely, and instead released an odd, condescending statement on its Kindle forum. In every report about its ongoing negotiations with Hachette you could expect to find one, beautiful sentence: “An Amazon spokesman declined to comment.”

That changed late Tuesday, when an Amazon representative—Russ Grandinetti, Amazon’s senior vice president of Kindle content—did comment, to the Wall Street Journal’s Jeffrey Trachtenberg. The timing was, perhaps, deliberate—Trachtenberg’s piece went up shortly before “Amazon: Business as Usual?” a panel discussion hosted by The New York Public Library began. That panel discussion featured a number of outspoken Amazon critics, including James Patterson, Bob Kohn, and Tim Wu. Amazon was clearly paying attention: it paid to fly self-publishing blogger and pro-Amazon zealot David Vandagriff to New York City to participate. (That Amazon finds Vandagriff, who does little to hide his disgust with “traditional publishing” on his blog, to be an appropriate spokesperson for the company’s aims is interesting, though it’s possible that they merely wanted to counter-balance the other panelists’ anti-Amazon views. Fight fire with fire: the Amazon way.) Once again, Amazon found the media narrative slipping away, and it decided to fight back.

Grandinetti attempted to recast the narrative from “Amazon is bullying its suppliers” to “Amazon is bully its suppliers so it can stand up for consumers.” Here’s what Grandinetti told Trachtenberg, with some back story (emphasis added):

But in an interview, Russ Grandinetti, Amazon’s senior vice president of Kindle content, indicated the retailer was willing to suffer some damage to its reputation and was simply doing what is “in the long-term interest of our customers.”

“This discussion is all about e-book pricing,” he said. “The terms under which we trade will determine how good the prices are that we can offer consumers.” …

There is some risk for Amazon if its customers get frustrated that they can’t find certain titles and look elsewhere. But Mr. Grandinetti said the company has been down this road before. He noted that in early 2010 Amazon briefly stopped selling books published by Macmillan. At the time, the publisher told Amazon it intended to move to the “agency” pricing model in which publishers set the retail price of their digital books, from the wholesale model, in which retailers set the retail price. Amazon opposed the switch, because it prevented it from discounting titles.

“We were fighting for what we thought was right for consumers, and the same is true here,” said Mr. Grandinetti….

Mr. Grandinetti pushed back on the notion that Amazon is a goliath battling small players, observing that almost all of the major publishers are “part of much larger media conglomerates.”

The “all we want is what’s right for consumers” is, as we’ve noted before, a smokescreen. Lower prices may be good for some consumers in the short-term, but they’re very good for Amazon in the long-term: Amazon can use low prices to gain market share (it already controls roughly 80% of the ebook market in America), which it will then use to gain better terms in other areas and greater leverage in future negotiations. It’s a completely bogus line:  Amazon fights for what’s right for consumers when fighting for consumers is good for Amazon—and only if you take an extremely narrow view of what “good for consumers” means. Lower prices have short-term benefits, but what Amazon is asking for from suppliers doesn’t just hurt fat cats at giant media conglomerates (like the one Hachette belongs to), it hurts the largely middle-class employees of those media conglomerates, to say nothing of the authors themselves. Amazon is out to destroy the publishing industry because destroying the publishing industry is good for Amazon. The consumer be damned. That’s not to say that Grandinetti’s wrong about the David v. Goliath narrative—Hachette is merely a smaller Goliath, though one with significantly less power or leverage than its foe—but anyone that thinks that either Hachette or Amazon is fighting for the best interest of consumers is completely naive. As Hachette author (and muscle car enthusiast) George Pelacanos told Trachtenberg, “It’s just business,” pure and simple.

Here’s what’s less simple: we still don’t really know what Amazon and Hachette are fighting over. Grandinetti is there to be Tony Allen (no, I won’t call him Tim Howard): he’s there to play defense. The claim that “This is all about ebooks” is an interesting one—especially considering that there are multiple reports floating around that Amazon is also seeking co-op payments (for things like pre-order buttons on all books, not just ebooks), MFN, and the right to print out-of-stock titles in Amazon warehouses. Grandinetti may be right—this fight may be all about ebook prices. (That would make its decision to also stop carrying physical Hachette books a bit odd, though again, this is business.) But it probably isn’t—Amazon has sought co-op payments, MFN, and the right to print out-of-stock titles in Amazon warehouses in previous negotiations and there’s no reason to believe it would suddenly start playing small ball now. They asked for these things from publishers in 2010, and there’s no reason to believe that they’ve stopped desiring them in 2014.

Amazon has always been about thinking big and there’s no reason to see why they’d suddenly start playing small ball—they’ve investors to please and a fancy, small-business destroying phone to sell, after all. But the “This is all about ebooks” line is more effective and sympathetic than “This is all about bringing the publishing industry to its knees.” Consumers generally think ebooks should be cheaper, so Amazon presumably thinks that telling consumers that they’re trying to lower ebook prices will bring some over to its side. Amazon doesn’t need public opinion on its side—it still holds all the cards in its dispute with Hachette—but it may be starting to feel insecure.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.