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Jon Talton

Analysis and commentary on economic news, trends and issues, with an emphasis on Seattle and the Northwest.

November 13, 2014 at 10:47 AM

Amazon vs. Hachette: Who won?

The seven-month standoff between and the publisher Hachette Book Group is over. The two signed a multiyear deal that allows Hachette to price its ebooks, but receive better terms if it “delivers lower prices for readers.” Hachette authors will be available again on Amazon. It’s not immediately clear how the two settled another element of the dispute, how revenues would be divided and profit margins set.

Even though Hachette appears to have prevailed in its key goal, setting its own digital book prices, the clear winner from a business sense is Amazon. The Seattle company had already signed an agreement with Simon & Schuster which gave the publisher some freedom in pricing its titles but allowed Amazon to discount some ebooks. Hachette was being boxed in. With the new deal, Amazon gets access again to popular Hachette authors such as Michael Connelly and J.K. Rowling.

(Disclosure: My mystery and thriller novels are carried on Amazon, as well as sold in bookstores and other online sites. Hachette has never been my publisher.)

The moral victor, if that’s the right word, is less clear. By engaging in such heavy handed tactics as removing pre-order buttons on Hachette titles and delaying shipment on some, the mask of the smiling online bookstore run by the book-loving Jeff Bezos slipped badly.

Bezos’ cozy relationship with many well-known authors crumbled, including at the annual Campfire, a confidential dinner for superstar writers hosted by the Amazon CEO in Santa Fe. More than 900 authors, including Stephen King and John Grisham, signed an open letter to Amazon, appearing as a New York Times ad. In part, it read:

It is not right for Amazon to single out a group of authors, who are not involved in the dispute, for selective retaliation. Moreover, by inconveniencing and misleading its own customers with unfair pricing and delayed delivery, Amazon is contradicting its own written promise to be “Earth’s most customer-centric company.”

The dispute laid bare Amazon’s commanding presence, controlling more than 60 percent of print books sold online and 64 percent of digital books. Calls for an antitrust investigation of Amazon received a boost from the dispute. Nobel laureate economist and columnist Paul Krugman was blunt: “…has too much power and it uses that power in ways that hurt America.”

With antitrust laws morphed by Robert Bork and others in the 1970s and 1980s into a monopsony and cartel protection racket, Amazon is probably safe.

One thing is clear: Bezos is a data-driven businessman, not a keeper of civilization. That might not matter as much if he didn’t have such control over the market, gained in no small part by the Internet whose development was heavily financed by the taxpayers and, by avoiding taxes, beating down his tax-paying competitors.

Oh, one other thing: Seattle, a city that claims to love its diminishing number of indie bookstores, is more economically dependent on Amazon’s success than ever.

The Amazon problem has not gone away with this settlement. The problem has merely been revealed — and it’s not lack of profits for Wall Street.


Today’s Econ Haiku:

The climate-change deal

Could create plenty of jobs

Beyond lobbyists




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