Authors big and small, publishers, lawyers and regulators gathered in Washington Wednesday to discuss the growing influence and monopoly power in the book publishing and selling market wielded by Amazon, described by those in attendance as “the Darth Vader of the literary world,” that if left unchecked by antitrust regulators, will spark “a nuclear winter in book publishing.”
Amazon, by a wide margin the largest book retailer in the U.S., currently has as large a market share in the entire book business as John D. Rockefeller’s Standard Oil — the largest vertically integrated oil refiner of it’s time — had in 1911 before the Supreme Court ruled it an illegal monopoly, breaking it up into 34 companies, according to economist Paul Krugman.
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The U.S.’s biggest online retailer controls 75 percent of online sales of physical books, 65 percent of e-book sales, more than 40 percent of new book sales and 85 percent of e-book sales by self-published authors, founder of Authors United, author and journalist Doug Preston said at New America’s “Amazon’s Book Monopoly: A Threat to Freedom of Expression?” event Wednesday.
“This would be concerning even if the company in question were benign, but we all know that Amazon is not a benign company,” Preston said. “Amazon is a monopoly in absolutely every sense of the word.”
The next-largest publisher, Penguin/Random House, sells 15,000 titles every year, while Amazon uploads 500,000 new titles annually — as many titles as there are in Harvard’s Widener Library.
According to unpublished statistics by the Codex Group first revealed during Wednesday’s event, the retail share of books sold in book stores has gone from 72 percent in 2010 to 33 percent today — a market shift Codex described as “total domination.” The model has allowed Amazon to make more than $5 billion in book sales and avoid paying more than $600 million in state sales taxes in roughly half the states where it lacks a physical presence.
Amazon’s aggressive vertical expansion in the book market, where it dominates the independent publishing and e-book sectors, is not news. Preston was one of 3,000 authors who saw their books suffer delivery delays for weeks, cancelled pre-sales and ads suggesting other books on Amazon during the website’s near year-long dispute with publisher Hachette in 2014.
Amazon refused to restock or promote Hachette titles, and even threatened not to renew its license with the publisher, over its policy of drastically discounting e-books, which Amazon sells at a loss — a long-term tactic aimed at shutting down competitors. The two concluded the eleven-month dispute in November 2014, with Amazon permitting Hachette to set the prices for its e-books.
“These are an example of Amazon’s dirty tactics,” Preston said.
Publishers aren’t the only ones feeling the squeeze. Authors’ bottom lines have taken hard hits since Amazon’s takeover, with the Author’s Guild reporting the mean annual income of an author dropping 24 percent since 2009 from $10,500 annually to $8,000 in 2015 — below the federal poverty line. Authors writing full-time for more than 15 years fell 38 percent from $25,000 to $17,500, and while advances for the top 10 percent of writers have gone up, they’ve gone down dramatically for the remaining 90 percent.
By compelling self-published authors to agree to non-compete contracts for better placement and promotion on Amazon and selling their titles at massively discounted rates on Kindle Direct Publishing, the retail giant is effectively whittling away budding authors’ ability to publish and market their content across multiple venues, self-published author and Smashwords CEO Mark Coker explained.
“Unless there’s some form of government intervention, we face a nuclear winter in book publishing,” Coker said.
Even authors in the top percent such as New York Times bestselling-author Scott Turow, who said Amazon has helped him sell hundreds of thousands of books, said the online retailer’s power threatens authors’ free speech and expression by favoring certain books over others based on factors from pacing to page-count.
“They are, as I have called them, the Darth Vader of the literary world,” Turow said.
Turow, a former federal prosecutor and president of the Author’s Guild, pointed out Amazon has been able to distort and corner the e-book market by selling e-books at a loss partly due to Wall Street’s willingness to prop up the online retailer, despite it barely earning a profit, in anticipation of Amazon setting higher prices in a future where it dominates the market entirely.
“In my view — I don’t claim to be an antitrust expert — but that’s where the Justice Department should have stepped in,” Turow said.
Preston’s group wrote a letter to the Justice Department during the Hachette dispute in 2014 asking the government to investigate Amazon’s monopoly practices, and met with Justice Department antitrust officials late last year to present their case for an investigation, which officials said they would consider.
That may be hard going according to Jonathan Kanter, an antitrust partner with the Cadwalader law firm, who, along with others at Wednesday’s event, alleged the current administration is unwilling to prosecute Amazon because it views the market’s current low prices as a win for consumers, and doesn’t want to upset the financial arm behind the Washington Post in fear of bad press.
While federal regulators have been willing to block mergers between Comcast and Time Warner Cable, Staples and Office Depot and AT&T and T-Mobile, they’ve been less-willing to take action on antitrust.
“Merger enforcement is alive and well, antitrust enforcement is barely on life support,” said Kanter, who worked at the FTC’s Bureau of Competition during the Microsoft antitrust case in the ’90s.
Kanter added it’s not a question of whether there’s a federal case to be made against Amazon, but whether there’s a political will to do so.
“When was the last time you can remember a major antitrust agency bringing a monopolization case? The reason you can’t remember is because they haven’t done it,” Kanter said. “We haven’t seen one since the administration came in with a promise of more enforcement.”