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Why I'd Give Up My Amazon Refund
Written by
State of the Art
October 2012
Written by
State of the Art
October 2012

Sarah Glazer worries that writers are getting shafted by Amazon

Like a lot of you, I got that “Dear Kindle customer” email from Amazon last week. It told me I was entitled to refunds on some past e-book purchases due to the settlement of a price-fixing case with publishers.

I normally wouldn’t consider myself a fan of price-fixing, but I confess my heart contracted a little when I learned that Amazon could go back to slashing e-book prices below their actual cost.

With Amazon and Sony now engaged in a price war, and some digital titles being offered for as little as 50 cents, “a little price fixing starts to look attractive,” commented British Evening Standard columnist Sam Leith. “Authors, publishers, and real-world bookshops are being slayed.”

Considering that Amazon was offering e-books below cost as a strategy to dominate the market, it’s not so surprising that publishers adopted the so-called “agency model,” where they got to set the prices closer to hardcover prices. And I’d gladly give up Amazon’s reimbursement of 30 cents to $1.32 per book—nowhere near the gap between Amazon’s standard $9.99 and the publisher’s price—if I thought it was going to some starving author.

Under the terms of the settlement, Hachette, HarperCollins, and Simon & Schuster will abandon the so-called agency agreements that the Department of Justice says illegally blocked booksellers from selling books at a discount. They’ve agreed to settle the case for $69 million, which will be returned to consumers in 49 states and D.C.

Apple, one of the defendants that did not agree to the settlement, says its entry into the e-book market around 2010 broke up Amazon’s monopoly in the market. Apple wanted its contract done the agency way, where publishers set the price and Apple took a cut, permitting it to keep up the price up for consumers.

Apple’s monopoly accusation seems to reflect the reality. Under the old model of pricing, Amazon dominated 90 percent of the market. After the publishers instituted agency pricing, its share dropped to 60 percent. And some prices on older ebooks fell, New York Senator Chuck Schumer noted in a Wall Street Journal editorial criticizing the Justice Department suit.

The suit, he wrote, “could wipe out the publishing industry as we know it.”

“If publishers, authors and consumers are at the mercy of a single retailer that controls 90% of the market and can set rock-bottom prices, we will all suffer. Choice is critical in any market, but that is particularly true in cultural markets like books. The prospect that a single firm would control access to books should give any reader pause.”

Immediately after the settlement was announced in September, publishers predicted that the market would revert to Amazon's 90 percent dominance of a few years ago. And a spokesman for the Authors Guild said brick-and-mortar bookstores would suffer if newly released e-book prices fell further, making it harder for them to sell hardcover books.

Some technology experts acknowledge that the corner bookstore may not survive, but reading and authors will. I felt a bit like an old-fashioned Luddite when I read the counter-argument posed by New York Times economics columnist Eduardo Porter

Porter writes: “For sure, if brick-and-mortar bookstores disappear, browsing will die with them. But writers and publishers will have plenty of other ways — think Amazon, Facebook or Google — of letting readers know about their books.”

He reminds me that we’re in a time of technological transition. We’ve been here before: “Music offers perhaps the best parallel of what could happen to the written word online," according to Porter. "Record labels that originally welcomed Apple’s iTunes soon realized it was a killer in disguise, allowing consumers to unbundle $13 CDs and buy only their preferred singles for 99 cents.

"But it wasn’t generally terrible for musicians. ITunes offered a shot to garage bands that could never have signed with a label. And fans didn’t fare too badly. Last year, consumers bought 1.3 billion singles — saving about $5 billion by not having to buy entire albums. This is hardly chump change. Would we be willing to give this up to save endangered record labels? While we ponder this, why not consider reviving Blockbuster, Circuit City and Tower Records?”

The other day I walked into an independent bookstore in the London neighborhood of South Kensington near my home. The books were beautifully displayed in a way that made it irresistible to reach out and stick my nose in at least a half-dozen, whiling away a lunch hour in pure bliss. I debated lugging one or two books home on my bike. But I walked out without buying a single one.

It seemed so much easier to go home and order them from Amazon for my Kindle.

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  • Jamie Brenner

    Fantastic post! This is a real problem. A serious problem.