Principled Profit: The Good Business Blog

Musings on the world-wide movement for ethical business, frugal marketing, and how honesty, integrity, and quality combine with deep relationship building to create business success. By the originator of the Ethical Business Pledge campaign and award-winning author of Principled Profit: Marketing That Puts People First and five other books

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Saturday, March 29, 2008

Amazon’s Stupid Anti-Competitive Move

Amazon wants to force publishers to use its wholly-owned printer, yesterday’s Wall Street Journal reports. If it thinks this is a good idea, needs its collective head examined. I think it’s one of the dumbest moves I’ve heard of in a loooong time.

Amazon gets a lot of its books through a company called LightningSource, Inc., or LSI–which is owned by Ingram, the 800-pound gorilla in the U.S. book wholesaling world. LSI prints digitally, which enables production of books as they’re ordered, in runs as small as a single book.

Thousands of publishers, from one-title solopreneurs up to the biggest names in the industry, use LSI for some or all of their printing–in part because it allows flexible inventory management, and in part because the connection with Ingram means any bookstore is automatically set up to special-order those titles.

LSI has many competitors, though it’s the only one to offer the Ingram connection. Amazon owns a competitor to LSI, called Booksurge/Createspace. And it’s going to force all publishers listing digitally printed books on its site to use this company.

The Journal reporter sees this move as rosy for Amazon:

The move will likely generate significant profit for Amazon, which has evolved into a fully vertical book publishing and retail operation.

Well, ummm, I don’t think so. This is what I see happening instead:

• Publishers, not a bunch that can be bullied easily (what’s that old saying about never getting into an argument with someone who buys ink by the barrel?), will haul Amazon into court for restraint of trade
• Publishers who control mailing lists totaling hundreds of thousands of names will tell their public about Amazon’s bullying, and encourage them to buy elsewhere (there’s already quite a bit of rumbling from publishers who say they themselves will shop elsewhere)–they may even get customers to write massive numbers of letters to Amazon saying if you want to keep my business, reverse this policy
• Subsidy publishers, which print perhaps 50,000 titles per year by mostly unknown authors, have promised those authors to get them listed both with Ingram and with Amazon, and are in a position to orchestrate a massive rebellion
• Publishers will withdraw book titles from Amazon, severely damaging its brand identity as “Earth’s largest selection”–on which they built their business
• If Ingram sees Amazon as

an enemy, and Ingram is a very powerful company, it will not be pretty

Of course, I may be wrong. Publishers may choose not to fight Amazon and to print non-exclusively with both LSI for Ingram and Booksurge for Amazon. Or they may simple knuckle under as if they’re John Kerry or Michael Dukakis attacked by Swift Boaters. But I’m betting this comes back to bite Amazon, hard.

Anti-competitive measures have a way of backfiring. There’s already been some backlash against certain independent bookstores that are demanding authors who do events with them don’t include links to Amazon. Amazon joining the fray will be shooting itself in the foot. The Abundance mentality, which I write about regularly, says it’s smarter to network with your competitors and to build alliances with them than to try to cut their throats, and end up cutting your own.


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