They might be giants

They might be giants

Are we at the beginnings of a backlash against big tech? Last week the New Yorker published a disruption takedown from Jill Lepore in which she castigated the tech community for its “reckless and ruthless” philosophy of disruption. Over the weekend the Observer criticised tech companies for sometimes thinking “they are above good rules”. A few weeks ago the New Statesman ran a series of articles puncturing the Silicon Valley dream, and warning about the “political and social damage that may be done by the future land-grab being pursued by the big internet companies”.

For publishers the context for this are the ongoing negotiations between Amazon and its suppliers over supremacy in the book business. As The Bookseller exclusively reported yesterday, Amazon’s latest terms indicate a direction of travel that would see the online retailer take a sizeable control over both a publisher’s inventory and its marketing. Can’t deliver fast enough to meet Amazon’s super-efficient distribution machine? Amazon would now POD the book. Not sure how best to market a book, or a list? Amazon could do it for you, albeit for a cut of the turnover.

Publishers spoken to — and obviously they will only speak on condition of complete anonymity — have every right to be concerned. This is a form of assisted suicide for the book business, driven by the idea that publishers are a sickly lot unable to run even the most basic operations efficiently. Asking publishers to move to print on demand “is largely about taking control of the business,” Mike Shatzkin, founder of Idea Logical, told Brad Stone two years ago (hat tip to the Melville House blog for that one). “It adds some profit margin, but it also weakens the rest of the publishing universe.”

This weakening, it now seems clear, is part of fundamental strategy shift. When Amazon told agents earlier this year it was going after publishers' profit margins, what did it think it hoped to achieve? Publishers make commendable but not huge margins on sales, but their ability to do so in the future will entirely dictate how many authors they can afford to invest in. Weaken publishers, and it is authors who suffer. Weaken publishers enough, and authors will jump ship to Amazon's KDP platform, created entirely by Amazon to satisfy its own content needs.

If Amazon was just a supplier or distributor (as some commentators make out) then this wouldn't make sense. But as Brian Appleyard noted in his New Statesman piece, the giant tech companies are playing by new rules they have already loaded in their favour: in other words, they “enforce rather than merely predict the future by rigging the entire game”. In short, the more Amazon dominates the book business the more it will be best placed to take advantage of the markets it has created.

One small example is around Amazon’s unwillingness to release sales data for the e-books market, though it continues to do so, via Nielsen BookScan, for print book sales. Sharing of data would likely make publishers more efficient, promote greater understanding of how price drives this growing sector, and enable all of us to more accurately report on this giant shift in reading habits. It would give authors more power (in the way Hugh Howey is trying to market his own Author Earnings reports) by adding some much needed transparency into sales reporting.

This is not simply an Amazon issue, of course. In the music business YouTube is holding small music labels to ransom by withholding their music from the channel unless they sign-up for YouTube’s new subscription service. One clause reported today, is the ability of YouTube to reduce the rate of royalties paid to independents, should a major label cut a lower deal.

Have the regulators noticed yet? The Bookseller reported that the European Union's Directorate General for Competition is understood to have approached major UK publishers over an investigation into Most Favoured Nation (MFN) clauses. In Germany just today the trade association the Börsenverein has officially lodged a complaint against Amazon with the German competition authorities, alleging that the giant e-tailer has abused its market power in its negotiations with the publisher Bonnier.

If they plan to act, then they will need to find a new way for dealing with these giant entities that are both creator and chief beneficiary of the worlds they weave. It is no longer enough to have a conversation just about Amazon. The context is important, and here the regulators have shown themselves to be wilfully blind.

In her summing up of the Apple collusion trial Judge Denise Cote evoked the two wrongs rule: “Another company’s alleged violation of antitrust laws is not an excuse for engaging in your own violations of law. Nor is suspicion that that may be occurring a defense to the claims litigated at this trial," she said. But as a profile of Cote published in Vanity Fair earlier this year noted: “Nothing the publishers did—delaying the release of e-books, complaining to Amazon, upping their wholesale prices to the company, or, in the case of one house, Hachette, actually going to the Justice Department to gripe—seemed to work.”

For Lepore the problem is not with the tech, but with the people behind it. The cult of disruption, she wrote, has been driven by people who would “convince a generation of people who want to do good and do well, to learn instead remorselessness”.

According to an article on Bloomberg, we should Go Easy on Silicon Valley's Nerds. ”We’re looking for rich, successful people to bash. And Silicon Valley happens to be where the rich, successful people are right now. So we’ve turned on the nerds,” wrote Noah Smith, an assistant professor of finance at Stony Brook University. “When the bespectacled Bill Gates became the world’s richest person, something changed for the better, and I don’t want to go back to the old days.”

The point is well-made.

Except, from where publishing stands, it no-longer feels like the nerds are in control.