Monopoly, Monopsony, and Shortsightedness

Some readers may recall that in 2012, the U.S. Department of Justice sued the major U.S. publishers because, as a group, they refused to discount ebooks to Amazon, and that practice was considered a restraint of trade [it was far more complicated than that but since that’s not the point of this blog, that summary will do], and all of them eventually capitulated, even Apple, and paid fines of various amounts, none of which were insubstantial.

At that time, I wrote a letter to DOJ protesting the Department’s action because I felt that DOJ was in fact enabling not only a monopsony but a monopolistic practice where, in the end, after Amazon drove out or weakened a great number of brick and mortar bookstores and bookstore chains, Amazon would essentially replace them and prices would rise.

And what happened? The entire Borders chain went out of business; Barnes and Noble has been closing stores and cutting back on books in stock in the remaining stores; and a great number of independent bookstores closed, far more than have opened in a recent small resurgence of smaller bookstores. In addition, in effect, Amazon is also now effectively dictating some terms of sale to the publishers, which it is able to do because it’s the single largest sales outlet in the book business, and that, in effect, illustrates that Amazon is in point of fact the textbook case of a monopsony.

Even more interestingly, Amazon now has brick and mortar stores and is planning more, although the Amazon experiment with “pop-up kiosks” just ended with the closure of all 87 kiosks and an Amazon statement to the effect that Amazon would be concentrating on the more permanent Amazon bookstores.

As a result of all this, publishing margins dropped, and when those margins fell, publishers stopped publishing, or published less frequently mid-list authors or authors who had something new or different to offer but who did not sell as well. Even the incomes of many best-selling authors dropped, particularly those without an “outside” media presence.

Through its marketplace, Amazon is also doing much of the same thing to retailers across the entire United States, using lure of lower prices in the present to obtain a market position that enables it to eventually control the market and raise prices.

But that’s what Americans get for always focusing on price… even when it’s clear they’ll pay more in the long run, both in consumer prices and in jobs.

3 thoughts on “Monopoly, Monopsony, and Shortsightedness”

  1. Tim says:

    I had finished reading a book on Hadrian’s wall on Kindle and Amazon recommended me another one. I knew the author so I decided to find out when it was written.

    When I tried Chrome I ended up on Amazon. When I tried Goodreads , I had a choice of Facebook or Amazon.

    Eventually I found a review by the Times (of London) which I assume was published soon after the book. So I had my date.

    But it was frightening that all roads led to Rome (so to speak).

    Amazon are dominant indeed.

  2. Michael John Creek says:

    In the e-book market there are numerous alternatives, but I choose the kindle experience, because basically a better software platform. Occasionally I buy a book from Google’s platform. These days I prefer to buy (or rent) E-books. Amazon is dominant. I don’t know if they are a quasi-monopoly, but, basically, they deliver a great service. I’ve not noted any greater prices on Amazon than on other providers.

  3. John M. says:

    Amazon has made a business practice of opening a line and running it at break even or even at a loss until it has forced other businesses to close. At which time they raise their prices.
    It is indeed legal, but by no means ethical.

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