Friday, March 16, 2012

Presumed Inane

Scott Turow was interviewed in Salon.com a few days ago, explaining why we should fear Amazon.

Scott said: "The concern is that they are getting so large and they compete so ruthlessly that there’s a lot of fear for what the world with Amazon in charge is going to look like."

This is entirely understandable. I mean, when one company has the majority share of any particular market, they always abuse their power. For example, how about...

Um...

Well, what about that famous case of... uh...

There have to be plenty of examples of this happening, right? How people get screwed once some company winds up with the lion's share of the market?

Just because Scott didn't list any examples, and because I can't think of any, doesn't mean this isn't a huge problem that happens time and again in the US.

Lemme consult Google, see what I can find.

(please hum the theme to Jeopardy in your head, and then send the copyright holder royalties)

Okay, I'm back.

I couldn't find any examples of any US companies who dominate a marketplace and then start screwing customers.

Ironically, I used Google, and one could probably call Google a dominant company. It certainly is the most popular search engine in the world. But it doesn't seem to be screwing over customers. In fact, it keeps innovating and improving customer experience.

Ditto Twitter, and YouTube, each also dominant.

Hmm...

Scott said: "Look, if what they’re into is maximizing profits, then if they were to have a monopoly there’d be no rationale not to use the monopoly power to increase prices to consumers. That is historically what monopolies do. There is plenty of precedent for that. It’s only rational to fear what they’re going to do with this accumulation of power."

That's historically what monopolies do? Okay, so show me the precedent.

Microsoft has pretty much dominated the market with Windows. Has Windows become more expensive since it first launched because MS has a monopoly on operating systems?

It launched in 1985 for $99.00. In today's dollars that equals $212.00

The latest version of Windows is $179.00.

But Amazon must have a track record for doing this, right?

When the Kindle was released in 2007, it was $399. Now that is has an overwhelming market share, how much did Amazon jack up the price?

The Kindle Fire is $199. The bare-bones Kindle is $79.

Hmm...

I'm old enough to remember Ma Bell having a true monopoly on telephones. You had no choice. You couldn't even own your own phone--you had to rent from them.

Am I off base, or did prices seem to get higher once the Department of Justice broke them up?

Monsanto owns 98% of the US soybean market, and 79% of the corn market. Last I checked, both corn and soy were still pretty cheap.

Where is all this precedent? Can't Turow offer a single example? Just one to show the bad things that happen when a single company controls an industry?

Certainly OPEC is an example, but that's a cartel, not a single company. They all agree on the price of oil, and we've seen how crazy oil prices have become. We're hitting $4.00 for a gallon of gas in Chicago right now. All because they collude to fix prices.

I mean, four bucks for gas is outrageous. It's almost as bad as paying $14.99 for an ebook.

Hmm. That's sort of ironic, isn't it? Because the Big 6 also fit the definition of a cartel, and they're being investigated for collusion.

Seems like cartels want to keep prices high, when Amazon wants to lower them. That's the reason the Big 6 colluded, remember? Amazon was selling ebooks for less than the cartel wanted them to be sold for. So the Big 6 forced Amazon to take the agency deal, resulting in LESS MONEY FOR AUTHORS.

I put that in caps because Turow and the Authors Guild support the agency model, when authors make less money from the agency model. And the rationale behind it is so funny it hurts:

The Big 6 wanted to control ebook pricing so they could keep the prices high, because they were afraid of Amazon becoming a monopoly which might raise the price of ebooks.

How about Wal-Mart? They certainly have a commanding market share. And look how they're gouging their customers with large selections and low prices, and how they keep appearing in more and more areas so more consumers can benefit from them.

And yes, I know some people hate Wal-Mart. For a nice counterpoint to all the hate, watch the Penn & Teller episode of Bullshit where they talk about all the good Wal-Mart does. It's on season 5, and you can get it on Netflix.

Hey, there's an example! Netflix is close to being a monopoly. In fact, they are one of the most visited sites on the Internet (#22 in the US). And look how poorly they treat their customers by charging an outrageous $15.98 a month. Compare that to cable TV companies, who have plenty of competition. Yet for some reason I still pay over $50 a month for cable.

Hmm. Cable (which has competition) screws me, and their customer service is laughable, and Netflix (the monopoly) is a fraction of the price and gives me great service.

"Scott said: This was something that Amazon pioneered. They would sell you a [just-released] book on Day One, buy it back from you on Day Two, and then resell it to another customer on Day Three. This was legal, but certainly not what anybody ever intended.

So Amazon decides to go into competition with the publishers by reselling the book they just bought. The publisher gets paid nothing, and neither does the author. It’s a pure profit for Amazon."

So Amazon pioneered selling used merchandise alongside new merchandise?

Have you ever been to a car dealer, Scott? They've been doing that for decades. So has Gamestop. They buy used videogames, and sell both new and used games, systems, and equipment. Best Buy is doing this now as well.


Record stores have been doing this forever. And I know plenty of indie bookstores who sell both new and used.

Apparently used sales don't hurt new sales as much as Scott would like us to believe. Or perhaps they do. Perhaps once Amazon began selling used books alongside new books, new book sales plummeted. I'm sure he's got reams of data that shows this was the case.

Funny he didn't share any of that data, or give a single example. As president of the Authors Guild (aka the Mouthpiece for Big Publishing) he certainly could contact some of the Big 6 and ask them how their new book sales on Amazon plummeted when Amazon began selling used books.

Used bookstores have been around for hundreds of years, yet the new book market has continued to survive, if not thrive.

I wonder what Scott and the Authors Guild think of libraries. They buy one book, and loan it out hundreds of times. Doesn't that hurt new book sales too?

Well, Random House thinks it does. They just increased their price of ebooks to libraries as much as 300%.

But Random House isn't a monopoly. It is part of a cartel.

Am I the only one getting the impression that calling Amazon a monopoly is just a tactic to scare authors, when authors should be fearing the disaster that is the Big 6 cartel? The Big 6 are the ones raising prices and giving authors poor royalties. Amazon is giving authors great royalties and lowering prices, which leads to more ebook sales.

BTW, see how I'm proving my points by linking to examples? Where are Scott's links?

Scott said: "One way that 25 percent of net became the standard royalty for e-books was because publishers said, “We all know they can’t go on selling e-books at a loss forever and sooner or later this pricing structure has got to change.” They told authors they couldn’t agree to a different royalty because everyone knew that Amazon wouldn’t be paying them $14 to $15 per title indefinitely."

Wow. This is such utter BS.

First of all, the 25% ebook royalty rate existed long before Amazon invented the Kindle. I've got book contracts to prove it.

Second of all, they couldn’t agree to a different royalty because everyone knew that Amazon wouldn’t be paying them $14 to $15 per title indefinitely--SERIOUSLY?!?! The Big 6 FORCED Amazon into the agency model. The Big 6 are the ones who cut author profits and guaranteed Amazon was no longer paying $14 to $15 per title.

So the Big 6 were worried Amazon would no longer pay them $15 per ebook, so they forced Amazon to take a deal where Amazon only paid them $7 an ebook.

In-fucking-credible. And of course, the author got screwed. And the Authors Guild endorsed this screwing.

Scott said: "Amazon responded by removing the buy buttons not just from all of Macmillan Publishing’s e-books — about which you can say, yeah, there’s a legitimate dispute — but from their print books, too. Paper, physical books! It was another demonstration of their ability to abuse their market power."

Actually, Amazon was the one being bullied here. Macmillan forced them to take the agency model. Amazon had deals in place with Macmillan, and Amazon was allowed to price their ebooks however they wanted to. That's how retail works. So Amazon decides they don't want to be bullied by a supplier, and they stop selling the supplier's ebooks, and that's an example of abusing power?

When someone smacks me in the mouth, and I smack them back, am I abusing my power too?

Scott said: "Barnes and Noble developed the nook because they really had no choice but to compete with Amazon. "

Amazon didn't force B&N to develop the Nook, Scott.

Readers did. Because readers decided they wanted ebooks. And smart companies try to pay attention to what readers want.

Unless, of course, they are part of a cartel and can control price. Like the Big 6 did for decades, releasing an overpriced $25 hardcover a year before the affordable $7.99 paperback. Why not release them both at the same time?

Oh yeah, because you can't gouge the consumer then. Funny how when a book is finally released in paperback, it pretty much always sells more copies than the hardcover. Perhaps because customers prefer paying less.

Historically, who charges customers less? Cartels like OPEC and the Big 6? Or so-called monopolies like Amazon and Netflix?

How about Apple? Apple is now the biggest music retailer in the world. And did they abuse this monopoly power by raising prices and becoming hostile to their customers? Or have they lowered prices and stopped using DRM, which customers hate?

(A quick aside here--the music business blames piracy for their woes, because their revenue decline coincides with the rise of mp3s. I have a different theory. Customers didn't want to pay $15 for a CD when they only wanted one song. When Apple started selling mp3s individually, consumers only bought the song they wanted, not the whole CD. Hence the sales decline. It wasn't piracy. It was the music business no longer able to bully consumers into buying full CDs. For a hilarious look at how industries inflate numbers, watch author Rob Reid explain Copyright Math.)

Scott said: "Again, my concern is for the sake of literary diversity. If the rewards to authors go down, simple economics says there will be fewer authors. It’s not that people won’t burn with the passion to write. The number of people wanting to be novelists is probably not going to decline — but certainly the number of people who are going to be able to make a living as authors is going to dramatically decrease."

Because there can be no literary diversity without publishers and brick and mortar bookstores, right Scott?

What a silly thing to say. Almost as silly as saying there will be fewer authors.

Actually, Scott, there are now more authors than ever, thanks to Amazon. There are over 100,000 self-pubbed titles in the Kindle Owner's Lending Library, and many more in KDP. And the majority of these authors are making more money than they were in legacy publishing.

Some of these books went out of print. Some were rejected. Some were never even submitted to the Big 6. Some, like me, will never submit again. Now these authors are earning 70% royalties through Amazon, while the Big 6 still only offer 17.5%.

Why don't you mention those authors, Scott? Some are Guild members.

Please, Scott, explain why you are defending the group that screws authors and demonizing the group doing good things for authors?

Is Amazon perfect? Of course not. No company is. But the things you accused them of doing are justifiable, and there is no evidence or precedent for the things you fear they'll do someday in the hypothetical future. At the same time, there is ample evidence that the Big 6 harms authors and disregards readers.

It seems to me that you, and the Authors Guild, are fighting for the wrong team.

After writing this fisk, I asked Barry Eisler if he had anything to add. He came up with these excellent points.

Barry: Joe, that was epic. It was almost painful to see someone so thoroughly demolished for his total failure to mention even *one* supporting example, and for his failure to address all the real-world examples that contradict the theories on which he relies.

Remember, this is not some high school freshman who's learning persuasive writing and argument for the first time. This is a graduate of Harvard Law School, a former Assistant U.S. Attorney, a practicing attorney, and the author of two works of nonfiction. His failure to provide any real-world evidence at all in support of his claims and theories is stunning. So is his failure to respond to this post or the one you and I did over the weekend. No one with any intellectual honesty, or even just dignity, could refrain from defending his arguments after they've been so publicly and thoroughly dismantled.

Just a few additional thoughts:

Look at Counselor Turow's opening argument again:
"The concern is that they [Amazon] are getting so large and they compete so ruthlessly that there’s a lot of fear for what the world with Amazon in charge is going to look like."

There's so much dishonesty in that one little sentence.

First, "the concern is" and "there's a lot of fear" construction. Anytime someone uses the passive voice, or otherwise constructs his sentences to obscure the actors, my bullshit detector starts to tingle. Who is Scott talking about here? Himself, presumably, but no one's going to particularly care about the fears and concerns of just one person, so he can't name himself. And legacy publishers, presumably, but if he were to say, "The concern among legacy publishers is…", people would discount that fear as illegitimate and self-interested. So instead, he twists his syntax to make readers feel like he's talking about the whole world, or at least about all of decent society, without ever having to take an actual position about just who is so concerned and afraid, and why -- a position that he might have to actually defend .

Remember, again, this is a guy who's written countless legal briefs. A professional, who chooses his words with exceptional care. So it's fair to assume his linguistic dodges are not accidental, but are instead done deliberately.

But okay, regardless of who is supposedly so concerned and afraid, what does Scott claim they're concerned and afraid of? "Amazon in charge."

Amazon in charge of what? Book retailing? Book publishing? My health care? The country? The world? What does it mean for a company to be "in charge" of something?

Well, that's just it -- you're not supposed to really know. Your imagination is supposed to just fill in a vague feeling of disquiet at the notion of a corporation being "in charge." So at best, the phrase is hyperbolic. The non-overheated way to phrase it would be something like, "Amazon having too much power in the book business." But that doesn't sound *scary* enough. So Turow deliberately resorts to hyperbole to achieve the scares he seeks.

Now, in fiction, this is fine. But from the President of the Authors Guild, in a letter posted on the Authors Guild blog?

That's just disingenuous.

Why is Turow creating these straw men? The same reason anyone does. Because he knows he can't make or counter real arguments. If he could, he wouldn't have to make shit up instead.

Here's another nugget.

"Barnes and Noble developed the nook because they really had no choice but to compete with Amazon."

Think about that for a moment. Turow makes it sound like mean old Amazon cruelly forced B&N into such a dire situation that B&N had to, like, *compete*, man. And that is so unfair!

Really? Amazon's innovations forced other companies to innovate, too? And Turow doesn't like that? He wishes it weren't so? Turow thinks that's *bad?*

This is what happens when you can't argue with logic and evidence -- when, as Orwell, said, "there is a gap between one's real and one's declared aims." The truth starts to bleed through the bullshit. And the truth is, Turow doesn't like innovation. He doesn't like competition. He likes the cozy, moribund world of establishment publishing that has been good to him, the one with which he identifies and of which he is part. He doesn't want that world to change, and he resents players who are intent on changing it.

Now, for all the Twitterers and commenters who are going to jump in now and say, "Hey Barry, you and Joe are biased, too! You guys are both Amazon authors and have made, and stand to make, a lot of money with Amazon!," let me say this.

Bias is only suggestive of unsound thinking. It is never dispositive. Logic, evidence, and argument are dispositive. So the urge to focus exclusively on what's at best merely suggestive while ignoring what's dispositive is as strange as it is unproductive.

But let's assume the bias-mongers are right. Let's assume Joe and I are biased (and that Scott Turow, bless his disinterested heart, isn't). Let's assume the Amazon model of low prices, high royalties, and high volume works for us, and that we like it the same way Pete Sampras likes carbon racquets -- because they favor our style of play.

Now that that's out of the way, can we address the *merits* of our arguments? Is what Joe and and I have argued here logical? Is it backed with solid evidence? Can it be refuted with solid evidence? And regardless of how one system or another might favor Scott Turow or how it might favor Joe and me, which system, on the merits, is likely to deliver more benefits to more authors and readers overall?

Those are the questions that matter, no matter who is biased in an argument, or how, or why. And anyone who really gives a damn about books and publishing should be trying to answer those questions, not trying to avoid them.

Joe: Thanks for chiming in, Barry. I want to add a bit about proving arguments. I have very little knowledge of monopolies. So when someone tells me something is a monopoly, they need to prove it to me and not assume I can automatically come up with ten examples. I found a few examples of monopolies on the Internet, but it's not my job to study every company in the history of the US looking for monopolies to disprove Scott's ideas. It's his job to prove them and support them, because he is the one claiming that monopolies increase prices, and that there is plenty of precedent for that.

He has to show the precedent, and show how it applies to Amazon, if he wants people to believe him.

If someone claims there is a gremlin in their house, it is not up to me to prove gremlins don't exist. The one who claims experience has to prove it.

I stated quite openly that I don't know of any past monopolies that increased prices once they wiped out competition. I'm saying that the dominant companies I've looked at (Amazon, Netflix, Google) seem to treat consumers better than cartels treat customers. I've provided evidence to support my ideas.

If you disagree with me, go point by point, using logic and evidence to show I'm wrong.