Amazon’s Pawns

I sometimes speculate at the end of my copyright class that, years hence, we’ll stop using a statutory supplement and just refer to the Amazon, YouTube, Facebook, etc. service agreements to find sources of legal authority. The cultural power of Google & Facebook gets a lot of media attention, and now Amazon is under renewed scrutiny. Wired highlights the business acumen of Jeff Bezos; Mac McClelland has told the story of the sweat it’s based on. Now The Nation is featuring an intriguing series on the company, with pieces by Robert Darnton, Michael Naumann, and Steve Wasserman (along with the slide show on 10 reasons to avoid Amazon). A few reflections on the series below:

1) Wasserman compiles an array of stats: according to the revised 2012 edition of Merchants of Culture, “in 2011 e-book sales for most publishers were “between 18 and 22 percent.” “Two decades ago, there were about 4,000 independent bookstores in the United States; only about 1,900 remain.” Publishers stand to be disintermediated, since too many have been “complacent, allergic to new ideas, even incompetent.” Amazon stands triumphant:

[By 2011], it had $48 billion in revenue, more than all six of the major American publishing conglomerates combined, with a cash reserve of $5 billion. The company is valued at nearly $100 billion and employs more than 65,000 workers (all nonunion); Bezos, according to Forbes, is the thirtieth wealthiest man in America

The aggregator has triumphed over the aggregated, and its own workers. As exposes revealed, “in one of Amazon’s main fulfillment warehouses in Allentown, Pennsylvania . . . employees risked stroke and heat exhaustion while running themselves ragged [and] [a]mbulances were routinely stationed in the facility’s giant parking lot to rush stricken workers to nearby hospitals.”

2) Amazon is not the only tech company with labor issues. Some might excuse the ruthlessness of an Apple or Amazon by lauding the innovation subsidized by exploitation of its lowest-paid workers. Even Barry Lynn, a fierce critic of the company, admits the appeal of this big picture view:

In rare moments of disquiet, we like to assure ourselves that all shall turn out well. Surely some Schumpeterian upstart will emerge, as if by magic, to disrupt Amazon’s reign. Or Apple or Google will choose to intervene, in some fashion that avoids the political dangers posed by Amazon’s control, even though these firms wield powers at least as awesome as the online retailer’s.

Then we drift back into our private utopias, there to marvel at all the wonders of modern technology and the freedoms that await us if only we are patient and trust the great corporations to deliver what they promised. And truth be told, it is an amazing world we live in. I mean, who would ever have imagined that one day we’d be able to read Common Sense right on our Kindles?

Darnton undermines the “gee, whiz” apologia by emphasizing technical shortcomings of Amazon. Lamenting the decline of “statistically improbable phrases” functionalities, Darnton says that “The new search capabilities that inspired and aided us a decade ago may not quite have become roadkill by the digital superhighway, but they’re shadows of what they once were.” If the Amazon malaise spreads, watch out. Given the stall in “sectors such as space exploration, transportation, energy, and biotechnology,” big data innovations in search, personalization, and analytics are the main games in town.

3) Finally, there is praise for cultural preservation from Germany. Having provoked outrage at a conference a few weeks ago by postulating that an agency might, in some circumstances, privilege the development of multiple weather forecasting and visualization services even if that reduced consumer welfare, I shudder to quote these passages, but here goes:

[P]ublishing and selling books in the United States was, and remains, a very different and far rougher business than in my home country of Germany, where since the late nineteenth century a fixed-price agreement between publishers and bookstores has defined a less competitive and highly regulated publishing market. The participants in this voluntary price cartel signed a mutual agreement: publishers set the prices on books, and bookstores abided by them. The arrangement resembled a prenuptial agreement between both sides, based on trust, notarized by a lawyer’s office and armed with expensive sanctions.

The agreement was deeply engrained in Germany, and in 2002 it became the law. Publishers list new books, prices included, in a database that currently contains around 1.2 million titles. An office of lawyers near Frankfurt, appointed by the Publishers and Booksellers Association, monitors the adherence of all participants to the agreement: every breach of the contract can be punished by a fine of up to € 6,000, enforced by a higher court. As you might expect, a black-sheep syndrome keeps the lawyers busy. Anonymous booksellers on the Internet offer so-called “used” books at a discount, some of which have been stolen from printers or warehouses. . . .

Stressing the cultural relevance of the book industry, the law grants publishers the right to set a price on all new books, hardcover or paperback. After eighteen months, the publishers may lift the fixed price, announcing the change in trade publications. Some loopholes in the earlier agreement — such as the selling of “damaged books” (which in fact were undamaged) at lower prices — were closed in 2002. The fixed-price law was revised in 2006 to cover all points of sale, including Internet shops like Amazon and e-books (except for those enhanced by add-ons such as videos, pictures and other gimmicks). One outcome of the fixed-price law has been the growth of a new online market for used books: approximately 100,000 titles are now available. The flourishing of this market is a clear indication that the backlist business of German publishing has declined dramatically since the passage of the fixed-price law. Whereas in the 1980s the backlist accounted for nearly 30 percent of the sales for hardcover books, today that share has fallen to 5 percent. It is also illegal to export German books to neighboring nations without fixed-price laws in order to reimport them and sell them more cheaply. (Fixed-price agreements are also in place in France, Greece, Italy, the Netherlands, Austria, Portugal and Spain.

I wonder if anyone has described the proposed Google Books settlement as a “prenuptial agreement?” Truly a phrase pregnant with meaning. I wouldn’t endorse the German system without a great deal more study. But it does raise some interesting questions about the role of publishers as gatekeepers in a digitized age. As the material foundations of the book industries in the US and Europe diverge, the circulation of ideas is sure to be influenced as well.