Amazon & Google Agree to Antitrust Consent Decrees

2018 Publishing Predictions

My 2013 predictions mainly concern the year 2018. Why?  It's easy to predict the near term (unless you are trying to accurately predict where the markets will go over the course of one year).  Also, the practical utility of a short term prediction is limited.  When the air raid siren has sounded, it's too late to build a shelter.  Predicting the mid term allows time to adjust behaviors and positions.  And, as a celebrity seer once said to me, "If you engage in fortune telling, foretell the mid-term.  That gives them time to forget your inaccurate or mistaken predictions."   His other advice was to "predict outcomes not details."  On that one, I've broken with accepted prophetic practice. 

[Suggested musical accompaniment:  Robert Plant & Alison Kraus' version of the late great Allen Toussaint's Fortune Teller.  Video embedded at end of post.]

Prediction 1

FTC Cuts Amazon & Google Down to Size

(New York) November 22, 2018.  The FTC concerned about

Depiction of FTC Attack on Google

vertical integration (control of content production and distribution) will prohibit Amazon and Google from having a monetary interest in content they distribute or display.  Amazon and Google will agree to consent decrees, whereby Amazon* is forced to spin off its Simon & Schuster, Avalon, Dorchester, Sony Records and Showtime divisions.  Likewise, in response to accusations it abused its market power, i.e. the ability to control price or reduce competition, in internet searches,   Google will agree to divest its Google Maps, JK Lasser Tax Institute, Automobile Club of America, Zagat and ESPN divisions. In a complicated formula to be worked out by FTC and European regulators, within 90 days of the decree, Google will be ordered to start sharing proceeds of revenues derived from sale of personal data of users who click a new "Monetize Me"  button.  Neither Google nor United Parcel Service (UPS)  will be willing to comment on how the  consent decrees will impact their proposed merger.  Lloyd Jassin will be quoted as saying, "Privacy is the new copyright."

"Protecting competition in the digital marketplace is a high priority for the FTC," will say Bureau of Competition Director Richard Feinstein. "This order will ensure that vigorous competition continues in the worldwide online market for entertainment and information products, and that consumers are not faced with reduced innovation as a result of digital favoritism and dwindling access to markets for independent publishers and other independent content producers." 

"The Internet is better served with less regulation," David Crane, a Google-friendly legal scholar will be quoted as saying. "This violates nearly every tenet of laissez faire capitalism.   What Google is doing is good business.  It's not exclusionary.  While Google is invaluable, it's not essential.  Stop complaining about your inability to compete. Start competing."   

*Why the FTC Took Amazon & Google Apart: An Antitrust Analysis: By 2016, the FTC determined that Amazon and Google had turned their backs on their original missions of openness and innovation. The platforms, via exclusionary tactics, have  become toxic to healthy innovation. Responding to real or perceived external threats, both companies had abused their market power by raising barriers to entry,  making it difficult for potential new entrants as well as large companies to compete.   It started in earnest in June 2012, when Amazon Publishing acquired category publishers Avalon and Dorchester. Four years later, Forrester Research reported that 70% of America's online shoppers began their search for a product at Amazon. Google which tied search to advertising, controlled 70% of America's advertising sales by 2016, and was rumored to be in talks with UPS about a possible merger. That same year, the EU fined Google $500M Euros for cooking search results, i.e., favoring its own content over the content of others. Book publishers and more so, film and television studios and the interactive gaming industry had become a threat to Amazon. They could withhold products, or, in the case of studios and the interactive gaming industry, increase license fees at the end of a license term. Google, now a mature business, simply lost its way. The FTC determined it was time to regulate the platforms. But they needed to make their case.  Amazon had shown an unsavory willingness to withhold technological innovations from suppliers and vendors for its own advantage. Using its position of dominance, it often disabled "buy now" and "buy" buttons to address threats from its publishing suppliers. But, it wasn't just about books. Similar tactics were used to punish suppliers and deny threats to entry in gaming, music, publishing, motion pictures, kitchenware, infant diapers and formula, and shoes. Hoping to mimic the trading template created by Amazon, Google eyed UPS as a way to fill in the gaps in creating a fully integrated trading company. Amazon and Google's entrepreneurial audacity were tolerated until they exhibited parallel habits of willful exclusion of others - otherwise known as conscious parallelism in the rubric of antitrust law. After being scrutinized for possible antitrust violations for several years, the FTC determined that they ceased to be the instruments  of innovation; so the FTC cut them down to size. Reflecting on the Apple "Agency Pricing" consent decrees of 2012 - 2013, a former Justice Department attorney (anonymously) observed that "Price fixing cases were easy to sell, both politically and as a coherent story. There were clear villains. Apple. Big publishing. The consumer felt it in their wallets. The price of eBooks went up. When former innovators go bad, those are the tough cases. When do you bring an enforcement action? It's a matter of timing. The FTC waited until they believed innovation and openness had taken a back seat to discriminatory practices."

Prediction 2 
 
Google Wins Fair Use Battle *

If you are looking for something short-term, something 2013'ish, I predict that Google wins (or The Authors Guild settles) the fair use litigation commenced in 2005; that Google does not seek attorney fees or otherwise act punitively.  Is the mass digitization of  books a good thing?  Yes, unless Google favors its own content over yours.  See, 2018 predictions above. 

*Update: Yep, it came to pass.  On October 16, 2015 the U.S Court of Appeals for the Second Circuit affirmed a 2013 lower court ruling that Google’s library book scanning project was protected by fair use and was not copyright infringement.


Resources 

Looking Back on My 2008 Predictions (blog post) (Lloyd Jassin):  I urge you to to look at the end of the post, where I score my 2008 predictions.  The growth of the independent book sector, which was predicted, as well as Google's search engine preference for its own content, are just two or four major predictions that have become reality.    

Three Versions of Fortune Teller

 

Looking Back: My 2008 Publishing Predictions

Amazon Changes the Digital Landscape

Published in the Summer 2008 issue of
 The Center for Independent Publishing newsletter

 

Recently, the industry was shaken by an announcement by Amazon that the company was changing its order fulfillment policy. In a nutshell, Amazon threatened to disable a book's "Buy Now" button if that book's publishing company did not subscribe to Book Surge Print, an Amazon owned print-on-demand (POD) printing service. Many called it a blatant attempt at a monopoly, because Book Surge is the only POD option available if one wishes to sell books through Amazon using its "Buy Now" button.

As the market evolves and embraces digital distribution options, we at the Center for Independent Publishing (CIP) find Amazon's move both troubling and exciting. Amazon wants to be active all the way along the digital supply chain from production to marketing to distribution. By force of will its Book Surge gambit will make Amazon the de facto virtual digital warehouse for hundreds of thousands of digital book files. What role will Amazon play in helping (or hindering) our members to make better use of their digital assets?

It strikes me that from Amazon's large and powerful river might flow not just POD books, but e-books, books disaggregated and re-purposed for mobile hand held devices, audiobooks and other digital derivatives -- whether now known or hereinafter invented. Our hope is that in the swirl of that digital river, we will see new digital revenue streams emerge for smaller and independent presses. If Amazon remains committed to the indie press segment, and acts as a bridge not just between publishers and traditional readers, but between publishers and digital readers, it becomes an enabler, and, perhaps, the best friend an indie publisher could have. However, Amazon's favoritism to Book Surge is a slippery slope that could easily decrease diversity. Amazon is steering consumers to books that are produced by its owned-and-operated press.

While it doesn't look like the cost of gaining access to the number one online bookstore has gone up (except for duplication costs associated with files formerly entrusted to other POD printers), the CIP is concerned about Amazon’s monopolistic intentions. The company’s claim that it is not seeking exclusivity (i.e., requiring POD titles be printed exclusively through Book Surge), seems to be a subtle bit of specious reasoning. Amazon's gain is the ability to monopolize the POD market. It is offering a single printer option. Just as Amazon deserves our praise for having been a good publishing partner for our publisher members, it deserves our scrutiny as it moves from online bookstore to what is beginning to look suspiciously like a celestial publishing house.

Traditionally, bookselling was separated from publishing, with booksellers (including Amazon) realizing the benefit of combining the wares of many publishers. Now that Amazon has the ability to perform all of the activities that take place between delivery of an edited manuscript and delivery of finished books to readers, the publishing industry needs to take a hard look at its current business model. Publishers have the potential to get squeezed on both ends. For example, there is the Barnes & Noble - Sterling combo with an increasing number of book sales being titles self-published by B&N. It is the same deal with Amazon, which is actively going after new product to self-publish with Createspace as well as original audiobook projects from Audible. To the extent publishers covet virtual shelf space at Amazon (with one-click ordering), Amazon's move should give indie publishers pause.

What if this virtuous publishing partner determines that it is profoundly profitable to publish their own books? If Amazon does not use its great size and ability to bring its own books to the attention of readers, we will be very surprised. When Amazon does this, we fear it will be at the expense of independent publishers whose distinctive personalities are reflected in the books they publish. To date, Amazon has been a good partner, but operating under the aegis of a publicly traded company who has shown the ability to act arbitrarily is disconcerting to the CIP and our publisher members. Publishing is a competitive business. It is likely to become more competitive if Amazon starts favoring its own self-published books

So, as a general proposition, vertical integration is a bad thing. Perhaps, the market will correct itself, as publishers move over to www.barnesandnoble.com, and other digital asset distributors and e-retailers pop up. Likely, that won't happen. Book distribution is not sexy enough, and Amazon is like the slightly abusive partner we tend to tolerate for the benefit of the kids. If the industry doesn't get an order of protection from the Justice Department, then perhaps we need a Plan B.

Physical distribution of books is largely the preserve of large conglomerate publishers and a handful of large independent distributors. It’s not a pretty business. It employs the equivalent of Yankee peddlers who hand-sell books to brick and mortar stores, with full return privileges for oversold books. If we extrapolate, the Book Surge gambit may be seen as a relatively painless first step in managing the digital distribution of titles to e-tailers and licensees. Amazon has the amazing ability to manage and organize content. It also offers a painless online experience for the consumer. Instead of Amazon merely being the recipient of digital assets, it’s easy to imagine Amazon providing comprehensive consultancy services to our members, helping them prepare their content for digital distribution for and beyond the traditional Amazon platform. Is the Book Surge gambit a disguised opportunity for indie publishers? Perhaps. Indie publishes are the small furry mammals scurrying around the legs of large dinosaur publishers. The digital meteor has hit. To survive, indie publishers need to be able to present content in a variety of digital formats. Is Amazon a friend or a foe? Only time will tell.

If I had to guess, I'd say in the next 24-months Google buys Ingram (Googlegram?) for its digital group assets (including Lightning Source), and it out-Amazons Amazon by creating the ultimate digital warehouse/distributor in the sky.

If Google were to exhibit digital favoritism, it would steer book buyers to its wholly owned and super- efficient Lightning Source imprint. Amazon owns the online store. Google owns the web. Amazon merchandises books. Google sells them contextually. Balance is restored to the planet.

The short- to mid-term changes in trade publishing are going to be dramatic. Large publisher dominance is shrinking in the new media economy. When the change comes, we believe the main winners will be independent publishers. They music industry taught us that. Amazon has confirmed it.

Lloyd J. Jassin
Chair, Executive Committee
Center for Independent Publishing

Postscript / Scorecard

Welcome to 2016! Glad you could make it.

It's time to assess my fortune telling abilities. So, how did I do in predicting the future of publishing? As predicted, Amazon's was the catalyst for profound changes in the publishing industry.  

These are the five publishing predictions I made in 2008: 

Prediction No. 1: Amazon acquires book publishing companies.
Verdict: Correct. In 2012 Amazon acquired Avalon and Dorchester.

Prediction No. 2: Google skews search results to favor its own content.

Verdict: Correct. As of this writing (late 2017), Google is appealing a record €2.4bn (£2.2bn)fine levied by the EU over search engine results. 

Prediction No. 3: Amazon will crush the competition. 
Verdict: Correct. In 2015 Amazon controlled 74% of the eBook market. 

Prediction No. 4: Google Acquires the Ingram Content Group.
Verdict: Okay, not yet. Give it time.

Prediction No. 5: The big winner will be independent book publishing. 
Verdict: Correct. "[N]on-traditionally-published books now make up nearly 60% of all Kindle ebooks purchased in the US, and take in 40% of all consumer dollars spent on those ebooks," according to a 2015 report by the AAP (Assoc. of American Publishers).