Does Monopoly Matter?

Maybe it doesn't, if all that matters is maximizing efficiency.

But it does, if there are other issues at stake as well -- community, the corrosive corruption of power, even serendipity.

I've been thinking about it today, thanks to two articles in the business section of the New York Times. They both cast a little extra light on last week's reports that the Justice Department was suing Apple and five major book publishers, accusing them of price fixing (on e-books). Hachette Group, HarperCollins, and Simon & Schuster have already settled with the government, are ending their "special" deals with Apple, while the other two (Macmillan and Penguin Group USA) have not, claiming that they have done nothing wrong. Apple has not settled either, and will be fighting the legislation.

The first of today's pieces that caught my eye was by "Media Equation" columnist David Carr, which muses about Justice's going after Apple when it is Amazon that is "book publishing's real nemesis."

Carr points out that, back in 2007 when Amazon introduced the Kindle, it began selling "some of the most sought-after books for $9.99 in order to bolster sales of its device." That price point made a lot of bookstores (and publishers) unhappy because "it made physical books sold for $25 or more seen [sic] outrageously overpriced." But there wasn't much that those stores and publishers could do.

With Apple, publishers developed a "so-called agency model", which allowed publishers to set the price. When the publishers all coalesced around what one might call "surprisingly" similar prices, Justice took note.

So yes, Carr decides, maybe there was some price-fixing going on. However:

From the very beginning and with increasing regularity, Amazon has used its market power to bully and dictate. It leaned on the Independent Publishers Group in recent months for better terms and when those negotiations didn't work out, Amazon simply removed the company's almost 5,000 e-books from its virtual shelves....

Amazon's $9.99 subprofit price ...[had been] a virtually impenetrable barrier to entry for anyone who couldn't afford to lose millions in order to gain market share. Remember that it was only after agency pricing went into effect that Barnes & Noble was able to gain an impressive 27 percent of the e-book market.

So, is Carr saying that the ends justify the means, and that since Amazon is a bully, the publishers' price-fixing should be OK?

I don't think so -- and if he did, I certainly wouldn't agree with it.

But I would agree with Carr that it looks as though "Amazon has the Justice Department as an ally to rebuild its monopoly and wipe out other players." And I would agree that this isn't a good thing.

As a consumer of dead-tree books (and e-books -- I'm the more-or-less-satisfied owner of a Kindle Fire), I like low prices. As the author of not-finished-yet-but-I'm-getting-there-and-hope-to-get-published novel, I know that low prices = low royalties. And just how low can they go? And what happens when Amazon is Last Company Standing? Will they stick to their low-prices-means-next-to-no-profit model, when they know that we don't have anywhere else to go?

Amazon also offers authors the opportunity to be "published" by Amazon. Those authors receive royalty rates of 70%, far beyond anything traditional publishing offers. But -- go ahead, call me cynical -- I suspect those rates will drop precipitously, once they're the last "publisher" standing.

That's my "corrosive corruption of power" concern about Amazon.

Then there's community. Bookstores, like other local retail outlets, are part of the fabric of a community. Take them away -- plunk a Home Depot two miles out of downtown where the land's a little cheaper, driving the local hardware store out of business -- and you hollow out the core of a community.

And finally, there's serendipity. I "met" some of my favorite authors by browsing through bookstore shelves, picking things up and reading a few pages. Amazon recommends things for me all the time, and most of them are wrong (That graphic novel I bought last month? It was a birthday present for a nephew, so, dear Amazon, you can take all the other graphic novels out of my face, please. And yes, I know that I could "optimize" recommendations, but why should I have to spend all that time making Amazon's job of smashing things in my face easier?).

Meanwhile, over in the second article that caught my eye today, David Streitfeld provides a nice counterpoint to Carr's note that Amazon had cut off the Independent Publishers Group's offerings when negotiations turned sour:

The Educational Development Corporation, saying it was fed up with Amazon's scorched-earth tactics, announced at the end of February that it would remove all its titles from the retailer's virtual shelves....

It is an unequal contest. EDC has 77 employees, no-frill offices on an industrial strip here [in Tulsa OK] and a stock-market valuation of $18 million -- hardly a threat to Amazon.... But Mr. [Randall ] White's bold move to take his 1,800 children's books away from the greatest retailing success of the Internet era is more evidence of the extraordinary tumult within the book world over one simple question: who gets to decide how much a book costs?

In the EDC case, unlike the case the Justice Department is pursuing, there are no e-books involved (EDC doesn't produce any e-books). Instead:

Amazon was buying EDC's books from a distributor and discounting them to the bone, just as it does with everything it sells. This might have been a boon for readers, but it was creating trouble with other retailers who carry the company's titles, as well as with EDC's network of independent sales agents, who market its books from their homes.

EDC CEO White complained that for his agents, their homes "were becoming showrooms for Amazon."

The Times' Streitfeld notes that late last year, "Amazon encouraged customers to use physical stores as showrooms before ordering more cheaply online, a move that infuriated bookstores in particular."

Some bookstore customers were infuriated, too, because that tactic was simply dirty pool.

EDC wants to think of itself as David to Amazon's Goliath, but White's not a pure hero (not that the Biblical David was one, either). His sales "consultants" operate on something more like a Tupperware Party plan than real consulting, talking up books to friends and acquaintances. It's a system that can be powerful, building on real social networks, and it's also one that can easily be abused.

There were plenty of reader comments to both articles along the lines of "change or die." People who are happy with Amazon's prices, or with the depth of material available, or the convenience of online ordering and downloading, think that they've seen the Future and they like it. "Get out of the way or get run over," they say. "And besides, all the publishers do is rip off the talent."

But it isn't that simple, is it?

I'm as fond of ordering books late at night when the bookstore's closed and of two-day shipping as the next person. I like being able to take one Kindle with me, loaded up with beach reads, on a week-long vacation instead of a stack of paperbacks. I like the depth of Amazon's offerings -- so much more than any physical store could offer.

But embracing the future doesn't mean that we should want to throw out everything about the past. I just read an e-book that I know a friend of mine would like ... and I can't loan it to her the way I could an actual book. I miss the tiny specialty bookshops that had deep knowledge of their own fields. I miss the local bookseller who knew what I would like and could make serious recommendations (as opposed to Amazon's "Recommendations for You").

What I'm still searching for is a way to keep the best of both worlds.