Punching straw men in the Hachette-Amazon dispute

publishing2There’s an all-out reactionary assault against the evil leviathan Amazon which, unfortunately, is manifesting itself as a foolish defense of the greater evils of incompetence and irrationality.

Galley Cat and the New York Times are mistakenly puffed up about the idea that Amazon misinterpreted George Orwell by quoting him out of context, ignoring the fact that the full quote not only says essentially what Amazon said it did—that “Orwell was suggesting collusion” (if only sarcastically). Check it out for yourself. It’s incredible how invested partisanship can blind you to what’s right in front of your eyes. And, NYT’s in-depth analysis of Orwell’s position on paperbacks, showing that he believed they would hurt publishing as a whole, was proved wrong by history.

Quite ironically, Amazon’s bashers accuse the company of behaving like Orwell’s Ministry of Truth simply because Amazon uses technology (Did these people even read Ninety-Eighty Four?) while they mimic MiniTruth’s tactics, tacitly rewriting inconvenient history by not pointing out how low-cost paperbacks actually made books available to a broader spectrum of readers and amenable to many more reading opportunities than hardbacks. Orwell’s sarcasm about collusion was more on-point than his economics.

But, never mind all that when you can shout “gotcha!” and pretend you caught Amazon with their pants down.

Inveterate Amazon-basher Melville House is reduced to truly desperate attempts to deny the complexity of the situation, boldly claiming that “everything else is irrelevant” when compared to Amazon’s profits and power. I agree that Amazon’s dominance is problematic, but when you have to suppress or misrepresent the other side’s evidence and arguments, it’s pretty much a confession that you don’t have a logical leg to stand on.

Which nicely segues into the most egregiously inane slash-piece against Amazon lately, a quasi-viral piece in the Los Angeles Times, wherein Carolyn Kellogg punches her way through a squad of straw men while pretending to pick apart Amazon’s position.

When you choose to attack straw men instead of attacking your opponent’s arguments, it’s usually because your opponent’s arguments are unassailable. So, let’s go point-by-point through Kellogg’s piece, with her clips of Amazon’s original statement in bold.

“[i]f customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99.”

Hmm. Doesn’t this depend on the book?

Yes. That’s why Amazon used an if-then logical construction in this hypothetical example, and modified “e-book” with “particular.”

There might have been an extra 74,000 readers waiting for Liane Moriarty’s “Big Little Lies” to drop to $9.99, but she’s a hot new bestseller. Would “The Informed Air,” a new posthumous essay collection by the Scottish writer Muriel Spark be able to attract the same number of buyers? Probably not.

And, there’s the straw man. Amazon’s if-then statement (and, in fact, any if-then statement) defines a given hypothetical set. It does not mean that everything falls into that set. Amazon could easily have followed up with “On the other hand, if customers would buy 100,000 of another book at $12.99, then…”

Kellogg either doesn’t understand Amazon’s reasoning—including how if-then works and what “particular” means—or she is being purposefully dishonest. And, she quotes Farhad Manjoo, another Times writer at another Times (the New York one), gleefully socking it to the exact same straw man.

It seems they are indeed “all in confederacy against” Amazon.

“Any author who’s trying to get on one of the national bestseller lists should insist to their publisher that their e-book be priced at $9.99 or lower.”

First, note the “or lower.” Kellogg includes this part of the quote, yet still brazenly misrepresents Amazon in her response:

If every e-book released Tuesday is priced at $9.99, readers have no incentive to buy the $9.99 e-book. Bigger sales are not guaranteed. If Amazon’s logic holds, seeking the competitive advantage of bargain e-books, publishers should lower prices still more.

Weird how she repeats Amazon’s “lower” as if that word hadn’t been in the original statement.

In case you didn’t notice, this response was two straw men in one. First, Amazon explicitly did not suggest pricing every e-book at $9.99. They said “$9.99 or lower.” Second, Amazon’s argument isn’t about competitive advantage between e-books. It’s about hitting the sweet spot of the supply-demand curve: pricing relative to consumer demand for a particular book, not in a simplistic competition with other e-book prices. Again, Kellogg either doesn’t understand what she just read or is being intentionally dishonest.

“With an e-book, there’s no printing, no over-printing, no need to forecast, no returns, no lost sales due to out-of-stock, no warehousing costs, no transportation costs, and there is no secondary market — e-books cannot be resold as used books. E-books can be and should be less expensive.”

It’s true that these material costs are removed from the equation of e-book costs. But most publishers are still publishing print books, so those costs remain part of their bottom line. Publishing e-books adds costs: making design adjustments, encoding in multiple formats, creating metadata methodology, etc. Making an e-book is not cost-free.

Again, “e-books are cost-free” is not even close to what Amazon is saying. Amazon is saying that e-books are less expensive and that this difference isn’t fully reflected in the prices being charged for them.

Can Amazon’s opponents only think in absolutes?

And, pointing out that publishing print books is also part of a company’s bottom line is like pointing out that Berkshire Hathaway sells See’s Candies and Fruit of the Loom. “We can’t mark down the chocolate because underwear is still part of our bottom line!” But in reality, Kellogg’s point is even more ridiculous than that, because print and e-books have the same source material, which means that many costs (e.g., screening, reviewing, and editing manuscripts) are shared by the two products. That’s not more cost per product as she’s implying. That’s less.

To Kellogg’s credit, her last response isn’t a straw man argument, but it misses the mark nonetheless.

“Keep in mind that books don’t just compete against books. Books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.”

While most readers would agree that many kinds of entertainments and online engagements compete for their attention, it is not logical to conclude that lower e-book prices will make them more compelling. Amazon’s list of books’ competitors includes several distractions — “Facebook, blogs, free news sites” — which are absolutely free. Book buyers buy books because they want to read books, not play Candy Crush.

Again, some very inept economic thinking here. Sure, pricing is part of a complex decision process, but the idea that adjusting the price won’t make a product more compelling, even against free goods, is simply naïve.

And, in this case, Amazon’s admittedly problematic size gives it a clear advantage over publishers in determining what the price should be, because they can quickly and easily experiment with pricing until they understand, scientifically, the optimal sales price to maximize profits for everyone: themselves, publishers, and authors. There is simply no way a company like Hachette could match the sheer scale of Amazon’s data and analysis on this matter. If Hachette had any sense (which their incessant fumbling proves they do not) they would take Amazon’s calculations more seriously.

Most importantly, Kellogg’s final sentence is not only a tautology, but it logically contradicts the dependent clause she starts with. Do book buyers categorically prefer books over online games or do “many kinds of entertainments and online engagement compete for attention”? Both can’t be true.

From the supposedly unraveled Orwell quote to Kellogg’s self-contradictory pretzel logic, Amazon’s opponents don’t seem to understand even their own arguments. If they really want to make ground against the internet giant, they should stick to the intrinsic evil of Amazon’s market-skewing size and stay out of the company’s skirmishes with incompetent publishers, where Amazon is clearly the lesser evil.

If Amazon’s opponents want to make antitrust arguments, I’m on board. But, trying to unravel Amazon’s pricing arguments, which are based on mountains of data and the undeniable fact that many traditional publishers have grown incompetent and clumsy from resting on their laurels? That’s not only fighting a lost cause, it’s fighting on the wrong side.



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