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Jeff Bezos, CEO and founder of Amazon, has a plan for the book business.

Associated Press,

Court ruling gives Amazon an advantage

  • Article by: David Streitfeld
  • New York Times
  • July 10, 2013 - 9:30 PM

 

Jeff Bezos, the founder of Amazon, loves disrupting markets. In that regard, he must be having a delightful summer. The book business, once so mired in the past that it seemed part of the antiques trade, is suddenly up for grabs.

A federal judge ruled Wednesday that Apple had illegally conspired with five of the six biggest publishers to try to raise prices in the budding e-books market. The decision came two days after Barnes & Noble lost its chief executive and said it would not appoint another, signaling that the biggest chain of physical bookstores could be immediately broken up.

The verdict in the Apple case might have been a foregone conclusion, telegraphed by the judge herself, but it emphatically underlined how the traditional players in the book business have been upended. Only Amazon, led by Bezos, seems to have a plan. He is executing it with a skill that infuriates his competitors and that his stockholders find rewarding.

“We’re at a moment when cultural power is passing to new gatekeepers,” said Joe Esposito, a publishing consultant. “Heaven forbid that we should have the government telling our entrepreneurs what to do, but there is a social policy issue here. We don’t want the companies to become a black hole that absorbs all light except their own.”

The Apple case, which was brought by the Department of Justice, will have little immediate impact on the selling of books. The publishers settled long ago, protesting that they had done nothing wrong but saying that they could not afford to fight the government. But it might be a long time before they try to take charge of their fate again in such a bold fashion. Drawing the attention of the government once was bad enough; twice could be a disaster.

“The Department of Justice has unwittingly caused further consolidation in the industry at a time when consolidation is not necessarily a good thing,” said Mark Coker, the chief executive of Smashwords, an e-book company. “If you want a vibrant ecosystem of multiple publishers, multiple publishing methods and multiple successful retailers in five, 20 or 50 years, we took a step backwards this week.”

Some in publishing suspected that Amazon had prompted the government to file its suit. The retailer has denied it, but it still emerged the big winner. While Apple will be punished — damages are yet to be decided — and the publishers were chastened, Amazon is left free to exert its dominance over e-books — even as it gains market share with physical books. The retailer declined to comment Wednesday.

“Amazon is not in most of the headlines, but all of the big events in the book world are about Amazon,” said Paul Aiken, executive director of the Authors Guild. “If the publishers colluded, it was to blunt Amazon’s dominance. Barnes & Noble’s troubles may stem from a misstep with its Nook tablets, just as Borders’ bankruptcy might have been hastened by management mistakes, but its precarious position is that of any rent-paying retailer facing a deep-pocketed virtual competitor.”

Amazon executives are not much for public debate, but they argue that all this disruption will ultimately give more money to more authors and make more books more widely available to more people at cheaper prices, and who could argue with any of that?

This was not a prospect that many were putting much faith in Wednesday.

Amazon, its detractors argue, is not a nonprofit or public trust but a hard-nosed company whose investors hope will make lots of money someday soon.

Its shares closed Wednesday at $292.33, a record.

 

© 2014 Star Tribune