THE very public, very fractious contract negotiations between online retailer Amazon.com and book publisher Hachette is affirming a modern truth.
As Professor Sandeep Krishnamurthy, dean of the UW Bothell School of Business, notes, content is no longer king; distribution is king.
The power that accrues to Amazon raises eyebrows when access to a single, dominant market platform — for vendors and consumers — can be impeded or manipulated.
Amazon’s demonstrated ability to move vast quantities of books gives it leverage in negotiations with publishers that is not unlike the power that accrues to Wal-Mart, Costco or Whole Foods, Krishnamurthy points out.
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From books to arugula, consumers have focused their buying power in market settings that are attractive for their price, selection and convenience.
Amazon has gone past selling products to taking over the order process and creating an affiliates network among booksellers. What Amazon has done has worked, and it has no apparent competition. Can that be used against the e-commerce giant by its critics?
Such market strength recalls past antitrust abuses by Microsoft and a dominant platform technology, or with Google and the attention it attracted from the Federal Trade Commission over anti-competitive practices and bestowing customer preferences.
Industries react. In the farming community, the response to wholesale operations has been to go local, and make a virtue of proximity. Farmers markets are a device to keep more of the profits closer to home.
Krishnamurthy wonders if authors might ramp up a kindred revival of book fairs, book readings, university promotions and library markets. It’s an attempt to reclaim a portion of the distribution chain.
Book buyers could be on the revolutionary front line by returning to book stores, the establishments so many of them abandoned for online convenience and pricing.
The publishing world is in the mode of the business-model victim. Amazon can respond with a challenge for others to distribute their goods. Indeed, a stark rebuttal might be, “Go ahead, compete with us.”
What Amazon has going for it, in Krishnamurthy’s view, is the sustained agility of a startup. Flexibility, aggressiveness and a willingness to test and embrace new ideas.
No sooner said than done. Amazon introduced a new smartphone on Wednesday.
In the end, Amazon the distribution king might find it to its advantage to settle for very good deals, instead of very, very good deals.
Amazon’s business practices, and not just its distribution prowess, will draw antitrust attention.
Editorial board members are editorial page editor Kate Riley, Frank A. Blethen, Ryan Blethen, Sharon Pian Chan, Lance Dickie, Jonathan Martin, Erik Smith, Thanh Tan, William K. Blethen (emeritus) and Robert C. Blethen (emeritus).