Cheap Words | The New Yorker
Amazon is a global superstore, like Walmart. It’s also a hardware manufacturer, like Apple, and a utility, like Con Edison, and a video distributor, like Netflix, and a book publisher, like Random House, and a production studio, like Paramount, and a literary magazine, like The Paris Review, and a grocery deliverer, like FreshDirect, and someday it might be a package service, like U.P.S. Its founder and chief executive, Jeff Bezos, also owns a major newspaper, the Washington Post. All these streams and tributaries make Amazon something radically new in the history of American business.
Recently, Amazon even started creating its own “content”—publishing books. The results have been decidedly mixed. A monopoly is dangerous because it concentrates so much economic power, but in the book business the prospect of a single owner of both the means of production and the modes of distribution is especially worrisome: it would give Amazon more control over the exchange of ideas than any company in U.S. history. Even in the iPhone age, books remain central to American intellectual life, and perhaps to democracy. And so the big question is not just whether Amazon is bad for the book industry; it’s whether Amazon is bad for books.
According to Marcus, Amazon executives considered publishing people “antediluvian losers with rotary phones and inventory systems designed in 1968 and warehouses full of crap.” Publishers kept no data on customers, making their bets on books a matter of instinct rather than metrics. They were full of inefficiences, starting with overpriced Manhattan offices. There was “a general feeling that the New York publishing business was just this cloistered, Gilded Age antique just barely getting by in a sort of Colonial Williamsburg of commerce, but when Amazon waded into this they would show publishing how it was done.”
During the 1999 holiday season, Amazon tried publishing books, leasing the rights to a defunct imprint called Weathervane and putting out a few titles. “These were not incipient best-sellers,” Marcus writes. “They were creatures from the black lagoon of the remainder table”—Christmas recipes and the like, selected with no apparent thought. Employees with publishing experience, like Fried, were not consulted. Weathervane fell into an oblivion so complete that there’s no trace of it on the Internet. (Representatives at the company today claim never to have heard of it.) Nobody at Amazon seemed to absorb any lessons from the failure. A decade later, the company would try again.
Around this time, a group called the “personalization team,” or P13N, started to replace editorial suggestions for readers with algorithms that used customers’ history to make recommendations for future purchases. At Amazon, “personalization” meant data analytics and statistical probability. Author interviews became less frequent, and in-house essays were subsumed by customer reviews, which cost the company nothing. Tim Appelo, the entertainment editor at the time, said, “You could be the Platonic ideal of the reviewer, and you would not beat even those rather crude early algorithms.” Amazon’s departments competed with one another almost as fiercely as they did with other companies. According to Brad Stone, a trash-talking sign was hung on a wall in the P13N office: “people forget that john henry died in the end.” Machines defeated human beings.
In December, 1999, at the height of the dot-com mania, Time named Bezos its Person of the Year. “Amazon isn’t about technology or even commerce,” the breathless cover article announced. “Amazon is, like every other site on the Web, a content play.” Yet this was the moment, Marcus said, when “content” people were “on the way out.” Although the writers and the editors made the site more interesting, and easier to navigate, they didn’t bring more customers.
The fact that Amazon once devoted significant space on its site to editorial judgments—to thinking and writing—would be an obscure footnote if not for certain turns in the company’s more recent history. According to one insider, around 2008—when the company was selling far more than books, and was making twenty billion dollars a year in revenue, more than the combined sales of all other American bookstores—Amazon began thinking of content as central to its business. Authors started to be considered among the company’s most important customers. By then, Amazon had lost much of the market in selling music and videos to Apple and Netflix, and its relations with publishers were deteriorating. These difficulties offended Bezos’s ideal of “seamless” commerce. “The company despises friction in the marketplace,” the Amazon insider said. “It’s easier for us to sell books and make books happen if we do it our way and not deal with others. It’s a tech-industry thing: ‘We think we can do it better.’ ” If you could control the content, you controlled everything.
Many publishers had come to regard Amazon as a heavy in khakis and oxford shirts. In its drive for profitability, Amazon did not raise retail prices; it simply squeezed its suppliers harder, much as Walmart had done with manufacturers. Amazon demanded ever-larger co-op fees and better shipping terms; publishers knew that they would stop being favored by the site’s recommendation algorithms if they didn’t comply. Eventually, they all did. (Few customers realize that the results generated by Amazon’s search engine are partly determined by promotional fees.)
In late 2007, at a press conference in New York, Bezos unveiled the Kindle, a simple, lightweight device that—in a crucial improvement over previous e-readers—could store as many as two hundred books, downloaded from Amazon’s 3G network. Bezos announced that the price of best-sellers and new titles would be nine-ninety-nine, regardless of length or quality—a figure that Bezos, inspired by Apple’s sale of songs on iTunes for ninety-nine cents, basically pulled out of thin air. Amazon had carefully concealed the number from publishers. “We didn’t want to let that cat out of the bag,” Steele said.
The price was below wholesale in some cases, and so low that it represented a serious threat to the market in twenty-six-dollar hardcovers. Bookstores that depended on hardcover sales—from Barnes & Noble and Borders (which liquidated its business in 2011) to Rainy Day Books in Kansas City—glimpsed their possible doom. If reading went entirely digital, what purpose would they serve? The next year, 2008, which brought the financial crisis, was disastrous for bookstores and publishers alike, with widespread layoffs.
By 2010, Amazon controlled ninety per cent of the market in digital books—a dominance that almost no company, in any industry, could claim. Its prohibitively low prices warded off competition.
Publishers looked around for a competitor to Amazon, and they found one in Apple, which was getting ready to introduce the iPad, and the iBooks Store. Apple wanted a deal with each of the Big Six houses (Hachette, HarperCollins, Macmillan, Penguin, Random House, and Simon & Schuster) that would allow the publishers to set the retail price of titles on iBooks, with Apple taking a thirty-per-cent commission on each sale. This was known as the “agency model,” and, in some ways, it offered the publishers a worse deal than selling wholesale to Amazon. But it gave publishers control over pricing and a way to challenge Amazon’s grip on the market. Apple’s terms included the provision that it could match the price of any rival, which induced the publishers to impose the agency model on all digital retailers, including Amazon.
Five of the Big Six went along with Apple. (Random House was the holdout.) Most of the executives let Amazon know of the change by phone or e-mail, but John Sargent flew out to Seattle to meet with four Amazon executives, including Russ Grandinetti, the vice-president of Kindle content. In an e-mail to a friend, Sargent wrote, “Am on my way out to Seattle to get my ass kicked by Amazon.”
Sargent’s gesture didn’t seem to matter much to the Amazon executives, who were used to imposing their own terms. Seated at a table in a small conference room, Sargent said that Macmillan wanted to switch to the agency model for e-books, and that if Amazon refused Macmillan would withhold digital editions until seven months after print publication. The discussion was angry and brief. After twenty minutes, Grandinetti escorted Sargent out of the building. The next day, Amazon removed the buy buttons from Macmillan’s print and digital titles on its site, only to restore them a week later, under heavy criticism. Amazon unwillingly accepted the agency model, and within a couple of months e-books were selling for as much as fourteen dollars and ninety-nine cents.
Amazon filed a complaint with the Federal Trade Commission. In April, 2012, the Justice Department sued Apple and the five publishers for conspiring to raise prices and restrain competition. Eventually, all the publishers settled with the government. (Macmillan was the last, after Sargent learned that potential damages could far exceed the equity value of the company.) Macmillan was obliged to pay twenty million dollars, and Penguin seventy-five million—enormous sums in a business that has always struggled to maintain respectable profit margins.
Apple fought the charges, and the case went to trial last June. Grandinetti, Sargent, and others testified in the federal courthouse in lower Manhattan. As proof of collusion, the government presented evidence of e-mails, phone calls, and dinners among the Big Six publishers during their negotiations with Apple. Sargent and other executives acknowledged that they wanted higher prices for e-books, but they argued that the evidence showed them only to be competitors in an incestuous business, not conspirators. On July 10th, Judge Denise Cote ruled in the government’s favor.
Apple, facing up to eight hundred and forty million dollars in damages, has appealed. As Apple and the publishers see it, the ruling ignored the context of the case: when the key events occurred, Amazon effectively had a monopoly in digital books and was selling them so cheaply that it resembled predatory pricing—a barrier to entry for potential competitors. Since then, Amazon’s share of the e-book market has dropped, levelling off at about sixty-five per cent, with the rest going largely to Apple and to Barnes & Noble, which sells the Nook e-reader. In other words, before the feds stepped in, the agency model introduced competition to the market. But the court’s decision reflected a trend in legal thinking among liberals and conservatives alike, going back to the seventies, that looks at antitrust cases from the perspective of consumers, not producers: what matters is lowering prices, even if that goal comes at the expense of competition.
With Amazon’s patented 1-Click shopping, which already knows your address and credit-card information, there’s just you and the buy button; transactions are as quick and thoughtless as scratching an itch. “It’s sort of a masturbatory culture,” the marketing executive said. If you pay seventy-nine dollars annually to become an Amazon Prime member, a box with the Amazon smile appears at your door two days after you click, with free shipping. Amazon’s next frontier is same-day delivery: first in certain American cities, then throughout the U.S., then the world. In December, the company patented “anticipatory shipping,” which will use your shopping data to put items that you don’t yet know you want to buy, but will soon enough, on a truck or in a warehouse near you.
Amazon employs or subcontracts tens of thousands of warehouse workers, with seasonal variation, often building its fulfillment centers in areas with high unemployment and low wages. Accounts from inside the centers describe the work of picking, boxing, and shipping books and dog food and beard trimmers as a high-tech version of the dehumanized factory floor satirized in Chaplin’s “Modern Times.” Pickers holding computerized handsets are perpetually timed and measured as they fast-walk up to eleven miles per shift around a million-square-foot warehouse, expected to collect orders in as little as thirty-three seconds. After watching footage taken by an undercover BBC reporter, a stress expert said, “The evidence shows increased risk of mental illness and physical illness.” The company says that its warehouse jobs are “similar to jobs in many other industries.”
When I spoke with Grandinetti, he expressed sympathy for publishers faced with upheaval. “The move to people reading digitally and buying books digitally is the single biggest change that any of us in the book business will experience in our time,” he said. “Because the change is particularly big in size, and because we happen to be a leader in making it, a lot of that fear gets projected onto us.” Bezos also argues that Amazon’s role is simply to usher in inevitable change. After giving “60 Minutes” a first glimpse of Amazon drone delivery, Bezos told Charlie Rose, “Amazon is not happening to bookselling. The future is happening to bookselling.”
In Grandinetti’s view, the Kindle “has helped the book business make a more orderly transition to a mixed print and digital world than perhaps any other medium.” Compared with people who work in music, movies, and newspapers, he said, authors are well positioned to thrive. The old print world of scarcity—with a limited number of publishers and editors selecting which manuscripts to publish, and a limited number of bookstores selecting which titles to carry—is yielding to a world of digital abundance. Grandinetti told me that, in these new circumstances, a publisher’s job “is to build a megaphone.”
After the Kindle came out, the company established Amazon Publishing, which is now a profitable empire of digital works: in addition to Kindle Singles, it has mystery, thriller, romance, and Christian lines; it publishes translations and reprints; it has a self-service fan-fiction platform; and it offers an extremely popular self-publishing platform. Authors become Amazon partners, earning up to seventy per cent in royalties, as opposed to the fifteen per cent that authors typically make on hardcovers. Bezos touts the biggest successes, such as Theresa Ragan, whose self-published thrillers and romances have been downloaded hundreds of thousands of times. But one survey found that half of all self-published authors make less than five hundred dollars a year.
Every year, Fine distributes grants of twenty-five thousand dollars, on average, to dozens of hard-up literary organizations. Beneficiaries include the pen American Center, the Loft Literary Center, in Minneapolis, and the magazine Poets & Writers. “For Amazon, it’s the cost of doing business, like criminal penalties for banks,” the arts manager said, suggesting that the money keeps potential critics quiet. Like liberal Democrats taking Wall Street campaign contributions, the nonprofits don’t advertise the grants. When the Best Translated Book Award received money from Amazon, Dennis Johnson, of Melville House, which had received the prize that year, announced that his firm would no longer compete for it. “Every translator in America wrote me saying I was a son of a bitch,” Johnson said. A few nonprofit heads privately told him, “I wanted to speak out, but I might have taken four thousand dollars from them, too.” A year later, at the Associated Writing Programs conference, Fine shook Johnson’s hand, saying, “I just wanted to thank you—that was the best publicity we could have had.” (Fine denies this.)
By producing its own original work, Amazon can sell more devices and sign up more Prime members—a major source of revenue. While the company was building the Kindle, it started a digital store for streaming music and videos, and, around the same time it launched Amazon Publishing, it created Amazon Studios.
The division pursued an unusual way of producing television series, using its strength in data collection. Amazon invited writers to submit scripts on its Web site—“an open platform for content creators,” as Bill Carr, the vice-president for digital music and video, put it. Five thousand scripts poured in, and Amazon chose to develop fourteen into pilots. Last spring, Amazon put the pilots on its site, where customers could review them and answer a detailed questionnaire. (“Please rate the following aspects of this show: The humor, the characters . . . ”) More than a million customers watched. Engineers also developed software, called Amazon Storyteller, which scriptwriters can use to create a “storyboard animatic”—a cartoon rendition of a script’s plot—allowing pilots to be visualized without the expense of filming. The difficulty, according to Carr, is to “get the right feedback and the right data, and, of the many, many data points that I can collect from customers, which ones can tell you, ‘This is the one’?”
Bezos applying his “take no prisoners” pragmatism to the Post: “There are conflicts of interest with Amazon’s many contracts with the government, and he’s got so many policy issues going, like sales tax.” One ex-employee who worked closely with Bezos warned, “At Amazon, drawing a distinction between content people and business people is a foreign concept.”
Perhaps buying the Post was meant to be a good civic deed. Bezos has a family foundation, but he has hardly involved himself in philanthropy. In 2010, Charlie Rose asked him what he thought of Bill Gates’s challenge to other billionaires to give away most of their wealth. Bezos didn’t answer. Instead, he launched into a monologue on the virtue of markets in solving social problems, and somehow ended up touting the Kindle.
Bezos bought a newspaper for much the same reason that he has invested money in a project for commercial space travel: the intellectual challenge. With the Post, the challenge is to turn around a money-losing enterprise in a damaged industry, and perhaps to show a way for newspapers to thrive again.
Lately, digital titles have levelled off at about thirty per cent of book sales. Whatever the temporary fluctuations in publishers’ profits, the long-term outlook is discouraging. This is partly because Americans don’t read as many books as they used to—they are too busy doing other things with their devices—but also because of the relentless downward pressure on prices that Amazon enforces. The digital market is awash with millions of barely edited titles, most of it dreck, while readers are being conditioned to think that books are worth as little as a sandwich. “Amazon has successfully fostered the idea that a book is a thing of minimal value,” Johnson said. “It’s a widget.”
There are two ways to think about this. Amazon believes that its approach encourages ever more people to tell their stories to ever more people, and turns writers into entrepreneurs; the price per unit might be cheap, but the higher number of units sold, and the accompanying royalties, will make authors wealthier. Jane Friedman, of Open Road, is unfazed by the prospect that Amazon might destroy the old model of publishing. “They are practicing the American Dream—competition is good!” she told me. Publishers, meanwhile, “have been banks for authors. Advances have been very high.” In Friedman’s view, selling digital books at low prices will democratize reading: “What do you want as an author—to sell books to as few people as possible for as much as possible, or for as little as possible to as many readers as possible?”
The answer seems self-evident, but there is a more skeptical view. Several editors, agents, and authors told me that the money for serious fiction and nonfiction has eroded dramatically in recent years; advances on mid-list titles—books that are expected to sell modestly but whose quality gives them a strong chance of enduring—have declined by a quarter.