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Cheap Words: Amazon is good for customers. But is it good for books?

| Written by ILSR Admin | No Comments | Updated on Feb 17, 2014 The content that follows was originally published on the Institute for Local Self-Reliance website at https://ilsr.org/cheap-words-amazon-good-customers-good-books/

The New Yorker, February 17, 2014

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. Sam Walton wanted merely to be the world’s biggest retailer. After Apple launched the iPod, Steve Jobs didn’t sign up pop stars for recording contracts. A.T. & T. doesn’t build transmission towers and rent them to smaller phone companies, the way Amazon Web Services provides server infrastructure for startups (not to mention the C.I.A.). Amazon’s identity and goals are never clear and always fluid, which makes the company destabilizing and intimidating.

Bezos originally thought of calling his company Relentless.com—that U.R.L. still takes you to Amazon’s site—before adopting the name of the world’s largest river by volume. (If Bezos were a reader of classic American fiction, he might have hit upon Octopus.com.) Amazon’s shape-shifting, engulfing quality, its tentacles extending in all directions, makes it unusual even in the tech industry, where rapid growth, not profitability, is the measure of success. Amazon is not just the “Everything Store,” to quote the title of Brad Stone’s rich chronicle of Bezos and his company; it’s more like the Everything. What remains constant is ambition, and the search for new things to be ambitious about.

It seems preposterous now, but Amazon began as a bookstore. In 1994, at the age of thirty, Bezos, a Princeton graduate, quit his job at a Manhattan hedge fund and moved to Seattle to found a company that could ride the exponential growth of the early commercial Internet. (Bezos calculated that, in 1993, usage climbed by two hundred and thirty thousand per cent.) His wife, MacKenzie, is a novelist who studied under Toni Morrison at Princeton; according to Stone, Bezos’s favorite novel is Kazuo Ishiguro’s “The Remains of the Day,” which is on the suggested reading list for Amazon executives. All the other titles, including “Sam Walton, Made in America: My Story,” are business books, and even Ishiguro’s novel—about a self-erasing English butler who realizes that he has missed his chance at happiness in love—offers what Bezos calls a “regret-minimization framework”: how not to end up like the butler. Bezos is, above all things, pragmatic. (He declined to be interviewed for this article.)

It wasn’t a love of books that led him to start an online bookstore. “It was totally based on the property of books as a product,” Shel Kaphan, Bezos’s former deputy, says. Books are easy to ship and hard to break, and there was a major distribution warehouse in Oregon. Crucially, there are far too many books, in and out of print, to sell even a fraction of them at a physical store. The vast selection made possible by the Internet gave Amazon its initial advantage, and a wedge into selling everything else. For Bezos to have seen a bookstore as a means to world domination at the beginning of the Internet age, when there was already a crisis of confidence in the publishing world, in a country not known for its book-crazy public, was a stroke of business genius.

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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.

In the nineteen-nineties, a different leviathan held publishers and independent bookstores in its grasp: chain stores, led by Barnes & Noble. When Amazon emerged, publishers in New York suddenly had a new buyer that paid quickly, sold their backlist as well as new titles, and, unlike traditional bookstores, made very few returns. Publishers must buy back unsold inventory from retailers, an archaic and costly practice that one ex-Amazon employee called “an absurdly inefficient model, worse than my uncle sending his laundry home from college.”

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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.

Amazon was a megastore, not an indie bookshop, let alone a literary review, and its writers were under pressure to prove that their work produced sales. If a customer clicked on a review or an interview, then left the page without making a purchase, it was logged as a Repel. Marcus was informed that his repulsion rate was too high. “Nobody ever felt safe,” Fried said of her editorial colleagues. “I took home my Rolodex every day.”

Book retailers, such as Barnes & Noble, negotiate “co-op,” or coöperative promotional fees, from publishers in exchange for prominent product placement. It’s a way for a retailer to get a larger discount without violating the 1936 Robinson-Patman Act, which prohibits producers from offering price advantages to favored retailers. Although co-op fees weren’t “dreamed up by Amazon,” Marcus told me, “Amazon proved to be particularly good at squeezing this money out of publishers.” Publishers paid ten thousand dollars for a book to be prominently featured on the home page. They never knew exactly how much these payments helped sales, and negotiations over them became tense. (In a statement, Amazon said, “As a general practice, we don’t discuss our business negotiations with publishers.”)

Each category within Amazon’s Books division had to collect co-op fees, and revenue targets rose steeply. In 1999, the company received $3,621,250 in co-op fees; the goal for 2000 was set at $9.25 million. When Marcus asked if publishers should be given sales targets in exchange for their payments, Lyn Blake, the executive who had created the co-op program, said no, adding, “Look, it’s the cost of doing business.” The editorial staff was reminded that the money, unlike the receipts on sold books, went straight to Amazon’s bottom line. Judgments about which books should be featured on the site were increasingly driven by promotional fees.

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. One day, Fried discovered a memo, written by a programmer and accidentally left on a printer, which suggested eliminating the editorial department. Anne Hurley, the editor-in-chief of the DVD and Video section, was viewed dismissively by her boss, Jason Kilar, who went on to run the video-streaming company Hulu. He told her, “I’m sorry, Anne, I just don’t see what value you add.” (Kilar denies saying this.)

In July, 2000, Bezos sent out a company-wide e-mail with the subject line “Smile, remember it’s Day 1, and let’s kick some butt.” Several months earlier, the bubble had burst, and Amazon’s overcapitalized share price was plunging. For the first time, Wall Street lost faith in the company, and Bezos announced that the next eighteen months would be devoted to making “serious profits.” Marcus and Fried quit before they could be laid off. Tim Appelo took Marcus’s place. “I was the last human editor of the home page,” he told me. “By the time I got there, it was only partly human.” By 2002, the home page was fully automated. (Today, eight editors select titles to be featured on the Books page, and if you scour the site you can find a books blog, Omnivoracious, but its offerings seem marginal to the retail enterprise.) Editorial content had served its purpose, just as selling books had served its purpose, and Amazon’s conquistadores galloped onward.

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.) Sales meetings in Seattle were now all about payments, not new books, and the size of orders was predicated on algorithms, rather than on the enthusiasm of the publishers’ sales staff and Amazon’s own buyers, who were rebranded as “inventory managers.” Brad Stone describes one campaign to pressure the most vulnerable publishers for better terms: internally, it was known as the Gazelle Project, after Bezos suggested “that Amazon should approach these small publishers the way a cheetah would pursue a sickly gazelle.” (Company lawyers later changed the name to the Small Publisher Negotiation Program.)

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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.”

Last September, lawyers brought a class-action lawsuit against Amazon, on behalf of a warehouse worker in Pennsylvania named Neal Heimbach, for unpaid wages: employees at the fulfillment center outside Allentown must wait in line to pass through metal detectors, and submit their belongings to be searched, when they leave for lunch and at the end of their shift. The process takes ten to twenty minutes each time. Theft is a common concern in Amazon warehouses—no doubt, a knock-on effect of the absence of bonds between the company and the ever-shifting roster of low-paid employees.

None of Amazon’s U.S. workers belong to unions, because the customer would suffer. A company executive told the Times that Amazon considers unions to be obstacles that would impede its ability to improve customer service. In 2011, the Allentown Morning Call published an investigative series with accounts of multiple ambulances being parked outside a warehouse during a heat wave, in order to ferry overcome workers to emergency rooms. Afterward, Amazon installed air-conditioners, although their arrival coincided with the expansion of grocery services. In any case, Amazon’s warehouse jobs are gradually being taken over by robots. Bezos recently predicted to a gobsmacked Charlie Rose that, in five years, packages will be delivered by small drones. Then Amazon will have eliminated the human factor from shopping, and we will finally be all alone with our purchases.

The combination of ceaseless innovation and low-wage drudgery makes Amazon the epitome of a successful New Economy company. It’s hiring as fast as it can—nearly thirty thousand employees last year. But its brand of creative destruction might be killing more jobs than it makes. According to a recent study of U.S. Census data by the Institute for Local Self-Reliance, in Washington, brick-and-mortar retailers employ forty-seven people for every ten million dollars in revenue earned; Amazon employs fourteen.

In the book industry, many of those formerly employed people staffed independent stores. Two decades ago, there were some four thousand in America, and many of them functioned as cultural centers where people browsed and exchanged ideas. Today, there are fewer than two thousand—although, with Borders dead and Barnes & Noble ailing, the indies are making a small comeback. Vivien Jennings, of Rainy Day Books, has been in business for thirty-eight years. “We know our customers, and the other independents are the same,” she said. “We know what they read better than any recommendation engine.”

After Amazon’s legal triumph, some publishing people were driven to the wild surmise that the company had colluded with the Justice Department, if not micromanaged the entire case. They grasped at the fact that Jamie Gorelick, a deputy attorney general in the Clinton Administration, and a friend of Attorney General Eric Holder, serves on Amazon’s board, and that three weeks after Judge Cote’s decision President Barack Obama appeared at an Amazon warehouse in Chattanooga—where workers earn, on average, eleven dollars an hour—to praise the company’s creation of good jobs. The coup de grâce came last November, when the cash-strapped U.S. Postal Service announced a special partnership to deliver Amazon—and only Amazon—packages on Sundays, with the terms kept under official seal. To some people in the book world, Obama’s embrace of their nemesis felt like a betrayal. One literary agent said, “It’s strange that a President who’s an author, and whose primary income has come from being an author, was siding with a monopoly that wants to undercut publishers.”

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Amazon’s entry into publishing has created an awkward divide, giving some book people a second or a third chance in an imperilled industry while tainting them in the eyes of others. The literary agent, contemplating the future of the editors currently at Amazon, said, “You’d have to consider the time you spent with Vichy when you’re looking for work after the occupation.” Benjamin Anastas, a novelist who couldn’t find an American publisher for his third book, told a friend that he was going to publish his fourth, a memoir called “Too Good to Be True,” with Amazon. The friend, a novelist who had once worked at Harcourt—the house that distributed Amazon’s hardcover editions—looked stricken. “You do that,” she said, and walked away. Anastas found the reaction hypocritical. “If you’re publishing with Penguin Random House, what’s the difference?” he said. “They’re both these massive entities that have totally changed book publishing. There is nothing more demoralizing for a writer than to go into one of these huge towers to talk about your book amid all this product. You feel like a sperm-oil salesman at the Petroleum Club.” Still, finding no copies of his new book in most stores was akin to watching himself disappear, and Anastas said that he would think twice before publishing with Amazon again.

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