Coyote Blog

I have been kind of amazed at the backlash at Amazon over its showdown with Macmillan Publishing.  As I understand it, Apple, with its new iPad, had adopted a strategy of wooing publishers by offering promises of higher retail prices, an offer Amazon basically refused to match.   This dynamic (with retail discounters pleasing customers but ticking off manufacturers and product suppliers) is not at all new to retail.  I am sure a lot of manufacturers wish Wal-Mart was never invented, but they have to try to play ball with them because Wal-Mart wields so much power with customers, in large part because of their pricing.

In this sense, I have always thought of Wal-Mart and Amazon as my agents, using the power of my and other consumer's volume to pound manufacturers on price.  They serve the same role as, and in fact are more effective than, a buying cooperative or consumers union.

So my agent, Amazon, had to go to the mattresses with a publisher on its pricing.  This happens in all negotiations -- if you are not willing to walk out the door, then at some point there is a limit to your bargaining power.  I was ready to applaud them for it.  Sure, they had selfish interests of their own, but who cares?  That is how capitalism works -- through the alignment of incentives, people who really don't even know me or really care if I live or die work hard to create value for me  (this is the opposite of big government, where people who claim to care about me deeply work really hard to destroy value).

Anyway, the clients that Amazon represents apparently lost faith quickly, and decided they were more freaked out by a couple day blackout than increased retail prices.  Wimps.

Postscript: I understand the debate is a bit more subtle, with Macmillan arguing that they want price flexibility over a range from $6-$16 (or whatever) for e-books rather than a hard cap at $9.99.  Trust me, though, any inference that this approach roughly averages Amazon's approach is so much chin music.  Most sales would be for new books at the high price, with low-volume books at the lower price  (something, by the way, Amazon already does).  The average sales price is higher in the Macmillan approach, and I don't blame them for trying.  And Apples is just trying to differentiate itself, and attempting to lock up publishers into exclusives or sweetheart arrangements fits their proprietary business model.   So I am not crying foul, I simply was rooting for Amazon because I felt my interests as a consumer lay with them in this dispute.   And I am wondering why so many people see it differently.