How Amazon Kills Books and Makes Us Stupid

Photo Credit: Nrbelex

Jeff Bezos loves numbers. In a speech in May to graduates at his alma mater, Princeton University, he recounted a childhood memory: when driving with his grandmother, a heavy smoker, he calculated how many years her addiction would reduce her life expectancy. Announcing the result from the back seat of the car, he expected praise for his deft maths. But his grandmother just burst into tears.

The Amazon founder's geeky obsession with numbers evidently formed early, and despite the glimmer of discomfort revealed by his Princeton anecdote, his fervently quantitative take on the world still predominates. In a letter accompanying the 2009 Amazon annual report, for instance, he sets out a mind-boggling 452 goals for the company in the coming year. The word "revenue" is mentioned only eight times, yet revenue growth is central to the Amazon story. Expanding both internationally and across other products—nonbook sales represent 75 percent of total Amazon turnover—Amazon's global business has increased fifteenfold over the past decade, 28 percent last year alone. Sales in 2009 topped $24.5 billion. To put that in perspective, in 2008 total sales by all US bookstores were less than $17 billion. In other words, the company is significantly larger than the entire American book business.

Of all the goals in the report, Bezos proudly points out, no fewer than 360 deal directly with customer needs. The customer has always been king in the Bezos ethos, and the formula for keeping the king happy is straightforward. "Amazon gives the customers what they want: low prices, vast selection and extreme convenience," he told a shareholders' meeting. On these terms, Amazon's success is stellar. It has more than 2 million titles on sale; bestselling books are routinely discounted by 50 percent or more; and it ranked first in BusinessWeek's "customer service champs" awards last year. But dig beneath the surface of the numbers and a more complex picture emerges, one suggesting that readers and writers may ultimately not be best served by Amazon's race to become the biggest, cheapest and most convenient bookseller around.

Amazon has not grown to where it is today by being touchy-feely. Sure, it adopted the informal trappings that characterized many of the new technology start-ups of the 1990s. But if Bezos's first desk at the company was an old door on trestles, the business conducted from behind it has been as ruthless as anything he encountered in his previous gig as a Wall Street broker. Soon after Amazon's launch in 1995, Bezos told his employees that he wanted a place that was both "intense and friendly" but that "if you ever had to give up 'friendly' in order to have 'intense,' we would do that."

This hard-nosed approach has not endeared Amazon to publishers, who have consistently felt the pressure of the company's intensity, especially when it comes to setting terms. In researching this article, I uncovered widespread resentment about the aggressive way Amazon pursues its objectives, matched only by dread of being publicly identified as a critic of publishing's largest customer. "They have no sense of collegiality," complained one publisher, who asked not to be identified. "They behave like pigs," said another, his voice dropping as he checked around to see if anyone was within earshot.

(Disclosure: the new publishing company with which I am involved, OR Books, does not deal with Amazon. We sell direct to customers, channeling money that would otherwise go on discount and distribution to extensive promotion, primarily on the Internet.)

Dennis Loy Johnson, co-publisher of the Brooklyn-based independent Melville House, is one of the few publishers who have dared to speak openly about Amazon's bullying. His story is far from atypical. In 2004 a representative of the retailer contacted Melville's distributor demanding an additional discount. Such payments are illegal under antitrust law, which precludes selling at different prices to different customers. Large retailers circumvent this restriction by disguising the extra discount under the rubric of "co-op," money paid to the bookseller for promotional services, often notional. In this case the distributor did not bother with such niceties, describing what Amazon was after as "kickback."