Posts Tagged ‘Amazon’

Monopoly power on the feudal Internet

June 21, 2017

Maciej Ceglowski, a writer and software entrepreneur in San Francisco, spoke at a conference in Berlin last May about monopoly power on the Internet: –

There are five Internet companies—Apple, Google, Microsoft, Amazon and Facebook.  Together they have a market capitalization just under 3 trillion dollars.

Bruce Schneier has called this arrangement the feudal Internet.  Part of this concentration is due to network effects, but a lot of it is driven by the problem of security.  If you want to work online with any measure of convenience and safety, you must choose a feudal lord who is big enough to protect you.

Maciej Ceglowski

These five companies compete and coexist in complex ways.

Apple and Google have a duopoly in smartphone operating systems.  Android has 82% of the handset market, iOS has 18%.

Google and Facebook are on their way to a duopoly in online advertising.  Over half of the revenue in that lucrative ($70B+) industry goes to them, and the two companies between them are capturing all of the growth (16% a year).

Apple and Microsoft have a duopoly in desktop operating systems.  The balance is something like nine to one in favor of Windows, not counting the three or four people who use Linux on the desktop, all of whom are probably at this conference.

Three companies, Amazon, Microsoft and Google, dominate cloud computing. AWS has 57% adoption, Azure has 34%. Google has 15%.

Outside of China and Russia, Facebook and LinkedIn are the only social networks at scale.  LinkedIn has been able to survive by selling itself to Microsoft.

And outside of Russia and China, Google is the world’s search engine.

That is the state of the feudal Internet, leaving aside the court jester, Twitter, who plays an important but ancillary role as a kind of worldwide chat room.  [1]

There is a difference between the giant Silicon Valley companies and Goldman Sachs, Citicorp and the big Wall Street banks.   The Silicon Valley companies have created value.  The Wall Street banks, by and large, have destroyed wealth.

I depend on Google; I found Ceglowski’s talk through Google Search.   I use Apple products; I’m typing this post on my i-Mac.  I don’t use Facebook or Windows, but many of my friends do.  I try to avoid ordering books through Amazon, because I disapprove of the way Jeff Bezos treats Amazon employees and small book publishers, but I use subscribe to Amazon Prime.

I don’t deny the achievements of the founders of these companies, nor begrudge them wealth and honor.  But I do not think that they or their successors have the right to rule over me, and that’s what their monopoly power gives them.

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The passing scene – August 22, 2015

August 22, 2015

So Elon Musk’s Hyperloop Is Actually Getting Kinda Serious by Alex Davies for Wired.

Hyperloop, which is being developed by Elon Musk’s SpaceX and Tesla Motors, would be a series of above-ground pneumatic tubes filled with people that would zip them along at near-supersonic speeds.

It’s being developed by men and women with day jobs at places such as NASA, Boeing and SpaceX who are paid in stock options rather than cash.  Two established companies, Aercom, an engineering design firm, and Oerlikon Leybold Vacuum, are helping with the project in return for stock options.

A prototype demonstration of the system is scheduled for 2016.

Germany fact of the day, will support for immigration collapse? by Tyler Cowen for Marginal Revolution.

A big backlash is developing across Europe against refugees and unauthorized immigrants.  Cowen favors open borders in principle, but doesn’t think it is politically feasible.

Dejá Vu: Germany Tightens Its Economic Power Over Europe by Richard D. Wolff for Truthout.  (Hat tip to Bill Harvey)

The European Union was supposed to be an association that benefited all its members.  Now it has devolved into a mechanism by which Germany, Europe’s richest nation, inflicts economic punishment on Greece, one of its poorest.

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Freedom of contract or corporate Big Brother?

March 30, 2015

Freedom of contract begins where equality of bargaining power begins.
    ==Oliver Wendell Holmes Jr.

No contract that requires someone to give up a basic right should be legally enforceable.

A contract to sell yourself into slavery is not legally enforceable.  A yellow-dog contract, which requires you to give up your right to join a labor union, is not legally enforceable.

So what about Amazon’s practice of requiring even temporary employees to sign 18-month non-compete agreements as a condition for employment?

Noncompete_CartoonThe Verge obtained a copy of the contract that forbids Amazon workers, for 18 months after leaving Amazon employment, from going to work for any company that “directly or indirectly” supplies any good or service they helped support at Amazon.

Such non-complete agreements are required even for temporary warehouse workers, who typically work for three months during the Christmas season, The Verge reported.  In return for that short stint of work, they’re asked to give up any chance of working for an Amazon competitor—and, since Amazon is “the everything store,” that would mean virtually any job in retailing anywhere in the world.

In other words, Amazon workers are asked to give up a basic right that they supposedly have in a free enterprise system—the right to freely seek work from any employer willing to hire them.

A study, based on an on-line survey of 10,000 American workers conducted by the University of Illinois at Urbana-Champagne and the University of Michigan, determined that 12 percent are covered by non-complete agreements,  The Verge reported.  This includes 9 percent of warehouse and transportation workers.

Evan Starr, co-author of the study, told The Verge that the percentages are probably underestimated because workers sign non-compete agreements without realizing what they’ve signed.

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Amazon is bad for writers and book lovers

June 12, 2014

 Amazon’s tactics against the book publisher Hachette are not just bad for publishers.  They are bad for writers.   And, in the long run, they are bad for lovers of books.

What’s going on is part of a familiar pattern.   A powerful company uses its power to squeeze the profit margins of weaker companies.   This means the weaker companies can’t afford decent pay for the people who produce the work.   But the producers can’t get at the powerful company because it is buffered by the intermediaries.

That is how it works with fast-food franchisers such as McConald’s, their franchisees and low-wage fast-food workers.   That is how it works with electronics companies such as Apple and Sony, their sub-contractors in Asia, and the low-paid sweatshop workers.  That is how it works with Walmart, its suppliers and their low-paid employees (aside from what Walmart pays its own employees)

Hachette Amazon LogoAnd this is how, apparently, it is going to work with Amazon, book publishers and authors.

Jeff Bezos of Amazon refuses to provide good service to buyers of Hachette books unless the publisher submits to his terms for distributing their books.  In an earlier dispute with the publisher Macmillian, he simply deleted the “buy” button from all Macmillan books listed on Amazon.

One of my favorite authors, Charles Stross, who is published by Hachette, explained what is at stake.

Amazon’s strategy … is to squat on the distribution channel, artificially subsidize the price of e-books “dumping” or predatory pricing to get consumers hooked, rely on DRM on the walled garden of the Kindle store to lock consumers onto their platform, and then to use their monopsony buying power to grab the publishers’ share of the profits.  If you’re a consumer, in the short term this is good news: it means you get cheap books.

But if you’re a reader, you probably like to read new books.  By driving down the unit revenue, Amazon makes it really hard for publishers—who are a proxy for authors—to turn a profit.  Eventually they go out of business, leaving just Amazon as a monopoly distribution channel retailing the output of an atomized cloud of highly vulnerable self-employed piece-workers like myself.

At which point the screws can be tightened indefinitely.  And after a while, there will be no more Charlie Stross novels because I will be unable to earn a living and will have to go find a paying job.

via Charlie’s Diary.

There is an old tradeoff:  Speed.  Price.  Quality.  Pick any two.  The business model being pushed by Jeff Bezos would pressure publishers into signing up authors who are prolific and cheap.  That literature has a value in and of itself doesn’t enter into his thinking.  As Stross said:

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Amazon, the Walmart of the Internet

February 17, 2014

615_Bezos_Amazon_Kindle_Reuters

Amazon is well on its way to monopolizing book distribution.  Its strategy is like Walmart’s.

First you gain an initial advantage through economies of scale and introducing new efficiencies.  So far, so good.  That is how free enterprise is supposed to operate.

Then you leverage your initial advantage in the marketplace to squeeze suppliers and lower your costs.  This enables you to keep prices low so as to knock out small competitors and keep new competitors from emerging.

Meanwhile you treat your rank-and-file employees like dirt.

The parallel is not complete, because the current Walmart owners are destroying their company through their short-sighted greed and stupidity, while Jeff Bezos, the founder and CEO of Amazon, may be greedy but he is anything but short-sighted and stupid.

And he is just getting started.  According to one analyst, 93 percent of Amazon’s $75 billion in annual revenues come from products other than books.

George Packer, writing in the New Yorker, says that 50 to 60 percent of the price of a book sold through Amazon goes to Amazon itself.  Another 10 to 15 percent goes for sales, warehousing and shipping.  What’s left over covers printing, editing, publicity and, oh yes, royalties to the author and, oh yes, any profit the publisher may earn.

This is new.  Historically retailers got 30 to 40 percent of the price of a book.

It is illegal for retailers to demand special discounts from publishers, but, according to Packer, Amazon gets around that by charging “cooperative promotion fees.”   Amazon charges publishers this fee for placement of a book title on its page.  Most of the ranking of books on Amazon’s lists are determined by these fees.  The few publishers who have been brave enough to refuse to pay this fee have found there is no longer a “buy” button on Amazon’s page.

“The only point at which Bezos enters the chain is to take all the money and the e-mail address of the buyer,” Colin Robinson, a publisher, told Packer.  “There’s an entire community of people and Bezos stands in the middle and collects the money.”

While Amazon offers bargain prices, its squeeze on publishers is bad for literature in the long run.  Bezos seeks to transition from physical books to digital books, from which Amazon has 90 percent market share.  If traditional book publishing dies out, Amazon will step into the gap, with book selection based on focus groups, surveys and computer algorithms rather than editors’ judgments of literary value.

Packer reported that  Bezos doesn’t care about books as such.  He started Amazon (named for a river into which all things flow) in 1994 because he had vision enough to foresee the importance of Internet marketing, and he chose books as his entry point because they are “easy to ship and hard to break.”  Now he uses the information on customers he gained through book selling to market a wide array of products.

The saving grace of a well-ordered free enterprise system is that when big business executives overreach themselves, there is an opportunity for a smart entrepreneur to jump into the gap they leave.  Such is Colin Robinson, who has started a publishing firm called OR Books, which bypasses Amazon and sells directly to consumers.  OR Books gives up sales but earns a higher profit which, presumably, can be shared with the author.

Robinson is able to stay in business because of Net Neutrality—the law that says Internet service providers have to provide service to all customers on the same terms.  There’s currently a legislative drive to abolish Net Neutrality (and some say the proposed Trans Pacific Partnership Agreement has an anti-Net Neutrality provision).  If that were to happen, dominant businesses such as Amazon could squeeze out small competitors by demanding special terms from IPPs, just as Amazon does with publishers.

Another public policy favorable to Amazon is anti-trust policy.  Historically anti-trust laws were directed against “the curse of bigness.”  But in the Carter-Reagan years, policy-makers decided that it was all right for a company to dominate its market if there was some benefit to consumers.  The problem with this reasoning is that the benefit to consumers is likely to last only so long as the dominant company has effective competition.  Without competition, the benefits of efficiency and economies of scale don’t necessarily flow to consumers.

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Click on Cheap Words: Is Amazon Bad for Books? to read the whole article by George Packer in the New Yorker.  It’s long, but packed with good information.

Click on a review of Brad Stone’s The Everything Store by Deborah Friedell for The London Review of Books for more.  Her review has additional good information that’s not in the Packer article.

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Correction: Amazon not world’s largest retailer

August 11, 2013

Contrary to what I wrote in Amazon’s Jeff Bezos to buy Washington Post, Amazon is not the world’s largest retailer.   It is the largest on-line retailer, but is far behind Wal-Mart and other giants in total sales.

Click on 2013 Top 100 Retailers for information about its revenues and ranking.

Amazon’s Jeff Bezos to buy Washington Post

August 6, 2013

Jeff Bezos, the founder and chief executive of Amazon, will buy the Washington Post for $250 million.  I suppose it is not as bad as the Post being bought by the Koch brothers or Rupert Murdoch.  We’ll see.

Bezos’ politics might be described as Silicon Valley liberalism.  He is a champion of gay rights, but not in the right of his employees to decent working conditions.

I worked on newspapers for 40 years, and liked to believe that journalism was a calling and more than just a way for journalists to earn a salary and owners to earn a profit.

Most (not all) of the historically great American newspapers were owned by families who believed in the newspapers’ mission, rather than by corporations whose main business was elsewhere.

Bezos will own the Washington Post as an individual and incorporate it into Amazon, so he doesn’t fall into either category.  It will be interesting to see what his intentions are.

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Alice in Wonderland indeed

October 4, 2010

This is old news, but I just learned about it through an article by Robert Darnton on the New York Review of Books web log.  Abobe Systems 2000 e-book version of Alice in Wonderland, which was first published in 1865, came with the following restrictions.

Copy: No text selections can be copied from the book to the clipboard….

Lend: This book cannot be lent to someone else.

Give: This book cannot be given to someone else.

Read aloud: This book cannot be read aloud.

Lawrence Lessig, the intellectual property expert, explained that this wasn’t quite as bad as it sounded because Adobe didn’t actually mean “read aloud” by the words read aloud, but the use of an audio system called Read Aloud in connection with the book.  These seems like Wonderland use of language. Anyhow the book is, and was then in the public domain, so why shouldn’t people be free to copy, lend, give or read aloud the book in any sense of the word they chose?

This compares to Amazon’s deleting 1984 from its Kindle systems last year – an illustration of the novel’s “memory hole” in real life.  Once again, this wasn’t as bad as it sounded.  The copyright doesn’t expire in the United States until 2044, and Amazon received information questioning its right to publish.  1984 was published in 1949, and George Orwell died in 1950; I don’t see what purpose is served in extending copyright for 95 years after publication.

Robert Darnton’s article was about the benefits of digitizing the world’s books.  Maybe he’s right, but I’ll hang on to my paper versions of Alice in Wonderland and 1984. Nobody can delete them or forbid me to copy, sell, give or lend them, or read them aloud.

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