There’s a war on between Amazon and its suppliers, but which side should you root for?


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Weeks after we learned that Amazon.com stopped taking preorders for books published by Hachette, the online retailer has now put the kibosh on advance orders for coming Warner Home Video products like "The Lego Movie."

The move pits Amazon against a different content industry, but the underlying business logic is the same: Amazon wants to pay the supplier less for products, and the supplier wants Amazon to pay more. This kind of negotiation happens all the time, but Amazon's talks are drawing attention because of the dominant role it plays in getting us the stuff we buy.

(Disclosure: Amazon.com chief executive Jeffrey P. Bezos owns The Washington Post.)

Amazon says its hardball tactics are meant to secure a better deal for you and me. Others are calling Amazon a bully for punishing content providers simply for trying to get fairly compensated.

If you're having trouble picking a side, don't feel bad. This is a complicated issue.

On the face of it, Amazon appears to be using its substantial leverage as a seller to extract huge concessions from suppliers. Let's just take the book publishing industry. Amazon effectively gets a 53 percent discount on all Random House titles. Kindle e-books account for a fifth of the entire U.S. book market, and within the e-book sector specifically, Amazon enjoys a two-thirds lock. If you're a publisher, you can't not sell on Amazon. Amazon knows this, and has an incentive to demand that publishers bend over backwards to accommodate the company.

That said, Amazon has also vastly expanded the overall market for books more generally. The novelist Barry Eisler defended the company earlier this month, arguing that Amazon has empowered legions of self-published authors. Small publishers who previously had trouble competing against the so-called Big Five report having benefited from the more level playing field that the Amazon platform provides.

Publishers themselves aren't exactly put-upon or defenseless, either. Consumers have long complained about the power of academic publishers to increase textbook prices, for instance. Literary agents have called out publishers for giving authors a raw deal. And most recently, in a controversial court case involving Apple, publishers were found to have acted like a cartel in trying to raise margins on e-books.

Of course, the publishers might say this whole sticky court case could've been avoided if only Amazon hadn't tried to sell e-books at such a low price. And the online retailer's habit of selling e-books below cost as a way to encourage Kindle adoption certainly fits into a much longer narrative about its stormy relationship with publishers.

Unfortunately, none of this helps consumers who just want somebody to take their money.

Brian Fung covers technology for The Washington Post.
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