Does Amazon Want to Monopolize The Entire Publishing Chain?

from the how-much-is-enough? dept

Thu, Oct 13th 2011 3:20am — Glyn Moody

The launch of Amazon's Kindle Fire at a price well below expectations has naturally focused people's attention on the e-book side of Amazon's operations, and the likely effect of the extended Kindle family on other publishers trying to go digital. But something else is happening at the other end of the publishing chain that could well disrupt the industry just as much, if not more: Amazon is becoming a major publisher in its own right.

Things began back in May 2009, when it launched AmazonEncore:

a new program whereby Amazon uses information such as customer reviews on Amazon websites to identify exceptional, overlooked books and authors that show potential for greater sales.

After this low-key start, Amazon added others imprints, including AmazonCrossing (foreign books in translation), Powered by Amazon (short books), Montlake Romance (romantic fiction), Thomas & Mercer (mysteries and thrillers) and, most recently, 47North (science fiction, fantasy and horror) - the last of these with some eye-catching authors:

47North launches with 15 books, including "The Mongoliad: Book One," the first in the ambitious, five-book, collaborative Foreworld series led by Neal Stephenson and Greg Bear. All of these books will be available to English readers in Kindle, print and audio formats at http://www.amazon.com, as well as at national and independent booksellers. 47North will publish original and previously published works, as well as out-of-print books.

Meanwhile, back in May this year, Amazon hired a publishing industry veteran to become VP, Publisher of Amazon Publishing�s New York office:

Amazon.com has taken its most aggressive step yet toward competing head-on with traditional publishers: It�s hired Larry Kirshbaum, a literary agent and the former CEO of Time Warner Publishing Group (now Hachette Book Group), to start a general trade imprint.

Until now, Amazon�s imprints have focused on genre fiction like mystery and romance. By hiring a high-profile industry veteran to focus on �quality books in literary and commercial fiction, business and general nonfiction��and by releasing those books in both print and digital formats�Amazon is announcing itself as a serious competitor against the �big six� traditional trade publishing houses.

Put all these imprints together, plus Amazon's main sales sites around the world and the Kindle e-readers range, and you have a fully-integrated global publishing strategy.

It's hard to see how traditional publishers can respond. They may have impressive back catalogs, and established links with leading authors, but Amazon has the distribution network and growing success in e-book publishing. Above all, the trade publishing houses seem to lack Amazon's ambition: it looks like it doesn't just want to make money from the entire publishing chain, it wants be the entire publishing chain.

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Filed Under: ebooks, economics, publishing
Companies: amazon

63 Comments

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Rikuo (profile), 13 Oct 2011 @ 3:35am

Odd...when my cursor points at the first paragraph, the entire paragraph becomes blue and underlined, as if its one giant hyperlink...but it isn't hyperlinking anything at all (not counting the "Launch of Amazon's Kindle Fire" hyperlink).
Using latest Firefox with Adblock Plus and Noscript on Win 7 Home Premium x64, if that helps.
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Anonymous Poster, 13 Oct 2011 @ 3:42am

Re:
It's a mistake in the HTML of the post; there's a stray "a" tag surrounding that part of the paragraph. I imagine that it will be fixed soon enough.
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Rikuo (profile), 13 Oct 2011 @ 3:43am

Re: Re:
Okay, cheers. Never did get around to learning HTML...
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frosty840, 13 Oct 2011 @ 4:55am

Re: Re: Re:
It appears to also be screwing with the paragraph formatting on the comment box, in some fashion...
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abc gum, 13 Oct 2011 @ 4:56am

I have no need for an e-reader,
however - if they published a calendar featuring scantily clad Amazon Women ......
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Kat, 13 Oct 2011 @ 4:58am

I love that Amazon is shaking up the publishing industry. The fine print on their contracts with authors gives the writers much better royalties than tradition pubs, more control over their print and e-rights, and gets both e and print versions out very quickly to readers. Oh, and prices are much lower for readers, too. Traditional publishers could offer much of this, too, but seem to be determined not to change. They have learned nothing from the pains of the music and movie industries, so I feel no sympathy for them.
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illmunkeys, 13 Oct 2011 @ 5:26am

Great news
Hopefully this means Neal's next effort won't be priced at 14.99 forcing me to await the library.

This is good news all around. The major publishers need new, powerful competition as their forced same price every where model has done nothing but hurt consumers.
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Dark Helmet (profile), 13 Oct 2011 @ 5:35am

Re: Great news
More importantly, IMO, eBook publishing, particular for independent or self-published authors need a real brand and platform to legitimize their work. Perhaps longer than any other entertainment medium, literature has suffered under the Gatekeepers syndrome, where only what gets put out by big publishers is worth looking at.

If Amazon can flesh out a crowdsourced rating/sample-sharing literature system, this could REALLY take off....
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Nana, 13 Oct 2011 @ 5:35am

Interesting
It's interesting what Amazon is doing and where it started from. After capitalising on distribution it is now going back to production. Such vertical integration leads to the creation of monopolies. Let's see what happens with these and who prices will be affected.
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John Doe, 13 Oct 2011 @ 5:49am

I have wondered why this hasnt happend sooner
Why haven't record labels, movie studios and book publishers done this before? Why haven't they setup their own digital stores and cut out the retail outlets? Sure, one stop shopping for all music is nice, but the labels could cut out the retail outlet and become the single source for all music of the bands they represent. This would allow prices to go lower since the retail markup could be done away with while still giving the labels their full cut.

It would be worse for the consumer is some ways as you would have to scan multiple sites for movies, music and books, but it might work.
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Jay (profile), 13 Oct 2011 @ 5:53am

Re: Interesting
"Such vertical integration leads to the creation of monopolies."

Can you explain please? In my view, it seems that Amazon is forcing others to compete in the marketplace and introduce more efficient models of business than currently presented.
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Chargone (profile), 13 Oct 2011 @ 5:54am

short answer?

yes..

duh.

it's a corporation. the ultimate goal of any corporation is monopoly control of every stage of production possible, for every product possible.

(well, i say 'goal', but that implies that there's someone who has sufficient capabilities to actually think it through like that. more like they have lots of lesser goals that have that consequence.)

*ponders* a cartel is a single entity controlling the entire production chain making it impossible for competitors to exist who cannot also create an entire production chain from scratch, no? (assuming i'm not misremembering the definition.)

it makes good sense from the point of view of maximising profits, which is the only thing corporations generally care about (due to the people running them being responsible only to share holders who, as a rule, have no interests beyond short term profits due to the nonsense that is the share-market.)
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Jay (profile), 13 Oct 2011 @ 5:54am

Re: I have wondered why this hasnt happend sooner
This is asking all of the labels and bureaucrats to think.

That wasn't in the job description.
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Anonymous Coward, 13 Oct 2011 @ 6:07am

Fix the first URL.
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Anonymous Coward, 13 Oct 2011 @ 6:30am

Middlemen.

Oh sorry, facilitators.
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NotMyRealName (profile), 13 Oct 2011 @ 6:33am

Re: I have wondered why this hasnt happend sooner
This would allow prices to go higher since monopolies raise prices and the retail markup could be done away with while giving the labels more money and the artists nothing.

FTFY
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Fickelbra (profile), 13 Oct 2011 @ 6:34am

Hmm
More power to them I say.
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Fickelbra (profile), 13 Oct 2011 @ 6:36am

Re: Re: Interesting
Exactly, there is no reason someone like Apple couldn't jump into this realm as deep as Amazon has if they so choose. Amazon is delivering a better service than anyone else at the moment, but it doesn't mean they will be the only ones to ever do it.
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Marcus Carab (profile), 13 Oct 2011 @ 6:50am

Re:
Middlemen.

Oh sorry, facilitators.

Actually, both. Because as has been established, middlemen are GOOD when they focus on FACILITATING instead of RESTRICTING.

Is everyone clear on that now? Can we move on?
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fogbugzd (profile), 13 Oct 2011 @ 6:52am

The trend noted in the article makes some of the recently negotiated exclusivity deals like the one that shut Barnes & Nobles out of e-distribution of DC comics a bit more ominous.

Frankly, I am surprised that Amazon is still pursuing those type of arrangements. They have reached such a dominant position in the e-publishing market that they really don't need exclusivity deals that lock out competition. Exclusivity arrangements are going to have no real effect other than drawing the eyes of FTC monopoly cops.
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Michael Lockyear, 13 Oct 2011 @ 7:11am

Re: Re: Re: Interesting
or Google...
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Dark Helmet (profile), 13 Oct 2011 @ 7:11am

Re: Re:
"Is everyone clear on that now? Can we move on?"

Nope, not til Monday. It ain't called troll-word-of-the-week for nothin', Marcus....
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The Groove Tiger (profile), 13 Oct 2011 @ 7:38am

Re: Re:
The Middleman!
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jupiterkansas (profile), 13 Oct 2011 @ 7:55am

Re: I have wondered why this hasnt happend sooner
Because the labels are run by marketers who are only focused on where people go to buy things, which research always told them was brick and mortar stores. They have always been fearful of doing anything that might sacrifice that well-researched, well-understood, and easily manipulated market. Selling stuff online means relearning their whole business, something Amazon has a big head start on, and threatens the one way they know for sure how to make money.

In other words, they don't want to take the risk for fear of losing their jobs. Amazon has nothing to lose.
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Anonymous Coward, 13 Oct 2011 @ 7:55am

Re:
Are you sure that you would want an Amazon woman??? The burlyness, hatred of men, and not mention hair...
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Anonymous Coward, 13 Oct 2011 @ 8:07am

Re:
Exactly this. While vertical integration can lead to high competitiveness in the market, Amazon is probably the biggest e-book distributor and all of these exclusivity deals, plus vertical integration, can lead to some legitimate anti-trust lawsuits.
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Anonymous Coward, 13 Oct 2011 @ 8:08am

Re: Re:
Marcus, how about "in context"? It seems that Amazon is just trying to be the evil middleman here.
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Hephaestus (profile), 13 Oct 2011 @ 8:14am

Re: Great news
"The major publishers need new, powerful competition as their forced same price every where model has done nothing but hurt consumers."

This move could actually make amazon the "Apple" of e-books. Which would hurt consumers if they forced authors to stick to certain price points. If they continue to allow authors to set their own prices, then it is good for consumers, and allow the free market to work.

I almost feel sorry for the big 5 publishing houses, and every book store in existance.
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Hephaestus (profile), 13 Oct 2011 @ 8:15am

Re: Re: Great news
sp - existence
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Marcus Carab (profile), 13 Oct 2011 @ 8:27am

Re: Re: Re:
I'm not sure I understand what you mean by "in context", or by "evil". Should every author develop their own reading device and wireless distribution network?
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Dark Helmet (profile), 13 Oct 2011 @ 8:29am

Re: Re: Re:
Jesus Christ, of COURSE THEY ARE. Amazon is one of the ultimate middle-men. Why are they so successful at it? Because they add fucking value.

Son of a bitch, where the hell do you get your bullshit nonsense premises? There's no designation of middlemen being evil here. None. At all. Value-adding middlemen are GOOD for the marketplace. Hell, I work for one. We're called a VAR, value added reseller, and for small businesses it makes a TON of sense to work with us. Amazon is no different.

I swear to christ, there HAS to be a better trolling option than just beating your own strawman to death....
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Hephaestus (profile), 13 Oct 2011 @ 8:45am

Re: Re: Re:
I didn't get the memo... whats the troll word of the week?
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Marcus Carab (profile), 13 Oct 2011 @ 8:56am

Re: Re: Re: Re:
"middlemen" - because they are under the erroneous impression that it's an automatic insult
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Hephaestus (profile), 13 Oct 2011 @ 9:08am

Re: Re: Re: Re: Re:
middlemen you!!! ... doesn't really work as an insult or a curse word. I wonder why they think it's an insult? ;)
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Anonymous Coward, 13 Oct 2011 @ 9:22am

Re: Re: Re: Re:
"I swear to christ, there HAS to be a better trolling option than just beating your own strawman to death...."

Actually, I am beating Mike's strawman to death. You just aren't catching it yet.

Do you like his middleman project, Step2 (which is likely to change names, considering that Step2 has been trademarked for a long time including online).
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jakerome (profile), 13 Oct 2011 @ 9:32am

Another leg up
Amazon is pricing their Kindle editions lower than their hardcover, only $8 for the Mongoloid title. It still baffles me that publishers set ebook prices to yield a profit of triple printed books... that's just depressing sales, and skewing the mix towards the less profitable print side. You'd think this would be obvious, but it appears the publishing industry has taken their cues from the RIAA, which STILL hasn't figured out that higher profits are quite possible with lower prices when your marginal cost is low or zero.
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Anonymous Coward, 13 Oct 2011 @ 9:49am

Re: Another leg up
I was wondering the same thing. I never bought any e-readers because I was under the impression that ebooks were same price or higher than their digital counterparts. I was pleasantly surprised when I bought my first kindle book: the price was significantly lower and I'm talking about technical programming books.
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Ron Rezendes (profile), 13 Oct 2011 @ 9:51am

Re: I have wondered why this hasnt happend sooner
I think you've answered your own question here:

"Why haven't record labels, movie studios and book publishers done this before?"

"This would allow prices to go lower since the retail markup could be done away with while still giving the labels their full cut."

The labels, studios and publishers have no concept of how to lower prices to increase income. It is a totally foreign idea to them and makes their head hurt if someone tries to explain it to them. Remember when cassettes went out because CDs were so much cheaper to make? Despite the lower costs the price of music instead went up! The content industries are about 5-6 years behind the economic times and they seem oblivious to the plight of middle class America - their core audience. Professional sports are even further disconnected from today's economic reality. Going to a baseball, football, basketball or hockey game now costs as much or more than going to a big name amusement park.
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Hephaestus (profile), 13 Oct 2011 @ 9:53am

Re: Re: Re: Re: Re:
Step1 - Point out middleman is the troll word of the week.
Step2 - Deliver you the message from the woman under the bridge, "Your mother wants you to come home for dinner"
Step3 - Walk away grinning ...
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Dark Helmet (profile), 13 Oct 2011 @ 9:56am

Re: Re: Re: Re: Re:
Someone has trademarked the phrase "Step2" for use similar to Techdirt? Please! Do Share!!!
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Marcus Carab (profile), 13 Oct 2011 @ 10:01am

Re: Re: Re: Re: Re:
Actually, I am beating Mike's strawman to death. You just aren't catching it yet.

A strawman is a dummy target... So I suppose you're admitting that you aren't responding to any real, meaningful points? How good of you.
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Mr. LemurBoy (profile), 13 Oct 2011 @ 10:07am

Re: Re:
It depends... would they be Wonder Woman type of Amazons?
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Marcus Carab (profile), 13 Oct 2011 @ 10:16am

Re: Re: Re:
You mean superhumanly strong, fast and smart, but powerless if "bound or chained by a male" ;)
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Mind The Rant, 13 Oct 2011 @ 10:26am

Re: I have wondered why this hasnt happend sooner
I think you've answered your own question: "It would be worse for the consumer in some ways..."

Nobody wants to buy Sony music from the Sony site (or, worse yet, Arcade Fire music from the Arcade Fire site), DreamWorks movies from the DreamWorks site, Random House fiction from the Random House site, etcetera -- if there's one place to go to find it all. And that, if you haven't noticed, is what Amazon wants to be: the one place to go to find it all, from used PC monitors to shoes to lawn mowers to, yes, books they publish themselves (and, as you note, cut out the middle man).

BTW: several publishers have joined forces to create their own bookseller site (bookish.com), but they're having trouble getting it off the ground. About which no one should be surprised.
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KeillRandor (profile), 13 Oct 2011 @ 10:34am

Re: Interesting
No - vertical integration and expansion is not, inherently, monopolistic. This is the method of expansion usually favoured by Japanese and other far-eastern companies and conglomerates. For many companies and industries, it makes perfect sense.

In the west, however, we've generally, (though not always), favoured horizontal expansion - buying out direct competitors - and it's THIS that leads to monopolies, and causes problems.
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Anonymous Coward, 13 Oct 2011 @ 10:34am

Re: Re: Re: Re: Re:
does that mean all the trolls here are middlemen?
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Ninja (profile), 13 Oct 2011 @ 11:13am

Re:
No monopoly is good. Not in the long term.

However, after I saw $100 worth for books for $18 (e-books format for kindle) I must admit that I drooled.

Hopefully publishers worldwide will start giving more attention to the ebook market. And God, we lack DRM free content there. Any tips on how to remove DRM from kidle e-books? It's fairly annoying if you want to use anything other than... kindle to read them.
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jupiterkansas (profile), 13 Oct 2011 @ 12:15pm

Re: Re: I have wondered why this hasnt happend sooner
Cassettes didn't "go out" because CDs were cheaper to make, but because CDs offered better quality sound and the ability to skip tracks. CDs always cost more than cassettes. It was a big boon for the recording industry in the 80s. Cassettes only stuck around for so long because car manufacturers kept putting cassette players in cars well into the 90s.

And manufacturing price had nothing to do with it - everybody recognizes that the money goes to the people that made, recorded, and distributed the music - not the piece of plastic it's recorded on.
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Anonymous Coward, 13 Oct 2011 @ 12:41pm

Re: Re: Re: Re: Re: Re:
DH: http://www.step2.com

domain trademarked, products trademarked, etc.

I would say they might have a reasonable case if there starts to be confusion in search engines regarding "step2".
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Anonymous Coward, 13 Oct 2011 @ 12:43pm

Re: Re: Re: Re: Re: Re:
Step 1: Point out that Mike started it by trying to create a mindspace to be a middleman without calling himself a middleman.

Step 2: Remind the shout down crew of that basic fact, and

Step 3: Shake head and wonder if it would take dynamite to move them from their positions.
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Dark Helmet (profile), 13 Oct 2011 @ 12:54pm

Re: Re: Re: Re: Re: Re: Re:
Are you kidding me? You don't know how this trademark thing works, do you? I'm pretty sure no moron in a hurry is going to confuse a discussion platform with NCAA branded children's toys, dumbass....
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Marcus Carab (profile), 13 Oct 2011 @ 1:27pm

Re: Re: Re: Re: Re: Re: Re:
What? For the dozenth time, "middleman" is not automatically bad, and nobody here has ever said it was...
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John Fenderson (profile), 13 Oct 2011 @ 2:16pm

Re: Re: Re: I have wondered why this hasnt happend sooner
And manufacturing price had nothing to do with it

Odd, that's not what the label said at the time. I remember, I was there. They overtly promised that because of dramatically reduced costs associated with producing CDs vs cassettes & vinyl, the consumer would see a healthy reduction in the list prices for them after an initial period of inflated prices intended to offset their costs of setting up the new manufacturing infrastructure.

The math works. Tapes & LPs cost a lot to make, and even more to ship (they're both relatively bulky and heavy). I forget the exact number, but if memory serves then manufacturing & shipping accounted for somewhere around 1/3 of the wholesale price. CDs are so much cheaper as to be effectively free.
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Anonymous Coward, 13 Oct 2011 @ 2:17pm

Re: Re: I have wondered why this hasnt happend sooner
Again, being a distributor and a producer is horizontal integration, which is not a monopoly. Vertical integration - being the only distributor - is a monopoly.
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Aerilus, 13 Oct 2011 @ 8:16pm

Re:
maybe netflix will catch on before they tank themselves
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nasch (profile), 13 Oct 2011 @ 8:17pm

Re: Re: Re: I have wondered why this hasnt happend sooner
Again, being a distributor and a producer is horizontal integration, which is not a monopoly. Vertical integration - being the only distributor - is a monopoly.

I could be mistaken, but I think you have that backwards - what Amazon's doing is vertical integration, right?
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nasch (profile), 13 Oct 2011 @ 8:21pm

Re:

*ponders* a cartel is a single entity controlling the entire production chain making it impossible for competitors to exist who cannot also create an entire production chain from scratch, no? (assuming i'm not misremembering the definition.)

A cartel is a group, and I think it's generally considered to have a horizontal monopoly or near monopoly, not necessarily a monopoly over the whole product chain. OPEC, for example. They control a big chunk of oil production, but not refineries.
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Anonymous Coward, 13 Oct 2011 @ 9:10pm

Re: Re: Re: Re: Re: Re:
Yup, Mike created a dummy target, the "middleman as a facilitator" thing. He made the post in preparation for what he announced with step2 (not to be confused with step2.com). It was sort of a nice false way to make sure there was some space for him to become a middleman, without being, well, a middleman.
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Jay (profile), 13 Oct 2011 @ 9:23pm

Re: Re: Great news
Not the used stores. I'm sure they'll always be around, albeit in a different capacity. I've always loved to explore the old stuff and read books at half the price.
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Marcus Carab (profile), 13 Oct 2011 @ 11:21pm

Re: Re: Re: Re: Re: Re: Re:
Er, what? Once again, nobody ever said being a middleman was bad...

Honestly, I have no idea what you are talking about and at this point I'm fairly certain you don't either.
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Anonymous Coward, 15 Oct 2011 @ 7:52am

Re: Re:
Google unswindle
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Mind The Rant, 17 Oct 2011 @ 8:25am

Re: Re: Interesting
"vertical integration and expansion is not, inherently, monopolistic" ... my goodness, have your heard of Carnegie Steel, Standard Oil, Loews Corporation (movie production via MGM and distribution via Loews Theaters), or AT&T?

They were all vertical monopolies broken up (with the exception of Carnegie Steel, which, I believe, despite its size and power, was never targeted) by the U.S. Justice Dept.

Unless I'm mistaken all the big trusts broken up by the Justice Dept. in the 20th century were vertical monopolies and not horizontal ones ...
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nasch (profile), 17 Oct 2011 @ 10:34am

Re: Re: Re: Interesting
Showing examples of abusive vertical monopolies doesn't disprove the claim that "vertical integration and expansion is not, inherently, monopolistic". Though I think a better claim would be that it is not inherently abusive.
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