Amazon destroys the book industry again

[HappyMartin]

Originally Posted by CommonReader

Eh? The US is one of only three countries (the other ones being Eritrea and the Philippines) that demand even from citizens that live and earn their money permanently abroad to file tax returns and to pay taxes. The US is going after its own citizens so hard that European banks increasingly refuse to open otherwise completely legitimate bank accounts for US citizens.

I don't see what's so patriotic about giving companies the opportunity to exploit tax loopholes that aren't available to companies that operate in the same line of business.

Simply not true. South Africa does as well. In fact most countries do, that is why there is a complex web of double taxation treaties in place around the world. My wife works for Accenture and deals with this stuff all the time as consultants are a very mobile workforce. Opening bank accounts is another issue entirely and not necessarily related to taxation laws

Anyway business will always exploit tax loop holes and government has a duty to identify and close them with legislation. As the trading enviroment changes legislaters need to stay on top of this. It is their job and moaning never fixed a thing. Doing your job will do it though.

When I purchase from Amazon they estimate the taxes for South Africa and collect the money up front. They then refund the difference after our local customs people have made the final assessment. Seems in this case they are trying quite hard to comply. Reason is local tax laws forced them into it. No big deal. If South Africa could do it and Amazon was prepared to work with it then there is no excuse for large first world economies.

[HansTWN]

Originally Posted by HappyMartin

When I purchase from Amazon they estimate the taxes for South Africa and collect the money up front. They then refund the difference after our local customs people have made the final assessment. Seems in this case they are trying quite hard to comply. Reason is local tax laws forced them into it. No big deal. If South Africa could do it and Amazon was prepared to work with it then there is no excuse for large first world economies.

And Amazon overcharges on international shipping. Which is why I usually go through a transshipment company, even if Amazon could delivery directly. That way I have more shipping options (slower but much cheaper) and I don't pay any taxes.

[HappyMartin]

Originally Posted by HansTWN

And Amazon overcharges on international shipping. Which is why I usually go through a transshipment company, even if Amazon could delivery directly. That way I have more shipping options (slower but much cheaper) and I don't pay any taxes.

I got insulted on another thread about not following rules and not turning my ereaders off for take off and landings. Taxation however is a law I believe in and while I follow the law and pay only what is required I pay all my taxes.

Strange how quick people are to hammer Amazon for tax avoidance when a lot of people do the same thing.

[HansTWN]

Originally Posted by HappyMartin

I got insulted on another thread about not following rules and not turning my ereaders off for take off and landings. Taxation however is a law I believe in and while I follow the law and pay only what is required I pay all my taxes.

Strange how quick people are to hammer Amazon for tax avoidance when a lot of people do the same thing.

I am not undervaluing the items when I ship them indirectly. The value usually seems to be below the threshold (a tax free amount) -- if I have to pay tax FEDEX or whoever will contact me and tell me. But I don't want to have to check how much I get back later, that part of Amazon's new system stinks.

[CommonReader]

Originally Posted by HappyMartin

Simply not true. South Africa does as well. In fact most countries do,

No, they don't. If you are e.g. an Irish citizen and you live and earn your income permanently in France, then you neither have to file tax returns nor to pay taxes in Ireland. An US citizen who lives and works permanently in e.g. Germany has to file tax returns in the US and is also liable to pay taxes in the US if certain conditions are met. Very unusual and very much different to what almost all other countries in the world do.

http://www.usembassy.org.uk/americanservices/?p=544

[HappyMartin]

You are quoting EU examples with Ireland and France and are effectively within the EU tax agreements system. What happens with an Indian citizen working in France or in Kenya?What of an Irish citizen working in Botswana?

I can tell you that I know Indians working in South Africa and they submit returns in India and are taxed in South Africa. Double tax agreements mean that the tax they pay in South Africa is deemed to have been paid in terms of their Indian tax liabilities but only for 200 days per year in the case of India.

Accenture has an entire division responsible for just these issues.

[CommonReader]

I don't want to take this thread completely off track, as it is about Amazon, not about taxes. However, you cannot claim similarities where there are none. People have to submit tax returns in several countries if they are residents for tax purposes in several countries or receive income from several countries, e.g. a national of country A who moves permanently to country B, but still receives rental income from his property in country A. This is normal - as you have stated - and usually covered by double taxation treaties. It's got nothing to do with the EU, either.
However, a US citizen has to file tax returns in the US even if he has never lived there (e.g. because he was born to an American parent abroad) and does not receive income from the US. This is indeed almost unique and a significant grievance for Americans living abroad. Sorry, I will leave it at that as it is really OT.

[BearMountainBooks]

New authors, building their customer base, need physical bookshops. Physical bookshops are lovely, tactile, friendly, expert, welcoming places. Physical books, which can only be seen and handled in physical bookshops, are lovely, tactile things. Destroy those bookshops – and Amazon is acting to achieve just that – and the very commercial and cultural base to the book industry is destroyed

New authors merely need a way to reach their audience. We don't care if it is a physical shop or internet or mail or little green aliens delivering it to readers doorsteps.

Right now Amazon and B&N and Sony, Kobobooks and a few others provide that portal to the customer. Right now they're paying authors a decent cut of sales. But. Amazon's move to get indie and backlist authors exclusive? Scary. Now I'm not saying they are planning on cutting commissions as soon as they control the market, but the thought occurs that if you control the market, you control the market.

Amazon hasn't destroyed the book market; they've made it more interesting, easier to get books, faster to get books out and better.

For now. It's the "for later" part that I'm keeping my eye on.

[SteveEisenberg]

Originally Posted by Kali Yuga

If US Airways is the only one running that route, then demand for that route is almost certainly low, which means the price will be high.

Then why are flights out of Scranton (low demand, but no dominant carrier) often cheaper than out of Philadelphia (high demand, US Airways hub)?

Another view:
"If you are not going to get [the low cost rivals] out tomorrow there is no point to diminish profits today" - American CEO Robert Crandall

To see how this works, check out the history of various airlines that have challenged US Airways on the highly-traveled Philadelphia-Boston route. And see how, in 2012, a non-refundable ticket to Boston can be more than one to Istanbul.

We can argue back and forth whether the book industry has potential to become like airlines. But we surely know that, in some industries, below cost pricing is used as a temporary tactic to drive up prices sky-high.

[fjtorres]

Originally Posted by BearMountainBooks

... the thought occurs that if you control the market, you control the market.

Amazon hasn't destroyed the book market; they've made it more interesting, easier to get books, faster to get books out and better.

For now. It's the "for later" part that I'm keeping my eye on.

You and the Feds both. They've made that pretty clear and Amazon is painfully aware of it.

People keep forgetting that it is *not* illegal to acquire a dominant market position or even an outright monopoly. (And again: market share is usually a poor metric of market domination.) What *is* illegal is to abuse dominant market power to the detriment of *consumers*.

Suppliers and competitors are *not* directly protected by US antitrust law, but rather only indirectly, to the extent that their continued participation benefits consumers.

And since antitrust law is *reactive* not proactive, Amazon is legally above reproach until they actually do harm to consumers. Which is why all the anti-Amazon whining achieves nothing.

[Kali Yuga]

Originally Posted by rhadin

Amazon really didn't start to beat up on B&N until Amazon began subsidizing its book losses with its profits from nonbook items.

If you're talking about ebooks, I'd agree. Paper is a very different story.

Amazon launched in 1994, and started selling other stuff in 1998. They didn't turn a profit until Q1 2001, and still lost money for the year.

During that time, they lost boatloads of cash -- $719m losses of net income in 1999, $1.4 billion in 2000, $527 in 2001, $149m in 2002. Amazon didn't eke out a positive annual net income until 2003, when their total revenues were equal to B&N's.

Except for 2002 and 2011, B&N has had positive profit margins. They've also had access to credit, and repeatedly went head-to-head with Amazon on price. (A CNN article in '98 discusses how both had essentially identical pricing.)

Selling non-book items also wasn't a zero-cost change -- Amazon needed more warehouses, new vendor relationships, a bigger database, had to handle explosive sales growth, and hire more people.

For a blast from the past, here's an article from 1997 which cited the conventional wisdom that B&N was going to bury Amazon. Among the advantages cited? B&N could get books cheaper, because they did so much more volume than Amazon.

And lest we forget, B&N also expanded its business into music and video in the 90s with its "superstores."

Amazon didn't undercut B&N on pricing. They didn't subsidize paper book prices with profit from other items; they did it with debt, in a calculated long-term plan to dominate the book biz and become the Target/Walmart of the Web.

Originally Posted by rhadin

That was and is a key difference between Amazon and other ebooksellers -- the ability to absorb losses in books for years because other divisions are profitable and able to support the book losses.

By the time that was actually the case, it was already too late for the publishers to refuse to work with Amazon.

Again it took Amazon several years to build up its warehouses, direct-to-customer shipping arrangements with distributors, and to do enough volume to qualify for the same prices as B&N. (Publishers also spent a few years trying to ignore the Kindle. That tactic didn't stop Amazon from popularizing ebooks anyway.)

I also have a real hard time imagining that in the 90s and 00s B&N and Sony were small-fry players who had no access to capital, debt or other resources.

The key differences were:
• Amazon / Bezos think long-term and have made several moves ahead of everyone else.
• Most competitors react rather than plan ahead -- especially B&N and Borders.
• Most of the time, competitors didn't execute well.
• Amazon was willing and able to get away with accruing huge debts to create and expand their business.

Ultimately the book market was B&N's to lose, and they lost it. And I'm fairly confident if they hadn't, you'd be kvetching as much about the Bully B&N as you do Amazon.

[fjtorres]

Originally Posted by SteveEisenberg

But we surely know that, in some industries, below cost pricing is used as a temporary tactic to drive up prices sky-high.

Absolutely.
But the reason why you don't see it used everywhere is because the price of entry for competitors isn't always high. It takes a *lot* of money and infrastructure to start an airline; it takes very little to start a cupcake stand. Nobody is going to lowball their way into cupcake dominance because the moment the cupcake price goes up, new bakers will jump in to undercut them. You can't buy present market share with future profits as you can in other industries.

eBookstores lie somewhere in the middle and, oddly enough, it is up to *publishers* as a whole which way it moves.
Their decisions and actions have a bearing on the startup costs and overall prospects for new players. So far, their ebook moves, much as their pbook moves have for decades, have all favored big, established retailers over small or new ones. So the industry has seen massive consolidation rather than diversification.

It's their call.
(shrug)

[Kali Yuga]

Originally Posted by SteveEisenberg

Another view:
"If you are not going to get [the low cost rivals] out tomorrow there is no point to diminish profits today" - American CEO Robert Crandall

The courts threw out that case. (http://www.businessweek.com/magazine...0/b3732075.htm)

The example cited in that article is Dallas. When a low-cost competitor added flights to/from Dallas, American would match them and add flights; when they left, prices went up. But American still didn't take a loss on those cheaper flights, and matched rather than undercut the competitors.

We could see this as American being predatory -- or the low-cost airlines behaving in a "predatory" (or merely bare-knuckled) fashion, by significantly undercutting American's pricing. If American didn't change its pricing, let the low-cost airline drove American out of Dallas, and watched the low-cost airline increase its prices, would that be unfair competition?

And I have to ask....
• Are you siding with the loser of that battle?
• Is it illegal for American to earn a higher profit margins on specific routes?
• Is the purpose of anti-trust laws to keep consumer prices low? Or is it to preserve competition? (And yes, those are two very different goals.)

Originally Posted by SteveEisenberg

We can argue back and forth whether the book industry has potential to become like airlines. But we surely know that, in some industries, below cost pricing is used as a temporary tactic to drive up prices sky-high.

What most of us know is that real predatory pricing is rare. It's difficult to pull off without going broke, difficult to distinguish from aggressive competition, and even more difficult to prove in court.

We know that an agency-priced book can't be priced in a predatory manner. We know that publishers can't discriminate on price except based on volume. We've repeatedly seen Amazon and Walmart and B&N go toe-to-toe in price wars, which means no big player in that industry has or is going to allow themselves to be underpriced.

Predatory pricing is not happening in the book biz, and is unlikely to do so -- especially if agency pricing is upheld.

[Ninjalawyer]

Originally Posted by kevinp

Here we go with the Indians. It was OK for them to murder the settlers just like it's OK for me to murder the Cubans, Puerto Ricans, Haitians, etc. that are moving into my country now. Right?

Jesus.

Which emoticon do you pick to show surface disapproval at a comment, but with a subtext of being impressed at the poster's perfect ability to meld on-the-surface ignorance of history with xenophobia? Adding Puerto Ricans to the list of people moving into your country? Brilliant, absolutely magical addition. If you'd added "Texans" or something similar instead the message would have been the same, but you would have lost the artistry.

Kevinp's post needs to be put on canvas and hung in a museum of modern art.

[SteveEisenberg]

Originally Posted by Kali Yuga

Are you siding with the loser of that battle?

Yes.

the purpose of anti-trust laws to keep consumer prices low? Or is it to preserve competition?

To me, a trick question. Law are passed to gain some advantage to the lawmakers, generally that of re-election, with satisfying big campaign contributors a related consideration. Yes, there also may be a public-spirited aspect. I'm not 100% cynical, just close.

What most of us know is that real predatory pricing is rare.

Let's suppose mine is a minority view. I'd find that a good thing

In transportation, at least, I think predatory pricing is the norm. Those $1 Megabus ads are not for my benefit.

What's rare is to see a gaffe like the Robert Crandall quote in my last post, where the monopolist admits it. Instead you need to look at the symptoms. One symptom is wildly gyrating prices. Like Random House charging OverDrive $25 one day and $100 the next. I don't look at this as proof Random House is evil. I don't think these companies are good or evil, just responding to where they find themselves. My point in mentioning Random House is that if prices for a product are subject to wild gyration, it's the kind of industry with a lot of potential for market-cornering.

We've repeatedly seen Amazon and Walmart and B&N go toe-to-toe in price wars, which means no big player in that industry has or is going to allow themselves to be underpriced.

As someone who reads few best-sellers, WalMart isn't even on my radar here. But I do think we can expect a continuing competitive market in best-sellers.

Maybe WalMart should be on my radar. Their everyday low prices model is the opposite of predatory pricing, and some economists say they keep down US inflation. By contrast, B&N no longer has the financial strength for battles that requires accepting losses.

Predatory pricing is not happening in the book biz, and is unlikely to do so -- especially if agency pricing is upheld.

I don't think agency pricing is going to be upheld.