The False Tale of Amazon’s Industry-Conquering Juggernaut

Felix Salmon (@felixsalmon) is an Ideas contributor for WIRED. He hosts the Slate Money podcast and the Cause & Effect blog. Previously he was a finance blogger at Reuters and at Condé Nast Portfolio.

Except, that logic isn’t really borne out by any kind of evidence. Amazon was founded as a bookstore in 1994, and it really did disrupt the business of bookselling. Publishing, too, is much less profitable now than it was 20 years ago, thanks to Amazon’s formidable monopsony power. Amazon is by far the largest buyer of books in the world, all publishers need to sell to Amazon, and Amazon forces them to accept terms they would never accept from anybody else.

It’s a testament to the cultural salience of the publishing industry that the books precedent looms so large in the mind of the public and stock traders, because today, 24 years after Amazon was founded, the company has failed to achieve similar market power in any other sector. Quite the opposite, in fact. By opening up its platform to third-party sellers, Amazon has ensured that it will nearly always face competition, even on its own website. And as Amazon has become one of the most valuable companies in the world, it has taken increasing pains to avoid doing anything that antitrust authorities might disapprove of. Amazon’s book monopsony is valuable, but it also comes at significant reputational cost; it’s not at all clear that building a similar monopsony in some other market would be a net positive for the company.

Not that it’s threatening to do so. When Amazon bought Whole Foods, it gained no particular control over the food industry: it merely went from having 0.2 percent of the groceries market to having 1.4 percent. When it bought PillPack, for all that it wiped $11 billion off the market capitalization of the likes of CVS and Walgreens, it still acquired a company that only has $100 million in revenue. (Walgreens, by contrast, has over $100 billion.) However Amazon intends to compete in such markets, it’s not going to do so by being the dominant player. Even Amazon’s attempts to become a book publisher have been pretty small-scale and unimpressive.

In fact, I can’t think of a single industry, other than bookselling, that Amazon has entered with significant negative repercussions for the incumbents in that industry. Amazon makes fantastic TV shows, for instance, but it has hardly damaged Disney or Netflix in doing so; for the producers of TV shows, its entry into the business has been an unalloyed boon. Its music-streaming service hasn’t hurt Spotify, even as Apple has proved that there was more than enough room for a new competitor. Its Fire phone, of course, was an unmitigated disaster. And while the so-called retailpocalypse has decimated the ranks of American shopping malls, it’s hard to blame Amazon for that when in-store retail sales continue to rise. (The real reason for shopping malls closing down is, simply, that developers built far too many of them, and that no country on earth has ever been able to support America’s per-capita number of shopping malls.)