More liberal discounting practices will give Amazon the power to continue to gain market share and it's easy to imagine a scenario where it controls three-quarters of all book sales in the U.S. At the same time, higher co-op payments would make book publishers less profitable and less likely to invest in riskier book projects.
Long-time industry consultant (and partner in Digital Book World, my employer) Mike Shatzkin explained to me what would happen next:
Let’s say Amazon goes to 70 percent and they’re basically the pipes for everything and they’re indispensable and you can’t publish a book without them. So, what do they do then?
If they’re still trying to maximize profits, we’ll still have lots of romance books and James Patterson will still write his books. But serious nonfiction books won't get published. Those are the books that will go first.
Nonfiction books, like Walter Isaacson's biography of Steve Jobs, are expensive and risky to produce and rarely sell well, yet many of these books drive intellectual thinking in the U.S. Robert Caro's latest book on Lyndon Johnson The Passage of Power: The Years of Lyndon Johnson took nearly a decade to write—and that means investment and risk.
Think of book publishers like venture capital firms. They invest in individual titles in the form of advances and the sunk costs of editing, packaging and distributing a book. Most of those bets lose money. Some make a lot of money (for every Fifty Shades of Grey there are dozens of money-losing duds). It all evens out to an industry where a strong year is one where a publisher clears a 10 percent profit margin.
As more book sales flowed through Amazon, it would have even more direct control over what people read. The company would have little incentive, for instance, to surface books readers are less likely to buy. If The Hunger Games is all the rage, then the company is best served pushing that title toward its readers at the expense of other books. Or, much more nefariously, it could discourage readers from buying books with a point of view it doesn't agree with.
Jeff Bezos, Amazon's founder and CEO, and the company's stockholders, have so far shown little or no bias toward political ideas or pushing one book over another for any reason but profitability, but that's not to say that someday that won't change. (Alarm bells went off across the publishing industry when the Washington Post, now owned by Bezos, was seen as publishing an Amazon-leaning article about its dispute with Hachette; later the same day, it ran a more even-handed account.) The rules of media ownership in the U.S. are built partially around the concept of not giving any one party too much control over the flow of ideas. Should Amazon become the sole place most books are purchased, it could start to have too much control over what we read. Shatzkin elaborated:
Amazon has so much control over what it surfaces. Even if Amazon doesn’t do anything overtly to prevent certain books from being published, they would have so much control over what you’re likely to see or buy, it’s not good for democracy.
Perhaps it was coincidence, but one of the books caught in the crossfire of this dispute is Brad Stone's The Everything Store, the best and most widely read book about Amazon—a book that Amazon royalty, notably Jeff Bezos's wife in an Amazon review, are not fans of.