Apr
23

Amazon is Obama’s Mistress

By Katie Kieffer

Apartment Keys - Secret Lovers

Image credit: “apartment key” by kara brugman on Flickr via Creative Commons.

President Obama has a mistress. Her name is Amazon. Whereas former Presidents Kennedy and Clinton rendezvoused with female interns, Obama rendezvous with an e-commerce company.

Amazon currently monopolizes e-book sales, controlling 60 percent of the market. And, like a jealous lover, Obama is suing Amazon’s competitors in order to further strengthen her e-book monopoly. Obama may be faithful to his wife, but he is breaking his vow to the American people to defend the Constitution. He is openly abusing his executive powers and giving preferential treatment to Amazon—hoping to curry favor with consumers and ensure his reelection in November.

Obama’s Attorney General, Eric Holder, announced on April 11, 2012 that the Department of Justice is suing Apple and five major book publishers on charges that they violated anti-trust laws by conspiring to raise the price of e-books.

Here’s the catch: Apple and the five publishers were not conspiring to artificially raise the price of the e-books. They were merely switching from an outdated “wholesale pricing model” for print books to an “agency model” that is better suited for e-books.

My assessment is that the agency pricing model (spearheaded by the late co-founder and CEO of Apple, Steve Jobs) can help writers and book publishers stay in business in the digital era and thereby gives consumers more choices by allowing new retailers (like Apple) to enter the market and compete with Amazon.

Amazon.com Headquarters.

Image credit: “Amazon.com headquarters” by K. Todd Storch on Flickr via Creative Commons.

Obama Sues After Jobs’ Death, But Before Election

If Steve Jobs—a lifelong Democrat, beloved by Americans of all stripes—were still alive today, I doubt Obama would dare to publicly distort Jobs’ vision or attack Apple. However, Jobs was a capitalist and therefore his life story and his company pose threats to Obama’s socialist platform.

Obama’s go-to scapegoat is “big oil.” His new scapegoat is “big Apple.” American incomes are not keeping pace with inflation, gas prices are rising and jobs are meager. Obama knows that Americans will blame him for the bad economy unless he quickly convinces them otherwise.

Apple is the world’s most valuable company, beating even Exxon Mobil; Obama likely thinks that he has a chance of winning the votes of American consumers if he can pretend that he is “defending” them from a conspiring corporation with a well-timed, high-profile lawsuit.

This is not the first time that Obama has misrepresented Jobs and Apple to advance his socialist political agenda. As I’ve written, Obama used Jobs and his wife in his 2012 State of the Union Address to curry favor for the Buffett Rule—even though Jobs had advised Obama to reduce regulations while he was alive.

Since Jobs’ death, Obama has used Jobs’ name to promote ideas that Jobs never embraced. Now, Obama is suing Apple and attacking the world’s biggest capitalistic success story so that he can look like a hero in the eyes of consumers and spend four more years flying in Air Force One at a rate of $179,750 per hour.

Amazon’s Undeniable Monopoly

The purpose of anti-trust laws is to promote and maintain market competition by regulating anti-competitive conduct by companies, including setting unnatural prices that inhibit free competition. When Apple collaborated with publishers, I contend that it did not violate anti-trust legislation because Apple’s agency-pricing model actually brought more competition and consumer choices into an e-book market that was—and still is—monopolized by Amazon.

Back in 2009, Amazon was a lone shark, controlling 90 percent of the e-book market. Today, even after Apple and others have entered the market, Amazon controls the majority (60 percent) of the e-book market. Barnes and Noble controls 25 percent and Apple commands a scant 15 percent. But Obama is suing Apple for conspiring to undermine Amazon? Maybe someone should file an anti-trust lawsuit against Obama for attacking the free markets and protecting Amazon’s monopoly.

Unlike traditional printed books, you can’t physically hold an e-book in your hands; you must purchase a special “e-reader” or tablet to peruse them. Amazon’s e-reader is called the Kindle. So, when Amazon monopolizes the e-book market, it also guarantees that people will be more likely to purchase its e-reading device.

Consumers, writers and book publishers have been unhappy with Amazon’s monopoly for some time. From a consumer perspective, Amazon’s monopoly lessens technology options. CNET News ratesthe third-generation iPad tablet as the “best full-featured reading tablet”—functionally superior to even the most advanced versions of the Barnes and Noble Nook and the Amazon Kindle.

Nook E-reader

Nook E-reader. Image credit: “Nook and Wine” by Let Ideas Compete on Flickr Via Creative Commons.

Publishers were also unhappy with Amazon’s “wholesale pricing model” because it cannibalized their print businesses. As Jobs explained to his biographer, Walter Isaacson: “Amazon screwed it up. It paid the wholesale price for some books, but started selling them below cost at $9.99. The publishers hated that—they thought it would trash their ability to sell hardcover books at $28. So before Apple even got to the scene, some booksellers were starting to withhold books from Amazon. So we told the publishers, ‘We’ll go to the agency model, where you set the price, and we get our 30%, and yes, the customer pays a little more, but that’s what you [publishers] want anyway.’ But we also asked for a guarantee [per a most favored nation clause] that if anybody else is selling the books cheaper than we are, then we can sell them at the lower price too. So they [publishers] went to Amazon and said, “You’re going to sign an agency contract or we’re not going to give you the books.’”

Jobs further explains: “We were not the first people in the books business. Given the situation that existed [Amazon’s 90 percent monopoly], what was best for us was to do this akido move and end up with the agency model.”

Jobs’ Vision Was to Save Journalism and Media, Not Profit

Jobs saw an opportunity to provide consumers with more choices. He knew he could turn a profit by competing with Amazon—but money was not his goal. Jobs’ main goal was to save high-quality print media from going extinct in the modern digital era where fewer consumers will pay for printed newspapers and books because they can get so much information and entertainment for free online.

I think Jobs intuitively understood that if major publishers can’t afford to pay writers and journalists, consumers suffer. I think Jobs understood that without media watchdogs, free speech deteriorates and the government is no longer accountable to the people.

For example, Jobs considered the New York Times to be one of the finest newspapers in America and he wanted to save its journalism for future generations. Isaacson writes: “Jobs was particularly interested in striking a deal with the New York Times, which he felt was a great newspaper in danger of declining because it had not figured out how to charge for digital content. ‘One of my personal projects this year, I’ve decided, is to try to help—whether they want it or not—the Times,’ he told me in early 2010. ‘I think it’s important to the country for them to figure it out.’”

The New York Times on an iPad

The New York Times on an iPad. Image available on Flickr via Creative Commons from the photo stream of Rubin421

Jobs also had great success working with Rupert Murdoch, the CEO of News Corp., which owns conservative-leaning media giants like the Wall Street Journal and the Fox News Channel. So, I believe that Jobs’ over-arching vision in implementing the agency model was to preserve all high-caliber media.

Sleeping with Amazon Hurts Consumers

When Obama attacks Apple and favors Amazon, he hurts the U.S. economy and American consumers. For example, in the days following Obama’s announcement of the anti-trust lawsuit against Apple, the Nasdaq composite index took a substantial plunge. Since Apple is the world’s most valuable company, it comprises 12 percent of the Nasdaq. So, Obama is hurting the U.S. economy for his own political gain.

Competition always creates more options for consumers. When publishers can stay profitable and new retailers can enter the e-book market, there are more quality options for readers. And when retailers like Apple can enter the market, they will innovate and offer alternative e-reading devices like the iPad so that Americans have more high-tech options for reading e-books than buying an Amazon Kindle.

Mr. President, please stop favoring your mistress Amazon. She already monopolizes the e-book market and consumers deserve high-quality choices.

iPad and Kindle

iPad and Kindle. Image credit: “Set up for the duration” by Martin Burns on Flickr via Creative Commons.

 

Key pages referenced from Walter Isaacson’s biography, “Steve Jobs:” pp. 503-04, 531 and 533-34.

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9 Responses to “Amazon is Obama’s Mistress”

  1. Custom avatar smatt65 says:

    Great article. While I am a big Amazon fan and consumer, I don't agree with the government getting involved in this "anti trust" stuff. Clinton did the same thing to Microsoft in the 90's and we see where that went.

    I'm all for competition in the market place as it does nothing but make things better for the US consumer.

  2. Default avatar PattyCakes says:

    It's not a illegal to have a monopoly in a market in the United States, and if it was, 60% (or even 90%) wouldn't be a monopoly. Yet you seem to be demonizing Amazon for being successful, which is very a un-libertarian thing to do.

    Colluding with competitors to raise prices, however, is illegal. "The customer pays a little more, but that's what you want anyway." How is this not colluding?

    • Custom avatar Kris says:

      60% of 90% wouldn't be a monopoly? What would be? 99.99999999%? I don't get your logic there, PattyCakes.

      Amazon is not “successful” if success is beating out the competition. As soon as Apple and Barnes and Noble entered the market, Amazon's market-share slid 30%. The only way Amazon can defend its market position is by having Pres. Obama sue its competitors and take them to court. Amazon doesn't have a better service, it's getting special treatment. How is that "success?"

  3. Custom avatar Bozo Bus says:

    Well organized and written, KT. This topic reminds me of when Bill Clinton did the same thing to Microsoft in the service of his campaign contributers (Netscape and Texas Instruments?). Microsoft dared to give its browser to the consumer free as part of the OS package. That politically motivated suit started the dot com bust. Progressives have their play e-books, don't they?

  4. Custom avatar SandSeraph says:

    Good to know, thanks. Here's the thing. I work at BN and have for a long time. I've watched the ebook rise and the book fall in its wake (who knows how far it'll go). Seth Godin (inspiration of mine/Amazon acolyte) says that the fungible thing nowadays is originality & creativity. I totally agree. Corner that and you've got it made. And while the Internet has made it possible for anyone to be heard, surreptitious tactics such as these will ensure that the channels stay exclusive.

  5. Custom avatar Kris says:

    Katie, I love all your columns! You tackle interesting issues that no one else does. It makes me disappointed and concerned to see how President Obama is misrepresenting Steve Jobs now that he has passed away. Keep up your writing and thank you! Hope to see you on FOX News again soon!

  6. Default avatar Gabriel Evans says:

    great article. if capitalism wins we win and Obama loses.

  7. Custom avatar Marie Frances says:

    Katie, you are right! Our liberty is also lost when the Gov't uses its power to make better
    one company at the expense of another for political gain.
    Why is Obama getting involved when Apple switched from an outdated wholesale printing
    model for print books to an agency model for e-books??? This man will stop at nothing to
    destroy America.
    Enjoyed your post! Great pics.