Could Amazon create a monopoly on books?

One of the concerns I've seen expressed around and about, both by apologists for traditional publishers and by proud-to-be-indie authors, is that Amazon could create a monopoly on books. The concern is that Barnes & Noble will go down the toilet, and the major publishers will follow, and the only one left standing will be Amazon.

I don't doubt that Amazon would create a monopoly on books if it could--any company (really, any person) would love to have a monopoly on anything at all. If you have a real, honest-to-God, Ma Bell-style monopoly, you are in Fat City. You don't have to spend money on research and development, or customer service, or new infrastructure, or technology. You don't have to keep up with the times, keep clients happy, or hustle in any way. You are at that spot on the supply curve where everybody wants to be. That's why we have to have antitrust laws, and that's why they have to be enforced--monopolies are just too tempting.

But is it possible for Amazon to create a monopoly? Keep in mind that there's a huge difference between dominating a market and having a monopoly. You could control 90% of a particular market and not have a monopoly. If everybody buys a GM car because GM makes the cars everybody wants to buy, that's market domination. If everybody buys a GM car because if you buy another kind of car, the police come to your house and shoot you in the head, that's a monopoly. The same is true if gentler forms of coercion are used: If you buy a non-GM car and cannot buy fuel for it because GM owns all the gas stations, then you are facing a monopoly.

Right now, Amazon is selling the majority of e-books, and a number of authors are making their titles exclusive to Amazon, because Amazon does a better job selling indie titles than other Web sites. It might be fair to say that Amazon currently dominates the indie e-book market; it's certainly fair to say they are a major player.

But could they create a monopoly on books? Now, I have argued that Amazon poses no special threat to indie bookstores, but let's say I'm totally wrong. E-books get so fully adopted that you can't give your paper copies away, brick-and-mortar bookstores have nothing to sell, and they all go under--every last one.

On the Web, there is Amazon and...oh, there's Barnes & Noble and Smashwords and Google Books and the Sony Reader store and Kobo and the iBookstore. Oops.

Not a monopoly.

No, you say, Barnes & Noble is going down! Well, OK, that leaves Smashwords and Google Books and the Sony Reader store and Kobo and the iBookstore.

Not a monopoly.

Plus, I could sell e-books from this Web site. You could sell e-books from your Web site. People kick up this huge fuss over Amazon's proprietary system of Mobi files and Kindle readers, but I can and do make my own Mobi files, I could sell them here if I wanted to, and Smashwords certainly sells them. It may be more convenient for someone to buy Mobi files for their Kindle on Amazon, but they don't have to.

Where are the barriers to entry into this market? You don't have to build your own bookstore chain; you don't even have to tangle with Ingram. Look at Smashwords, a company that began operations all of four years ago. They're not some huge corporate entity with phenomenally deep pockets--Mark Coker describes the company's financial backers as "me, me and me." And yet, there they are, reportedly profitable and also a major player in indie e-books.

How could Amazon create a monopoly? They could try underpricing everybody, selling books at a loss, and that might work...for a little bit. Drive Smashwords under, though, and another will take its place, because the barriers to entry are not that high and there's money to be made off indies.

Amazon could also turn on authors, demanding exclusivity and offering increasingly-crappy royalties in exchange. That would require them to believe that people buy books on Amazon because they're on Amazon--not because they're written by an author the reader likes. The problem with that strategy is that the authors could always say, "Screw you!" and offer their books elsewhere. That's actually kind of what the traditional publishers are doing right now, and I think that strategy would work for Amazon just as well as it's working for them.

The change to self-publishing and e-publishing isn't a simple exchange, where you swap one group of corporate overlords for another. It is a completely different ecosystem. It is technology at its most disruptive.