Author Charlie Stross posted an interesting article in his blog about the strategies that Amazon is employing in it’s quest to dominate eBook sales in which he postulates that “the peculiar evil genius of Amazon is that Amazon seems to be trying to simultaneously establish a wholesale monopsony and a retail monopoly in the ebook sector:”
You’re probably familiar with predatory pricing. A big box retailer moves into a small town with a variety of local grocery and supermarket stores. They stock a huge range of products and hold constant promotions, often dumping goods at or below their wholesale price. This draws customers away from the local incumbents, who can’t compete and who go bust. Of course the big box retailer can’t keep up the dumping forever, but if losing a few million dollars is the price of driving all the local competitors out of business, then they will have many years of profits drawn from a captive market to recoup the investment. (Meanwhile, helpful laws allow them to write down the losses on this store as a loss against tax, but that’s just the icing on the cake.) Once the big box store has killed off every competiting mom’n'pop store within a 50-mile radius, where else are people going to shop?
Amazon has the potential to be like that predatory big box retailer on a global scale. And it’s well on the way to doing so in the ebook sector.