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10.18.2014

Selling Your Soul to the Company Store: Amazon’s Mistreatment of Its Employees, Partners, Developers, Publishers, and Content Creators

Tens of thousands of current and former employees of a prominent Fortune 500 company know the deal they made with the devil—a smiling faced devil named Amazon.com. And you may already know the lyrics to the “Devil Went Down To Georgia” by the Charlie Daniels Band, but just in case you don't here's a verse for you:

Well the Devil went down to Georgia; he was lookin' for a soul to steal.
He was in a bind 'cause he was way behind; and he was willin' to make a deal.

Although the song has a happy ending with Johnny besting the devil, the devil in Seattle continues to steal souls. As for my part in the devil’s rise, I regret being one of the movers and shakers who helped put the company on the map when I featured Amazon.com in my bestselling books and high-profile articles read by millions throughout the 1990s. I regret it because Amazon has become a heartless, soulless beast whose primary mission is not to create but rather to disrupt and destroy. The Amazon executive team states such things openly, that what they disrupt and destroy are marketplaces and outdated models, but what they’re really disrupting and destroying are livelihoods, careers, lives, and families.

There’s a reason Amazon offices and distribution centers are referred to as Meat Grinder by those who work there. It is a meat grinder, and at times it is akin to a sweatshop too. Many of Amazon’s own employees have come forward over the years to decry poor working conditions, substandard wages, and mistreatment at the hands of greedy company executives.

News outlets, including BBC Channel 4, have been telling the story of overworked, underpaid, and exploited Amazon workers and their extreme anger over timed toilet breaks, punishments for talking in the workplace, zero-hour contracts and more. Business Insider and others have reported on the miserable working conditions inside Amazon. Labor strikes in Germany have exposed Amazon’s dependence on exploitive labor practices. A BBC investigation into a UK-based Amazon warehouse found conditions that could cause mental and physical illness.

Meanwhile, Amazon management is greedily snapping up stock-based compensation, enriching themselves and lining their pockets with extreme wealth they are unwilling to share with the rest of their own workforce. As Amazon’s valuation remains lofty, however, public good will toward the company and its management team may wear thin. The company remains vastly overvalued given actual return on investments over its life as a publicly traded company. Whether this overvaluation is 300%, 500%, or 1500% is up to the stock markets to decide today, tomorrow or some day in the future.

What is up to the public decide is whether the human cost—the toll in livelihoods, careers, lives, and families—is much too much and whether any consumer with any sense of a moral conscience wants to continue to make purchases from such a company.

Employees aren’t the only ones being mistreated by Amazon. Amazon also mistreats those who do business with the company, including its partners, developers, publishers, and content creators. If you think this is where I’m going to dive into the recent Amazon – Hachette debacle as an example of Amazon’s mistreatment of its business partners, including publishers and authors, you’d be right and wrong.

Amazon does use its marketplaces as blunt instruments to achieve its goals, no matter the impact on livelihoods, careers, lives, and families. Amazon does use its proximate monopoly position to force partners, developers, publishers, and content creators to accept less than palatable terms. Amazon does want the buying public to believe that it has the right to set prices and that such price fixing is actually good for consumers.

What Amazon doesn’t want anyone to know is that the consumer public has already spoken, that the $9.99 price point for fiction ebooks is functionally irrelevant. Many fiction ebooks are, in fact, already priced well below $9.99. Why? Publishers have been lowering prices to stay competitive in a hyper-competitive industry. This trend of lower prices has been ongoing for years and it’s why you often can pick up last year’s bestseller for not $9.99, $8.99 or even $7.99 but often $6.99, $5.99 or even $2.99.

While we’re talking about how irrelevant $9.99 as a price point is for fiction ebooks, let’s look at list price and sale price. To Amazon.com, list price is the price set for a product by a business partner, such as a publisher. Sale price is the price a product actually sells for and that price is set by Amazon itself.

Consumers buy products based on sale price, not list price. Sale price is often a discount to list price. When you buy an ebook at Amazon you may not pay list price. That’s because many products are sold at a discount from list price. For example, instead of paying the list price of $12.99 for an ebook, you pay $8.88. Amazon, however, wants the publisher to list the ebook at $9.99 so they can sell you the ebook for $9.99, or even $8.88 in a pinch.

Why? Amazon has to pay traditional publishers 45% of the list price. When an ebook has a list price of $12.99 and sells for $8.88, Amazon has to pay the publisher $5.85 and keeps only $3.03. When that same ebook has a list price of $9.99 and sells for $8.88, Amazon has to pay the publisher $4.50 and keeps $4.38—a profit for Amazon that is 145% of what it was previously.

It’s worth noting also that Amazon typically only discounts $9.99 ebooks when a competitor’s site lists that ebook for less. Thus, the ebook with a list price of $9.99 is more likely to sell for $9.99. If so, Amazon keeps $5.49 and pays the publisher $4.50—a profit for Amazon that is 182% of what it was previously.

So is the consumer really saving anything? No. For the consumer, there’s no difference. For Amazon, there’s a major profit incentive.

Additionally, with the continued introduction and adoption of subscription services that let consumers read as many books as they want for $9.99, $8.99 or $7.99 a month, the list price of books will have decreasing relevance as well. With a subscription service, the list price and sale price of a product are irrelevant. The consumer pays a flat fee every month. Publishers and Amazon split this flat fee, with Amazon typically getting 55% and publishers sharing the remaining 45%.

Like a fight with your spouse that begins with a disagreement over whose turn it is to take the family dog for a walk, the fight for $9.99 isn’t really about the price and helping consumers at all. It’s about profits and who keeps what share of them.

Don’t ever forget that it’s Amazon that controls the sale price. Anytime Amazon wants to sell a $12.99 ebook for $9.99 or even $8.88, it can do so and does do so. The company would just prefer to keep more money for itself while leaving less for those who create a product in the first place.

Okay, so that’s a lot about a fight between two corporate heavy weights that you may or may not care about. Odds are anyway, if you’re a content provider, developer or publisher, you’ve made up your mind about this particular debacle one way or the other.

While public fisticuffs like this make headlines, you likely won’t be reading anytime soon about the tactics Amazon uses on those who don’t have public relations teams, corporate lawyers, and celebrated media connections. I’m talking about the little guys. Small developers, small publishers, individual content creators. Small businesses and people that Amazon crushes every single day simply because it wants more complete control over the content creation industry and those who work in it.

You won’t hear from these little guys because they are the voiceless, and just as often these days, the ones who have had their voices, livelihoods, and lives taken away by Amazon. Speak up for your rights, say something Amazon doesn’t want to hear, and you risk becoming one of the voiceless too.

Speak out and you’ll be told you don’t have to work with or for Amazon. You’ll be told to go somewhere else. You’ll be told many other things that anyone who ever cried out for what’s right and just has been told.

In the old days of corporate robber barons, a company like Amazon would have just sent crooked cops or hired goons with billy clubs to break legs and bash in skulls, promptly putting an end to any public outcry. These days, Amazon seems to do the virtual equivalent with as little care. 

Do you really think anyone who works in a sweatshop wants to work in a sweatshop? Do you really think teachers or machinists or engineers or anyone else want to work for substandard wages? Do you really think any Amazon employee wants to have a stopwatch tracking how long it takes them to pee?

Is it appropriate for a single company to have proximate monopoly control over the livelihoods, careers, and lives of millions? When will the US, UK, German and other governments step in and do what’s right and what’s needed. What’s needed not only for the employees of Amazon, but for content creators and everyone else who has no choice and no voice.

Amazon supporters don’t confuse your passion for ebooks, your love of the new opportunities of the digital age, or even your fondness for kindle, with a sense of loyalty to Amazon. Amazon didn’t invent ebooks, eink or even ereaders. Amazon doesn’t empower this social, connected age. We, the people, empower this social, connected age. We, the people, have earned the right to our voices. And we, the people, have earned the right to decry injustice and mistreatment.

As for me, you can consider me an Amazon expat if you want. I was for twenty years one of Amazon’s strongest supporters. But my support, your support, the support of your friends, family, neighbors, coworkers, and associates means nothing to a company that operates the way Amazon operates. Amazon controls public opinion with public relations teams, corporate lawyers, and media connections. What Amazon can’t control it buys, as was the case with the purchase of the Washington Post and as is the case with Amazon’s many political contributions to curry favor with governments around the world.

Thanks for reading,

Robert Stanek

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