Has Amazon gone mad?

by Rick Jelliffe

One feature of modern US capitalism is that successful companies are ones which can obtain a market domination in one sector, then extract value-adds from it, attempting to get a locked-in (i.e. non-market) revenue base in other sectors. Microsoft Windows parlays into Office sales; Google search parlays into advertising revenue; Apple IPods parlay into iTunes sales; IBM mainframe and server sales parlay into solutions sales; Sun Java adoption parlays into server sales, and so on. Now it is Amazon's turn.

It is not surprising that this should happen, but this is a particularly brazen case.

6 Comments

Ric Johnson
2008-04-10 05:03:31
Our rights as individuals are being slowly diminished. I read a story the other day about how lawyers are using individual cases the build up a legal legacy to enforce Digital Rights. Now I hear that PayPal is mandatory in Australia


http://www.australianit.news.com.au/story/0,24897,23515926-15306,00.html


Rick Jelliffe
2008-04-10 05:12:52
Ric: Yes, that is yet another example of the same levering (or leveraging). This kind of tight coupling corrupts the market.
bryan
2008-04-10 05:12:55
There's a disconnect, unless you suppose the revenue base is that of the people selling things through Amazon.


This is more like a case of getting market domination in one sector and then forcing suppliers to take less and less profit in order to get through you to the customers you support. Thus in line with WalMart and Apple with regards to producers of physical goods and music companies respectively.


However it is different from those other cases because in Apple and Walmart case the profit is extracted by lowering costs. The actual analogy would be if Walmart owned a bottling plant and then told suppliers of bottled goods that they can't sell through Walmart unless they switch over to bottling their bottled goods through Walmart's bottling plant.

Rick Jelliffe
2008-04-10 05:24:33
Bryan: For the Ebay case, there are two markets: one for the auctions and one for payment methods. The dominance of Ebay in one case parlays into removing its users from the market for payment methods. Lock-in.


I don't know whether this is outright illegal anywhere: looking at the Australian government website there are lots of things like it (third line forcing and so on) but I doubt if they are exactly or uncontestably against it.


http://www.accc.gov.au/content/index.phtml/itemId/259608/fromItemId/3669

len
2008-04-10 07:10:15
Baby boomer wisdom:


No Product.
No Market.
No Sale.
No Pay.


That's capitalism. What you are describing is a protection racket where to stay in business, you pay for a service you don't need or could get elsewhere cheaper.


Greed and muscle.

Rick Jelliffe
2008-04-14 00:31:38
UPDATE: For a different POV, see
http://www.oreillynet.com/xml/blog/2008/04/has_anybody_actually_read_amaz.html