February 16, 2012. Our article from two weeks ago, Publishing’s Ecosystem on the Brink: The Backstory, and similar articles spur frequent comments online that Amazon is simply reaping the rewards of its innovation, that its growing dominance of book publishing is merely a demonstration that the free market is functioning as it should. This isn’t really what’s been happening.
Useful innovation should of course be rewarded, but we've long had laws in place (limits on the duration and scope of patent protections, antitrust laws, stricter regulation of industries considered natural monopolies) that aim to prevent innovators and others from capturing a market or an industry. There's good reason for this: those who capture a market tend to be a bit rough on other participants in the market. They also tend to stop innovating.
Amazon's first Kindle, released in November 2007, was certainly innovative, but its key breakthrough wasn't any particular piece of technology. Sony had already commercialized e-ink display screens for handheld e-books in September 2006. (E Ink, a Cambridge company co-founded by MIT Media Lab professor Joseph Jacobson developed the displays used by both companies.) Amazon's leap was to marry e-ink displays to another existing technology, wireless connectivity, to bring e-book shopping and downloading right to the handheld device.
Amazon's innovation, in other words, was to untether the Sony device and put a virtual store inside it. This is no small achievement, and Jeff Bezos's particular genius seems to be his ability to grasp the transformative potential of this sort of thing long before others do, just as he saw the potential of databases and the Internet to facilitate shopping for books and the potential for one-click shopping to ramp up online sales before most others had caught on.
Amazon's reward for developing the wireless e-reader should have been that it would become a significant vendor of e-books and earn a profit commensurate with the value it added to the publishing ecosystem. Whether it would then continue to be a significant e-book vendor should have depended on whether it continued to innovate and provide good service to its customers. Amazon's reward should not have included being able to combine its wireless e-reader, deep pockets, and an existing dominant position in a related, but separate, market -- the online market for physical books -- to prevent other vendors from entering the e-book market. Amazon's reward as an innovator, in other words, shouldn't be getting to wall itself off from competition.
Full report at The Author's Guild website.
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