1 More Reason to Fear Amazon?


Amazon.com already dominates online retailing.

But the e-tailer may be aiming for an even stronger competitive position on the web. In a bid to grab extra Internet real estate, Amazon has once again got rivals crying foul with allegations of monopoly building. And book authors are joining in with complaints against the retailer, too.

Fool me once
Amazon already irked writers with its recent move to explore launching a secondhand market for used e-books. It appears to be competing with Apple in a race to see who can create a better platform for used digital products. That makes sense, as whichever company solves the tricky rights issues around digital content will be rewarded with a stronger ecosystem supporting their hardware sales.

Apple's iStuff would be more valuable to users if the ownership rights to downloaded stuff, such as songs and movies, becomes more flexible. And Amazon's e-reader and tablet lineup would be more useful if customers ever get the freedom to trade in their used e-books after reading them.

Still, even if the digital marketplace that Apple and Amazon imagine would be a nirvana for consumers, authors aren't impressed. They're worried they could lose pricing power for their creations.

What's in a name?
And now writers have another bone to pick with Amazon -- this time over web domain names.

Amazon has been bidding on a host of new website domains, which are set to be given out soon by ICANN, the official keeper of web monikers. On the list of controversial titles that Amazon wants are the ".book," ".read," and ".author" domains. Whoever controls those domain names would have the power to box out competitors from potentially attractive web domains like, say, www.adventure.book.

The Authors Guild cried foul over the process last week, complaining that Amazon's attempt to tie up those terms is "anticompetitive." Barnes & Noble is on the same page. The bookseller urged ICANN to keep those domain names out of Amazon's hands so that the company couldn't use them to "stifle competition in the bookselling and publishing industries."

That seems like a bit of an overreaction to me. Amazon isn't going to corner any markets with this move, even if it wins ICANN's approval. It is just competing in the digital land grab along with many other major companies. Google, for example, is targeting several domain names for itself, including the ".blog" tag. Apple and Microsoft have requests in with ICANN for a number of domains as well. Maybe Amazon is pushing the envelope with more everyday terms, but web domains just don't convey much market power.

And while it might be nice to own generic terms such as "book" and "author," Amazon clearly doesn't need them to build awareness around its products and services. Its "Kindle" brand name didn't rely on an everyday term as it grew into lead e-reader status. And don't forget that there used to be a time when "Amazon" was just a long river in South America.

The downside
But the biggest risk I see to Amazon here is in harming its relationship with authors. As part of the company's core mission, it lists content creators (along with consumers, sellers, and enterprises) as one of the key groups that it aims to please.

You could argue that's been going extremely well lately -- for the creators of digital video content. Amazon's battle against Netflix has sent the price of online video skyrocketing. As it shells out more than $1 billion annually, Amazon has quickly grown into Netflix's biggest bidding rival for streaming video. And the owners of that content, such as DreamWorks and Disney, have to be enjoying all the extra attention. Prices for original series have climbed into the millions of dollars per episode.

Book authors haven't seen anything close to the same jump as their content gets digitized. Sure, the market has grown larger with the explosion in sales of e-readers and tablets. But the potential for falling prices is the main concern for writers. Scott Turow, president of the Authors Guild, has said that lower e-book prices will be good for consumers, "until there [are] no authors anymore."

Bottom line
That's probably an overreaction, too. But as Amazon's corporate mission spells out, the company needs content creators to be on board with its digital strategy. And that's just not the case right now for a lot of the book author community.

Amazon may be the king of the retail world right now, but at its sky-high valuation, most investors are worried it's the company's share price that will get knocked down instead of its competitors'. We'll tell you what's driving the company's growth, and fill you in on reasons to buy and reasons to sell Amazon in our Motley Fool premium report. Simply click here now to get started.

The article 1 More Reason to Fear Amazon? originally appeared on Fool.com.

Fool contributor Demitrios Kalogeropoulos owns shares of Apple and Netflix. The Motley Fool recommends and owns shares of Amazon.com, Apple, and Netflix. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

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