Used e-books: Threat or menace? Publishing in the twilight of the printed word continued

by John MacBeath Watkins

Amazon has announced that it will patent a system to sell used e-books. This will damage publishers even more than its current policies.

Keep in mind, Amazon, which until fairly recently controlled about 90% of the e-book market, has sold e-books at a loss in order to capture the market. As Richard Russo said, "When you sell books at a loss, by the millions, to corner the market, you're not interested in competing," said novelist Richard Russo, a Pulitzer Prize-winning novelist. "You're interested in burying your competitors and then burying the shovel."

The technical term for this is predatory pricing. And once the competition is buried, the predator can gain monopoly power to raise prices and monopsony power to pressure suppliers.

The publishers, already pressured by Amazon for large discounts, tried to fight back. Instead of the wholesale model, where they sell to the vendor and the vendor sets the price, they wanted to go to the agency model, where they set the retail price. Apple, eager to gain a foothold in e-books with its tablet, agreed to the agency model.

The Justice Department, keeper of the keys to the Sherman Antitrust Act, decided that the publishers had colluded to raise prices. This lead to a great lede in a New York Times story:

The Justice Department finally took aim at the monopolistic monolith that threatened to dominate the book industry. So imagine the shock when the bullet aimed at threats to competition went whizzing by Amazon — which not long ago had a 90 percent stranglehold on e-books — and instead, struck five of the six biggest publishers and Apple, a minor player in the realm of books.

That’s the modern equivalent of taking on Standard Oil but breaking up Ed’s Gas ’N’ Groceries on Route 19 instead. 
 The Justice Department is acting as though the Sherman Antitrust Act was passed to protect consumers from being charged high prices by producers. And to some extent it was. But the pressure for an antitrust law came in part from farmers, who were being charged exorbitant shipping fees by the railroads. They formed the Granges and other organizations in large part to fight the railway monopolies.

The meaning of the term "charging all the market will bear" did not mean as much as you could sell something for in a competitive market. It meant how much a monopoly railway could charge the farmers before they went out of business.  It was bakers using the wheat at the end of the line that were charging as much as they could in a competitive market, because they did not have the conditions to charge all the market would bear. Someone else would charge less.

In effect, the antitrust laws of this country stem from producers getting together to fight against being exploited by those who controlled the distribution of their product. Pretty much what the publishers were doing, but the publishers did it in a way that was illegal under antitrust law. The ironies abound.

Now, Amazon is filing a patent to sell used e-books, presumably with the publishers and authors getting nothing. Up to now, if you bought a physical book, it was yours to dispose of as you wished, leading to a secondary market in used books and free lending libraries. But a physical book has a limited life, and you can be sure that it's the same book you bought.

When you download an e-book, Amazon or Apple does not have one less e-book on the shelf that they have to replace. What you downloaded is a copy, and if you send the download to someone else, it will be recorded on the memory media of their computer, Kindle, or tablet, in effect being a copy of the one you downloaded.

In short, the notion that Amazon would be selling the same book is a legal fiction. The particular arrangement of 1s and 0s on your hard drive that make up the book won't be the same physical book as the 1s and 0s on the vendor's computer. It's as if it were the same words on different paper, in short, a copy of the book.

Which means the technology is useless unless Amazon can work the legal system in their favor. Which, apparently, they have a history of doing.

Amazon has many books priced at a penny. The only thing working in the publishers' favor here is that the shipping costs $3.99, unless the buyer gets one of Amazon's free shipping deals. E-books priced at a penny will cost nothing to ship. This will hasten the demise of the paper book, and, not coincidentally, concerns me because it will hasten the demise of the physical bookstore. The patent appears to be for a disruptive technology, a term valorized by business writers, but really, distributing e-books is fairly easy, so the technology is really about maintaining this fiction -- when you sell the e-book to Amazon, it is no longer available to you. But because it is a perfect copy, it will never get moldy or have coffee spilled on it and be thrown away.

I don't know if Amazon will ever use its patent, or if Apple will use the patent for selling new e-books that it has filed. I'm fairly sure the doctrine of fair use would have to be considerably expanded for them to do so. But if they manage to lobby for such legal treatment successfully, it will be the change in law, far more than the change in technology, that is disruptive. It would essentially allow Amazon to get most of the money resulting from the sale of a book, infinitely copying any one copy it sells, and take money away from publishers and writers, much like the way railroads took money from farmers.

Of course, if they want to sell e-books in a manner that does not involve pretending a copy is the same book, there's a simple way to do it. Put it on some physical media, such as a ROM chip, that can be lost or ruined or wear out, and you'll have something that fits existing fair-use law and can therefore be resold, traded, or given away with ease.  Of course, they will have to sell new Kindles and tablets to accommodate this technology -- oh, dear, I think I've just told them how to make more billions.

 Now, in a lot of ways, I like Amazon. I've had friends and one relative work for them. I'm all in favor of books being read, and they have provided a distribution network that has helped people get the books they want. But not everything that is good for Amazon is good for everyone. If writers can't get paid enough to live on, we won't have professional writers, who devote their lives to producing the books we love.

More on publishing in the twilight of the printed word: 


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