Six Probable Outcomes From Amazon’s Used Digital Sales Patent

tl; dr:  DRM has a new reason to live.  Amazon is going to lock in more of the eBook market.  Authors, publishers, and readers need to break out of the frame Amazon put us all in – because it only benefits Amazon.  (And no, I’m not an Amazon-hater, thanks.)

Ophelias BooksThe First Sale doctrine suddenly became a whole hell of a lot more important yesterday, with Amazon getting a patent on selling used digital objects.  What these two rulings APPEAR to say1 is that people can sell “used” eBooks and MP3s.

There’s a few things that are readily apparent2:

1.  DRM will make a comeback.  There will have to be a way to show that the “used” copy no longer exists on the seller’s equipment.  Which means that Amazon just gave DRM another, completely different justification to live.  Ironically, the claim will be that DRM is necessary to prove that you “own” the content… even though DRM means you don’t actually own your eBooks.  (Note:  This is a totally different argument than what I expected originally from Amazon, possibly because the “licensing” argument didn’t play well.) Realistically, DRM will continue to be the most effective mechanism to keep people locked into using one storefront, and one storefront only.   This is bad, because…

2.  Amazon is going to get bigger.  Amazon holds this patent, and they’re going to wave it in front of people as much as they can.  Which means Amazon will get a bigger market share in the eBook business.  Which is also bad, because…

3.  This will hurt authors and publishers.  As I keep saying, you can substitute any company you like for “Amazon” here.  Any company that gets too big starts to control the market.  A year ago, I said Amazon is the Wal*Mart of booksellers, and they’ve done little to convince me otherwise.  This move profits only Amazon, not anyone involved in the creation of the book.  Why do I say this?  Because…

4.  This will drive down eBook prices more.  Unlike Half-Priced Books or any used bookstore, this is a straight-up commodity trade.  There’s no question about quality, no question about the condition of the eBook, no change in shipping methods.  I just listed some of my extra copies of books on sale with Amazon.  I had to price them below the retail price in order to sell them.  I’m sure the next person along will do the same thing.  Not only is it a race to the bottom, but it now involves direct competition with the publishers and authors for the exact same product.  Authors and publishers will have to race to the bottom as well.  Which means…

5.  The produce model suddenly becomes relevant again.   (If you don’t know what the produce model is, go read this blog post from Dean Wesley Smith.)  This is bad, bad, bad, bad.  Because the longer your book is on sale, the more people there will be directly competing with the author for sales. And if you sell a gazillion copies in the first week, you can bet there will be a gazillion identical used copies a month or so later.  Which is how…

6.  Amazon can play both sides against each other3 .  I wondered how long that 70% option for authors would stay in place. Given that Barnes & Noble has (almost certainly, dammit) started circling the drain, I’m guessing that option will disappear shortly after B&N is gone.  But in the meantime, they can continue to say they’re pro-author by keeping the 70% option, and KDP Select… while raking in money on the back end from “used” digital sales.  And Amazon can say they’re on the side of the reader by pointing out how they can sell back their used books.

The False Frame

Mind you, these “sides” that Amazon has actively tried to cultivate are artificial distinctions Amazon created.  And that’s the most powerful tool they have.  Amazon has set up this frame of a reader’s frugality against the greed of those overpricing publishers… while enlisting authors to participate in this frame by dangling the 70% option in front of them. 

I have to admire the genius of it.  DRM to keep people locked to their store.  Used eBook sales to further deepen their market share.  A “soft” dictation of prices.  Pitting authors against publishers – which was probably necessary, but Amazon totally used that for all it’s worth.  Training readers to think of eBooks as overpriced – and therefore, totally willing to resell those suckers.

How Amazon Can Save This Program

The one thing that nobody (yet) knows is whether or not Amazon is going to cut authors/publishers in on these used eBook deals.  If they do, then we’re (merely) back to the same old monosopy/monopoly position we were a few days ago, just accelerated a bit.

How Authors and Publishers Can Futureproof Themselves

This one is simple to describe, but hard to do.  We break the frame.   It’s the same one as with fighting piracy.  We cultivate relationships with fans.  Depending on what Amazon does, we point out that it can take money away from your favorite authors.  We make it clear that you have to support the things you love in order to have them continue.

That last may be the most important one.  This year, Alliteration Ink will be running two crowdfunding campaigns for some really worthy, awesome projects.  I’m doing it specifically because I want to be able to guarantee a particular payment to the authors involved in those projects.  Perhaps crowdfunding will be the way we get that initial support – some very smart and very keen people (Matt Forbeck being a great example) have been using this model.  What Amazon does after the fact simply doesn’t matter as much.

In the meantime:

Authors – Reach out to your readers.  Let them know you’re a real person, and you need and appreciate their support.

Readers – support the authors you love.  Buy their books whenever you can, and retail whenever you can.

1 I’m not a lawyer. Further, US law is notorious for having unintended externalities and perverse incentives. This is my best layman’s guess as to some of the outcomes. I think the solution is vital, though.
2 I’m using authors and publishers kind of interchangeably here… because I’m talking about anyone involved in the creation of the eBook and who earns money from its sale to the public.
3 NOTE:  I am not saying Amazon is evil here.  They’re a company out to make money.  I am saying that Amazon’s interests and motivations are not the same as those of authors and publishers.

4 thoughts on “Six Probable Outcomes From Amazon’s Used Digital Sales Patent

  1. – Cutting authors in on the share…

    Perhaps this could be a variant off of the "borrow" process Amazon currently employs. Every time a book is borrowed the author gets a "share" of a pool of money.

    That said, this development is concerning.

    Does this drive authors/publishers back to print to some degree?

  2. Re: "pool" of money – I hope so. It's probably the most likely, as it'll keep some of the heat off of them for longer.

    I don't think it's going to drive people back to print, though. The problems around print aren't going to go away… and from the reader experience, this is a bonus, not a detriment.

    My main concern is further down the line, as Amazon (or any company) gets more and more of a market share.

  3. Correct me if I'm misreading, but doesn't that wikipedia page say the North American courts have ruled the First Sale Doctrine doesn't apply to digital copies? Providing the European laws don't cross the pond, I would take that to mean Amazon has to compensate authors and publishers for second-hand sales if they go through with this.

  4. Sofie: My understanding (again, NOT a lawyer!) is that the matter is still highly contested in the USA, since there are still cases in the court system that have yet to set a clear precedent (e.g. ReDigi). For that matter, I'm sure there will be litigation around whether ReDigi's technology is sufficiently different from what Amazon patented, further confusing the issue.

    You're probably right that Amazon will have to share some of the profits with authors. Still, that doesn't make me feel too much better. It wouldn't be difficult to provide a "choice" like they have with allowing your eBook to be lent. (If you don't want to lend your book, you can't get the 70% royalty rate.) It's that kind of power that I find problematic for any company to wield, and exactly why I compare Amazon to Wal*Mart.

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