Sunday, August 10, 2014

The Fight Over The Right To Establish E-Book Prices

Few writers are unaware that there is a debate raging about the price of e-books. Some would say that a retailer may sell any item (that it has negotiated the right to sell) for any price it pleases...

... as long as it pays the copyright holder (or copyright owner) the price it agreed to pay the copyright holder (or copyright owner) for the privilege of acting as middleman.

The crux of Amazon's rant about fighting for lower, "more affordale" e-book prices cannot be about the price it charges to readers. It must be about the price it PAYS to copyright owners and copyright holders.

Also (and I will get to this later), Hachette ought to be giving Amazon the same price per ebook that it gives to a lending library, because when a copyright owner "sells" one ebook to Amazon, Amazon then assumes the right to lend additional copies.

Under copyright law, Hachette and any other copyright holder has an absolute right to set whatever price makes sense to Hachette for any given work it holds.

It is for Hachette to calculate the cost of acquiring, editing, proofing, publishing, distributing, and marketing any title in a bundle of formats. Hachette has no duty to sell at a loss or to subsidize another publisher (Amazon) or manufacturer of devices (Amazon) or retailer (Amazon) or for-profit subscription service (Amazon) or marketplace for used products (Amazon).

Nor does Hachette or any other copyright holder or copyright owner  have to give away any rights granted under the law.

BITLAW on the Distribution part of copyright protections for copyright holders. (Mostly with regard to physical products, rather than ebooks. As noted, First Sale Doctrine does not apply to digital content.... which is what ebooks are.)

The wording about "rental", "lease" and "lending" is of interest, given KU and Lending Enabled. Copyright owner have the exclusive rights to agree or not to agree to renting, leasing and lending and subscription models.
The distribution right grants to the copyright holder the exclusive right to make a work available to the public by sale, rental, lease, or lending. This right allows the copyright holder to prevent the distribution of unauthorized copies of a work. In addition, the right allows the copyright holder to control the first distribution of a particular authorized copy. However, the distribution right is limited by the "first sale doctrine", which states that after the first sale or distribution of a copy, the copyright holder can no longer control what happens to that copy. Thus, after a book has been purchased at a book store (the first sale of a copy), the copyright holder has no say over how that copy is further distributed. Thus, the book could be rented or resold without the permission of the copyright holder.

Congress has enacted several limitations to the first sale doctrine, including a prohibition on the rental of software and phonorecords.

When Amazon talks about the price of ebooks, commentators should not overlook the fact that for many ebooks, when Amazon facilitates a "sale" (really a license to read), it often also acquires the right to make multiple additional copies available for LENDING by the reader who paid Amazon, also for backup, also for account sharing as noted in the Engelin revelations


"it was revealed that up to six Kindles could share one account. The Kindles did not need to be in the same household or owned by the same person. Thus, according to Amazon’s interpretation of the Kindle terms of service, up to six Kindles can share one account and the digital copies attached to that one account."
Also "The problem comes with the number of devices a book can be on at one time. Most books you can put on 6 devices at a time, if you have more than 6 people in the club with Kindles then you will have a problem."

Also this

My point is, when Hachette negotiates a deal with Amazon, it's more like licensing an ebook to a lending library than selling one product at a discount or wholesale price for the retailer to sell on once.

Nowhere in Amazon's rant is this acknowledged. Amazon ought in my opinion to be paying Hachette at least $14.99 for the right to distribute six or more copies for every one "sold" to a Kindle reader.
Possibly the existence of lending and account sharing may also throw off the rationale for pricing in Amazon's "Dear KDP author" letter.

CORNELL is also worth quoting.
Subject to sections 107 through 122, the owner of copyright under this title has the exclusive rights to do and to authorize any of the following:
(1) to reproduce the copyrighted work in copies or phonorecords;
(2) to prepare derivative works based upon the copyrighted work;
(3) to distribute copies or phonorecords of the copyrighted work to the public by sale or other transfer of ownership, or by rental, lease, or lending;
(4) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and motion pictures and other audiovisual works, to perform the copyrighted work publicly;
(5) in the case of literary, musical, dramatic, and choreographic works, pantomimes, and pictorial, graphic, or sculptural works, including the individual images of a motion picture or other audiovisual work, to display the copyrighted work publicly; and
(6) in the case of sound recordings, to perform the copyrighted work publicly by means of a digital audio transmission.
Here's an interesting side note regarding copyright infringement;
(e) Involuntary Transfer. — When an individual author's ownership of a copyright, or of any of the exclusive rights under a copyright, has not previously been transferred voluntarily by that individual author, no action by any governmental body or other official or organization purporting to seize, expropriate, transfer, or exercise rights of ownership with respect to the copyright, or any of the exclusive rights under a copyright, shall be given effect under this title, except as provided under title 11.2

Here we get to the matter of content (ebooks)

§ 202 . Ownership of copyright as distinct from ownership of material object

Ownership of a copyright, or of any of the exclusive rights under a copyright, is distinct from ownership of any material object in which the work is embodied. Transfer of ownership of any material object, including the copy or phonorecord in which the work is first fixed, does not of itself convey any rights in the copyrighted work embodied in the object; nor, in the absence of an agreement, does transfer of ownership of a copyright or of any exclusive rights under a copyright convey property rights in any material object.

Here's the skinny from the Government, I think from Wikipedia.
The Copyright Clause of the United States Constitution (1787) authorized copyright legislation: "To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries." That is, by guaranteeing them a period of time in which they alone could profit from their works, they would be enabled and encouraged to invest the time required to create them, and this would be good for society as a whole. A right to profit from the work has been the philosophical underpinning for much legislation extending the duration of copyright, to the life of the creator and beyond, to their heirs.
The original length of copyright in the United States was 14 years, and it had to be explicitly applied for. If the author wished, they could apply for a second 14‑year monopoly grant, but after that the work entered the public domain, so it could be used and built upon by others.

Exclusive rights for copyright holders

  • to produce copies or reproductions of the work and to sell those copies (including, typically, electronic copies)
  • to import or export the work
  • to create derivative works (works that adapt the original work)
  • to perform or display the work publicly
  • to sell or cede these rights to others
  • to transmit or display by radio or video.[28]
The phrase "exclusive right" means that only the copyright holder is free to exercise those rights, and others are prohibited from using the work without the holder's permission. Copyright is sometimes called a "negative right", as it serves to prohibit certain people (e.g., readers, viewers, or listeners, and primarily publishers and would be publishers) from doing something they would otherwise be able to do, rather than permitting people (e.g., authors) to do something they would otherwise be unable to do. In this way it is similar to the unregistered design right in English law and European law. The rights of the copyright holder also permit him/her to not use or exploit their copyright, for some or all of the term. There is, however, a critique which rejects this assertion as being based on a philosophical interpretation of copyright law that is not universally shared. There is also debate on whether copyright should be considered a property right or a moral right.[29]

My apologies that the above was somewhat repetitive, but one has to quote multiple sources.

Now, an interesting comment revealed the sense of entitlement that readers who own Kindles feel, and perhaps this is because Amazon sold them Kindles based on a promise of cheap reading?

What  George Orwell really said

"Customers have a lot invested in devices and internet connections..."   quoth one correspondent to explain why publishers and authors should accept less for ebooks.

Is it Hachette's fault (or the responsibility of any other copyright holder or copyrigh owner) that Amazon might have made a promise like that in order to market its own proprietary devices? Is it Hachette's duty to make good on a promise Amazon may have made?

Rowena Cherry   (aliendjinnromances)
PS. Most of the Amazon letter (there was no copyright notice on it.)

Dear KDP Author,

Just ahead of World War II, there was a radical invention that shook the 
foundations of book publishing. It was the paperback book. This was a time when 
movie tickets cost 10 or 20 cents, and books cost $2.50. The new paperback cost 
25 cents – it was ten times cheaper. Readers loved the paperback and millions of 
copies were sold in just the first year.

With it being so inexpensive and with so many more people able to afford to buy 
and read books, you would think the literary establishment of the day would have 
celebrated the invention of the paperback, yes? Nope. Instead, they dug in and 
circled the wagons. They believed low cost paperbacks would destroy literary 
culture and harm the industry (not to mention their own bank accounts). Many 
bookstores refused to stock them, and the early paperback publishers had to use 
unconventional methods of distribution – places like newsstands and drugstores. 
The famous author George Orwell came out publicly and said about the new 
paperback format, if “publishers had any sense, they would combine against them 
and suppress them.” Yes, George Orwell was suggesting collusion. 

Well… history doesn’t repeat itself, but it does rhyme.

Fast forward to today, and it’s the e-book’s turn to be opposed by the literary 
establishment. Amazon and Hachette – a big US publisher and part of a $10 
billion media conglomerate – are in the middle of a business dispute about 
e-books. We want lower e-book prices. Hachette does not. Many e-books are being 
released at $14.99 and even $19.99. That is unjustifiably high for an e-book. 
With an e-book, there’s no printing, no over-printing, no need to forecast, no 
returns, no lost sales due to out of stock, no warehousing costs, no 
transportation costs, and there is no secondary market – e-books cannot be 
resold as used books. E-books can and should be less expensive.

Perhaps channeling Orwell’s decades old suggestion, Hachette has already been 
caught illegally colluding with its competitors to raise e-book prices. So far 
those parties have paid $166 million in penalties and restitution. Colluding 
with its competitors to raise prices wasn’t only illegal, it was also highly 
disrespectful to Hachette’s readers.

The fact is many established incumbents in the industry have taken the position 
that lower e-book prices will “devalue books” and hurt “Arts and Letters.” 
They’re wrong. Just as paperbacks did not destroy book culture despite being ten 
times cheaper, neither will e-books. On the contrary, paperbacks ended up 
rejuvenating the book industry and making it stronger. The same will happen with 

Many inside the echo-chamber of the industry often draw the box too small. They 
think books only compete against books. But in reality, books compete against 
mobile games, television, movies, Facebook, blogs, free news sites and more. If 
we want a healthy reading culture, we have to work hard to be sure books 
actually are competitive against these other media types, and a big part of that 
is working hard to make books less expensive.

Moreover, e-books are highly price elastic. This means that when the price goes 
down, customers buy much more. We've quantified the price elasticity of e-books 
from repeated measurements across many titles. For every copy an e-book would 
sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, 
if customers would buy 100,000 copies of a particular e-book at $14.99, then 
customers would buy 174,000 copies of that same e-book at $9.99. Total revenue 
at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000. The 
important thing to note here is that the lower price is good for all parties 
involved: the customer is paying 33% less and the author is getting a royalty 
check 16% larger and being read by an audience that’s 74% larger. The pie is 
simply bigger.

But when a thing has been done a certain way for a long time, resisting change 
can be a reflexive instinct, and the powerful interests of the status quo are 
hard to move. It was never in George Orwell’s interest to suppress paperback 
books – he was wrong about that.

And despite what some would have you believe, authors are not united on this 
issue. When the Authors Guild recently wrote on this, they titled their post: 
“Amazon-Hachette Debate Yields Diverse Opinions Among Authors” (the comments to 
this post are worth a read).  A petition started by another group of authors and 
aimed at Hachette, titled “Stop Fighting Low Prices and Fair Wages,” garnered 
over 7,600 signatures.  And there are myriad articles and posts, by authors and 
readers alike, supporting us in our effort to keep prices low and build a 
healthy reading culture. Author David Gaughran’s recent interview is another 
piece worth reading.

We recognize that writers reasonably want to be left out of a dispute between 
large companies. Some have suggested that we “just talk.” We tried that. 
Hachette spent three months stonewalling and only grudgingly began to even 
acknowledge our concerns when we took action to reduce sales of their titles in 
our store. Since then Amazon has made three separate offers to Hachette to take 
authors out of the middle. We first suggested that we (Amazon and Hachette) 
jointly make author royalties whole during the term of the dispute. Then we 
suggested that authors receive 100% of all sales of their titles until this 
dispute is resolved. Then we suggested that we would return to normal business 
operations if Amazon and Hachette’s normal share of revenue went to a literacy 
charity. But Hachette, and their parent company Lagardere, have quickly and 
repeatedly dismissed these offers even though e-books represent 1% of their 
revenues and they could easily agree to do so. They believe they get leverage 
from keeping their authors in the middle.

We will never give up our fight for reasonable e-book prices. We know making 
books more affordable is good for book culture. We’d like your help. Please 
email Hachette and copy us.
Please consider including these points:

- We have noted your illegal collusion. Please stop working so hard to 
overcharge for ebooks. They can and should be less expensive.
- Lowering e-book prices will help – not hurt – the reading culture, just like 
paperbacks did.
- Stop using your authors as leverage and accept one of Amazon’s offers to take 
them out of the middle.
- Especially if you’re an author yourself: Remind them that authors are not 
united on this issue.

Thanks for your support.
The Amazon Books Team

P.S. You can also find this letter at

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