The Shatzkin Files


From where I sit, you can’t actually “sell” an ebook


This comes up often and I grit my teeth every time.

You can’t have a discussion of any length about ebook sales and pricing and DRM in any sized group of digital publishing observers before you hear that it is somehow wrong or unfair that a “purchaser” can’t do everything with an ebook they’ve bought that they do with a print book they’ve bought.

That is: various “controls”, sometimes deliberate (DRM) and sometimes circumstantial (tech doesn’t always work smoothly) make it hard or impossible to lend, give, or re-sell an ebook in the same way that you do a printed book. Have enough of these conversations and you will become educated about “first sale” rights, which are enshrined in law, which basically say that when you buy something you own it and can lend, give, or re-sell it.

So the way the complaint often goes is that those damn publishers are putting this damn DRM on my ebooks so I can’t do all the things with them I can do with my print books.

This has always struck me as highly questionable on its face. First sale rights make complete sense with something physical. They make no sense with something digital. When you lend, give, or re-sell a print book, you don’t have it anymore. When you lend, give, or re-sell a digital file, you still have it and you could lend, give, or re-sell it again and again without limit. Surely, that’s a distinction that justifies a departure from the physical world paradigm.

The complaint that first sale rights are being abused — often delivered as a complaint about publishers — proceeds from a fundamental misunderstanding that publishers themselves are entirely responsible for creating. You don’t actually “buy” an ebook the same way you buy a physical book. What you actually buy is a license to access a digital file, which — in the developing world of the cloud — you may or may not ultimately “possess” in any machine or device you own. (Of course, you can own the machine or device, which is physical. If you lend, give, or re-sell it, you won’t have it anymore.)

Publishers promulgated this misunderstanding. From the beginning, publishers analogized ebook distribution to print book distribution. They started out using about the same retail price and about the same discount structure to intermediaries as they did with print books. Some, at the very beginning, even tried to make the royalties the same (in the neighborhood of 5 to 15 percent of the retail price.) It seemed simple and it seemed logical. It has turned out to be neither.

There is a core reason why publishers promote this nomenclature of misunderstanding. Publishing contracts vary widely, but one thing is pretty common among all of them and has been for a very long time. They enumerate the splits between publishers and authors on rights sale revenue for a long list of possible transactions: first serial, second serial, book clubs, paperbacks, cheap hardcover editions, foreign editions in English, foreign editions in foreign languages, and others.

And then they almost all say — almost forever have said — that all rights transactions not enumerated will see revenue divided between authors and publishers 50-50. In fact, according to some agents, even in contracts where an ebook royalty is specified, the sale of electronic book rights are almost always specifically designated as a 50-50 split.

So if publishers called their ebook transactions what I believe they really are — rights licenses — they’d have what looks to me (but I’m not a lawyer) like a contractual obligation to pay authors half the revenue. Since that is double what many publishers, and all the big publishers, think is “fair” and commercially viable, there’s no motivation to move the conversation back in that direction, even if it would make the consumer interaction, and the restrictions policed by DRM, sensible.

Of course, smart agents have been thinking about this question too. They see very clearly that ebook sales are different from print book sales. First of all, ebook sales are — almost without exception — governed by a contract between the publisher and the consumer’s source. That’s not true (with very rare exceptions) for relationships between publishers and print retailers or wholesalers. But it is true for the relationship between publishers and book clubs. In fact, the book club paradigm has much more in common with the ebook marketplace than the publisher-bookseller relationship does. Book club deals are covered by licenses. Book clubs “print” their own editions, just as ebook resellers deliver the books in their own proprietary format or DRM.

It is worth emphasizing here that the publisher is (in today’s world) very seldom delivering the file directly to the end consumer. The fact that the publisher gives the intermediary a clean digital file, which the intermediary then manipulates and copies (or, we could say, “prints” in its own proprietary edition) to deliver to its customers underscores that there is activity betwixt publisher and consumer that falls under a license. And it is a license that is spelled out in a contractual relationship.

But agents have apparently chosen, at least for now, not to fight the royalty battle with publishers on these terms. For any agent to do so would be employing a sort-of “nuclear option”; they might be right and they might even win in court (eventually), but they’d effectively deal themselves out of the game from the moment they attempted to enforce this position.

This is symmetrical with the publishers’ restraint on the non-compete clause. From the publishers’ perspective, it is transparent and obvious that an ebook edition competes with a print book edition of the same book. All book contracts have non-compete language. But no publisher has yet used that particular argument to strongarm an author who wants to self-publish an ebook when their print contract didn’t contemplate ebooks. Both sides — despite the flare-up that occurred last year when Andrew  Wylie appeared to go toe-to-toe with publishers for a little while before he apparently backed down — want to continue doing business and prefer to negotiate solutions rather than attempt to impose them, even if they have a very strong position.

And agents are aware that they and their authors might also benefit from the misunderstanding about whether the ebook transaction is a sale or a license. If it is a license that doesn’t explicitly grant first sale privileges (and, by the way, it actually often is already: check your Kindle agreement with Amazon!), then consumers might insist on paying less for it than they do for print. At least, that has been a component of their restraint. Now that ebook prices, most dramatically for hardcovers, have been coming down in relation to the print prices (first through Amazon’s deep-discounting initiative, and then made permanent by publishers lowering their established prices when they switched to agency), consumers are getting a dollars-off deal as compared to print much (though not all) of the time.

Even though authors don’t sell their copyrights to publishers (they license their use) and publishers don’t sell inventory or even production masters to ebook resellers (they license them to replicate and distribute the publishers’ ebook files), the fiction that Kindle or Nook or Kobo or Google or iBookstore is selling the book to you or me will persist. If we had truth in labeling here, it would make the restrictions comprehensible. It would even make consumers understand why Amazon was within its rights (and upholding its responsibilities) when it chose to “cancel” the licenses it granted erroneously for an edition of “1984” a couple of years ago. We can all recall the high dudgeon among many observers when they infamously reached into people’s Kindles and erased a file they were given by somebody who did not have the rights to grant those licenses to it. But truth in labeling would also eliminate an ambiguity that works in favor of publishers’ margins today.

What would worry me if I were a publisher is that someday somebody who is not an agent trying to keep things sweet with publisher customers will file a lawsuit to make the case that ebook sales are licenses already covered in just about every publishing contract. That would suggest a potential liability equal to half the ebook revenue minus what has been paid so far on every ebook ever sold under any contract where that kind of rights split language still governs. Publishers have perhaps mitigated their exposure by putting new ebook agreements in place with many authors, but they still wouldn’t want a court poking its nose into this particular problem.

On the other hand, it would certainly make things a lot clearer and stop a lot of silly conversations if we all understood that ebook access is granted by license, not sale.

Looking forward to lots of hellos at Tools of Change this week. I’m sure, as always, it will be a jam-packed and stimulating couple of days.

  Back to blog

  • http://www.davidderrico.com/blog/ David Derrico

    While I may not agree with your position on every issue or every prediction you make about the future of publishing, your posts are always well-researched, well-written, and logical.

    I think a lot of readers understand (deep down) that e-book sales are currently actually licenses, or at least some hybrid license with certain traditional ownership rights included. But I don't think readers will accept full-on e-book licenses — not without certain guarantees that make those “licenses” act more like traditional sales. (Just look at the overblown hullabaloo about the 1984 removal.) For the same reasons, I don't think customers will accept reading “in the cloud.” I think readers are willing to give up owning a physical object (and are even willing to give up lending and resale rights, SO LONG AS the e-book prices are lower than physical), but I don't think they're willing to give up ownership of the digital file (at least not now or anytime soon). People want to build digital libraries and own those files forever — they don't want to re-buy them in some other format for some new e-reader/tablet/smartphone/laptop device 5 years from now, and they don't want to somehow lose access to them. So, call it a license, call it a sale, call it whatever you want, so long as I can download the file to my computer and back it up and keep reading it even if Amazon disappeared from the face of the Earth or wanted to stop all Kindle operations tomorrow.

    • http://www.davidderrico.com/blog/ David Derrico

      P.S.: You inspired a whole post from me on the issue here:

      http://www.davidderrico.com/ar…/

      • /blog Mike Shatzkin

        Interesting and covering a lot of the issues covered here. And it isn't

        unreasonable to ask for a set of rules to replace the First Sale doctrine.

        It isn't unreasonable, but also isn't likely.

        Mike

      • Debrakatz

        I so much appreciate this discussion! I posted last month but don’t see my comments. I am an author and feel absolutely swindled over this issue. I would never have agreed to give my ebook rights for my first book with.llewellyn publishing for the measly 10 percent I now recieve of what they make from amazon. My contract clearly states, “author shall be paid 50 percent for ebook sales lisenced to third parties. Why would an author, in 2004, think this meant any different then it sounded? My publisher only offers ebooks on amazon. They sign an agreement. How is this not a lisence! My publisher made 2,000 on this book in the last 6 months, I made 200! (And, they wrote off a year of sales from borders books due to bankruptcy – different issue, sorry, but I’m pissed!) My publisher won’t budge. I kept my ebook rights for my second and third books. So I’m doing only think I can, starting my own e publishing business and selling my first book without their authoization – after all , where does it say I can’t sell my own ebook, I can sell the print versions – they encourage this, so why not sell my own ebook? The bottom line, I am ready to be that author that goes to court! I’m beyond caring who likes or dislikes me any more. All they care is my books keep selling. But I need legal help! I’ll file a law suit tomorrow if someone helps!!!

        Debra Lynne Katz

      • /blog Mike Shatzkin

        We don’t do legal advice on this blog, but I would encourage you to check and see if you have a “non-compete” clause in your publishing contract. If you do, that might be the basis on which the publisher would complain (to put it mildly) about you doing an ebook edition of something they’re trying to peddle in print.

        One thing that your post makes clear is that the 25% offer from the major houses for ebooks is *not* the most penurious in the marketplace. I have long thought that smaller publishers might be taking even greater advantage of the new situation than the big guys who have to deal with agents. Of course, there are MANY small publishers, and the policies will be all over the lot.

        Mike

    • /blog Mike Shatzkin

      David, when you generalize about “people” will or won't accept, you just

      lose me. Some people will, some people won't. Some will “accept but hate it”

      and I'm not sure what column you'd put them in.

      These things aren't decided by “votes”, they're decided by commercial

      reality. When cloud delivery really matures, it could be that holders of

      valuable copyrights won't allow their content to be distributed any other

      way. That will really test those people who won't “accept” cloud delivery.

      We were told by many that consumers wouldn't “accept” ebooks priced at over

      $9.99 and, even today, we're told by various individual consumers that they

      won't buy anything over price X. I'm sure that's true. And I'm also sure

      that publishers are selling tons of ebooks at more than $9.99.

      I don't think the vast majority of people have any idea what's in the

      license agreements they click “I accept” to over and over again on the web.

      I certainly don't. (Do you always read those things before you click “I

      accept”? If you do, you are one very rare bird.) And, frankly, I don't think

      most people for most ebooks they buy really care about anything except that

      the damn thing work properly while they're reading it because they never

      return to it again.

      Thanks for the kind words about my posts in general and I'm sorry I could

      reciprocate by saying “right on!” Maybe next time.

      Mike

      • http://www.davidderrico.com/blog/ David Derrico

        Oh, I definitely agree that the vast majority of people don't read EULAs, including myself most of the time (and I'm a lawyer). But I think, so long as people don't have any reason to feel like they DON'T own their e-books (so long as they have no problems reading it whenever they want, as you point out), they won't question it too much. But when a publisher or retailer starts trying to infringe on the ownership rights that readers EXPECT (no matter what the EULA says), there will be lots of friction, and I think the 1984 case is a good example of that. Had Amazon said “we're going to keep doing this whenever we want” (instead of the emphatic opposite of that), I have no doubt they would have sold far fewer e-books than they have.

        Sure, I'm being a bit general by saying “readers won't accept,” and I understand people will vote with their wallets, and that it's never 0% / 100%, but some spectrum of opinions in between. But I still think it's fair to say that readers DIDN'T generally accept $14.99 prices (and most publishers moved away from that price point), some fair percentage of them did accept $12.99, and a large percentage votes with their wallets on inexpensive e-books (half the Amazon Top 100 is $5 or less):

        http://www.davidderrico.com/ch…/

        I do believe that publishers or retailers ENFORCING licensing arrangements that interfere with readers' expected ownership and ability to do certain things with their e-books will lead to a strong pushback leading to a reduction (or at least slowing of growth) in e-book sales and a reduction in the average price consumers are willing to pay. I could be wrong, but from my sense of readers' mindsets, that's what I think.

      • Luciana Sodre Costa

        Paradigms coexist, but there is always a dominant one that, appearing to be single prevents us to see any other way. Suddenly, something important changes in context and a minor paradigm shows off. I'm the kind of reader who also think that e-books are taking something from me for that I demand a lower price.

        However, I've read enough about e-books to realize that there are readers who love e-books due to what they have won at the exchange and are even willing to pay for it: e-books take no room, you can carry several at once, can choose the size of the letter, may decide to read a title at any time and can do it in less than 30 seconds, can read more comfortably without having to flip the pages…

        How many of us can read a book only for the pleasure of the journey? How many really need to keep the book after reading? Who is the reader of the next generation? What is the fair price for an e-book? (do not answer this last one till you have tried to publish and sell one)

      • /blog Mike Shatzkin

        Thanks for this. I agree that ebooks are superior to print books for the

        reasons you state and others (searchability). I think publishers and the

        “ebook industry” have done a poor job of selling the additional value.

        Mike

  • http://twitter.com/ChadRut Chad Rutkowski

    A lot of lawyers would tell you that the questions raised above have already been answered. FBT Productions v. Aftermath Records, which involved royalties owed to the recording artist Eminem, determined that music downloads were licenses, not sales, such that a 50% royalty was owed on such downloads. It was handed down in September of 2010.

    No court that I'm aware of has yet applied this decision directly to the publishing industry, but there's no reason to believe that it won't be. The reasoning was sound and broadly worded. First sale doctrine questions are still open, but publishers and authors would do well to become familiar with this case when assessing their rights.

    Like it or lump it, a lot of the legal precedent that will control interpetation of e-book rights has been or will be hashed out first by the recording industry. They've been dealing with digitization longer and there's more money there, so the decisions generally are coming out faster. So the good news is folks in the publishing world have some guidance, the bad news is the decisions that control publishing's fate aren't entirely analagous and will leave some holes.

    • /blog Mike Shatzkin

      Chad, thanks for the information. But I'd offer one correction.

      Although it is certainly true that the music business felt the pain of

      digital disruption earlier and harder than books, it is *not* a bigger

      business. A quick Wikipedia check tells me that recorded music is currently

      in the $12-13 billion range in the US, which is the neighborhood of trade

      publishing's volume but nowhere what we do in books when you add in all the

      other segments we've got.

      Music faced disruption sooner because the unit of sale didn't equal the unit

      of appreciation, not because it was bigger.

      Nonetheless, I appreciate having the added information that my conjecture

      about the truth of this has been confirmed by the courts in a music business

      case.

      Mike

      • http://twitter.com/ChadRut Chad Rutkowski

        No kidding, Mike, that was a big assumption on my part. Thanks for clarifying.

  • http://twitter.com/queridapatricia Patricia Arancibia

    Mike, this is far from settled. From the perspective of someone who deals with contracts and copyright laws globally, the license v purchase issue is not a simple one and it is not solved or close to be solved. Both aspects have merits, and it might be a bit early to declare a winner. If you look at contracts between publishers and retailers based on the rights granted to pubs by authors/agents, or between authors/agents and retailers, you can see that there are at least a few twists that are far from clear.

    No one wants to freak out consumers and consumers have from their perspective purchased their eBooks. Nowhere in any moment when a person is buying an eBook with any significant retailer (a list in which you insist to include iBooks and Google as if they were actually selling, but OK, let us fly with it) they get a message saying that they are licensing and not purchasing. No product page in any retailer says so either. There is no instance in the checkout where a message explains this to the consumer. And the reason is not that retailers are hiding something. It is that that some things are not as clear as you are implying.

    I cannot imagine a day when authors, publishers, and retailers come out to tell customers “hey, that was just a license, give the files back” and you get anything but fairly angry customers winning lawsuits everywhere.

    Happy TOC everybody! See you there,
    P

    • http://twitter.com/ChadRut Chad Rutkowski

      Thanks for this interesting perspective Patricia. It seems to me that the FBT court swept away the impact of contractual niceties and focused on the underlying relationships themselves. Stated simply, there's no sale under the Copyright Act unless title to something passes, either the object embodying the copyright or the copyright itself, and because no title passes in either a consumer's download or in the publisher's distribution agreement with the digital distributors, there's no sale. All that's being conveyed is a “permission to act.”

      I'd be interested in hearing a different perspective on it, because the folks I talk to don't see how there's any getting around the fundamental nature of the transaction. In fact, the court specifically said that it didn't matter that the term “license” was never used in a “technical sense.”

      • http://twitter.com/queridapatricia Patricia Arancibia

        Chad, I am not denying precedent or trying to minimize FBT Productions v. Aftermath Records, which is sound and strong. I am just bringing up another aspect. FBT was about royalties, and the conversation about them is already on and heated between pubs and authors/agents.

        I am saying that when it comes to consumers, the perspective fairly and legally changes. Consumers may have been losing rights at a dangerously fast speed in last couple of decades, but they do have a few left. And even if you change ownership into access, which is case in some clauses, access is forever.

        And since everybody is talking now about how easy it is selling ebooks everywhere and how territorial rights are obsolete (a great idea with little ground in reality for now and up until most of the big contracts are obsolete in a decade or so, when one talks this license v purchase thing, global copyright laws must be considered.

        For instance, under EU copyright law, eBooks are licenses because they are considered software. Because of this, EU publishers have lobbied both their national congresses and Brussels to change the definition of eBooks to that of another book format. That way instead of of paying the 19% tax applied to digital products and be subjected to discounts, they pay the 4-5% tax applied to books, and get the protection of fixed price. Similar stories are developing in Latam.

        Of course you could then argue that American consumers aren't owners whereas others are. The scene is already complex enough to keep piling up. You could also need several contracts for several territories due no longer to territorial rights but to territorial laws, as it is the case with many products.

        I am trying to say that FBT aside, the issue is far from settled because consumers get impacted by one or another definition.

        Thanks for the patience to read!
        Patricia

      • http://twitter.com/alfaqueque Jorge Portland

        Cuidado Patricia, que en la Unión Europas no hay uniformidad ni en tasas impositivas aplicadas a los libros, ni tampoco en lo referido al precio fijo del libro, que en unos países se da y en otros no.

      • /blog Mike Shatzkin

        I think the fact that *every* country in Europe has a different VAT rate for

        printed books than they do for ebooks underscores the point that it is

        pretty widely understood that the two are very different kinds of

        transactions.

        I am glad to hear that, at least from some perspectives, this could be

        “settled” law. I didn't expect it to be; many things related to the Internet

        and digital transition aren't yet. My argument proceeded from logic, not

        law. If the law is NOT settled, ALL the MORE reason to argue the logic of

        what it should be. In light of that, I think I put the correct title on this

        piece. And I'm glad I wrote it.

        Mike

      • http://twitter.com/queridapatricia Patricia Arancibia

        They are changing that, Spain and France have already for instance. The EU gov still has to though.

      • http://twitter.com/queridapatricia Patricia Arancibia

        Lo perfectamente, no va al caso enumerar cada legislación, pero si te hace sentir más importante saberlo, tengo el cuadro comparativo país x país en mi escritorio. Lo mío no son comentarios de como en teoría se mucho y que me admiren, son conversaciones de trabajo.

      • http://twitter.com/ChadRut Chad Rutkowski

        Excellent points, Patricia, thanks for taking the time to reply.

        I think you're exactly right that the consumer impact needs to be addressed. Now that we have some clarity as to what to call these things, I think it's incumbent on everyone in the industry, authors, pubs and retailers, to explain to the consumers what the legal reality is and license out accordingly. That is, let's all agree that ebook sales are indeed licenses and then address the ramifications of that.

        There's nothing to say that we can't recreate first sale type protections through licensing. If a consumer wants to “lend” her ebook to her mother in Manasquan, perhaps we could allow her to copy her digital file once every 6 months, with say a total limit of 4 copies. That way you're not completely destroying the market for the book, especially since everyone wants to read a hot book at the same time, but you're giving the ebook downloader a greater sense of ownership. You can even have different tiers of pricing for the “privilege” of making copies.

        If the industry knows how courts are going to handle downloads it can at least tailor its behavior accordingly, even if it doesn't really like the answer. Going forward it can set royalty tiers accordingly as well. But I think Michael's post hits at an important point– everyone has to know what to call these things before we can move forward.

        Your point on how this then impacts global distribution is an important one. All I can say is that copyright laws have diverged in the past which is something no one I can think of would want to return to. Luckily better mechanisms are in place to bring uniformity where needed. Is this a WIPO issue, I wonder? Is the industry as a whole interfacing with it? Can we bear to wait while it wends its way through committee?

      • http://twitter.com/queridapatricia Patricia Arancibia

        Absolutely agree, Chad, point by point. Thanks for a very good set of good ideas! And…it is WIPO issue to some extend, but I try not to even mention that, because then one has to deal with all the DRM-bad/Free all for all good craze, WIPO bad, and I am just too old for that!

    • /blog Mike Shatzkin

      Patricia,

      I'll stay away from the messaging to consumers for the moment and how to do

      it without freaking people out and whether we need to worry much about

      freaking people out. People freaked out when agency pricing was installed

      and the $9.99 bestseller became less ubiquitous, but ebook sales are up

      drastically and the number of ebook retailers is proliferating since then.

      The former may be more restrained than it would have been; the latter is

      certainly more robust.

      A colleague has sent me the wording from the Amazon license for their

      Android app:

      *Use of Digital Content. Upon your payment of the applicable fees (if any)

      set by Amazon, Amazon grants you the non-exclusive right to keep a

      permanent copy of the applicable Digital Content and to view, use, and

      display such Digital Content an unlimited number of times, on the Android

      device onto which you download the Application and on other Kindle

      applications and devices as authorized by Amazon, and solely for your

      personal, non-commercial use. Digital Content will be deemed licensed to

      you by Amazon under this Agreement unless otherwise expressly provided by

      Amazon.*

      I think things *are* as clear as I'm implying. Read that last sentence a

      couple of times. What it says is that the absence of further information at

      checkout has a different meaning than you inferred.

      Mike

      • http://twitter.com/queridapatricia Patricia Arancibia

        Yo are right, Amazon added that wording after the Orwell problem. And you are as well right that consumers get used to change.

        Still, the wording above sounds a bit strange for Agency content. And the $9.99 complains came from a very vocal but tiny minority. I never expected sales to suffer because the largest majority had not complained and most people did not even buy eBooks yet.

        Taking content away from consumers who paid for it and did not get an expiration date when they paid, is more delicate. Of course, you can compensate that buy for instance updating the content and other niceties.

        But costumers do matter and in that sense I see your article as a wake up call. As Chad wrote below, as an industry we may want to agree about how to handle this and properly communicate with our customers in a way that doesn´t end up sounding deceiving. There are many things that corporations can legally do and yet, consumers would be right to be infuriated.

        (And I have seen many contracts of very many kinds where all the legal terms points to sale, and seat in meetings with people of many companies where this was discussed and far from settled.)

        Be well,
        Patricia

      • /blog Mike Shatzkin

        I think you, Chad, and I are ultimately mostly in agreement. I agree that

        the article is a “wake up call” and I agree that the licenses can be crafted

        to preserve some semblance of what we think of as First Sale rights. But

        none of that has happened yet.

        Mike

  • MerchManiac

    Some random thoughts:

    1) I'm surprised no one has mentioned software, which you also don't own. When you “purchase” a copy of Microsoft Office 2007 or Adobe Photoshop CS5 you're also buying nothing more than a nonexclusive license to use it forever. (I'm not sure what those notorious software End User License Agreements — EULAs — have to say about reselling your software, but since so many software products these days come with a unique code that is verified online by the publisher, reselling them isn't something you've got an obvious right to do, either.)

    2) I think most people are as ignorant about owning software as they are about owning ebooks, but since software EULAs have been around a lot longer — and people are still ignorant of what they mean — it suggests that without many more high-profile flubs like the one Amazon experienced with 1984 the reading public will remain in the dark about what they're getting when they “buy” an ebook.

    3) On the other hand, I believe I've read that Apple built a back door into its iTunes app servers to allow the company to reach out and delete any app for any reason from a user's iPhone or iPod Touch. I also believe Apple has done so at least once, but at the moment I'm too lazy to research this issue.

    4) The upshot may turn out to be that this is a generational issue that will take care of itself as young people accustomed to downloadable apps, mobile web appliances, and the cloud reach my advanced age and buy fewer and fewer physical books.

    5) In the meantime, though, the reading public tends to be older, as are those who buy ereaders, and the reality of buying a license instead of a product is likely to be strange, unpleasant, and objectionable. Which suggests that publishers and resellers will continue to keep things legally opaque for as long as they can.

    6) To return to software for a moment, I can't help thinking that consumers' continuing ignorance of what they're buying — a nonexclusive license instead of a physical product — indicates that no software publisher is eager to disabuse its customers about the reality of the transaction … and therefore the industry works under a certain pressure not to engage in preemptive Amazon-deleting-1984-like measures. It's just bad for business, whether you publish software or books.

  • http://www.tobyneal.net/ Toby Neal

    This is a really thoughtful article on a convoluted subject that has me as a writer (and buyer of ebooks) confused. While I'm still confused, it's apparent everyone else is as well.

    • /blog Mike Shatzkin

      I believe the applicable aphorism here is “if you're not confused, then you

      really don't understand the situation.”

      Mike

  • Giggleton

    I suppose we can consider the legalities involved with distributing information for a bit longer, but does anyone really think that there won't come a time when all information will be able to accessed anywhere by anyone?

    Might as well start now.

    • /blog Mike Shatzkin

      It won't change things. Access to everything by anyone (adding any*where* and

      on any *device*) will indeed happen, but it won't all be free and it won't

      be without licenses.

      Mike

  • http://tahlianewland.com Tahlia

    That's a really good point. I still want to be able to share an ebook with my daughter without her having to borrow my ereader though. It's not like I can read something else while she's reading.

    • /blog Mike Shatzkin

      Tahlia, if you and your daughter share an account at Kindle, Nook, or Kobo,

      you'll be able to attach more than one device to the account and share books

      very easily. Actually better than print for sharing because you can share

      both read the same book simultaneously. (But in that case, you'll have to

      remember not to let it synch for you to the further place read in the book

      if your daughter's ahead of you!)

      Mike

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  • http://www.caxtonia.com Caxtonian

    I think that the situation is as much about the economics of publishing as it is about the legal distinctions outlined. The 50/50 of secondary rights of licencing in all forms presupposes the primary rights of print book sales. The impact of shifting from the idea of there being a primary form of income for book sales to a more broad range of incomes across all the forms will require a rethink of all rights based income.

    • /blog Mike Shatzkin

      I agree with you completely. And I think that's precisely the way the

      publishers see it. The legal aspects haven't caught up with the commercial

      realities. Unfortunately, the shortcut being taken is to call a license a

      sale, and that approach creates a different set of problems.

      Mike

      • http://www.caxtonia.com Caxtonian

        My only thought is that the sale/licence distinction doesn't sustain close scrutiny. The sale of a book is a transfer of rights as well as a transfer of a physical object, you are not allowed to do anything with that book (e.g. scan and resell it) and in some cases the rights of re-sale and lending only came around as publishers failed to stop them (the inside of old UK paperbacks often have long paragraph excluding just those rights that you ascribe to first sale).

      • /blog Mike Shatzkin

        Not a lawyer, but I believe the “first sale” rights are an American feature,

        not universal. Otherwise, what you say is right and what I'd say is that the

        first sale privileges extend only to the physical object. Perhaps I should

        have made the point that way.

        Mike

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  • Tonywlls

    The fiction of it all is inherent in the word 'ebook'. Psychologically, it reinforces our notion of what we purchase as being a book, albeit in digital form.
    Great article!

    • /blog Mike Shatzkin

      Might be the term is the beginning of the confusion, but I think the

      mistaken notion is fostered for other reasons.

      Mike

  • http://www.courtneymilan.com Courtney Milan

    I started to type out a response, but it ended up way too long. I posted it on my blog.

    I basically think you're wrong, everywhere.

    http://www.courtneymilan.com/r…/

    • /blog Mike Shatzkin

      I found your blog post as unpersuasive as you apparently found mine. It

      would have been helpful to your readers if you actually *linked* to my post,

      as this comment string is now linked to yours. I am sure the omission was

      unintentional.

      And, just to correct your apparent misunderstanding of what I said, I have

      no problem with people complaining about the terms of a license. Sure, why

      not? What I have a problem with is the notion that ebooks are obtained as

      “sales” not “licenses”, which I believe is illogical and, according to those

      better informed than I who have commented on the post above your comment,

      also contrary to the way the law sees it.

      Mike

      • http://www.courtneymilan.com Courtney Milan

        It is linked, and has been from the start. I'm sure your overlooking the link in the first sentence was unintentional.

        I would really love it if someone who actually keeps abreast of first sale rights and license versus ownership would comment on this thread, and talk about whether your position is viable in light of the Ninth Circuit's recent opinions in Vernor and Universal Music Group, and more generally in light of the Supreme Court's opinion in Quanta Computing v. LG Electronics.

        The law is just not as simple as you state, and as I said, based on actually going to people's sites and looking for the material, I doubt that all sales of e-books today are mere license transfers rather than purchases.

        Can you really tell me that when the Wild Rose Press doesn't offer an EULA during the purchase process, doesn't mention it in the downloaded ebook, and mentions no restrictions on use besides those on print copies, that that is a license and not a sale?

      • /blog Mike Shatzkin

        Courtney, sorry I missed the link.

        I am not arguing the law; I'm arguing the logic. To me, applying first sale

        rights and transferring “ownership” when a digital file are involved is

        illogical and nonsensical. Obviously, you see logic and sense where I do

        not.

        Perhaps not “all” ebook transfers are granted as licenses, but *all* ebook

        relationships between major publishers and their intermediaries are governed

        by contracts that including limitations that sure smell, look, and feel like

        a license.

        Mike

      • Laureano Stella

        The same principle used for software should be used with ebooks.
        You do not own the work, you own the right of access. 
        That right of access should be resellable. 

        First sale law does not only apply to physical things.Autodesk has tried to sue someone from selling his used copy of AutoCAD to someone. Stating that they “lease” you a “license” or in other words a “right to access” the software and not the software by itself.  http://arstechnica.com/tech-policy/news/2008/05/court-smacks-autodesk-affirms-right-to-sell-used-software.arsThe judge asked how much time did the lease last?Autodesk replied forever.The judge accorded that it was not a lease and a sale, therefore the “right to access the information” is also resellable. The license is resellable.

        Kindle does the same thing.

        You can lend a book:
        It temporarely removes your right of access and gives it to someone else some the same duration at which you are removed the right to read it. (that is logic)

        Why if you are able to lend it should you be restricted from reselling it?
        Legally, you should be able to give your right of access to someone else.

        Physical books in a sense act the same way, when you buy a book you have no rights on it content. You only have certain rights on the medium and that medium gives you the right of access on the work. But you have absolutely no rights on the actual work. You can copy the text, you can only photocopy it for personal use (or in some book a certain percentage) university textbooks copyright states that you can copy up to 20% of the book.

        I think you are partially right in some aspect, but the concept is not as clear-cut as you make it to be.

        1st you can really copy certain files and transfer them. Amazon did a pretty good job with the kindle and the access, why did they ommit the “give” feature? Pretty easy, to make more money. Certainly you can crack it. But you can also crack DVD’s and you can still resell them legally even if the medium is really not secure at all. (Another medium that is similar and could be compared to ebooks)

        P.S. I’m sorry if there were any grammatical/spelling mistakes English is my third language and I’m only human.

      • /blog Mike Shatzkin

        You did fine with communicating the thoughts.

        Precisely what rights the purchaser has to pass around the ebook would, I think, depend on the “license” (which nobody reads).

        Mike

  • Charles Levine

    This is a great blog post with an illuminating follow-up discussion about important e-book issues that have yet to get worked out. As a somewhat experienced publishing type, I suppose I should not get raised hackles each time Amazon prompts me to “buy” or “purchase” an e-book, or when a publisher sends me a royalty statement paying a 15% royalty on an e-book sold at full list price from its own Web site. But I do. And ultimately the book industry will have to move toward a much more open and fairer handling of both e-book authors and customers.

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  • Extra_ad

    I think that if publishers want to rent me the book instead of sell it to me, they need to charge me rental prices. But as long as they continue to charge higher-than-paper prices for decades-old paperbacks, they are going to fighting an uphill battle on DRM and file-sharing, imho. You can't have it both ways. Either it's a rental, I pay a rental price and give up certain privileges, or it's a sale and I pay the full price and I keep those privileges. But a rental at full retail price? Unacceptable. And that is why you are getting customer revolts on ebooks.

  • John Cordell Spence

    Publishing has in many ways become a quasi monopoly. Thirty or forty years ago there was more competition in the publishing industry, even though it was centered in New York. There have always been other smaller publishers, including university presses, scattered around the country, It may be that digital publishing results in more real competition. I am a small author/publisher, with two publications for sale on Scribd.com. I am willing to take a chance and sell my publications without DRM.

    • /blog Mike Shatzkin

      Best of luck to you with your venture and, despite the fact that I quite

      understand why big publishers and brand authors employ DRM, I think selling

      DRM-free is definitely right to try to get on the map.

      Mike

      • John Cordell Spence

        Thank you for your comment Mr. Shatzkin. I enjoy your column and look forward to reading it in the future.

  • http://blog.goethe.de/librarian/archives/379-What-youve-got-down-in-black-and-whiteyou-can-take-home-and-then-be-sure-of-it-but-what-about-e-books.html Brigitte Doellgast

    The licensing model becomes apparent, when you look at the contract with libraries. If a library cancels its contract with the provider, users’ access to content expires. Copyright law (at least in Germany) does not allow for copies to be archived, nor are publishers willing to grant this.

    Personally I would have doubts if I can access an e-book, that I pay for today after – let's say – 20 years. Paper books I bought 20 years ago – no problem with the 'access'.

    • /blog Mike Shatzkin

      I remember 40 years ago when the issue was “acid-free paper” to make sure

      that paper book remained accessible!

      Mike

    • Stevenhowardsmith

      I had a flood in my basement once, and my books were rendered unreadable.  

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  • http://firesidepark.blogspot.com Tony Benson

    Sorry, but you're wrong. You can lend or sell digital media. The problem is that ebook technology isn't good enough to make that possible without enabling piracy or abuse. That's a problem with technology that would be easy to solve if we put any real effort into it, but it just hasn't happened yet. DRM will annoy the whatsits out of everyone until this is solved, so ranting against people who don't like DRM is a losing game.

    Sorry if I come across as putting this rather strongly, but as a scientist and an engineer, and a disgruntled reader of ebooks it annoys me. I'm not supposed to be able to read a book that my wife bought. Nobody can tell me that's an acceptable limitation.

    The world of ebooks will catch up with the world of peoples' expcetations, but it seems we have to wait. It's an emerging technology, so this kind of discussion is inevitable.

    • /blog Mike Shatzkin

      Nothing at all wrong with an ebook license that says “you can share it with

      your wife.” Of course, it would take some form of DRM to manage that.

      By the way, you can share it with your wife now very easily. Amazon, B&N,

      and Kobo all allow multiple devices to be associated with any account.

      (Amazon allows five.) I share books with my wife all the time. We have one

      Kindle account; her Kindle is associated with it and so is my iPhone. No

      problem.

      And from the publisher's perspective, no unlimited casual sharing.

      Mike

  • Arelius

    I would argue DRM neither implies a license nor necessarily abuses “first rights” (of course depending on the type of DRM). That is if the DRM simply prevents a digital duplication, it would be the same as any DVD or other physical/electronic media that prevents the duplication, but not the re-sale (sharing). If the DRM prevents the re-sale or “sharing” then if someone “hacked” the DRM and resold the digital media (not duplicating, but selling the file) that would likely be considered legal. A publisher suing would have to prove “piracy” (that it was duplicated) or breaking some type of licensing agreement. It is likely they'd sue as piracy way before licensing, because of the profit ramifications you mentioned. However, even if ebooks had a EULA does not mean it is so, the user must agree [click some agreement] (see Microsoft Corp. v. DAK Indus., ) , the publisher “licensing” the material must also demonstrate an “an intent of the owner to regain possession” (see UMG Recordings vs Troy Augusto).

    With Amazon, it's likely they have some “clicked” agreement but that likely can only cover the material for which they have copyrighted (viewing software, etc..) not the ebook content themselves (which you would have to click on an agreement for each book purchased). Given all that, there's doesn't seem to be any legal (or fiscal) reason why a publisher can't add a DRM that prevents sharing, there simply no legal recourse for hacking the DRM to be able to share (Similar to the supreme court allowing iOS to be hacked). Same as CD's putting “not for resale” on the label, it's only preventative, not definitive. That's my opinion….

  • Steve

    At the end of the day, as a publisher and an author and a one time attorney (those days are long past) I want to say that I am very appreciative that this article was presented and opened up such a discussion but the issue – for me – is not license v sale, its getting authors and agents to understand who is looking to move ebook publishing forward and what can be done for the author when the right publisher – such as Dzanc Books http://www.dzancbooks.org – is in their corner and working with the author in ways other presses fail to consider. When that point is addressed, all else is moot.

    • /blog Mike Shatzkin

      I am generally reluctant to let people just plant commercials in my comment

      stream, but I'll let this one go.

      Mike

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