There are continuing signs that the e-book market is cooling. Sales growth remains strong, but the rate of expansion, which fell sharply over the last year, still seems to be heading down. But whether that’s a blip or a trend, e-books are already a substantial segment of the overall book market, and there’s little reason to believe that they won’t be an even bigger segment in the future.
Which means that the question of the used e-book — what it is, what can be done with it, who controls what can be done with it — is not going to go away. As was widely reported, Amazon was recently granted a very interesting patent on a method that allows e-books (and other “digital objects”) to be resold or given away through a secondary market. The method essentially allows the rights to the file (ie, the ability to open it) to be traded a certain number of times. When the maximum number of transfers is reached, the rights remain with the last “owner” in perpetuity. No further trades are possible.
Marcus Wohlsen provides a lucid explanation of the patent. He points out a crucial difference between a used e-book and a used print book: the former is a perfect copy (in theory), whereas the latter is a degraded copy. Just as a used car is a different product from a new car, a used physical book is different product from a new physical book. They’re not perfect substitutes. A used e-book, on the other hand, is the same product as a new e-book. They are perfect substitutes.
“There are no dog-eared pages or scratches or nicks or cuts or highlighter marks or whatever,” says Bill Rosenblatt, a consultant and expert witness in digital content patent cases. “It’s the same exact product.” In other words, a customer given the choice between a “new” e-book and a less expensive “used” e-book will buy the used copy every time. The extra expense of “new” won’t get you anything better.
Not only that, but since e-books don’t suffer decay, as physical books do, they can essentially be resold, as perfect substitutes, an infinite number of times. For those reasons, people who make their living in the book trade find the very idea of a used e-book awfully scary, which is why they’ve worked to prevent that idea from becoming a reality. Books aren’t songs, but, still, the specter of perfect digital copies of books being traded endlessly over the Net is more than a little discomfiting for those who deal in words.
So why would Amazon patent a method for permitting used e-book sales? One theory is that it’s a defensive patent, intended simply to make it more difficult for others to come up with a viable method for selling used e-books. That seems far-fetched to me. It’s not how Amazon operates. Amazon’s all about the offense. A more plausible explanation is that Amazon wants to restrict the number of times an e-book can be copied — to prevent infinite copying and hence protect new-book sales. By establishing such restrictions on copying, you also, to a small degree, add an imperfection to the used copies: every time a copy is transferred, the e-book loses a little of its value because the number of times it can be transferred in the future is reduced by one.
More important to Amazon, though, is the prospect of being able to set up and control a marketplace for used e-book sales, just as it operates a lucrative marketplace for sales of used print books. Such a marketplace is particularly attractive to Amazon because it cuts publishers out of the picture, or at least provides Amazon with another source of leverage over publishers. Amazon’s long-term goal is to influence the power structure of markets, giving itself dominance. The used e-book could make a good tactical weapon in this struggle. At the very least, it’s a weapon you’d prefer to control rather than allowing control to fall into the hands of another player. Hence the patent.
But there’s another angle here. The fact that a used e-book is a (theoretical) perfect copy of a new e-book is a bad thing for those who produce and sell books. But software has its advantages. As soon as a physical book was sold, the author, publisher, and bookseller lost all control over it—indeed, all knowledge of it. It became the property of the buyer. That, for better or worse, is not at all the case with an e-book. An e-book remains tethered, electronically, to the seller. Amazon knows, for instance, what you do with a Kindle book. It knows when you read it (or don’t read it), it knows when you lend it, and it will know when you sell it—and it will also know when the new owner reads or lends or sells it, and on and on and on. Indeed, that kind of post-sale tracking and control is what made the Amazon patent possible in the first place. The patent would make no sense for print books.
This is where things get interesting. If, for instance, Amazon made it possible to resell (or even give away) the e-books it sells, it could also, via restrictions coded into the file, control the way the resale takes place and even the terms of the sale. So if you wanted to sell a Kindle edition, you might be required to sell it through the Amazon store and you might be required to pay a set fee or a set percentage to complete the transfer. In order to set up such a system, Amazon would need the cooperation of the rights holders (publishers and authors), but now it has a carrot to offer them: a cut of the transfer fee. In this way, the downside of allowing a customer to trade a perfect copy of an e-book is offset, at least to a degree, by the ability to participate in those trades, in perpetuity. So maybe the used e-book is, for the book business, not quite as ugly as it seems.
One thing that all of this makes clearer than ever is this: being able to exert control over the ultimate shape and workings of the e-book market — rules, rights, copy protocols, percentages, etc. — will be critical over the long run. This is a power game — a game of tomes. I’ve argued in the past that publishers should give away a downloadable electronic copy with every copy of a physical book that’s purchased. The e-book should be a complement to the print book. That would not only make a print book more valuable and hence more likely to be purchased. It would also give publishers more control over the future of the e-book market. By setting up their own mechanism for downloads, they’d also gain more control over the rights and restrictions built into e-books, including the ability to make money directly from future transfers. They would not cede to Amazon another important set of tactical weapons. In the short run, though, making an e-book a free add-on to a print book would almost certainly mean sacrificing some e-book sales. And that’s not something that’s easy to swallow.
The big danger for publishers is that their view does not seem to extend out as far as Amazon’s does. In a long war, that could well be a fatal disadvantage.
Photo by How I See Life.