Do You Own Your Ereader Or Ebook? Nope, And Possibly Nothing Else Either

Do we actually own any of the things we have bought? for Americans this question has now become very relevant, as their Supreme Court decides which way to decide on a recent almost unnoticed legal case over copyright.

Rich Adin (owner of the splendidly diverse blog An American Editor) has picked up on this case and seen a very large Adder, almost a Black Mamba hidden in the grass with it.

As he points out, if the Supreme Court decides in favour of the publishers bringing the case, then effectively Americans will no longer be able to sell on anything they “own” if any one component in that object has any sort of copyright attached to it.  This covers almost everything in our daily lives.. be it food, electronic devices, aeroplanes, boats, cars, books, music, TV programs and the TVs themselves, and so on..   Probably even second hand cloths will cease to be saleable, as I am sure that the zips and other fittings on our cloths have some form of copyright.. Even cloths pegs, damn it have copyright when you come to think of it.

Obviously for ebook and ereader owners this has implications as well.   We are all more or less aware that we do not actually own any of our paid for ebooks, or at least any with DRM protection of any sort, but we did think that we owned our ereaders, and could lend them or sell them at will.      But obviously if this case goes the wrong way, that will mean the end of selling our older ereaders on eBay – Well not a problem for me, as I do not live in the USA, but for all you Americans… Not a good look out.

So this on the face of it, simple legal wrangle has enormous economic repercussions for the USA should the Judges decide in favour of the Publishers in the case.   America beware!

Anyhow, as always, Rich analyses this whole sorry mess in a clear and concise fashion, so I am now going to repost his excellent discourse on this alarming bit of idiocy.

So read on – The word is with Rich.

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Why is the Book Market Different from the Art Market?

The United States Supreme Court recently heard oral argument in Wiley vs. Kirtsaeng, a copyright case that deals with first resale principles. The gist of the case is this: Kirtsaeng bought textbooks in developing countries where the books sell for less than in the United States and brought them to the United States for resale. (Sounds like the pharmaceutical scene here in the United States: The same drug sells for multiple times more in the United States than in any other country in the world so U.S. citizens get the privilege of subsidizing pharmaceutical sales to other countries. The same is often true in the textbook industry.)

Wiley sued Kirtsaeng for copyright infringement and won; Kirtsaeng has appealed. Kirtsaeng’s defense was primarily the first-sale doctrine, which allows owners to resell, lend out, or give away copyrighted goods without interference. This doctrine is a prime reason why every ebook comes with terms of sale that state that what you are “buying” is a limited license, unlike with a pbook.

Here’s the problem as I see it: If Wiley wins in the Supreme Court, it will be the death knell of all markets for all goods except the primary market, which is the original transfer from manufacturer/copyright owner to licensee. In other words, we won’t own anything, we will simply be licensees subject to the whims of copyright owners. If we don’t own it, how will we dispose of it?

It has always been assumed that the secondary market for artwork is legitimate. No one has tried to put an end to Sotheby’s auctioning artwork that is still under copyright, which, thanks to Mickey Mouse, seems to be never-ending. It is this secondary market that is the value market. It is the market that lifts art prices (value) across the entire spectrum, in both the primary and secondary markets.

Yet this case could spell the end of such secondary markets except for goods that are outside copyright, which means not in our lifetime for currently produced artwork.

More importantly for artists, publishers, and authors alike, all art — regardless of form — that is still under copyright will plummet in value if capitalism works correctly. Why would anyone pay a handsome price for art that they cannot resell 10 years from now. Copyrighted works will have limited market value because there will be real market.

Isn’t this the fight we are experiencing with ebooks? Publishers cry about how piracy and discounting devalues ebooks, but it is really neither that devalues ebooks; instead it is the licensing scheme that intentionally prevents a secondary market that causes the devaluation.

Of course, the counter to that argument is that ebooks are the fastest growing segment of the book market; yet, it remains a small percentage of overall book sales. It may be the fastest growing but it is not yet the majority of sales.

And there is something deceptive about the “fastest growing” statement. What is not disclosed and what I would like to know is how do sales stack up once you eliminate all ebooks whose sales price is less than, say, $5.99, which is the price below which you rarely see the big publishers price their ebooks, and once you eliminate the ultra bestsellers that are trading on the current value of the author’s brand. In other words, I want to know how ebook sales of midlevel books being sold at $7.99 to $14.99 or higher compare to the sales of their pbook versions. I know I’ll never be given that information, but that is really the information we need to determine how “valuable” consumers consider licensed ebooks.

(It probably would also be worthwhile to eliminate from the equation DRM-free ebooks and ebooks that do not have a pbook version except via print on demand. Both skew the numbers. DRM-free ebooks, although technically licensed, are really viewed by consumers [and probably by many authors] as owned in the pbook sense of owned. eBooks that do not have a trade-style pbook version should be excluded because there is not a comparable option against which to test value.)

I suspect that the book industry’s rejoinder to the art market comparison is that unlike a Monet or Edlund painting, which is a unique creation not massed produced, books are not unique and so the secondary market plays no role in setting value. But that, I think, misconstrues what is the secondary market. The secondary market for books includes the paperback version, the remainder, and the used book markets. Each works, in conjunction with the number printed, to limit the primary market for books, which is the hardcover market. It is hard to charge $100 for the new Stephen King novel when a consumer knows that eventually the book will be available as a mass market paperback for a lot less, as a remainder for less than the paperback price, and in a used bookshop for the remainder price or less.

But if you eliminate some of the secondary market in an attempt to shore up value, I think you will fail with books because they lack uniqueness, the one thing that truly sets the art market apart from the book market. It is hard to claim a high value for a book that is available in the millions (it is similar to lithographs of a Renoir in the art market: the lithograph is significantly less valuable than the original painting because it is a replica, not an original, and because there are multiple copies). In the absence of a secondary market for books, consumers will see even less value in the books.

In the case before the Supreme Court, the market in question is the student market, which is a captive market for publishers. It is a market that traditionally has sustained high pricing but has done so because of a confluence of multiple unique factors, such as a requirement to use a particular book in a course. It isn’t a free market. But any decision the Supreme Court makes is likely to affect the whole book market, not just the student book market. Even though Wiley and its cohorts pooh-pooh the effects of a favorable decision on markets outside the student textbook market, I think it is being done with naiveté.

The end of the secondary market in all goods would mean a devaluing of all goods. Either the first sale doctrine is upheld or invalidated; it would be difficult, if not impossible, to fashion a rule just for the student textbook market. As one Justice wondered, how would we dispose of an automobile we wanted to replace because automobiles have numerous items that are copyrighted. We couldn’t sell that auto in the absence of permission from all copyright holders, a difficult task in the absence of the first sale doctrine.

Wiley and friends may regret this action should the first sale doctrine be abrogated.

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So, thus Rich Adin on this topic.

As you can see, from what started out as a simple battle between two companies has grown like topsie into a major economic and philosophical crisis in fact.  One can only hope that the Supreme Court Judges have also seen the hidden risks in this case and decide to throw the appeal out of court, and fast too!

Link to An American Editor: http://americaneditor.wordpress.com

Share with us:

Does anything that Rich (or I) have written above seem sensible or do you disagree with our reading of the implications of this upcoming judicial decision?  Do let us know your thoughts on this here please.

2 thoughts on “Do You Own Your Ereader Or Ebook? Nope, And Possibly Nothing Else Either

  1. Garry Martin

    I am sure we all agree with the concept, that since I paid for it and I should be able to resell or give it away.
    There are two issues with eBooks. (a) if I am in fact licensing the book, I am effectively renting it. Therefore the price should be a rental price, not a purchase price. (b) If I could sell my eBook then we have to be sure that the original copy I purchased is not still on my eReader, PC, Cloud library etc. This would mean that I sold my eBook and still retained a copy, thus violating the copyright law.

    Unfortunately unless the Publishers reduce their eBook prices to that of a rental model or we have DRM technology that is infallible we are at a stalemate.

    Here is my take on the situation. Most Publishers agree on the amount of times a physical book is recycled, borrowed, lent out or sold via a second hand bookstore. There the eBook should be priced accordingly. If the average physical book is recycled 5 times then make the eBook 20% of the physical book price. After all the Author/Publisher does not receive any revenue when the physical book is resold.This would increase eBook sales, since no one would bother to sell an eBook that they only paid $1.50 for in the first place.
    If the Publishers don’t want to go that route, then tie the eBook to the individual via DRM, but allow the customer to transfer ownership to a new owner with a new DRM wrapper that automatically disables the original (not hard to do) and far more effective than the BS they use today which can be easily removed.

    Reply
    1. Tony Post author

      I agree with your last suggestion, that sounds a sensible way to go as if it works, it would seem to protect all those who need protection, but also allow us the benefits of full ownership of the ebooks we have paid full price for. Thanks for the input.

      Reply

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