Writing, speaking, and translating the future

The rise of ebooks, the “doctrine of first sale”, and the potential of a used ebook market

The rise of ebooks, the "doctrine of first sale", and the potential of a used ebook market 1

Ironically Amazon’s Kindle may eventually cannibalize one of their most profitable areas- used books.  No ebook seller has yet created a used ebook market. The obvious obstacle is that these ebooks will remain forever and thus they would pose a serious threat to the first sales market.  But what if ebooks began to denigrate once they left the library of the original owner? Could a viable secondary market be created for ebooks? And thus could another revenue generating used market be created for procurers and vendors of these products?

In the paragraphs that follow this is exactly the discussion I’d like to explore.  What makes used books sales possible? What would prevent the development of a used ebook market? Is there any legal precedence that would allow for such a market? And how would this market function?

Used book market

The used book markets in the U.S. depends on a Supreme court ruling from 1908 that prohibited copyright holders from mandating conditions of resale  (see “doctrine of first sale” link for details).  This solidified the idea that copyright only applies to “first sale” of a product. Ebooks in their present form only offer a first sale market. In the ebook space there have be no tests of  this particular ruling and there is no viable “second market” for resales.

Ebooks and their publishers

Ebooks are licensed products protected by End User License Agreements similar to software.  When you buy an ebook you are licensing the file either for reading on a specific reader, or in a specific format. The EULA may cover both conditions. There will be no incentive by ebook resellers, publishers, or authors to change this market because the new licensing arrangement will make them a lot more money.  So how does a consumer force the change?

It is incumbent on buyers of ebooks and ereaders to demand a used market.  Apple, Amazon, Sony, Barnes and Noble and others are already being forced to allow publishers to set their prices on ebooks which does not bode well for ereader owners. Ebooks gives publishers a way to completely eliminate the secondary market. And since most ebook publishers are moving to a 70/30 split with resellers, and are raising their prices on ebooks, their largest revenue stream will quickly become ebooks.

Publishers (especially the “big six”) are arguing that Amazon’s $9.99 pricing is “devaluing” their product.  But for us to believe this they should produce some metrics showing a direct correlation between ebook sales and a drop in sales of physical books. Imagine a product with no physical form, little to no development costs, restrictions on resale and use, and the ability to sell your product without competitors. This is what ebooks offer publishers. So how is this a devaluing of their product?

An Ephemeral Ebook market

This problem could be addressed if ebooks were more like physical books. I could see this creating two new ebook markets. A used market where ebooks could be sold for whatever the market, and the book’s condition will bear, and a secondary exchange market where ebooks could be permanently exchanged for other books.

Over time physical books lose their value because they are less up to date, their authors are not in high demand, or the book itself begins to disintegrate. Why shouldn’t ebooks be subject to the same conditions? Here is what I envision:

First- ebooks will remain intact (and in the cloud as long as the primary purchaser retains them).  This is fair since there are so many restrictions that are inherent in the ereader format.

Second- Ebooks will begin to disintegrate as soon as a primary book owner sells or trades the book into the ebook secondary market. For example, the ebook text will begin to show wear or there will be virtual dog ears on the escreen of certain pages. Over time or through continual resale and trading the ebook will begin to wear. The text will begin to fade, or dissipate until the book loses its trade or exchange value.

These proposed changes will improve the ebook market.  Ereader companies would benefit from more sales because their product would be more useful. They may not sell as many ebooks but that would be made up in more ereader sales. It would also give online booksellers more leverage and incentives to keep their prices down. Authors would be fairly compensated for their work and their work would be read by a larger audience. Publishers in this model would feel as if they were the biggest losers. It’s true it would limit their profits, but it would restore secondary sales which will keep used book companies in business and probably create more demand for books.

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