Amazon has patented a means to sell used ebooks within the Kindle system. A book will be branded within the system when it is bought, then when the buyer puts it up for resale at the Kindle store, it will be removed from his account and transferred to the buyer’s account. Amazon will receive a small fee for each sale. A limited number of sales of each book may or may not be included in the system.
According to copyright law, specifically “The Doctrine of First Sale,” this is illegal because digital goods aren’t physical things so they can’t be resold. (See my article on “The First Sale Doctrine and eBooks” for more details. http://mbyerly.blogspot.com/2009/04/first-sale-doctrine-and-ebooks.html )
But a legal battle is currently being fought between ReDigi, a used digital music store, and the various groups in the music industry over a similar system. If ReDigi is able to win this, Amazon will probably move forward with their own system of resale.
At first glance, it appears Amazon would be cutting into its own Kindle profits with this system, but Amazon isn’t known for its poor business practices. Here’s what it will gain from the system.
Buyers go for the cheapest prices. If a used Kindle ebook is cheaper than any other version of the book, buyers will start using the Kindle system and its hardware. iTunes, Nook, and other sites won’t be able to match these lower prices unless they start selling new ebooks for next to nothing or they put into place their own reselling system. Such a complex system would take some time, perhaps years, so Amazon would gain the advantage in the market for many years to come.
Some in the industry believe that Amazon is intent on killing off publishers so authors will have to go the self-publishing route, and authors as individuals have no real bargaining power when it comes to the terms Amazon will set. (See “Used eBooks: The Ridiculous Idea that Could Also Destroy Publishing” http://motherboard.vice.com/blog/used-ebooks-is-a-ridiculous-idea-that-could-ruin-authors-publishers )
What will all this mean if Amazon’s used ebook system becomes available? Readers may be happy with this system, but authors and publishers will not. Publishing has a very low profit margin, as is, and anything that will cut into that profit will hurt, sometimes to the point of putting authors and publishers out of business.
Authors like me have been busy educating readers on “The First Sale Doctrine” so they will know that ebooks can’t be resold, loaned, or put online for free, but a system like this will make readers believe that, if Amazon can do this, so can they. Piracy will spread.
If Amazon gains total supremacy in the distribution market, then they will be able to dictate the terms in contracts with authors and publishers, and those terms will shift even more of the profit into Amazon’s pockets.
If the other distribution markets fail and Amazon is the only source of ebooks, it can close down the used market place, and readers will have to pay much more for the surviving content. After all, Amazon is in it for Amazon as they have proven over and over again.
This system may not be the eBook Zombie Apocalypse as a universal removal of “First Sale Doctrine” on digital goods would be, but it may very well be the beginning of the end of publishing as a profitable venture.
UPDATE: On March 30, 2013, a federal court ruled in the Capitol Records versus ReDigi case that it is illegal to sell "used" digital files. No word yet if ReDigi will continue to fight this battle.
UPDATE: On March 30, 2013, a federal court ruled in the Capitol Records versus ReDigi case that it is illegal to sell "used" digital files. No word yet if ReDigi will continue to fight this battle.
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