Thursday, August 25, 2011


Something has changed at The New York Times. This change is to be found in the well-regarded and highly touted "New York Times Best Seller List" which appears to be the list to be on (based on the number of book covers festooned with the banner "New York Times Best Seller").

For the first time ever, on February 13, 2011 the Best Seller List included e-books:
"On the Web, there are three entirely new lists. One consists of rankings for fiction and nonfiction that combine print and e-book sales; one is limited exclusively to e-book sales for fiction and nonfiction; and the third, Web-only list tracks combined print sales — of both hardcover and paperback editions — for fiction and nonfiction." 1

This is a pretty big deal.

Clearly there is money to be made by being recognized on the Best Seller List and this inclusion of  e-book-specific lists further legitimizes e-books (which can use any legitimacy being tossed their way). Although in July 2010 Amazon reported that their sale of e-books had outpaced hardcover books, selling 140 e-books for every 100 hardcovers, e-books have several significant issues that need to be sorted out before they are fully embraced by the public.

Note: Although the term e-book is used interchangeably with electronic book, digital book, and ebook, I'll use the same terminology as used by The New York Times which is an "e-book" and refers to the content of a traditional book that is provided in a non-tangible format.

Q: When is a book not a book? A: When they disappear overnight.
A very important distinction between the purchase of a traditionally-tangible-book (book) and an e-book is that the latter is not sold, instead it is licensed. This distinction is significant. For example, a book, once purchased, can be read essentially forever; an e-book might theoretically disappear overnight from the reading device.

In July of 2009 Amazon's Kindle device did precisely that. In an effort to "recall" two books that were not properly licensed, Amazon remotely deleted two e-books from the Kindles of customers who had legally purchased these books via Amazon. The fact that one of the affected e-books was "1984" is a delicious piece of irony - but troubling nonetheless.

Although the affected customers received credit for the amount of the purchase, they were not amused. One customer was quoted in the New York Times as comparing it to "Barnes & Noble sneaking into our homes in the middle of the night, taking some books that we've been reading off our nightstands, and leaving us a check on the coffee table." 2

Amazon has promised never to engage in such behavior in the future but the troubling impact remains: Amazon has the technological ability to remotely delete legally purchased content. Further, the distinction that these e-books were licensed - not purchased - should give current (and potential) customers pause.

Q: When is a book not a book? A: When you can't lend it to a friend.
Another distinction between a book and an e-book is the ability to lend that e-book to a friend. Under the First Sale Doctrine (a ruling from Bobbs-Merrill Co. v. Straus, 210 U.S. 339 (1908) later codified as §109(a) of the Copyright Act of 1976) a purchaser has the ability to transfer a book to another provided that the initial purchase was legally made.

Unlike a book however, e-books could not be lent out until Barnes & Noble provided a lending option in 2009 with Amazon following suit in late 2010. Amazon allows an e-book to be lent out for 14 days and naturally the lender cannot read the book while lent out to the lendee. There are also some not-so-natural limitations: the e-book can only be lent out once; international lending ability is spotty at best; and the publishers of the e-book have the final say if their e-books are "lendable" or not.

Q: When is a book not a book? A: When you can't resell it.
Perhaps the most significant distinction comes when the consumer is finished with his book and wants to sell it. Under the First Sale Doctrine the legally purchased book could be sold at a garage sale, sold back to the bookstore at the end of the semester (good luck with that), or traded to Book Nook. Not so with e-books however - currently there is no legal process to re-sell an e-book.

What is "legal"?
The word "legal" has many connotations. Here, the ability to "legally" re-sell an e-book is restricted initially by the license agreement that an e-book purchaser has to agree to in order to purchase the e-book in the first place. Obviously contract law comes into play and arguably there are any number of ways to dispute the validity of the agreement. The license agreement isn't the big stick though, much more significant is the interplay between DRM and DMCA.

Alphabet soup
DRM, or Digital Rights Management, is the use of technology to limit access to content. The technology involved is either software-based (e.g. the software for reading an e-book) or hardware-based (e.g. the device that allows the e-book to be read). These DRM constraints establish the limits about what can be done with the content in question.

DMCA, or Digital Millenium Copyright Act, is a 1998 U.S. copyright law that has many provisions but the most pertinent here is the criminalization of circumventing DRM. When you take an e-book that has DRM and combine it with criminal sanctions from DMCA you can see that the ability to "legally" re-sell an e-book has taken on a more significant meaning. We're no longer talking about a contractual issue, there's the possibility of jailtime. In fact, when Russian programmer Dmitry Sklyarov wrote a piece of software that allowed blind people to utilize Adobe Reader to "read aloud" an e-book in violation of the DMCA he wound up in jail (but was eventually acquitted).3

If it walks like a duck . . .

So it appears that publishers and retailers are clearly saying:

"E-books are not books in the traditional sense. Consumers clearly are only licensing specific rights to the content; these rights are limited and are clearly laid out in the agreement agreed to at the time of purchase."

Except that they aren't clearly saying that.

Instead they are using words like "buy" instead of words like "rent." Consumers know what renting a movie means - it means we have a limited amount of time in which we can access that movie. If I went to a Blockbuster store (assuming any still exist) and got two movies, one movie that I bought and the other movie I rented, I would have different expectations with respect to what I could do with these movies. I could watch both of them as much as I wanted but one of them would have to be returned to the store within an agreed-to amount of time, the other I could continue to watch indefinitely or could instead give it away or sell it to somebody. Consumers have been trained to understand what "buy" means.

Instead they are using words like e-books instead of "less-than-books." Retailers and publishers are calling these digital books "e-books" because they understand that it's a term that will resonate with consumers. Consumers understand what books are and so are comfortable "buying" what they believe to be a book that exists in a different form. However as indicated above, these e-books aren't truly bought - instead they are licensed; further, the rights that the consumer has to these e-books are dramatically different than those associated with books.

What is going to happen?
I believe that DMCA if challenged will probably be held to not protect publishers from actions associated with circumventing DRM to access e-books contrary to licensing agreements. Additionally I believe that the First-Sale Doctrine will be held to apply to e-books.

If this does not happen then the model for how e-books are sold will have to change - otherwise they will not be successful. Once the consumer understands the numerous limitations of e-books they will instead continue to buy traditional books. The smart and influential retailer (read: either Amazon or possibly a pseudo-outsider like Google) will convince a group of publishers to support unlimited re-sale of e-books with a technology constraint limiting each license to a single instance. This is the scheme that will benefit everybody. It's only a matter of time before case law or statute requires such a move. Presumably the large publishers have astute legal counsel who will advise their clients accordingly.

[1] New York Times: Introducing E-Book Best Sellers
[2] New York Times: Some E-Books Are More Equal Than Others
[3] cnet: Russian crypto expert arrested at Def Con

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