Tuesday, November 15, 2011

The Authors Guild on Amazon's Kindle Lending Library

Posted by Victoria Strauss for Writer Beware

Two weeks ago, Amazon announced its brand-new Kindle Owners' Lending Library, which makes it possible for Amazon Prime members to borrow ebooks for free. Members can borrow one ebook a month, which they can keep on their Kindle for as long as they like. Since borrowing is limited to one book at a time, downloading a new title causes the old one to be deleted.

Sounds cool, right? Except that over the days that followed the Library's launch, it was discovered that Amazon in fact didn't have permission from many of the publishers whose ebooks were included in the Library. Among the questions posed by this unauthorized use: how do authors get paid? (For a good overview of this and other issues, see this blog post by agent Rachelle Gardner.)

The AAR has released a statement expressing its concerns about author payment. A further concern: most book contracts don't provide for author compensation under subscription models, and "[w]ithout a clear contractual understanding with their authors, it is unclear to us how publishers can participate in this program."

Now the Authors Guild has weighed in with concerns similar to the AAR's, particularly about publishers' contractual right to enroll titles in the Library. The AG's full statement, which includes suggestions about what to do if your book is included without your approval, appears below.

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Contracts on Fire: Amazon's Lending Library Mess

Are any of the books in Amazon’s new e-book subscription/lending program properly there?

Earlier this month, Amazon launched its Kindle Online Lending Library as a perk for its best group of customers, the millions who’ve paid $79 per year to join Amazon Prime and get free delivery of their Amazon purchases. Under the Lending Library program, Amazon Prime members are allowed to download for free onto their Kindles any of more than 5,000 books. Customers are limited to one book per month and one book at a time – when a new book is downloaded, the old one disappears from the Kindle.

The program has caused quite a stir in the publishing industry, for good reason (as you'll see).

First, let’s look at how books from some major U.S. trade publishers wound up on the Lending Library list.

Major Publishers Turn Amazon Down

Amazon approached the six largest U.S. trade book publishers earlier this year to seek their participation in the program. By all accounts, each refused. Small wonder. Publishers aren’t eager to allow Amazon to undermine the economics of the e-book market, representing the lone bright spot for the industry, by permitting an estimated two to five million Amazon Prime customers to start downloading e-books for free. So books from the Big Six publishers – Random House, Simon & Schuster, Penguin, HarperCollins, Hachette, and Macmillan – are not in the Library Lending program.

Amazon’s attempts to enlist the next tier of U.S. trade book publishers, major publishers that are slightly smaller than the Big Six, appear to have fared no better. Many, perhaps all, also refused.

No matter. Amazon simply disregarded these publishers’ wishes, and enrolled many of their titles in the program anyway. Some of these publishers learned of Amazon’s unilateral decision as the first news stories about the program appeared.

How can Amazon get away with this? By giving its boilerplate contract with these publishers a tortured reading.

Amazon has decided that it doesn’t need the publishers’ permission, because, as Amazon apparently sees it, its contracts with these publishers merely require it to pay publishers the wholesale price of the books that Amazon Prime customers download. By reasoning this way, Amazon claims it can sell e-books at any price, even giving them away, so long as the publishers are paid.

From our understanding of Amazon’s standard contractual terms, this is nonsense – publishers did not surrender this level of control to the retailer. Amazon’s boilerplate terms specifically contemplate the sale of e-books, not giveaways, subscriptions, or lending (Amazon does have a lending program that some publishers have authorized, but it’s a program that allows customers – not Amazon – to lend their purchased e-books). Amazon can make other uses of e-books only with the publishers’ consent.

Amazon, in other words, appears to be boldly breaching its contracts with these publishers. This is an exercise of brute economic power. Amazon knows it can largely dictate terms to non-Big Six publishers, and it badly wanted to launch this program with some notable titles.

Why did it matter so much to Amazon? It’s all about the Kindle Fire, and Amazon’s unexpected e-book device battle with Apple and especially Barnes & Noble. (More on that, in another post.)

Some Small Publishers Sign On, Without Authority

Now, let’s look at the publishers who did willingly sign on to the Kindle Lending Library. Many (but not all) of these are smaller, newer companies that devote their efforts to e-book and on-demand publishing. They signed licensing agreements with Amazon for a selection of their titles, providing for a flat annual fee per title.

While these publishers generally have the right to license e-book uses for many of their authors’ titles (just as most trade publishers do), our reading of the standard terms of these contracts is that they do not have the right to do so without the prior approval of the books’ authors.

Licenses are traditionally done on an advance-and-royalty basis. In this way, the interests of the author and the publisher are aligned: if the license pays off, both benefit. When a list of titles is licensed for a flat fee, however, interests can easily become misaligned, and opportunities for mischief abound.

For example, a publisher could cherry pick a selection of “loss leaders” to license for unlimited use in order to attract readers to the publisher’s other books. To avoid this conflict of interests, publishing contracts have for decades included an array of clauses intended to prevent a publisher from using cheap or free copies of one author’s books to promote another’s.

Under most (perhaps all) publishing contracts, a license to Amazon’s Lending Library is outside the bounds of the publisher’s licensing authority. This isn’t a minor matter – in order to protect the author’s interests, all publishers should be asking permission before entering into such a bulk licensing agreement, and most would need to seek a contract amendment to do so. For more on this, see the post of Simon Lipskar of Writers House at the AAR’s blog.

What to do if your book is in the program

If your book is in the Lending Library without your approval, we recommend that you:

1. Get in touch with your publisher (or ask your agent to do so) and say that you object to your book’s inclusion in the program without your approval and that you do not consent to have your work in any such initiatives without your prior authorization. This is fundamental.

2. Ask your publisher why your book is in the program. The publisher may be using the program to introduce your books to Amazon Prime customers with the hope that they’ll then come back to buy your other titles. Other publishers may be seeking to give some life to quiescent titles. Once you’ve heard your publisher’s rationale (it may be well considered and in your favor), you’ll have to decide whether you’d like your book to remain in the program.

If it’s a major publisher, however, you may learn that Amazon chose to include your work in its lending program over your publisher’s objections. If so, we expect that you will be compensated for the uses (Amazon is paying its regular wholesale price for the e-books from these publishers), but this may still not be in your best interests: Amazon, for its own reasons, has chosen to override your publisher’s marketing plan.

No matter what you decide to do, please be in touch – one of our attorneys would be happy to discuss the matter with you.

So, are any of the more than 5,000 books legitimately in the program? Probably. Amazon published 138 of the titles in the lending program, according to Publishers Lunch (subscription required). Other publishers may have gotten their authors' permission, or may have unusual contracts that give them authority to enter into bulk licenses without their authors' approval. If so, we've yet to learn of such arrangements.

20 comments:

JL Stratton said...
This comment has been removed by the author.
JL Stratton said...

I could see where this could be a real serious problem for publishing houses, and those authors associated with them. I mean, how WOULD they get paid, and how can sales be tracked, if the book disappears when another is downloaded. I feel for all those authors out there in this predicament, especially those included in the program without their consent.
On the other hand, as an independent author, selling my books individually on sites like Amazon, I am simply thrilled at the thought that someone might be able to download one of my books free. This is the best publicity I could ask for. I could only hope that thousands, even millions of my books would be pirated by people looking for a free read. If my work appealed to them, I would hope that they might find more of my work and buy it. I consider the lending program to be a win-win for independent authors.
It's too bad though, for those authors still held in the grips of the mainstream publishing industry, where there are so many mouths to feed that one must charge $9.99-$16.99 for an eBook that costs pennies to make and distribute.

Brett said...

I like the idea of being able to simply get books on subscription. Quite a few books are readable, but I would never pay the individual price to buy them. If it's a choice between buying-and-reading, or not-buying-and-not-reading, I'll choose to avoid reading the book. Hence the existence of libraries.

I frankly don't see what the big deal is, and how this "undermines the economics of the e-book market" when there are already e-book libraries like Overdrive.

P. David Gardner said...

Amazon's audacity never fails to amaze me. And if they "win", it will set a precedence that will be extremely hard to fight in the future. Google tried and ultimately failed. Hopefully the same will happen with Amazon.

Victoria Strauss said...

JL Stratton--as far as I know, self-published authors aren't included in the Lending Library.

Also, though ebooks don't involve the expense of ink, paper, and warehousing, there's considerable expense involved in acquiring, editing, designing, formatting, and distributing them.

S.M. Carrière said...

I was about to say the same, Victoria.

It is a shame that decency seems to be so lacking in this debacle. I would not have objected to having my book included, but it would have been nice to have been asked first.

Not that my book would be included - it's self published. But all the same, what ever happened to plain good manners?

I really dislike the manner in which Amazon conducts its business.

Missy said...

I'm on the fence about it. I can see how getting my name out there would be good, but I do appreciate being asked. I'm mulling over how this fits in with Netgalley because for a simple, few statement review readers can have free books (ARCs) from there. We don't get paid for Netgalley ARCs. How many of us use those reviews?

Danielle said...

Missy- I have decided to read several books based on the reviews I've read on Blogs. :)

What I'm wondering is how this relates to physical libraries? Do they have to get publisher permission to distribute the books? I do understand that everyone needs to get paid for their effort, but libraries are libraries. Does it matter if it is electronic or physical?

amber polo said...

Libraries purchase books. They are not allowed to make infinite number of copies to loan at one time.
Publishers and authors are compensated for ebooks loaned through Overdrive.

Missy said...

This came up in conversation today -- apparently libraries can offer it for download 26 times and then they need to pay for it again.

Anonymous said...

Copyright laws has what is known as the "First Sale Doctrine."

This means that once you buy a copy of a book (or CD, DVD, etc.) you can do as you like with that copy -- read it, burn it, give it away, resell it, or lend it -- without requiring additional payment to, or permission from, the publisher.

This is why libraries don't need publishers permission.

It seems to me that if Amazon buys ONE copy of an ebook, it can circulate that ONE copy as long as it likes (provided that only ONE person at a time has it on their ebook).

Likewise, if Amazon buys FIVE copies of an ebook, it can circulate up to FIVE copies at a time.

Etc.

Some 30 years ago the Big Studies tried to outlaw videotape rental stores, saying that these stores did not have the Studio's permission to lend tapes.

The Supreme Court later ruled in a case that the First Sales Doctrine allowed video stores to rent tapes which they had bought, even if the Studios refused to grant permission.

A music attorney told me in the 1990s that the record companies were lobbying Congress to change copyright law, so as to outlaw used CD stores, or at least force used CD stores to pay royalties to the record companies for each CD resold.

I don't think that ever got anywhere.

For that same reason, used bookstores are allowed to resell books, without additional compensation to the author.

Victoria Strauss said...

Anonymous--the difference here is that paper copies of books impose physical restraints (one book can only be borrowed by one person at any one time) while digital files impose no such restraints. The number of people who can simultaneously borrow an ebook from Amazon's Library is limited only by the number of people in its Prime program (I understand that membership is in the millions).

This is part of what publishers who didn't give permission for their books to be enrolled are objecting to: their contracts with Amazon don't cover this use of their books. As for publishers that did give permission, they may not have had the contractual authority to grant this kind of license to Amazon.

These issues may seem picky and obscure--but they're an example of the ways in which giant retailers like Amazon are attempting to use their economic clout to establish business practices by doing end runs around rightsholders.

Frances Grimble said...

Victoria,

I am extremely concerned because, I clicked on the link of "books available for lending" and discovered:

All of mine.

And all my books are offset printed. They are all self-published. There has never been any e-book edition of any of them. Mind you, it is not clear whether Amazon is lending a print edition or an e-book edition.

Any suggestions as to what I should do? Do any Prime members subscribe to this blog--can someone test for me?

Fran

Frances Grimble said...

I should add, I discovered my books in a search of the Library list, not a browse. I also searched on the name of another author whose books I know are not in e-form. His are on the Prime list too.

So either there is a bug in the search system, or Prime is also lending print books.

Anyway, my eternal gratitude goes to any Prime member willing to try ordering one of my books through Prime and seeing what is offered. My name is Frances Grimble.

Victoria Strauss said...

Frances, can you point me to the link you used? Maybe I'm just sleep-deprived, but I couldn't find any links to Lending Library content.

If your books are print-only, I don't see how they could be included in the Library except by mistake. The Library is strictly for ebooks.

Boone Blinds said...

I really dislike the manner in which Amazon conducts its business.

Kat said...

As I've understood it, Amazon is paying wholesale price to the publisher every time someone "borrows" a book from the prime library. They are not relending copies that they've already paid for. Doesn't that essentially equate to a sale? Also, amazon has only included publishers that sell their books to amazon using wholesale model and not the agency model. Seems like the best of both worlds for the publisher to me. They get paid by Amazon when someone "borrows" the book, and then if the person wants to buy the book later they get paid again.

Publisher Weekly: http://www.publishersweekly.com/pw/by-topic/digital/content-and-e-books/article/49430-could-amazon--s-lending-library-end-in-court-.html

Frances Grimble said...

Victoria,

The link is:

http://www.amazon.com/gp/search/ref=sr_nr_p_n_feature_browse-b_mrr_2?rh=n%3A283155%2Cp_85%3A2470955011%2Cp_n_feature_browse-bin%3A618073011&bbn=283155&ie=UTF8&qid=1320591977&rnid=618072011

and is in this blog post:

http://www.rachellegardner.com/2011/11/amazon-kindle-owners-lending-library/

I clicked on the link and then searched on my name. I'd think what with about 5,000 books available for lending, users would want to be able to search the list instead of paging through it. So maybe Amazon search for this is broken, or I did it wrong somehow.

Fran

Victoria Strauss said...

Thanks for the link, Frances. I don't see a way to search the listing, though--the search box at the top searches all books.

Anonymous said...

I love how people instantly assume that Amazon will go ahead and just pirate contant. Such as lending multiple concurent copies of 1 purchased ebook. Clearly, a company of that size can't understand basic law.

This topic has been very heavily discussed on PGs site. A lot of it is still conjecture, but it seems the AG's statement may be no better. http://www.thepassivevoice.com/11/2011/contracts-on-fire-amazons-lending-library-mess/

Every time I see the Authors Guild in the news its been bad. In general, it's been technophobic knee-jerk reactions. Akin to claiming your new TV is broken, because when you bring up the menu, it always blinks 12:00 in the corner.
Sigh.