Railroaded? Second hand ebooks revisited

What a tangle: Amazon has received a patent for a system for selling “pre-owned” digital files, opening the way for a secondary market in ebooks - and putting the electronic cat amongst the analogue pigeons.

There are so many things going on here, and it’s worth unpacking a few of them. I looked at the issue of “second hand” digital books back in 2010. The first thing to take on board is that the idea is a result of completely illogical thinking - the application of the physical metaphor to the digital world. Second hand sales in the real world make sense because a product - a book, say - is both rivalrous and excludable, i.e. if I have it you don’t and I can have it and keep you from getting it. Digital files are neither of these things. More, while physical copies of things depreciate, becoming foxed and eventually falling apart, digital ones don’t, so a “second hand” copy is exactly like the original. Then, too, transferring ownership of a physical object is easy - you just move it in space. In the present model of digital commerce, you don’t acquire ownership of a file when you buy, but an open-ended license to view the material - an access right.

Transferring an access right is a different sort of thing - it requires on some level the transfer of the consent of the licensor (although the Oracle and UsedSoft rulings in the European Court complicate that simple statement).That said, “second hand” and “cheaper” go hand in hand in people’s minds, and the perceived right to sell on in exchange for cash back on a purchase no longer desired or used is a dangerous thing to mess with. When I looked at the issue before, I said - a bit frivolously - that the point wasn’t actually selling something second hand, but creating a “second hand” experience which was gratifying and functional. I actually went a bit further, but let’s leave that for now.

A bit more background: there’s already a service “reselling” digital music. It’s called ReDigi, and yes, inevitably, it is locked in litigation over first sale doctrine and so on. The interesting thing about ReDigi is that the company’s model has tackled the hard stuff: the system purports to guarantee to the seller of origin that the file has been removed entirely from the machine of the first purchaser - although in reality it can’t possibly account for an offline external hard drive. Presumably someone attempting to game the system would have to copy all files on a drive, remove it, install the ReDigi software and sell on their local copies, then remove the software again before reattaching the illicit drive - and repeat that procedure any time they wanted to use ReDigi again - a certain amount of hassle. More than that, ReDigi cuts the artist in on the secondary sale - alleging that they may actually make more second time around than in the first instance - which takes the sting out of the practice.

So before running around yelling “the sky is falling”, take note: this need not be a bad thing. It could be clever, helpful, and profitable. On the other hand, this is Amazon: brilliant, predatory, and expansionist. Publishers should not expect to come out of the situation in a stronger position than when they went in unless they’re prepared to wrestled Bezos’s bear, and be serious about it.

The nightmare scenario is for slow-selling midlist titles which work well as “long tail” books. Let’s say a book sells 3000 digital copies in the first year - which is either a large or a paltry number depending on whom you compare it with - and happily sells 2000 per year thereafter as it gets discovered by a small but persistent fan-base over time. That’s a respectable 21000 over ten years. But factor in a second hand market which doesn’t give a cut to the author (or the publisher) and the “second hand” digital file is listed alongside the identical but more expensive standard edition and you’ve got something of a monster: you could theoretically see those 3000 copies just keep circulating. And it’s not even as if the urge to keep a copy on file is particularly strong - you can almost guarantee being able to buy and download a cheap copy at any time. The retailer pockets a slice of profit each time, of course, but the author and publisher see money from only 3000 sales in total, as opposed to 21000. (Yes, I’m stacking the odds. The point is to make the extreme case, not the likely median - although if a service arranged in this way were to catch on, it’s not clear that I’m stacking them that badly.)

That scenario, of course, would make authors extremely unlikely to sell through Amazon, so I suspect it’s profoundly unlikely. More plausible is something more canny - Amazon could use this to make their own publishing more profitable and more appealing by offering participation as a draw to authors working with them. 

This is, of course, another situation in which a bit of clever market-creation hands Amazon greater control and greater profits from books - unless the publishing industry can get in first. If Amazon can get this up and running, it also opens the way to something I’ve occasionally mentioned before - customer-to-customer book sales in which each buyer can potentially also be a bookseller. And once that’s working for “second hand” titles, why not do it with new titles, too, turning every reader into a potential hand-seller of their favourite titles? I suggested this - again in 2010, I think - as something publishers could do to lure customers to their own direct-to-consumer websites, along with bundling print and ebooks to avoid the much-lamented “buy twice” trap. But it would work just as well for Amazon, of course.

ReDigi says Amazon’s system may violate existing copyright, but that’s not something Amazon will fuss about: the company has a lot of cards to play in any showdown. Amazon can either indulge in a bit of brinkmanship, as we’ve seen in the past, or offer a good-enough deal, or just create the market for its own ebooks and wait for the industry to come and beg to be admitted. 

Smart play: get alongside this rather than waiting for it to fall from the sky; recognise that it comes in various flavours, some of which are pleasing and others not - so it’s best to work for the former.

Dumb play: Kübler-Ross of publishing.

I leave the issue of which option is more likely to the reader.