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.
As much as I like the program, I have to agree with the AG here. Under most of the contracts, Amazon really doesn't have the rights to give ebooks away. One might make the clever legal argument that they are selling the ebook to themselves and then giving it to their customers, but I seriously doubt that will stand up in court.
I strongly suspect that Amazon has a contract with the major and lesser publishers that strictly controls how they can transfer the ebook to customers. I haven't seen it, no, but I have seen author contracts and if those are taken as a yardstick then Amazon doesn't have a leg to stand on.
It's a pity. A lot of people like the idea of a content subscription service; you can tell that by the success of Netflix. But the fact remains that the publishing industry wasn't ready for the concept and they're not able to sign the kind of deals that a subscription service needs in order to function.
I would expect that in the next couple months we're probably going to see Amazon's program shrink or even be shut down. Amazon pushed too hard, too far, and too fast, and that will be their downfall. But I also think we'll eventually see ebook subscriptions happen - just not from Amazon.
There are a several projects in the works now that plan to offer an ebook library of one sort or another, including Afictionado and Flatleaf. One is owned by Macmillan and the other is an indie startup, and both stand to benefit from Amazon's trailblazing. But both will need publishers to take the first step. The contracts with authors need to be changed to allow for subscriptions or they will never happen.
BTW, there's one curious detail that might not be obvious at first glance. Afictionado is owned by Macmillan,and they're one of the Big 6 publishers who have never allowed library ebooks because, as they've said in the past, they couldn't find a business model they liked. Now they're funding an ebook subscription startup, and that could mean they plan to put their full weight behind Afictionado.
Ebook subscriptions would mean an an ongoing revenue source for publishers, and that's probably why Macmillan is funding Afictionado. That also could be how they'll eventually talk everyone else into signing up.