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Authors Guild Urges Caution on Amazon Prime Ebooks

It’s been just over 2 weeks since Amazon started offering free ebooks to Amazon Prime members, and it looks like the fight is just beginning.

Yesterday the Author’s Guild posted a moderately worded warning against the Prime Ebooks (in what was a much milder critique than I had expected). They raised a number of valid issues about how Amazon don’t actually have the rights to lend most of these ebooks.

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.


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fjtorres November 15, 2011 um 11:21 am

I’m thinking Amazon wants a confrontation.

What’s the worst that could happen? They get sued and settle quickly.
If the AG isn’t willing to allow lending on any terms, they shut down the service and bask in the good karma and publicity. As with TTS and agency pricing, amazon is the good guy and the old-school powers are the heavy.
And that’s the worst that can happen.

The best? They get to negotiate reasonable terms for lending subscriptions.

Try this one for size: if Amazon didn’t go ahead and force the issue, when (if ever) would the obstructionist powers-that-be sit down for a well-intentioned discussion on the merits of the model?

curiosity killed the.. November 15, 2011 um 11:38 am

you know i thought this whole amazon lending system was rather odd from the beginning i didn’t realize they went behind the backs of publishers to offer these deals.
personally I’ve been thinking a lot about these ebooks vs library tug of wars they’ve been having for years now and i wonder why the libraries themselves haven’t come up with a netflix/redbox hybrid mail subscription system.
they could have like a monthly fee of $5 to use the service that allows 1 book from the library to be sent by mail and either returned by mail or dropped off at the library itself. then for a buck more per book have another 1 sent through the mail. however if they want to return through the mail and not just return at the library then maybe cost $1 more.
why this would be different than just a company stepping in and lending books purely for profits sake is.
1 the bulk of the money goes into shipping through maybe united states postal service(which would be a boost to their slowly dying system)
2 it would increase the chances of people coming to the library to return the books saving them a little cash but also picking up a few more books while they’re there so that’s increased exposure to their many events and fundraisers.
3 as a public library they have the legal rights to lend books in pretty much any fashion they please
4.i doubt any one would take this act of small fee lending as a detriment to the library system only an alternative to using the library when you don’t have the time to drive their.
5. i suspect they could also since the system would be in place allow all returns of books(even if picked up at the library) directly through the mail for the same $1 price if someone didn’t want to drive back for returns.

maybe this is overly simplified and legally wouldnt work..but if something like this was in place? i certainly would use the library more often

curiosity killed the.. November 15, 2011 um 11:40 am

i didnt make this too clear above but i meant real books not just like an ebook on disk lol though that might be an option too.

Jeff Posey November 15, 2011 um 11:45 am

I’m not an attorney, but why would it not legally hold up for Amazon to buy the books and give them away? A sale has still taken place. The owner of the intellectual property got paid. Seems a logical and just outcome to me. The Author’s Guild argument seems flimsy and argumentative at best.

curiosity killed the.. November 15, 2011 um 12:04 pm

i think it has to do with the fact they are ebooks with mad drm set into place. it would be 1 thing if it were physical books being lent but ebooks have all sorts of sub restrictions to them that lending by company would be frowned upon i imagine

fjtorres November 15, 2011 um 4:07 pm

Because you don’t buy digital media (DRM or no DRM) what you buy/license are usage/reading rights, which are nontransferable.

What makes it a gray area is that Amazon aren’t giving them away permanently but just letting one person use them for a limited time. So it is the legal equivalent of Amazon selling it (for free) but with an expiring DRM, like the original Sony Librie.

I don’t think the AG has an open and shut case nor do they really want this to go all the way to court and risk the doctrine of first sale coming up. Which is why I think a negotiated deal is coming.

Jeff Posey November 17, 2011 um 11:23 am

It certainly is a gray area. I bought my mother a book the other day for her Kindle. So I purchased the reading rights, but I transferred or gave those reading rights to my mother.

I realize there are all kinds of complicating factors, especially with expiring DRM, but the principle seems about the same.

What I hope does not happen is that authors' groups, such as the AG, unintentionally create more obstacles for writers finding paying readers. If the distributor (Amazon) can’t be innovative in trying to encourage more consumption of its products, then it hurts authors.

Maybe the AG is using this merely to put Amazon on notice that it’s watching to make sure they don’t pull a fast one. If so, then it’s a brilliant move.

Logan Kennelly November 17, 2011 um 7:46 pm

"What I hope does not happen is that authors’ groups, such as the AG, unintentionally create more obstacles for writers finding paying readers."

Considering that the Authors Guild stood against mechanized book reading (which would allow more people to read more books, faster, and more flexibly), I’m not sure the Guild is interested in helping writers find readers or innovation. If I were to guess, their goal is probably to maintain the status quo and provide a stable environment in which authors can use past experience and data to make future decisions.

Obviously this is a different situation, but I think it would be a mistake to think of the Authors Guild like a marketing company trying to come up with new ways of helping authors succeed.

Fbone November 15, 2011 um 1:06 pm

How long can Amazon afford to buy these ebooks and not raise the cost of Prime?

fjtorres November 15, 2011 um 4:00 pm

Longer than the AG will put up with it. 😉

Bluegrass Geek November 15, 2011 um 4:25 pm

You didn’t make anything clear. Hint: punctuation and capitalization are your friends.

Whats that November 15, 2011 um 11:40 pm

Lots of misinformation here. The KDP contract (which is online; you don’t need to "hear" about it on Twitter) provides for inclusion in the Kindle *Book Lending* Program, which is their program to match Nook. It is not the Kindle Lending Library Program.

All we "know" about Afictionados is that the site was built by MPS–a division in which Macmillan has a 60 percent stake that they put up for sale in July. It’s in the UK only (so nothing to do with the US lending policies) and the idea that it will have any books from the British Pan Macmillan is internet supposition only at this point–quite possibly based on misunderstanding the relationship between MPS and the publishing unit.

Nate Hoffelder November 16, 2011 um 7:25 am

Yes, MPS is rumored to be up for sale, but that rumor has only the one source. I’m not sure I trust it.

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