Author's Guild Not Happy With Amazon Lending Library

Posted on November 15, 2011

The Author's Guild is extremely unhappy with Amazon.com's implementation of its digital lending library for Amazon Prime members. The Author's Guild posted a lengthy memo on its website, laying out its objections to the service. It asks the question: "Are any of the books in Amazo's new e-book subscription/lending program properly there?" The Guild first notes that all of the six major book publishers turned Amazon down when it asked for their participation in the program. The Guild says that Amazon ignored many publishers' wishes and included the titles anyway, saying:

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.

This is a permutation of the longstanding battle between Amazon and publishers over setting book prices. For years, Amazon paid publishers the stated wholesale price of each book and then charged whatever it wished. That all changed when Steve Jobs implemented the agency style of ebook selling, in which the publisher sets the retail price of the book. Jobs pushed publishers to charge more for books and insisted they set their own prices on Amazon.com. That eliminated Amazon's pricing advantage on ebooks, which were much more expensive when purchased in the Apple store.

Jobs won that round. Now many major publishers insist on following the agency style of remuneration and price setting. When you see a title on Amazon.com that follows the agency model there is a note that says the publisher set this [high] price of this book [so don't blame us]. Readers would prefer that prices be as low as possible, but publishers have thin margins as it is.

As for how this all plays out with the lending library, it's too soon to tell. We haven't seen the contracts of the books in question, but apparently Amazon's attorneys -- of which they have many -- think they are in the clear here. If Amazon.com pays the wholesale price to the publisher for each book it loans out, then presumably each author gets paid under the terms of his contract which is the most important issue. But nothing is clear at this point. This is yet another case of technology advancing more quickly than applicable law. Most likely, it will end up in court.



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