Mr. Lynn makes the case that Amazon’s dominance isn’t just a story of an industry disrupted by online commerce and digital upheaval, it’s about the abandoning of New Deal era protections of retailers in 1975 (promoted by backers as a means to fight inflation, says Mr. Lynn) and what he portrays as a shift in 1981 in the Justice Department’s interpretation of antitrust law based on “Chicago School” theories of efficiency and consumer welfare. The upshot appears to be that non-consumer markets (business-to-business markets and labor markets) are often insufficiently protected from monopolies.

Chicken growers are largely at the mercy of the poultry processors who buy their adult birds, who have a number of means to dictate the growers’ business practices. In Silicon Valley, Google and Apple had a private agreement not to poach each others’ employees. Even the 1,750 beer microbrewers in the US mostly sell through two distributors that control 90% of the market.

Meanwhile, Amazon has such tight control over the lion’s share of the book and e-book market that even the publishers who are the most vehemently outspoken against it will not go on record with their comments. It regularly throws its weight (and the weight of its $6 billion in capital) around, and publishers who do things it doesn’t like are prone to have their “buy” buttons removed for a while.

Amazon has such a big chunk of the market, the Authors Guild notes, that even the disappearance of Borders did not drive as much traffic to remaining brick-and-mortar bookstores as one might have expected:

To understand just how precarious things are, realize that last year’s Borders’ bankruptcy represented an enormous reduction in browsing space, shuttering 650 stores. (B&N has about 700 stores.) One benefit of the loss of Borders should have been a short-term lift to B&N’s 700 stores and the 1,500 or so remaining independent bookstores. B&N’s sales were indeed up in the nine weeks before Christmas, Ms. Bosman reports. How much? Borders’ collapse led to a bounce of just four percent, compared to the prior Christmas. That’s what’s passing for good news in brick-and-mortar bookselling at the moment.

The Authors Guild paints Barnes & Noble as the one bright spot in the market, which has managed to claw its way up to a 27% share of the e-book market over the last two years (roughly half Amazon’s current 60% share) and, the AG argues, largely out-engineered Amazon in developing usable e-reader and inexpensive tablet technology.

As a number of comments below the article point out, the Authors Guild is not exactly an unbiased source, and that does show through in the slant from which the article is written. (For example, a claim that “Amazon wanted to price every Macmillan e-book, and indeed every e-book of every publisher, at $9.99 or less” is demonstrably untrue.)

But still, Amazon’s market dominance ought to be a little worrying even to those who currently like the company. Competition keeps companies honest—if Amazon does manage to kill off all its competition, it doesn’t have to be so nice to consumers anymore.

(Found via eBookNewser.)

But Google is likely to carry on its battle with the authors, photographers, and other individual copyright holders. Some authors consider the fight a matter of principle. And even if Google convinced the individual named authors to settle their lawsuit, that wouldn’t prevent other authors from filing lawsuits in the future. So Google may have little choice but to seek a ruling from the courts that its scanning project is legal under copyright’s fair use doctrine.

One of the important questions is whether the authors’ lawyers can get class-action certification so they can claim to represent the interests of all authors. New York Law School copyright scholar James Grimmelmann notes this is an important question, because if they can’t get class-action status some of the plaintiffs’ lawyers will probably decide it’s not worth their while to continue representing so few clients. This is why Google is asking for the Author’s Guild to be dismissed from the suit—it will make it easier to argue against class-action certification.

If the case proceeds at its current pace, Ars Technica suggests, we can expect a decision on the question of fair use in late 2012 or 2013.

The guild argues the class should be approved because individual claimants “could not as a practical matter effectively assert alone against Google” such claims of infringement, and that “those claims are presented far more fairly and efficiently than they would be in individual actions, which would require the same issues to be litigated multiple times.”

The Authors Guild’s filing (PDF) doesn’t say anything about the fact that it really represents a considerable minority of the authors whose works would have been appropriated by Google. Google is expected to bring this up in its response and argue for multiple classes, each with its own counsel—which would mean the Authors Guild would lose a lot of control over the suit.

Although its response to this motion isn’t due until January, Google is expected to have a few things to say about it in its motion for dismissal which is due December 23rd.

(Found via GalleyCat.)

[Judge Chin] set a deadline of Dec. 23 for Google to file the dismissal motions. The plaintiffs will have until Jan. 23 to respond to the motions, and Google will have to reply to the dismissal oppositions by Feb. 3, Chin wrote in the order.

The article notes that even though most people refer to the Google Books case as a single lawsuit, there are actually three separate lawsuits from three different plaintiffs—the Authors Guild, the Association of American Publishers, and the American Society of Media Publishers. It is not clear which parts of which lawsuits Google will ask to dismiss, though TechWorld speculates Google might ask to dismiss the authors’ and photographers’ suits but not the publishers’—Google has been having better luck in settlement talks with them than with the other two groups.

It also speculates that the reason the Authors Guild filed a separate lawsuit against the HathiTrust library scanning project in September is that it saw chances of a successful settlement diminishing.

In any event, it looks as though after all these years we may finally start to see the legal issues behind the Google Books project get their day in court. I expect much of the publishing industry will be watching with great interest.

(Found via Slashdot.)

The “Big Six” publishers are exempt from this program, because the agency pricing agreements restrict Amazon from doing that sort of thing to their books—but since Amazon doesn’t have those agreements with any publishers except the Big Six, it can do this to their books with impunity, at least based on its reading of its contracts with the publishers. There are some publishers who have signed onto the program, getting a flat yearly fee per loaned title instead.

The Authors Guild objects to Amazon’s reading of the contracts with those publishers who did not sign onto the program, and feels that many of those who did sign on do not have the authority to license their authors’ books that way without explicit permission (and possibly an amended contract) from the authors. The Authors Guild entreats authors who find their books included in the program without their or their publisher’s authorization to contact the AG and its lawyers, so I imagine the Guild will probably file a lawsuit over the matter sooner or later.

The funny thing to me is how much this a recapitulation of the pricing practices that led the Big Six publishers to throw a snit at Amazon and demand agency pricing. Instead of losing a few bucks on each book, Amazon eats the entire wholesale price, holding down the monetary loss by limiting it to one title per Prime subscriber per month. Either way, the publishers and authors still get paid their standard royalties for each “lent” book.

The Authors Guild seems to be concerned over the same slippery slope that the Big Six were—the “devaluing” of e-books. I have a hard time seeing it, though. It’s not as if Amazon is handing them out free on street corners—just on a very restricted basis to people who have already plunked down a fairly substantial investment in an e-reader and paid a yearly fee for Amazon Prime. If it does get more people to buy e-readers and Amazon Prime, it makes the e-book market bigger and might just sell more e-books overall.

And, of course, physical libraries continue buying and lending out paper books on a much less restricted basis with impunity. And even in countries that have Public Lending Right payments, the PLR per checkout doesn’t amount to anything close to what Amazon is paying for each copy it lends out.

As with so many things, we’ll just have to wait and see what comes out of all of this. If the Authors Guild does file suit, it certainly won’t be the first time it’s done so.

First, SF and fantasy novelist Elizabeth Moon strongly opposes the use that the universities and HathiTrust are making of scanned works. Moon is up in arms over HathiTrust’s plans to allow unlimited free download of “orphaned” works from the trust (though she seems to be under the impression that it would allow download of all works, not just the orphaned ones). She is also rather upset that she had to put in a great deal of time and effort hunting down all scan of her books and opting them out of Google’s process when Google is the one that violated copyright to begin with. She also points out that her own works are definitely not orphaned.

Evidently, no one looked: not the librarians who took my books off the shelf and sent them to Google for scanning, and not Google. No contact was ever made asking my permission to use my work this way. Instead, someone at some library gave Google the books to scan–without ever considering my rights–and Google scanned them with the same lack of concern. When I found out about it, I went through the laborious process (it took several days because of Google’s clear intent to make it difficult) to refuse Google permission to allow the scans’ use. Google indicated it would "probably" not use the scans for which permission was refused, but that was the best I could do. 

Moon feels that the universities should remove every copyrighted work from their files and not put any back until they can establish a solid procedure for researching the ownership of works thought to be orphaned.

From the other side, Corynne McSherry of the Electronic Frontier Foundation points out some commonly-held misconceptions about the HathiTrust situation (found via BoingBoing) that suggest it might not be as bad as authors fear. She notes that the legality of the scans is already being litigated in the Author’s Guild vs. Google case, and filing a separate suit over the same issue isn’t going to do anything but enrich the lawyers. And since the libraries are making noncommercial use of works, and only providing full access to public-domain books for now (only factual information is provided about works still under copyright), the libraries are in a better position, legally, than Google.

As for the matter of orphaned works, McSherry mentions that the owners of those works are not actually members of the Guild (and, indeed, in some cases are not even known), which brings into question whether the Guild even has standing to file the suit. And as for the works that the Guild was able to de-orphan with a few minutes’ work, those works are already being pulled from the orphaned works collection, as the libraries promised would happen if their rights-holders came forward.

The lawsuit gamely claims the libraries are causing “great and irreparable injury” to the authors the Guild claims to represent, as well as several additional individual authors, but it is hard to imagine what that harm might be. Presumably, most authors would like to have their works preserved, which is what the original scans are for, and can hardly object to the public having access to bibliographic information about them. The Guild claims there is an “intolerable” risk that the repository will be hacked – but offers no reason to imagine this will happen, or that the digital repository is less secure than the places where physical books (and digital works on microfiche, etc.) are stored. The Guild also complains that the problem of orphan works should be solved by Congress. That would be great, but it doesn’t seem to be happening anytime soon and denying academic communities (and indeed all communities) access to these works while Congress fiddles seems deeply wrong.

The Author’s Guild did score a public relation coup by easily locating authors of several works HathiTrust considered orphaned. Standing or not, it doesn’t make HathiTrust look very competent. But the proof of the pudding is in the eating; it will be interesting to see how this case fares in court.

The Authors Guild, its counterparts from various Commonwealth countries, and a group of authors have filed suit to block the use of unauthorized scans of copyrighted works from the universities libraries as part of a project to build a group archive. A separate suit targets an orphaned works project which aims to sell e-versions of still-in-copyright works whose rights-holders cannot be found.

The authors’ coalition would like to see everything grind to a halt—Google and the libraries kept from any further scanning, the HathiTrust’s orphaned works project shuttered, and the digital copies on its servers impounded. The digital works wouldn’t be deleted, but it wants to see "any computer system storing the digital copies powered down and disconnected from any network, pending an appropriate act of Congress." (Note that they want them shut down and unplugged, just to be sure.)

Of course, judging from the progress in the Google lawsuit, this case might go nowhere just as fast.

Judge Chin had rejected the much-vaunted $125 million previous settlement back in March, feeling that it gave too much power to Google. He expressed the opinion that an opt-in system, in which authors and publishers explicitly had to allow their books to be made available, would be preferable over the opt-out system Google had previously proposed.

After the hearing, a Google spokesman said that the company was looking into “a number of options” to comply with the judge’s suggestions, and an Authors Guild lawyer said they were working toward an opt-in settlement.

If both parties have not come up with a settlement by the September deadline, the judge will set a “relatively tight schedule” to move the case forward to trial. Lest we forget, in six years of legal wrangling, the case has never managed to move past preliminary hearings and settlement talks. It’s hard to blame Judge Chin for starting to get a little impatient.

Still, it’s a little sad to see the opt-out option, which would have made orphan works available by default, go out the window. One of the parts of the original settlement that most appealed to me is that it would have meant vanished rights-holders would no longer default to being dogs in the manger.

Harper insists that it is not abandoning the CD format—it may choose to bring out a few more of those 150 titles as CDs later in the publishing process—but that in recent years its listeners have more and more moved over to digital audio. A Simon & Schuster rep pointed out that CDs still do not have to sell too many copies to turn a profit.

Perhaps most interesting from a TeleRead point of view, however, is a note that HarperCollins has lately changed its boilerplate contracts to bundle audiobook rights in with the rest of digital rights to any given book.

While any attempt by publishers to control more rights is often met with outrage by agents, the issue with audio is more complex. Although some agents said they dislike the idea of rolling up audio rights with digital—one said, bluntly, “It is something we will not accept”—others acknowledged that perhaps audio belongs with digital. With the market for digital books in varied formats expanding, agents said that audio will likely be something necessary for those ancillary digital forms, like enhanced e-books and formats that have not yet sprung up. Almost all those interviewed said the industry is looking ahead to a time when the audio download will be bundled with the e-book, and these enhanced editions will be something that can then compete, and be priced competitively, with a print hardcover upon a title’s initial release. If a publisher is only using the audio right to create a digital download, which generally brings in less revenue for authors since its price is significantly lower than the CD’s, agents will be forced to weigh the pros and cons of selling audio separately. Withholding the audio right may block a publisher from creating editions like enhanced e-books or apps, cutting off valuable revenue streams. But withholding the audio right offers the chance to land a separate audiobook deal with a smaller audio publisher.

However, Paul Aiken of the Authors Guild noted that this could prove to be a serious point of contention for many authors and agents, potentially making it harder to recover audio rights if a publisher is not doing anything with them.

The digital publishing world is changing, and this is only one more example. Perhaps audio and digital do belong together—after all, both formats are predominantly delivered over the Internet now. It will be interesting to see how this all shakes out over the next year or so.

Yes, this is exactly the feature that debuted in the Amazon Kindle and was then removed when publishers screamed bloody murder. But somehow, so far, Apple has gotten away with it, maybe because nobody’s even realized this feature is in there.

Why is it all right for the iPad to read books aloud, but not the Kindle? Because it’s more obviously part of an overall accessibility system for the blind, whereas the Kindle’s was meant for the convenience of the sighted (and indeed, the rest of it proved to be so inaccessible to the blind that colleges were prohibited from adopting it for textbooks), perhaps? Or is the Authors Guild more willing to give Apple a pass since it helped them stand up to the “man” on the matter of e-book pricing?

Since Pogue explained how to do it, I went ahead and gave it a try myself. It read a little fast to be understandable on the default setting, though that is adjustable by slider. The odd emphases and pauses also didn’t help understandability, and I didn’t really like the way it changed the device’s default gestures. It’s not going to replace a talented audiobook actor any time soon.

Still, I did like how loud and fairly easy to understand the individual words were, and it’s good to have the capability available even if it’s not one I would ordinarily choose to use.

Several agent friends have confirmed that Macmillan sent a letter over the weekend asking authors to sign amendments that gave them electronic rights to backlist titles.

Kristin points out that these letters went directly to the authors in question—not the agents or agencies that represent them—and reminds authors not to sign them without checking with their agents or attorneys.

The Authors Guild has spoken up a couple of times about this kind of behavior coming from Random House, but this seems to be the first sign that Macmillan is moving to take the same position. Of course, Macmillan’s CEO did say he was “appalled” by the Wylie deal, so it’s not exactly a surprise in that light.

Even though Wylie’s actions brought new attention to it, the issue of e-rights to backlist titles (books published before e-book rights started hitting standard publishing contracts in the early to mid nineties) pre-dates this blog’s earliest post by several years—it first surfaced back in the Palm PDA reading days when an outfit called RosettaBooks got together with some authors to publish e-books of such titles.

Random House objected, but dropped its lawsuit after a summary judgment against it indicated that if they took it to full trial they would probably lose on the merits. That hasn’t stopped them (and other publishers) from making the same angry noises after Wylie’s recent move, however. Of course, Random House has not filed another lawsuit yet, so perhaps noise is all it will end up being?

(Found via BookSquare.)

Today, Galleycat reports that the Authors Guild sent out a warning over a letter from Wiley & Sons, the new owner of Bloomberg Press, to Bloomberg writers concerning changes to the accounting system. Notes the Guild:

We’ve asked an independent royalty auditor to review the effects of these contractual changes on royalty income. The royalty auditor found reductions of 24% to 43% using actual sales figures and applying Wiley’s amendments. (The precise affect of the amendments will vary by title, depending on particular categories of sales of the work.)

The Guild is also concerned that a clause pertaining to retaining rights through relatively low print-on-demand sales could amount to granting the publisher perpetual rights to the work for “a pittance,” rather than letting it revert to the author’s ownership after a set period of time. (This has been a common fear ever since print-on-demand and electronic publication first came to prominence in the last few years.)

Galleycat since reported that Wiley & Sons has responded to the Authors Guild’s allegations:

This morning — without speaking with Wiley concerning its specific assertions — the Authors Guild issued an ‘alert’ to its authors, claiming that the Wiley letter is deceptive and inferring that the Wiley changes it effects will reduce royalties for all or most former Bloomberg authors. This is simply not the case. We believe former Bloomberg authors will be paid higher royalties in most instances. The limited number of contract amendments the AG apparently chose to select are not therefore representative; nor are their ‘calculations’ accurate.

Wiley further offers to discuss the contract changes with all affected authors.

Related: Open letter to Authors Guild president on piracy from Brian O’Leary

It should not come as a surprise that now that the Kindle followed by the iPad have suddenly catapulted e-books and e-book reading into the spotlight, suddenly a lot of light is being shined into that dark corner of the net where e-book pirates lurk.

Carnoy singles out the iPad as the main culprit in the increase in e-book piracy, comparing its greater sales over the Kindle to the original iPod’s greater sales (and great boost to music piracy) over the Rio and other MP3 players that came before it.

He suggests that the fragmentation of the e-book market originally slowed down piracy just as it slowed down sales, but that standardization on the EPUB format is giving pirates an easier goal to target.

It seems that most of the EPUB files available are converted from PDF files (scans of books), but what’s scary is how compact the files are (less than 1MB) and how easy they are to load into iBooks and other e-readers that support the EPUB format. Though the size of movies and games can easily exceed 1GB and take hours to download (just ask folks who own the PSP Go how they long they have to wait to download games they’ve legally purchased), e-books can be shared in a few seconds. It seems that it’s only a matter of time before file sharers move from exploiting the "analog hole" (scanning a hardcopy book) to the digital world of cracking copy-protection schemes and stripping legally bought e-books of their DRM.

Carnoy seems not to be aware that there are already DRM-cracking tools for MS LIT, eReader, MobiPocket, Kindle, and Adobe ADEPT—in fact, every major e-book encryption format except for Apple’s, and I don’t doubt that one will come out soon. All the same, it seems that for whatever most pirated e-books still turn out to be scans rather than cracks.

Apart from the ease of piracy, Carnoy also touches on the way consumers are rebelling against higher prices for e-books by leaving negative comments on Amazon, and suggests those higher prices may drive readers to pirate the books rather than pay for them just as $11-$12 CD prices drove consumers to do the same for music.

Over on TechDirt, Mike Masnick has his own opinions of Turow’s stance on piracy as mentioned in Carnoy’s article:

Rather than saying that unauthorized file sharing is such a big problem, perhaps Turow should take a look at the music industry more closely. He seems to only be superficially aware of what’s happening in that industry. Instead of recognizing that the industry wasted over a decade fighting what fans wanted, he seems to think that he can magically fight what every other industry has failed to fight. That doesn’t seem like a strategy that has a high likelihood of success.

E-book piracy is nothing new. It has been going on for at least as long as scanners have existed. I remember seeing e-books circulating on peer-to-peer networks as soon as there were peer-to-peer networks, and naturally the Harry Potter novels were all pirated literally within hours of their release—in blatant defiance of Rowling’s refusal to license e-book editions.

Only a very few writers have ever troubled themselves to take legal action over on-line piracy of their books. But now that a nontrivial amount of money is being made in the e-book trade, and estimates are that number will only increase, suddenly publishers and writers are finding piracy worth fretting over.

As Masnick says, the other industries have not had much luck fighting piracy with legal battles. The music industry by and large stopped trying after its attempts to coerce file sharers into paying up with nasty legal letters turned out to cost a lot more money than it took in (and not dent the continued sharing of music files). The movie industry does not seem to have learned this lesson yet, but Time-Warner Cable is starting to school them.

It is hard to imagine how Turow might succeed where they failed.

Update: Charlie Sorrell at Wired’s “Gadget Lab” blog has another great opinion piece on the matter. He points out that e-book piracy is still relatively small at the moment, and probably won’t become a major problem until everybody, not just early adopters, has an iPad—though it undoubtedly will happen.

Blaming the iPad is stupid, though. If it causes a rise in book piracy, it is only because it is driving demand. The book industry should embrace this and give us what we want: cheap books, published day-and-date with their paper equivalents, along with all back-catalog titles made available. And preferably DRM-free.

Related:

• Harlan Ellison will cut off your hand
• Too pricey…or not enough piracy?
• Apple App Store approves ‘Knife Music’ novel after David Carnoy removes F word: Self-censorship in action

On the E-Book Community mailing list,

There are hoops to jump through to be included but nothing outrageous. Among them…a unique ISBN (they have a free option that shows SW as the publisher and a $10 version that doesn’t, which they will allow you to run a credit balance to get), acceptance into the premium catalog, and cover art loaded of at least 600 pixels high.

More details here.

Whether bestsellers on iBooks will be priced at $9.99 or $12.99, there will be a number of books on the store absolutely free. AppAdvice reports that the iBooks catalog includes access to a number of Project Gutenberg titles. Although other iPhone readers also have access to Gutenberg, either directly or via Feedbooks or Manybooks, having them in iBooks will help Apple make the app more appealing.

Saying that iPhone apps look terrible when blown up to the size of the iPad’s screen, developer Marco Ament is making a new version of his Instapaper read-later application that will work to best effect on both iPads and iPhones. Gizmodo thinks that this new version of Instapaper will be a great killer-app for the iPad.

Apparently the iPad SDK will allow programmers to bundle both iPhone and iPad versions in a single app, meaning that it would only be necessary to purchase one version to run in both places. That means that those who have already purchased Instapaper Pro will have the use of it on the iPad without paying again.

Since the iPad is eminent, a number of e-book devices’ prices have dropped already, and CNet speculates on whether Amazon might consider cutting the price of its Kindles to $199. As the next lower price with the psychologically appealing lots-of-9s in it, this price point could have the potential to sell a good number of the devices. It certainly seems that the iPad is going to benefit even those e-book readers who don’t plan to buy one, since it will drive down so many other prices to compete.

Over on TechDirt, Mike Masnick wonders why it is that the Authors Guild has not yet “freaked out” over the iPad’s text-to-speech reading capabilities. It was fairly quick to jump on Amazon after the announcement of the Kindle’s text-to-speech after all, claiming that it infringed on the separate audiobook rights, until finally Amazon permitted them the option to disable it.

There has not yet been any sign of a similar outcry from the Authors Guild this time, however. Have they simply not noticed the text-to-speech capability yet? Or is negotiation going on behind the scenes?

Google Livres (the French version of Google Books) has lost an appeal not to have to publish the text of the December court ruling against it on its website for two weeks. The verdict ordered Google to pay a French publisher damages for digitizing copyrighted books without permission.

Google is appealing both the ruling in the appeal not to publish and the original ruling itself. However, the appeal against the original December decision may not be heard for another year or more.

Amazon may be forced to adjust its e-book pricing at the behest of publishers and their new agency model, but it seems to be just as guilty of enforcing price-fixing itself in other ways.

Amazon sites in the European Union—Amazon.co.uk, Amazon.de, and Amazon.fr—will be requiring “price parity from all sellers” beginning March 31. That is to say, those people selling goods through Amazon Market as well as other venues will be required to post the lowest price on Amazon. (At least, I think  that is what the article means. It might mean they can’t sell anything cheaper than Amazon itself does. I’m not sure.)

Mediabistro

It seems that those two publishers are trying to get their writers to lock into 25% royalty rates on e-books. While this might look better than the 15% going rate on hardcovers, the Authors Guild warns that the terms may not be entirely desirable:

Authors and publishers have traditionally split the proceeds from book sales. Most sublicenses, for example, provide for a 50/50 split of proceeds, and the standard trade book royalty of 15% of the hardcover retail price, back in the days that industry standard was established, represented about 50% of the net proceeds of the sale of the book. We’re confident that the current practice of paying 25% of net on e-books will not, in the long run, prevail. Savvy agents are well aware of this. The only reason e-book royalty rates are so low right now is that so little attention has been paid to them: sales were simply too low to scrap over. That’s beginning to change.

The Guild advises authors try to retain the right to renegotiate terms after a couple of years, stipulate a “royalty floor” in their contract (such that the amount of money they get for each e-book sale is at minimum equivalent to the amount they would get from a print sale), make sure the terms do not adversely affect their reversion of rights clauses, make sure they are not signing away rights they already control—and if all else fails, wait for a better offer to come along as the market develops.

The royalty percentage increase was in part a reaction to the new agency pricing model that Apple and Amazon are going to, to give the writer a bigger chunk of the smaller monetary amount coming in. But it is still too early to tell whether this increase will really be enough.

Related: Authors Guild repudiates Random House e-book rights grab