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Reselling E-Books and the One-Penny Problem

There's so much to love about e-books. They weigh nothing, they remember your place, you can make the type larger.

But as I've written over and over, they are also a rip-off in one big way: Although e-books cost nearly the same as printed books, you can't sell or donate them when you're finished reading. So my eyebrows nearly shot off my face when I read an article in The Times indicating that both Amazon and Apple have filed for patents to make reselling e-books possible. These patents would cover not just e-books but music, movies and computer programs.

I took to Twitter.

To my surprise, my followers weren't so much jubilant as concerned. Their questions ran along these lines:

(In the Times article, Scott Turow, president of the Authors Guild, puts it another way: “Who would want to be the sucker who buys the book at full price when a week later everyone else can buy it for a penny?”)

Well, obviously, no plan to resell e-books would work unless the books were copy-protected. Reselling an e-book would work only if there were only one of it, just as with physical books. Once you sell it, you no longer have it.

Both Amazon's proposal and Apple's take care of that problem. Each ensures that only one person can have a particular e-book copy at a time.

You know how it works in the physical book world. Publishers and authors get money from the first sale of the book; after that the owner can sell it to other people.

Look, I'm the author of 50 books. I'd be delighted to get a cut of secondhand book sales. But I never have, and the world hasn't come to an end.

Funny. This Twitterite is imagining that with each new owner, the e-book becomes a little more worn, a little rattier, exactly as with printed books. Very cute. Next?

Another person restated the same concern in different words.

This finally stopped me in my tracks.

So let's see. Bob buys an e-book from Amazon for $10. After reading, he sells it to a new person for $8. After a couple more transactions the used e-book is going for $1. But the reading experience is as pristine and clean as the first one.

In this world, you could buy any e-book for $1 or less if you're willing to wait long enough. For best sellers, you wouldn't have to wait long at all.

Turns out material degradation isn't just a fond side effect of book resales. It's essential. It's what ensures that the resale price matches the diminishing value of the product. If every copy is perfect, the whole thing breaks down. With unlimited e-book sales, every book's price would eventually drop to a penny.

I couldn't believe that Apple and Amazon would be so naïve. Surely they'd thought of this nightmare situation. I decided to read the actual patents.

Patents are pretty hard for nonlawyers to puzzle through. (Typical verbiage from Apple's patent: “Storing threshold data that indicates that the digital content item is associated the specified usage amount and that a second digital content item that is different than the digital content item is associated with a second specified usage amount that is different than the specified usage amount.”)

Both Apple's patent and Amazon's are incredibly broad. And they give the publisher and bookstore a lot of control over what would happen - including, possibly, providing for a cut of each resale.

But what about the one-penny problem? These patents also give the publisher or bookstore the right to impose a minimum price for reselling an e-book. That limit could drop over time, as Apple's patent makes clear: “As another example, all digital movies must be sold for a minimum of $10 until six months after their respective original purchase date. After the six month period, all digital movies must be sold for a minimum of $5.”

Both proposals suggest that publishers could also limit the number of times a digital item can be resold: “A threshold may limit how many times a used digital object may be permissibly moved to another personalized data store, how many downloads (if any) may occur before transfer is restricted, etc.,” says Amazon's patent. “These thresholds help to maintain scarcity of digital objects in the marketplace.”

Clearly, it's much too soon for anybody to panic. Systems like this will take a long time to discuss and develop. Publishers will be given the final say and there will be so many variations and permutations it won't look anything even remotely like a used bookstore. The greatest worry isn't that authors will go out of business. It is that the resulting used e-bookstores will be so complex and saddled with restrictions, they'll be ruined before they even open.

Here's hoping that all four parties - authors, publishers, bookstores and consumers - will demonstrate good will, a love of reading and a minimum of greed and paranoia.