An Ounce of Copyright Reform is worth a Pound of Competition Law

An Ounce of Copyright Reform is worth a Pound of Competition Law

Libraries across the country, despite being more valuable than ever, face a triple threat as a result of the pandemic. Their funding sources (state and local tax dollars) are being squeezed, the demand for online reading material is at an all-time high, and the largest publishers of e-books have the market power to charge exorbitant rates–if they make their works available at all. As reported by Geoffrey A. Fowler in The Washington Post:

Turns out, the tech giant [Amazon] has also become a publishing powerhouse — and it won’t sell downloadable versions of its more than 10,000 e-books or tens of thousands of audiobooks to libraries. That’s right, for a decade, the company that killed bookstores has been starving the reading institution that cares for kids, the needy and the curious. And that’s turned into a mission-critical problem during a pandemic that cut off physical access to libraries and left a lot of people unable to afford books on their own.

Many Americans now recognize that a few tech companies increasingly dominate our lives. But it’s sometimes hard to put your finger on exactly why that’s a problem. The case of the vanishing e-books shows how tech monopolies hurt us not just as consumers, but as citizens…

Librarians have been no match for the beast. When authors sign up with a publisher, it decides how to distribute their work. With other big publishers, selling e-books and audiobooks to libraries is part of the mix — that’s why you’re able to digitally check out bestsellers like Barack Obama’s “A Promised Land.” Amazon is the only big publisher that flat-out blocks library digital collections. Search your local library’s website, and you won’t find recent e-books by Amazon authors Kaling, Dean Koontz or Dr. Ruth Westheimer. Nor will you find downloadable audiobooks for Trevor Noah’s “Born a Crime,” Andy Weir’s “The Martian” and Michael Pollan’s “Caffeine.”

Libraries, reports Fowler, pay “more than we do for e-books — between $40 and $60 per title and as much as $100 for a popular audiobook. And unlike print books, which libraries can lend out to one person at a time again and again, e-books often come with digital locks that make them expire after a certain number of loans or a set period of time.”

In response to this state of affairs, a number of states have introduced laws that would require e-book publishers to make their works available to license for the public. Andrew Albanese writes in Publishers Weekly on a just-passed law in Maryland:

[T]he Maryland legislature became the first state to pass legislation that would ensure libraries can license e-books and other digital “literary” content that is available to consumers. And in a strong sign of support for libraries (especially in these politically divisive times) the bill passed the Maryland General Assembly (both the House of Delegates and the State Senate) unanimously.

First introduced in January, the bill (HB518 in the House of Delegates and SB0432 in the Senate) would require “a publisher who offers to license an electronic literary product to the public to also offer to license the product to public libraries in the State on reasonable terms that would enable public libraries to provide library users with access to the electronic literary product.”

The bill is limited to Maryland, though Rhode Island and New York are considering similar legislation. And while it addresses the problem of e-book publishers flat-out refusing to license to libraries, it doesn’t explicitly define what reasonable means in terms of pricing or other terms of licensing agreements (though it does lay out what terms shall be included in such arrangements). And it’s unclear how vigorously Maryland would enforce this law.

This isn’t a dig on the Maryland law. Instead, it’s a caution to those who are enthusiastic about the use of competition laws which must be enforced by some government body. Such laws aren’t self-executing. Political capture, underfunding the relevant enforcement agency, or more general logistical difficulties associated with enforcing these laws can undermine an otherwise worthy policy.

The corollary to this caution is that it’s better to design laws and institutions which either facilitate competition or prevent market dominance from translating into undue leverage. Even better is to undo or clarify regulations which make the worst abuses of market dominance possible. Enter copyright reform, specifically the explicit legalization of controlled digital lending (CDL) and digital ownership.

I have written about the merits translating the benefits of physical property rights into the digital world elsewhere, and this is another example of the benefits of such laws. If libraries could either digitize collections of physical books or purchase (instead of merely license) e-books, Amazon wouldn’t have nearly as much leverage as it currently does in this situation.

We already know what controlled digital lending looks like in practice, and the rise in prominence of non-fungible tokens (NFTs) makes transferring ownership of digital assets the same way you could transfer a physical book possible. Indeed, it’s not difficult to imagine a world where the widespread adoption of these practices would make laws like Maryland’s unnecessary.

While Amazon, in its capacity as a publisher, holds the rights to the books it publishes, the “end of ownership” means it has no incentive to offer e-books with the same legal protections associated with books in the physical world. The damage to the general functioning of the market for books and music may already be done, but it’s not difficult to imagine a world like ours but not ours where the DMCA included provisions explicitly allowing for digital exhaustion or where ReDigi went the other way and the transfer of objects purchased online were allowed.

It wasn’t that long ago that you’d “purchase” a song or movie on iTunes, and subscribing to a streaming service simply wasn’t an option. There are unique advantages to streaming, of course, but the legal impossibility of ownership in the digital age puts a thumb on the scale in favor of streaming for both consumers and distributors. Most folks don’t purchase physical books with resale in mind, but the option to either get rid of it at a yard sale or donate to your local library is most certainly a consideration that doesn’t exist in the digital world.

But enough alternate history–what is possible in the future if CDL or digital ownership were explicitly legalized? In the case of digital ownership, it would be easy for someone to transfer their purchased copy of an e-book to their local library if they’re done with it. In the case of controlled digital lending, one could easily imagine an arrangement where a library could bulk-purchase physical copies directly from publishers, lock them in a warehouse, and make them available under a CDL system. This may be workable for university libraries or large institutions like the New York Public Library to go it alone, but it’s also easy to imagine an arrangement where a large network of public libraries agree to make such a purchase and start their own CDL program. This could be a state-based system, or potentially national. The sky’s the limit.

Of course, it’s the prerogative of the rights holder to choose to license or sell a work, and legislation like Maryland’s would be warranted if Amazon or other publishers flatly refused to license or sell to libraries. Such an arrangement where institutions are ready to bulk-order books may be attractive to traditional publishers (who have predictable objections to Amazon’s dominance in the book publishing world), but facilitating competition in the e-book market by making ownership real would significantly undermine Amazon’s advantage as a tech company vis-a-vis distribution.

This proposal isn’t One Weird Trick to end Techlash once and for all, and it’s worth pointing out there’s nothing per se wrong with old business models being upended. But the benefits of creative destruction via innovation can only be truly realized if there aren’t gross asymmetries created by the law, and making physical books near-perfect substitutes for digital ones is one way to level the playing field.

I didn't find this helpful.This was helpful. (+1 rating, 1 votes)
By |2021-03-19T09:27:47-07:00March 19th, 2021|Blog, Intellectual Property|