Used bookstores: The next notch in Amazon's belt?

Selling used ebooks could become a lucrative market for the Seattle company. But it might obliterate another retail sector.
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Ophelia's Books in Seattle's Fremont neighborhood

Selling used ebooks could become a lucrative market for the Seattle company. But it might obliterate another retail sector.

Amazon remade the publishing business first with online bookselling and next with the Kindle/ebook one-two combination. Now it’s poised to reinvent another segment of the paper-and ink universe: used books. And Amazon could use the technology to drive another wedge between authors and traditional publishers.

Amazon’s plans surfaced in late January when the U.S. Patent and Trademark Office awarded the company Patent No. 8,364,595, titled “Secondary market for digital objects.” The abstract describes a way for the owner of an ebook, say one of titles in the wildly popular Hunger Games series, to sell the digital file to someone else. It could go to a friend or possibly Amazon itself. Amazon would earn a fee on the sale, or perhaps resell the digital file from its website. Amazon’s main competitor in digital goods, Apple Computer, filed a patent application on March 7 for a similar method.

According to the Association of American Publishers, ebooks make up 22 percent of the American book market. If Amazon is able to build a system for buying used ebooks, there would be fewer reasons for consumers to buy printed books, or for publishers to create them.

Now, when a person buys a physical book, she has the right to sell that book to anyone, including a used bookstore, without violating any of the publisher’s or the author’s rights. But this rule doesn’t apply to digital media files, such as ebooks, music files and videos. Legally, you can only buy downloadable digital files “new.” Amazon’s patent signals that it believes a legal marketplace for used digital files may be in the offing. (Full disclosure: I use Amazon and other distributors to sell my independently published ebooks.)

The potential for a used ebook market has sparked a bitter debate among authors working in the brave new world of independent publishing. Some argue that Amazon has no right to create a used digital book market without violating the author’s copyright. A secondary market for ebooks could also encourage piracy, one author argues. Others observe that the market for digital files is fundamentally different than physical books. For one thing, a person who purchases an ebook buys a license, not the object itself. In other words, you pay Amazon a fee for permission to read an ebook on a Kindle, permission that Amazon can technically revoke at any time. The company can even limit the amount of time you have to read the book.

In a used ebook market, you would simply sell the license to someone else, and Amazon would delete or disable the book on your Kindle. From the consumer perspective, a trade group called the “Owners Rights Initiative,” which includes the American Library Association, believes copyright and patent laws need to be reformed to allow re-selling of all digital goods under the principle of “You bought it, you own it, you have a right to resell it.”

The revenue potential for Amazon is enormous. It could charge a fee for every license transfer. As in the “new” ebook market, prices for used ebooks would likely be lower than in brick-and-mortar used bookstores, undercutting their business model. For example, the price of a used book is often based on availability and condition, factors that disappear in the digital world, because computer files never get dog-eared or stained by spilled coffee.

And if Amazon plays this opportunity smartly, it could give new and established authors yet another reason to abandon legacy publishing. When a used bookstore sells a book to a customer, the author gets nothing for his labor; he only earns money on the first sale of the volume. But in a market for used ebooks, Amazon could assign a portion of the license transfer fee to the author, giving him another source of revenue. (Apple’s recent patent application explicitly includes this idea.) It would be another nail in the coffin of traditional publishing.

Amazon and others interested in creating a market for used digital goods face important legal hurdles. ReDigi, a company that sells what it calls “pre-owned digital music,” is challenging the music industry’s perceived right to control the content it creates and distributes even after it’s purchased by the consumer. And a farmer in Missouri argued last month in the U.S. Supreme Court that he has a right to grow patented genetically modified soybeans and save some seeds (that is, keep unlicensed copies) for replanting. Amazon probably won’t move on a used ebook market until the law’s murkiness on digital and other types of patents is cleared up.

But the story arc of digital media is clear: physical objects that can be turned into 1s and 0s — books, images, music recordings, and videos — will continue to shrink as a proportion of the media marketplace, perhaps becoming little more than a niche. If Amazon and other ebook sellers create a secondary market for used ebooks, in 10 or 20 years, the used bookstore on the corner may become a curiosity frequented only by collectors and sightseers interested in how things used to be.


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