Amazon, Used Books and E-books

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By albaby1
April 11, 2002

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Posted on the BNBN board, apparently the Author's Guild is a bit miffed at Amazon's Marketplace.

In a nutshell, the Guild is concerned about Amazon's promotion of used book sales. Unlike rival BNBN, Amazon provides links to used books on the same page as the listing for new titles � thus, sales of used books now account for a sizable percentage of Amazon's total sales. The Guild is upset because authors don't receive royalties on sales of used books; and they are calling for their members to remove links to Amazon. What really got their goat, though, is Amazon's newest innovation � "a new Web page reminding returning shoppers what their previous purchases were and advising them how much they might earn by reselling them through Amazon."

The little protest action is unlikely to affect Amazon � after all, Ammie's a long way past depending upon affiliate links to promote the brand. However, it does raise some interesting questions about the future of the book industry, or indeed any of the major consumer media industries, in the digital age.

Used books have always been with us, so why is the Author's Guild upset now? Largely because the internet substantially reduces the transaction costs associated with purchasing used goods. Prospective purchasers used to have to take the time to comb antiquarian bookshops or flea markets looking for a title; now, the thriving used marketplaces on Ebay and (presumably) Amazon have all but eliminated those non-pecuniary costs.

Expansion of the used book market may disturb the fundamental basis of publishing economics � namely, that there is an approximate correlation between the number of persons who "consume" a book's content and the number of books that are physically sold. Under this system, basing royalties on the number of sold books makes sense. If it takes 950,000 physical books to satisfy the reading needs of a million readers, publishers and authors can establish a royalty framework based on book sales relatively easily.

What happens, though, when the book's content reaches that same user base via fewer physical books? With a thriving used-book market for a title, it may only take 800,000 books to reach that same million readers � or 700K, or 600K. To provide the author with the same economic benefit commensurate to the actual use of the content, the royalty for each book sold has to rise. The price of the first book purchase rises, which only increases the economic benefit to purchase the used copy.

This has disturbing implications for electronic books. Although the 'net may have lowered the transaction costs to buying used, there are still costs associated with shipping a book. And all on-line sales have a time delay between purchase and consumption while the good is being delivered, with book rate shipping being slower than most. With e-books, however, these barriers may disappear altogether. What happens if I can resell my e-book on Ebay or Amazon instantly, with no shipping costs, through an electronic upload to the end purchaser? Heck, even if I still have to ship a physical disk, it's quicker and cheaper to do so than shipping a book. How many copies will then be needed to satisfy a particular reader base? Just think Netflix, but with books.

If the Author's Guild is openly protesting even this limited used book market, it seems unlikely that they would buy into the economic model that would flow from e-books. Same goes for publishers, who only earn profits the first time an individual copy of a book is sold. As long as e-book buyers have the same right to resell their single copy as do buyers of physical books, then the e-book market poses a substantial threat to the publishing world. Perhaps this dynamic will pose an even greater obstacle to electronic publishing than the technological hurdles.


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