Reflections on the IPG-Amazon Dispute
by George H. Pike
The intersection of the publishing world, technology, and the law—particularly copyright law—can be a very volatile place. This has been recently illustrated by a series of semiconnected developments that raise issues about the way publishing, technology, and law will be able to move forward in an ever-changing digital world.
One such development was a rapidly escalating dispute between Amazon and the distributor Independent Publishers Group (IPG) over royalty and payment terms. At almost the same time, another development emerged when Harper-Collins Publishers filed suit against Open Road Integrated Media, Inc., an ebook publisher, over ownership of ebook rights versus ownership of book rights. Add this to the ongoing investigations in the U.S. and the European Union over possible price fixing in the ebook marketplace, and you have a significant state of turmoil.
Challenges at this intersection of content, technology, and the law are not new. In some respects, the evolution of copyright law is a reflection of the evolution of technology and the publishing marketplace. From its earliest inceptions, copyright law was intended to provide economic incentives for creating and publishing content, while maintaining some benefit to the public through access to information. The U.S. Constitution promotes progress in “Science and useful Arts” by protecting the “exclusive Right” of authors and inventors. But from the earliest days, the practical impact of copyright has been to protect the manufacturers, publishers, distributors, and other such middlemen, while securing royalty payments to the author or the creator.
This made sense through most of copyright history, since these middlemen often were the ones who provided an infrastructure for getting content from author to reader. Investments in printing presses, warehousing, distribution, and other systems needed the security of income that copyright provided. An author was entitled to royalties for his or her creation, but it was the publishing industry that collected and retained the bulk of the revenue.
The first U.S. copyright law in 1790, which applied only to books, maps, and charts, lasted for only 14 years, plus a 14-year renewal. Given what was published, how long materials remained in publication, and the limited life expectancies of authors, this made sense.
In the 19th and early 20th centuries, technological innovations triggered expansions in technology and publishing and a concurrent expansion in copyright law. By 1909, copyright law furthered its reach to encompass music, plays, works of art, photographs, and motion pictures as publishing infrastructures had been established or expanded to cover this content. The copyright term was also broadened to 28 years, plus a 28-year renewal. However, the law required that copyrights be registered in order to be covered by federal copyright protection.
By the 1970s, however, technological advances had not only continued, but they had shifted to allow more “end-user” copying, which threatened the publishing infrastructure in new ways. The photocopier, audiocassette tapes, instant photography, and the beginnings of the computer age gave individuals greater ability to participate in what previously had been the exclusive domain of the publishing industry. As a result, copyright law changed again, expanding not only to protect new content forms and theoretically applying to any known or unknown technology, but also expanding copyright to the life of the author plus 50 years (later raised to 70 years), or 75 years (now 95 years) for corporate authors. In addition, the registration requirement was eliminated; works are now copyrighted at the moment they are created.
And yet, the disputes continue, and the intersection of publishing, technology, and law remains at the center of it all. The IPG dispute with Amazon is a good illustration of these ongoing challenges. The problem was triggered by transitions in the means by which content passes from author to end user, a process that includes copyright and other legal implications.
IPG is a book distributor that provides services to several hundred small publishers to distribute their works to booksellers, including brick-and-mortar bookstores, as well as online bookstores and ebook retailers. The small publishers benefit by having a service available to get their works distributed for a modest cost, and the booksellers and retailers benefit by having one company to deal with to obtain works from multiple small publishers.
IPG distributed works to Amazon in both physical and ebook formats. While terms of the agreements were confidential, Amazon would generally pay a set price per item to the distributor. The distributor in turn would take a cut before passing on the proceeds to the publishers. In early 2012, Amazon proposed a new agreement that would have changed the terms of the agreement as it applied to ebooks, presumably reducing the amount paid to IPG. When IPG refused to agree to the new terms, Amazon removed more than 4,000 ebook titles from its website in response.
David Versus Goliath?
Some commentators are presenting this event as a David versus Goliath dispute with IPG as the one distributor willing to stand up to Amazon’s perceived attempts to dominate and dictate the ebook marketplace. According to The New York Times, Amazon reportedly controls about 60% of the ebook market through its Kindle e-reader. However, The Times also reports that Amazon is “under pressure” from stockholders to improve its margins. IPG is actively asking its publishers and authors to encourage the purchase of print books through “your local independent bookshop” or in ebook editions through Amazon competitors Barnesandnoble.com and Apple’s iTunes.
Apple’s ebook program has its own share of David versus Goliath problems, although it’s harder to identify who David is here. For several months, Apple and a group of five major ebook publishers were the target of several investigations and lawsuits over alleged agreements to set up an “agency” pricing model for ebooks. Agency pricing is based on a publisher setting a standard pricing model for all books in all formats, compared to normal wholesale pricing that allows a retailer to determine its own price and profit.
If, as alleged, several publishers and Apple (in its role as a distributor or bookseller) collectively agreed to agency pricing, it could be considered an antitrust violation. In mid-April, the U.S. Department of Justice decided exactly that and filed a 35-page federal antitrust lawsuit against Apple, as well as several major book and ebook publishers. If publishers entered into an agency pricing model with Apple and at the same time mandated an agency model for Amazon and other retailers, the Justice Department is alleging that there was a conspiracy to fix higher prices for ebooks.
However, both of these cases could also be seen as foreshadowing change in the marketing of print and ebooks, driven by the technology, market, and copyright changes. As copyright law protects an author’s work at the moment it is created in any fixed format, the author has more control over how his or her work is distributed. With the kinds of instant and near-instant publication and distribution technologies available—including Amazon-based self-publishing—who says that distributors and perhaps even publishers are not, as one commentator wrote, “dinosaurs”?
The confluence of publishing, technology, and law is also at the center of an unrelated lawsuit filed by HarperCollins against Open Road Integrated Media. Open Road recently published several ebook versions of works by Jean Craighead George, the Newbery Medal-winning author of young adult classics such as Julie of the Wolves and My Side of the Mountain. George’s original publishing agreements, dating from the 1970s, gave “book” publishing rights to HarperCollins. When Open Road published ebook versions of George’s works—with her authorization—HarperCollins sued, claiming copyright infringement.
What Is a Book?
The legal question will end up being, “What is a book?” Is an ebook the same thing as a print book? Both are mechanisms that “reproduce the author’s text in its complete form as a reading experience”; therefore, ebooks are the same as books. On the other hand, a book’s dictionary definition specifies that it is “a written or printed work of fiction or nonfiction, usually on sheets of paper fastened or bound together within covers,” so ebooks are not the same as books. As copyright law now recognizes the rights of the author as being a separable “bundle of sticks,” it is critical that the law distinguish between an ebook and a book or that authors identify which rights they are offering.
But if the traditional worlds of publishing are breaking down, authors may only need to identify through whom and how they want their books and ebooks made available to readers. In one discussion about the IPG-Amazon dispute, Jane Graf, director of International Publishers Marketing—a separate distribution group—indicated that Kindle contracts were so focused on requiring that the publisher have documented ebook rights, that it opted out of the e-format and encouraged individual publishers to deal directly with Amazon.
Publishing, technology, and copyright law have always struggled to coexist; however, the digital world continues to add to the challenge. It may be that the law will again change to keep up (or catch up) with new technologies. It is more likely that technology will continue to provide for as-yet unexpected challenges. It is probable that traditions in publishing will change and that some participants will not survive. History would suggest this to be true.