(This is part of a series; the earlier posts are here.)
Electronic distribution has long been touted as making content cheaper for consumers. This has largely been true: Newspaper articles, including articles from out-of-town or foreign newspapers, are now largely available for free. So are many magazine articles. Many old books are available for free on Google Books and Project Gutenberg; the latter books can be easily downloaded onto the Kindle 2. And many Kindle versions of legal books already tend to sell for about 20% below their list price (though some remaindered copies of slightly older paper books actually sell for a deep enough discount that they cost less than the Kindle versions).
But that discount likely won’t be enough by itself for a broad conversion to ebooks, for two reasons: the used book market, and libraries.
Used book sales, and library borrowing, are both enabled by the so-called “First Sale Doctrine” of U.S. copyright law: Once a book is sold, buyers are free to resell it or lend it, and don’t need the author’s permission for that.
And people routinely take advantage of this. Law students often buy used textbooks, and then sell them back to the bookstore when they’re done. Legal academics can borrow pretty much any book they want from their university libraries. Likewise, lawyers routinely borrow books from the firm library; even sole practitioners may pool their book collections with other lawyers in the same suite of offices. We’ve gotten used to borrowing books for free, once someone at our institution — such as a university or a law firm — has bought a copy.
Yet the same transactions would likely be infringing when done for e-books (and are often technically stymied by copy protection). The First Sale Doctrine only applies to “distribution” of books, which is to say the transfer of tangible items. It does not apply to copying of materials. And “reselling” or “lending” an e-book that’s stored on an e-reader’s disk drive necessarily involves copying.
Even if you copy the book to someone else’s e-reader and then delete it from the original, thus trying to mirror a traditional resale or lending arrangement, you’ll still have performed a copy, and thus infringed the copyright in the work. [Foonote about why the fair use defense is unlikely to allow such copying omitted. -EV] So you can only buy e-books “new”; you can’t lend or borrow them, or buy or sell them used.
This is both a barrier to the wide acceptance of e-book textbooks, and an opportunity for publisher. First, the barrier: One can often find used books on Amazon at a much steeper discount than Kindle books tend to provide. Likewise, many college bookstores offer used textbooks at about 75% of the price of new textbooks, and then buy them back at 50% or so of the sale price, if the store expects the same edition to be used again the next semester.
Let’s consider, then, the economic lifecycle of a textbook. Assume an edition comes out in 2010, the textbook is used in one class per year, and a subsequent edition comes out in 2014 (something that the book¬store sees coming, so that it doesn’t buy the book back after 2013). Assume a national average sales tax (6%), which is charged when one buys the book, new or used, but which isn’t charged when one sells it back to the distributor. Here’s how the transactions might look:
| Semester | Transactions | Net cost to student |
| Fall 2010 | Buy new, sell back at 50% | 56% of list price |
| Fall 2011 | Buy used at 75%, sell back at 50% of the sale price | 42% of list price |
| Fall 2012 | Buy used at 75%, sell back at 50% of the sale price | 42% of list price |
| Fall 2013 | Buy used at 75%, no sell back | 79.5% of list price |
Of course, this pattern won’t be perfectly followed: Many students keep their textbooks for future reference. Some students delay selling back their textbooks, and when they’re ready to sell them back might find that they no longer can. Some students prefer to buy clean books, without someone else’s possibly misguided highlighting and notes distracting them from the text. And some bookstores might refuse to buy back books with too much writing in them. Nonetheless, this table suggests that, for many students, a 20% discount from list price might not be enough to get them to buy an e-book version of the textbook.
Now the opportunity: Textbook publishers are already unhappy with the used paper textbook market. One reason they urge authors to come out with new editions is to dry up the used book market, at least for a while.
Textbook publishers, then, have a substantial incentive to charge much less for e-books, precisely because e-books can’t be resold (and because they’re cheaper to produce and distribute). In the example above, for instance, a publisher could charge 35% of the paper list price for an e-book (amounting to roughly 37% with tax included) and still make more money as well as saving students money. [Footnote: The author would also make more in royalties, assuming the rate remains what it has been, since both the author and the publisher now get nothing from used textbook sales.] The savings will come out of the money that the bookstore would otherwise pocket; the book¬store’s costs and profits would no longer have to be paid for.
The students would also get clean copies of the books rather than having to deal with others’ highlighting and marginal notes; and they would get to keep the books for future reference. All these would be further incentives — in addition to portability and, with the revised pricing plan, cost — for them to embrace e-books. And this would happen naturally, if textbooks coexist in the e-book and paper editions: The competition from the used book market would pressure publishers into reducing the e-book costs.
Of course, if publishers can persuade instructors to adopt e-book-only textbooks, then the competition will be absent. Publishers could continue charging high prices for the e-books, because the used paper books won’t be an alternative. And of course the selection decision is made by law professors, while the cost has to be paid for by law students. Still, I assume that professors will be at least mildly interested in saving their students money, and will react to the student annoyance that would likely be created if the professor’s decision makes students pay more for e-textbooks than students have historically had to pay for used paper textbooks.
More on libraries to come.
Texas Lawyer in DFW says:
One small problem. I read law related printed text at about a thousand words a minute. I read on-screen material at about 300 or sometimes less. I find it hard to make good margin notes on a screen or to underline as I read on an e-book.
While I’m hopeful that the “new” standard (the 200 dpi screens, in theory to be available under the Monet standard around 2005 …) will speed up the speed at which I read legal text on-line (I’m hoping to speed up how fast Westlaw is useful for my work), when I need to read a true book, I often end up with a paper copy — and I’ve been known to print out some materials since the net time to make use of them is actually less, print time and all, than reading them on-line.
Just a thought. Though on-line sure is easier for making certain I have accurate citations and quotes.
October 5, 2009, 3:09 pmChrisTS says:
Another small problem. I find I can move around far more quickly and easily in a book than on a screen. Not only can I turn down a corner, but also I just have an easier time returning to a page and going back-and forth than I do by relying on page numbers. Mutiply this by having several books open and spread out around the desk.. I think e-books would make me crazy.
October 5, 2009, 3:29 pmMike says:
To follow up on ChrisTS, you can have multiple physical books available to you at once, and you are able to quickly switch between them. If you only have one e-reader, it could have the entire Library of Congress on it but accessing more than one at once would be a pain. There is both a technological problem, how to make the e-reader quick/responsive enough, and an interface problem, how to present the ability to switch between books to the user to make it efficient and easy enough that it is at least no more of a hassle than with physical books.
October 5, 2009, 3:38 pmPerseus says:
Going to all e-books would probably mean no more free desk copies (in book form) that can be sold to bookstores. So a side-payment would be necessary to make it Pareto optimal.
October 5, 2009, 3:58 pmTatil says:
Here is my take on this: (Assuming what you say is true and publishers can forbid buyers from lending or reselling electronic books without having to worry about “fair use” etc) If books move to online distribution exclusively, publishers do not have to compete with the used book market anymore, which means they can charge more. The ceiling will be determined by the ease of piracy and the kindness of the instructors who will refuse to use textbooks that are too expensive for their students. Companies will not and should not try to keep profit levels the same as before. They will try to maximize their profits.
October 5, 2009, 4:05 pmLaura(southernxyl) says:
“Not only can I turn down a corner”
Vandal!
October 5, 2009, 4:32 pmLior says:
The lack of “first sale” limitations on digital material is a bug, not a feature, and needs to be fixed. As long as laws like the DMCA are in effect there needs to be positive law legalizing the private transfer of digital copies of books, where only a single copy is maintained at any given point.
October 5, 2009, 4:36 pmSoronel Haetir says:
I would expect some savings in this market once the publishers realize that they no longer have to provide a profit margin for the brick and mortar retailer in the list price. However I continue to have problems with the denial of first sale doctrine in this context.
Charging 75 to 80% of the price of a print book for something that is perhaps only 30 to 40% as valuable isn’t going to facilitate any such transition. On the other hand, I can also see publishers pressuring the authors to update editions far more frequently when the production costs drop radically. I can also see other pressures, such as instructors being able to pull together material from online sources without needing a printed book at all that lead in entirely different directions. Perhaps this is all just an example of the current guest poster’s commentary that rather than adapt to new business models existing companies fight emerging models with everything they have.
Even courses that have fairly set curricula over long time periods such as entry level calculus now have online sources that could easily be substituted for printed textbooks. I would think that sort of pressure would be even greater in areas that face frequent updating. I find it ironic that computer programming is one of the areas lacking excellent entry level instruction comparable to what is found in the generally accepted texts. You can find huge gobs of expert level material and answers to specific entry level questions, but not cohesive instruction the way you can for so many other areas.
October 5, 2009, 4:38 pmCato The Elder says:
Preach it sister! I dislike people who mutilate books.
October 5, 2009, 4:45 pmChrisTS says:
MY books, Laura! :-)
October 5, 2009, 4:46 pmChrisTS says:
Actually, that does bring to mind one advantage of e-books: I could stop filling every inch of my home with more bookcases.
October 5, 2009, 4:47 pmChrisTS says:
EEKs. I do not mutilate anyone else’s books; I try to not ‘mutilate’ my own. But even a piece of paper or a sticky flag is more quickly plonked on a page than …well, doing whatever one has to do to bookmark a page of an e-book.
October 5, 2009, 4:49 pmChristian K says:
@Texas Lawyer, ChrisTS and Mike,
October 5, 2009, 4:58 pmThe problems you mention are problems with the currently available “ebook readers”, not with “ebooks” in general, which is a problem many people have when discussing digital distribution. It is very similar to saying that “Mp3s” won’t succeed because the Diamond Rio (anyone remember those?) were too heavy to carry around. In fact, only a small number of techies bought the Rio, but now the majority of music is distributed digitally outside of physical media. Unfortunately this digital conversion has almost destroyed the music industry. Mr. Volokh makes a very good point, digital can be superior, both in functionality and economically.
ChrisTS says:
Christian K:
Yes, I do understand technological advances – in both hardware and software.
My point was more specific: books have pages that can be turned by hand; the location in a book of a desired page can be easily estimated by eye [or hand-eye]; one can make use of several books at a time.
Perhaps the march of technology will resolve all these matters. I stand ready to be amazed.
October 5, 2009, 6:19 pmDerek Shampoo says:
50% of original sale value? I’ve never got anything near that for textbook at a bookstore.
October 5, 2009, 6:54 pmAnon Y. Mous says:
Of course, they only need to worry about the competition for as long as it takes to put an end to the paper books. Once the change has been made, they can charge whatever they can get without the market “distortion” of that particular form of competition.
I would be very interested in reading your omitted footnote on fair use.
October 5, 2009, 7:04 pmStrick says:
Kindle DX: Not Ready for College?
October 5, 2009, 7:04 pmSoronel Haetir says:
I’ve also never seen a serious challenge to the first sale limitation. I suspect that is because there is no player with enough interest to mount such a case. Amazon and other vendors like the current situation just fine.
It would take a retailer like Powell’s or some such and even then the e-book technology owners such as Amazon and Sony can thwart the whole thing from the start. Perhaps our European friends can help here the way they have with the iPhone and other technology opening requirements.
October 5, 2009, 8:59 pmkumquat says:
Unfortunately this digital conversion has almost destroyed the music industry.
The problem is not digital conversion per se, it’s the rampant piracy the record industry failed to effectively combat. If the publishing industry is clever enough to sell e-books in such a way that buying them is approximately as convenient as pirating them, before people get into the habit of pirating, it will probably avoid the same fate.
October 5, 2009, 9:05 pmSoronel Haetir says:
Book publishers are also still in the favorable position that their physical products are more desirable than their digital counterparts. For music that became untrue almost the moment computers became powerful enough to decompress in real-time. Look at all the investment put into creating an e-reader that people will actually use. The technology continues to improve but is still not quite there. The move from printed books to digital books is a much greater leap than the move from the hip radio through tape and cd player and on to mp3 was. In all those cases the basic interface didn’t change all that much, that is not true with the move away from print books.
October 5, 2009, 10:56 pmShelbyC says:
Why? Assuming the fact pattern of the table above, if I want to buy a textbook I have to compensate the publisher for 4 uses of the book, even if I want to keep it. With the e-books, assuming that same fact pattern, the publisher can sell the book at 25% of list price and break even, and by cutting the bookstore out students pay much less. Although, as the OP points out, the publishers will capture some of that, but it’s still a better deal.
October 6, 2009, 12:38 pmThe Volokh Conspiracy » Blog Archive » What Manufacturers and Publishers Need To Do To Facilitate The Move to Electronic Delivery of Legal Books — Competing with Library Lending says:
[...] as I discussed earlier, e-textbooks have to compete with substantially discounted used textbooks. But scholarly books that [...]
October 6, 2009, 1:08 pmGlen says:
Getting 50% is tough from the bookstore unless the book is a really recent edition. You can generally get 50% of what you pay for a book if you buy it online and then immediately at the beginning of the next semester sell it online again. If you buy your books in advance before the rush they are cheap online, and if you sell them the beginning of following semester online you can get quite a bit and your overall cost of owning the textbook is relatively low.
Another option that is not discussed is textbook rental…
October 7, 2009, 11:20 amVolokh on eLawtric books: Post No. 4 | Jason Wilson | Electronic Books says:
[...] come to just refer to them as digital books, or in the case of these posts, digitexts), the fourth is probably one of the most enjoyable, I think because the points made are directed not so much [...]
November 29, 2009, 1:42 amWanda E. Selby says:
I purchased the Kindle 2 as a gift for my husband. I could pretty much say he is reading from it every free moment. He absolutely loves it, even carries it with him to show friends. He has probably tripled the amount of reading he does. So…it was a great purchase. I even read some of the newspapers he has downloaded every day.
December 13, 2009, 9:44 pm