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Summary:

A day after Amazon’s announcement that it will begin lending e-books free to Kindle-owning Prime members, and following the discovery last n…

Kindle Lending Library

A day after Amazon’s announcement that it will begin lending e-books free to Kindle-owning Prime members, and following the discovery last night that some publishers are being included in the program without their consent, publishers, agents and authors are beginning to wrap their minds around the new model. Here are some of the issues the different parties are concerned about.

How do authors get paid? The publishers who agreed to include their books in the program are receiving a lump sum from Amazon (NSDQ: AMZN) no matter how many times their titles are borrowed. “I strongly believe this type of program needs to compensate publishers and authors on a usage level, not a flat fee,” writes Joe Wikert, general manager and publisher at O’Reilly. “The more a title is borrowed, the higher the fee to the publisher and author. Period.”

Wikert thinks the release of the Kindle Fire is going to lead to a surge in Amazon Prime members, and “there’s no way to estimate how many times a book might get loaned out. That also means it’s impossible to come up with a reasonable estimate on a flat fee for a publisher’s list.” Though Wikert is generally a big Kindle fan, he says he can’t support the Lending Library as a publisher unless it switches to a pay-for-performance model.

According to literary agents’ group Association of Authors’ Representatives (AAR), Amazon has “confirmed that they will be reporting title activity back to subscribing publishers.” But…

Why don’t authors get to decide whether their books will be included? The AAR issued a statement today (emphasis mine):

The agent and author community have not been consulted about this new sort of use of authors’ copyrighted material, and are unaware of how publishers plan on compensating authors for this sort of use of their books, which is unprecedented. But we think free lending of authors’ work as an incentive to purchase a device and/or participation in a program is not covered nor was anticipated in most contracts between authors and publishers-nor do most contracts have any stipulation for how an author would be compensated for such a use. Without a clear contractual understanding with their authors, it is unclear to us how publishers can participate in this program. We take very seriously our role to protect the interests of our clients, and at this stage it is difficult to see how this program is in the best interests of our clients.

Agreements like this aren’t covered by existing publishing contracts, in the eyes of the AAR, and publishers don’t have the right to lend authors’ books without their permission. Writers House literary agent Simon Lipskar goes into this in much more detail on the AAR’s blog, AARdvark. “Any subscription model in which the publisher is receiving some kind of guaranteed fee for participation, we are clearly talking about a license, not a sale,” Lipskar says. He goes on:

Publishers, unless they’ve very, very specifically addressed these issues in their contracts, do not have the right to include books in subscription models for which they are paid flat fees. They have no basis for distribution of the income to authors, and they have no real basis for determining how much authors should be getting in aggregate in the first place, given the inadequacy of the traditional license concept to the model being used.

Which books are included, anyway? As Publishers Marketplace reported yesterday, Amazon is including some publishers’ books in the program without their permission, simply by paying the wholesale price for the book any time somebody borrows it. In those cases we don’t have to worry about how the author is paid (it’s a regular sale), but publishers may not realize their books are being included until they actually check. Amazon made it a little easier to do that today by listing 5,379 of the “Prime Eligible” Kindle titles in a page on its site. The crowdsourced Google document I started yesterday to track all the titles and sort them by publisher is coming along slowly.

Oddly, when I cross-checked on my Kindle, just 5,159 titles are available–down from the number available yesterday. It’s possible some publishers whose titles were included without their permission complained and got those books pulled. But Amazon believes it’s within its rights to do this. Evan Schnittman, managing director of group sales and marketing, print and digital, at Bloomsbury, told Publishers Weekly, “If Amazon, or B&N or anyone who buys from us using the wholesale model wants to sell at a loss, we have no say.” But, he said, Bloomsbury is examining its contracts closely to make sure that wholesale terms extend to a book being given away for free.

Any questions I’m missing? Let me know in the comments.

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  1. I have yet to hear anyone pose the argument that Amazon received payment for these “free” e-book titles in the form of their annual $79 Prime membership. It would bring back the argument of selling for a loss but it is income none the less. Could this be considered a wholesale model wrapped up in a different package?

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  2. How is Amazon going to stop it’s Prime members from un-DRM-ing these loaned books and just keeping them? Because technically speaking it’s pretty easy to do. And if the lending program doesn’t translate into eventual sales of the books being lent (which I assume is the point – it may just be a way to increase Prime memberships), that can’t be good for anyone.

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