Time for an Antitrust Policy in the Public Interest of Competition, Diversity, and Localism

In the October 26, 2019 Copyright and Technology Blog, Bill Rosenblatt offers a very thoughtful and helpful discussion of the expanding conflict between the six major publishers and the U.S. public library system. This conflict is extremely troubling because it presages a growing divide between free, publicly available content and content protected behind rapidly expanding paywalls.

This tension is certainly not new. In the early days of the “information wants to be free” era, Stewart Brand’s statement about the cost of content dissemination was transformed into an anthem to attack the publishers and producers of professional content. It led to rampant piracy and was economically devasting for musicians, authors, and others trying to build professional careers in the creative arts.

Since then, a new equilibrium has emerged. YouTube, Amazon, Vimeo, Soundcloud, iTunes, Brightcove, and many other platforms have enabled creative artists to reach the marketplace directly, while major publishing houses and distributors have restructured their business models.

Section 109 of the Copyright Act guarantees the right of an owner of a physical copy of a book or other work to resell or loan out that work without the permission of the copyright owner. Section 109 does not apply to licensed works or to digital copies, however, so the legal protections built into copyright law are unavailable to serve as a limitation on the digital distributors.

The failure to create a new version of Section 109 to deal with digital lending is part of the larger trend to ignore the public policy implications of moving all content behind paywalls. The need to provide media as a public service is starting to be eliminated from the nation’s public policy. The Federal Communication Commission’s mandate to regulate radio and television station licenses was founded on the need to provide radio and television services to the general public. This mandate has been part of FCC regulation through a public interest standard focused on competition, diversity, and localism. These rules are limited to broadcast station licensees, however, rather than to the networks or over-the-top, Internet-based distributors. Commercial media providers are racing to leave the modality of over-the-air, antenna-based broadcasting behind – and with the change, the last vestige of FCC regulation will fade away.

The issue is receiving new attention in the field of digital books, but it should also be a significant concern for news and entertainment since more and more of the content available to the public is not provided free but instead sold in online licenses. In this regard, the battle between the American Library Association (“ALA”) and the six major publishers serves as a prime example.

Established in 1876, the ALA is a nonprofit trade association comprised of more than 57,000 librarians, library trustees, and supporting nonprofit enterprises dedicated to providing and improving library services and promoting the public interest in a free and open information society. The six major publishers, for purposes of this debate include Amazon and its five publishing rivals, Hachette Book Group, HarperCollins, Macmillan Publishers, Penguin Random House, and Simon & Schuster.

Amazon is perhaps the worst offender in this regard. It simply refuses to enter into any license agreement with the ALA or its members. As an author who publishes some of my works exclusively on Amazon precisely because I can keep the prices much lower, I find this refusal to deal with libraries particularly galling. Through its Kindle Unlimited service, Amazon certainly has the ability to develop an opt-in pricing model that would enable authors like me to provide my books to libraries at reasonable prices – while growing the audience for these works and assuring that the price barrier was not blocking my works from millions of potential readers who do not have the discretionary funds for such works.

For the other five publishers, they are adopting identical or nearly identical versions of contracts that license a single copy of a work at prices significantly above that available to the general public. Worse, the publishers are insisting on hold-backs, so that a library is permitted to purchase only a single copy of a book for the first eight weeks. When a library system the size of the New York Public Library or the Los Angeles Public Library can offer a single copy, the waitlists become extreme and the service becomes a source of frustration rather than public good.

The October 15, 2019 letter from the ALA to the House Judiciary Committee also provides excellent illustrations of the pricing behavior exhibited by the publishers:

Abusive pricing for libraries also is typical from the Big 5 publishers. For example, The Codebreakers by David Kahn and published by Simon & Schuster was quoted for $59.99 as an eBook for a consumer purchase8—which means lifetime access. By contrast, the price to libraries for the very same eBook is $239.99—and this is for one copy (i.e., it can be loaned out to one person at a time, simulating the print loan model) and lasts for only two years. If a library wanted access for four years, it would pay $479.98. If the library wanted access for 20 years, it would pay a staggering $2,399.90—for one copy, lending that eBook to one person at a time.

As another example, All the Light We Cannot See: A Novel by Anthony Doerr, is priced as an eBook for $12.99 to consumers. The library price is $51.99—for two years or $519.90 for 20 years—for one copy.

The letter also raises concerns about the ability of libraries to serve a public interest for film, television, and musical content that is only offered to the public through proprietary streaming services.

The Authors Guild, the trade association for professional authors, has taken a very modest stance, reflecting that the need for an author’s compensation needs to be balanced with the broader need to support libraries and enhance readership among the public.

The library ebook market is still relatively young and evolving. In these recent changes to licensing agreements, we see publishers and libraries struggling to try to find the right balance between libraries’ interest in broad access to library ebooks and ensuring that publishers—and authors—have sufficient economic incentives to publish and write great books. No one model is perfect, and undoubtedly the latest reconfigurations will need to be tweaked over time as markets continue to evolve. In the meantime, we applaud publishers and libraries for their willingness to experiment to figure out how to recalibrate the balance.

The ALA is not advocating that the media companies must be compelled to give away their products for free, and my publications make clear that content creators should be compensated. But the need for compensation does not excuse anticompetitive practices. If the public is willing to pay market rates – as defined by the robust consumer markets – then price gouging and refusals to deal should not be ignored.

The consequence of this anti-competitive behavior creates direct and lasting harm on the public that cannot afford the luxury of multiple streaming services. The purpose of the public interest standard was not to control what the public reads, hears, and watches. Instead, it is essential to guarantee that rich and poor alike have the opportunity to be part of the informed citizenry. Without this, all of society will eventually suffer.

2 comments

  1. Jon,
    Thank you! I enjoyed your excellent article
    Eith you permission I will shsre with the University Librarian, Jim Hutchins and the Broward County Library Director, Kelvin Watson. You have earned my Honorary Library card😁😁👍

    Like

    1. Thank you very much. I appreciate it.

      Jon M. Garon
      NSU Shepard Broad College of Law
      ________________________________

      Like

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