Recently, I participated in a seminar on the first-sale doctrine. The seminar was held under the Chatham House Rule, so I won’t be attributing any of the particulars of the discussion, but in any event my real interest is elsewhere: How does the first-sale doctrine influence editorial strategy?
That’s editorial strategy, not business or market strategy.
And if the first-sale doctrine were to be extended to digital works, what kind of products would publishers create?
My underlying thesis is that the economics of how a work is created and consumed are as much a part of a work as, say, dividing a play into multiple acts or insisting that a sonnet have 14 lines. Change the application of the first-sale doctrine, and you potentially change the economics of publishing, and that change in turn will trickle into how books, articles, and everything else are conceived.
We take first-sale for granted in the print world. I walk into a bookstore and buy a paperback book. After I read it I may throw it away or put it on a shelf, but there is nothing to stop me from giving or lending it to a friend; nor is there anything to stop me from selling the book on eBay. Once I’ve purchased the copy (the first sale), I can do whatever I please with it. There are some nuances and controversies here — for example, can I scan the book for my personal use? Can I scan it and then resell it from a Web site? I am not going to engage those questions. What is clear is that as long as the copy remains in printed form, first-sale applies.
With digital materials things get more complicated — or they don’t, depending on your point of view. When I lend or give a copy of a digital work — say, an e-book–to a friend — I have to make a new digital copy. This is how content moves around the Internet — copies of copies of copies — which raises the question of whether each and every instance of making copies must be authorized by the copyright holder. If first-sale applies to digital works, then once you purchase a copy of an ebook or any other kind of digital work, you can proceed to pass it around without authorization despite the fact that each “passing” requires the creation of a new copy.
Most publishers insist that first-sale does not apply in these instances. Instead each copy is licensed to the purchaser — that is, the purchaser buys a restricted license to use the work, not the underlying work itself. Most digital publishing businesses are built on this assumption. If first-sale were to be applied to digital works, then most publishing business models would have to be changed.
How those models would be changed is an interesting question, in part because no one really knows what unlimited copying would lead to. It seems self-evident that unlimited copies would undermine the sale of authorized copies from the publisher, but in fact the information on this topic is not altogether clear. Some copying has promotional value, just as free library lending of print books has promotional value (or is widely believed to have promotional value — there is no clear evidence for this point either). The fact is that unless and until large-scale experiments are conducted in this area, we won’t have solid evidence one way or the other. It’s hard to imagine who would conduct such experiments, as the parties would have to risk their programs to get definitive information. Instead, we have policies and programs built on hunches and speculation. There is no alternative to this, so we should not be overly harsh in our judgment. You can only have evidence of things in the past, but publishing is an investment in future outcomes.
The broad trends in publishing all support the view that first-sale does not apply to digital works. Note that when I say “support” I don’t mean from a legal point of view; I mean that publishers rely on this assumption about first-sale. Those trends are:
- The shift from print manifestations of a work to digital manifestations
- The shift from the firm sale of an object to an ongoing sale, otherwise known as a subscription
- The shift from a first-sale right to a license, wherein future use of a work is restricted in some way by the originating publisher
Journal publishers will review these three items and simply say, What else is new? Publishers in other areas are struggling to catch up with many of the practices of journal publishing.
But let’s imagine a different set of assumptions:
- First-sale applies to digital works
- Once a library purchases a copy of a work, the library has unlimited lending rights
- Once an individual purchases a copy of a work, that work can be passed along or resold
- Publishers can sell products; they cannot sell licenses
Publishers are not likely to be happy with this alternative scenario, as they will contemplate the possibility that after selling one copy, the entire marketplace will be flooded with copies of the original copy. In other words, when the first-sale right is combined with the friction-free copying of digital works, the marketplace as we understand it today would be diminished and potentially destroyed. We should not be surprised, then, to find publishers fighting the extension of first-sale rights to digital works any more than we should be surprised that people on the consumption end of the spectrum — libraries, individual readers — would want to see a more liberal rights regime, which would include the right of first-sale.
In my view, publishers are making a very, very big mistake in not addressing the interests of librarians about lending rights. Libraries are in the business of lending books and other materials; when publishers hesitate in making e-books available to libraries, librarians naturally act to preserve their interests. Telling a librarian that “this is the future; deal with it” is not a wise strategy — because all established institutions seek to persist. Librarians have gathered formidable intellectual talent to further their aims and the first-sale doctrine is being prepared to go on stage in the digital age. The prudent action for publishers is to establish library-lending programs for e-books so that first-sale does not become a rallying cry against all form of copyright.
It would be a bad idea for publishers to restrict their response to advocates of first-sale simply to fighting. They also have to think beyond the conflict — even as they engage in the conflict, mostly likely delegating the actual battle to their trade associations. To think beyond the conflict means to imagine what the world would look like if first-sale becomes the standard for digital media. How to make money in that environment? Is the conflict over first-sale an existential battle or is it simply a short-term tactical response (in part a delaying action) while longer-term plans are being thought through and tested?
It’s instructive to look at the precedent in television, where Tivo and the DVR have altered forever the kind of programming we see and how we watch. DVRs allow programs to be recorded. When someone decides to view a recorded program, it’s possible to fast-forward through the advertisements. Obviously, advertisers don’t like this, which undermines the revenue model for broadcast TV. This in turn has put a new emphasis on programming where much of the pleasure is to watch things in real-time (e.g., sports), where “Tivo-ing” is less desirable. It also has given rise to product placement strategies, where the advertisement is embedded in the program itself. You can’t fast-forward to avoid an advertisement where the advertisement has become part of the event. Thus the change in the business model has altered the nature of the content itself. (Entertainment alert: make sure you see the spoof on product placement in David Mamet’s film, “State and Main.” Pay close attention to the closing minutes.)
So let’s jump into the time machine, the GSS Walter Wriston, and see where this ends up. (The convention for naming time machines is to use the abbreviated prefix for “Galactic States Ship” and the name of a cynical economist.) After some struggles in the courts and Congress, first-sale is declared to be applicable to digital works. One copy of each work is purchased by a library and loaned infinitely. One individual purchases a copy and distributes it to “friends” on Facebook and these “friends” distribute it to their “friends.” The market for content has disappeared and all the publishing companies come crashing down.
Or do they? We note that the Walter Wriston’s onboard computer is set to the default mantra mode: Capital goes where it wants to and stays where it is welcome; capital goes where it wants to and stays where it is welcome; capital goes where it wants to and stays where it is welcome. Perhaps the publishers play two games at one time. On one hand (and in full public view) they fight furiously to reverse the legal rulings and experiment with new models — a greater push for advertising, perhaps, or wrapping the content into new (as-yet unconceived) services. On the other hand they work toward content types that are harder to copy and distribute, content that is dynamic and highly interactive in nature. This new form of content (we really need a name for it; I nominate “The Processed Book” to reflect the centrality of content that is surrounded by a network of activities and relationships) cannot easily be passed along, as to do so would require passing along the entire network of related, interacting material along with it. A new editorial strategy offsets the implications of the application of the first-sale doctrine.
This is not like Whack-a-Mole; it is not as though the content keeps popping up. It is more like trying to hold onto a slippery fish. What makes it slippery is the publishing imagination, which will continue to find ways to make new things and new kinds of things in order to provide a return for its investors. Librarians are asking for greater freedom to loan material, but that very freedom will alter the nature of that material. There is no rule in the galaxy that says we will always have fixed texts–books, articles–that can easily be shared with others. The only rule is that the creation of texts, fixed or otherwise, must comply with the Walter Wriston’s mantra.