As more information has come to light about the Lending Library program Amazon launched last week, the tenor in the industry has shifted from puzzlement to anger. Although Amazon initially said it reached a "variety of terms" with publishers to include their titles in the Lending Library program, which allows Amazon Prime members to borrow one title per month for free, PW has learned that the overwhelming majority of publishers with titles featured in the program did not reach any agreement with the retailer. Rather, these titles were taken without publishers' knowledge or consent. Many publishers, who feel the program undercuts the value of their content and is something Amazon is doing to promote sales of its devices--a Prime membership costs $79 a year and also includes free shipping on products and access to streaming video content--are now consulting their contracts and their lawyers to see what, if any, legal action can be taken. PW has also learned that Amazon has been in talks with some agents who have expressed discomfort with the program.
As has been reported already, titles from the big six houses were not included in the Lending Library because these publishers sell on the agency model. The books featured in Amazon’s Lending Library are all either self-published, published by Amazon (under one of its imprints), or published by houses that sell on the wholesale model. Amazon was able to include publishers’ titles without their consent because the e-tailer is treating the borrowing process as a sale—each time a Prime user borrows a book, Amazon pays the publisher as if the book was bought.
Thus far Houghton Mifflin Harcourt, one of the few trade publishers that has done business with Amazon in the past (in April it acquired paperback rights to 10 titles published by Amazon), is the only house saying it sanctioned the use of its books in the Lending Library. Amazon did not respond to PW’s inquiries about the Lending Library program.
Aside from HMH, which sent a statement to PW last week saying that, after it initially turned down Amazon’s proposal to join the Prime lending program opted to do a “limited test of eight titles,” most of the mini-majors, all of whom spoke on the condition of anonymity, said they found out their titles were included in the Lending Library late Tuesday night, just before the program was publicly announced. One source said that when the program was initially proposed to her publishing house last summer, it had different parameters; the proposal then outlined a program through which Prime members could purchase books, as opposed to “borrowing” them for a one-month period. This source also noted that the program, as it stands now, does create problems for paying out royalties, since the books being borrowed are not being traditionally sold.
Agents have been vocal about their anger over the Lending Library program—the AAR (Association of Authors' Representatives) released a statement saying it is “unaware of how publishers plan on compensating authors for this sort of use of their books” and it’s hard to “see how this program is in the best interests of our clients”—but it remains unclear about just who they’re angry with. One insider said he's aware of a letter an author received from his publisher, a major house, apologizing for the author’s use of the book in the program. The letter, the source noted, explained the publisher had no prior knowledge the book would be in the program, but stopped short of saying any action would be taken.
Another agent, who spoke to Amazon about the program, told the e-tailer he had an issue with lump sums being paid to publishers and that their subscription model is "inherently flawed."
Executives at only two publishing houses, F+W Media and Lonely Planet, were quoted with positive statements about the Lending Library in Amazon’s initial press release about the program. Since Lonely Planet and F+W both rely heavily on for-hire writers, their statements about the Lending Library being a potential boon to their titles is unsurprising. Nonetheless, many agents, angered over the program and the notion that publishers would include titles in it without consulting authors beforehand, could not provide examples of houses that had participated beyond those, as one source put it, “listed in the news.”
While the Lending Library features a little over 5,000 titles, it is still unclear how many of those books are published by traditional houses. Some publishers have noted that they are still trying to figure out how many of their books are featured in the program; one source said she initially thought Amazon took eight of her house's titles, but now thinks it may be as many as 40. Perusing the most popular books in the Lending Library hints that Amazon cherry-picked a few strong backlist books from the mini-majors, then outfitted the program with its own content. The three most popular titles in the Lending Library, as of Monday afternoon, were the books that make up the Hunger Games trilogy, with the #4 title published by AmazonEncore. Aside from Tyndale and Adams Media, the only other major publisher with a book in the top 15 is Hyperion.
While some have speculated that Amazon’s latest actions could entice publishers who currently sell wholesale to switch to agency, one source at a house whose titles were “taken” by Amazon said that option is not under consideration at this point. Other sources, whose houses were also “raided” to outfit the Lending Library, when asked why, if Amazon had the opportunity, it did not take more titles, ruminated that, since the e-tailer is still paying for every book borrowed, it might have been more interested in taking just enough titles to have something attractive to put in its press release. (Not surprisingly, many of the titles Amazon touted in its announcement about the Lending Library were included without publishers’ consent.)
So what’s next? Although one source said her company’s lawyer has not found anything in its contracts that indicated it has legal recourse in this situation, attorney Lloyd Jassin, who specializes in the publishing industry, thinks it comes down to how that contract is interpreted by a judge. “These are not physical sales, but sales of digital copies and, unless that signed contract says you can give away these books for free, and I suspect in some cases it does not, then there’s an argument,” he said.
Jassin elaborated that Amazon is banking on its contracts with publishers being read exclusively as distribution arrangements, but that they don’t have to be interpreted as such. Since Amazon is dealing with digital files, the contracts, he thinks, could be read as licensing agreements. When asked if the situation could be forced into a court, Jassin said he thinks it’s more a question about who, if anyone, wants to stand up to Amazon. Jassin then invoked the publisher that took the first strike in bringing about the agency model for the big six: “The question is if there is a John Sargent among these publishers who would want to go after Amazon.”