Publishers: Ebooks Are Sold After All

Despite the prevalence of the "Buy Now" button, publishers, labels, studios, and retailers insist that the digital products they provide are "licensed not sold." There's a simple reason for that. If they don't sell it, you can't own it. And if you don't own it, they can control how, when, and where you use the products you buy. So the message sent to consumers, even if it isn't particularly clear, is consistent.

But it turns out, copyright holders aren't exactly sticklers for consistency on the license vs. sale question. As we discuss in the book, when it's in their best interest to characterize a transaction as a sale rather than a license, they are more than willing to do so—even if those are the very same transactions they tell consumers are absolutely-unquestionably-swear-to-god licenses. We've written about the efforts of record labels to weasel out of royalty payments due to recording artists by calling digital downloads sales rather than licenses. Labels, you see, owe artists relatively small royalty rates on each sale under their recording contracts, but owe much larger rates on licenses. Unsurprisingly, when artists want to get paid for those billions of iTunes downloads, the labels call them sales and pocket the difference. Artists like Eminem have successfully sued labels over this practice.

A new class action lawsuit filed against Simon & Schuster alleges that the publisher tried the same tactic with authors. It told consumers that ebooks were licensed, but paid authors as if they were sold, denying them half of their royalties as a result. We'll see if the court insists on a greater degree of consistency.