Ebook Distribution Contracts Legal Issues and Beyond Cali Bush ©2011 O’Reilly Media, Inc.

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As ebooks evolve, so do distribution models and the contracts that cover these relationships

You’re looking for information and best practices

You face an increasing variety and complexity of contracts for ebook distribution Agency model International laws APPS Curated content Bundles Sale or license? Pre-orders Commissionaire model Enhanced ebooks

You need to know what to pay attention to

Join us as we explore the current landscape of ebook distribution contracts

START WITH THE BASICS

Certain concepts and vocabulary are consistent across ebook distribution contracts

Contract framework

 What the distributor is doing for you

Contract framework  What the distributor is doing for you  What the distributor needs from you

Contract framework  What the distributor is doing for you  What the distributor needs from you  Rules of the game

Contract framework  What the distributor is doing for you  What the distributor needs from you  Rules of the game  Results of the relationship

Contract framework  What the distributor is doing for you  What the distributor needs from you  Rules of the game  Results of the relationship  What happens if something goes wrong

Contract framework  What the distributor is doing for you  What the distributor needs from you  Rules of the game  Results of the relationship  What happens if something goes wrong  Exit strategy

Vocabulary

Available Title

Copy/Ebook

Customer = End User?

DLP/Digital List Price

 Established by the publisher on a per-title basis

DLP/Digital List Price  Established by the publisher on a per-title basis  Same content in different formats may have different DLPs

DLP/Digital List Price  Established by the publisher on a per-title basis  Same content in different formats may have different DLPs  Often is the basis for payment calculation

DLP/Digital List Price  Established by the publisher on a per-title basis  Same content in different formats may have different DLPs  Often is the basis for payment calculation  May be changed by publisher upon written notice

DRM/Digital Rights Management

Technology used to impose limitations on the usage of digital content and/or devices.

Refresh/resupply

Continued ability to make a Copy available to a Customer who previously purchased it, with no further payment being due to publisher

Reserves

Territory

Definitions matter

Each contract is a closed ecosystem

IDENTIFY WHAT MATTERS FOR YOUR BUSINESS AND WHAT DOESN’T

O’Reilly’s 5 Hot Topics

Hot Topic #1: Available Titles Some or all?

“Available Title” means any work specified in Exhibit 1, and any works subsequently supplied to Distributor under Section 3.1.

EXHIBIT A Available Titles Publisher’s entire inventory of digital or electronic works, including any book, treatise, journal, periodical, monograph, literary or scholarly work, public domain work, and other works, whether written or otherwise.

Hot Topic #1: Available Titles Some or all? Publisher’s obligation to make future works available?

Hot Topic #1: Available Titles Some or all? Publisher’s obligation to make future works available? Distributor’s obligation to distribute?

“Despite the rights granted above, you understand that we make no promise that we will include in the Program any Books that you make available to us.”

“Despite the rights granted above, you understand that we make no promise that we will include in the Program any Books that you make available to us; however, we agree that the criteria we apply in determining the inclusion of your titles will be consistent with the criteria we apply with respect to the content of other computer and technology publishers.”

Hot Topic #2: DRM Permitted or required?

Hot Topic #2: DRM Permitted or required? Who decides?

Hot Topic #2: DRM Permitted or required? Who decides? What can we live with?

Hot Topic #3: Withdrawal Do we have the ability to withdraw Available Titles?

Hot Topic #3: Withdrawal Do we have the ability to withdraw Available Titles? We want the ability to remove titles upon reasonable notice

Hot Topic #3: Withdrawal Do we have the ability to withdraw Available Titles? We want the ability to remove titles upon reasonable notice 2-tier structure OK

Hot Topic #3: Withdrawal Do we have the ability to withdraw Available Titles? We want the ability to remove titles upon reasonable notice 2-tier structure OK Post-termination refresh/resupply issues

Hot Topic #4: Payment, etc. What’s in it for us?Show me the money!

Hot Topic #4: Payment, etc. What’s in it for us?Show me the money! Understand carveouts – what you’re not paid on.

Hot Topic #4: Payment, etc. What’s in it for us?Show me the money! Understand carveouts – what you’re not paid on. Payment is only one upside.

Hot Topic #4: Payment, etc. What’s in it for us?Show me the money! Understand carveouts – what you’re not paid on. Payment is only one upside. We want access to online, real-time (or nearly real-time) sales data.

Hot Topic #5: Rights What rights are we granting, and why?

Hot Topic #5: Rights What rights are we granting, and why? Consistent with author contracts?

Hot Topic #5: Rights What rights are we granting, and why? Consistent with author contracts? Exclusivity?

Hot Topic #5: Rights What rights are we granting, and why? Consistent with author contracts? Exclusivity? Derivative works?

Hot Topic #5: Rights What rights are we granting, and why? Consistent with author contracts? Exclusivity? Derivative works? Conflicts?

Hot Topic #5: Rights What rights are we granting, and why? Consistent with author contracts? Exclusivity? Derivative works? Conflicts? Format-specific?

IDENTIFY WHAT MATTERS FOR YOUR BUSINESS AND WHAT DOESN’T

IDENTIFY WHAT MATTERS FOR YOUR BUSINESS AND WHAT DOESN’T

Gimmes  Security requirements

Gimmes  Security requirements  Preview access

Gimmes  Security requirements  Preview access  Pricing and payment models

“Distributor will pay Publisher __% of the Sales Price for each Copy sold by Distributor under this Agreement. “Sales Price” means the gross amount paid by the Customer for the Copy, minus only the amount of any sales, use, VAT or similar taxes included in price paid by the Customer.”

“Distributor will pay Publisher __% of the Sales Price for each Copy sold by Distributor under this Agreement. “Sales Price” means the gross amount paid by the Customer for the Copy, minus only the amount of any sales, use, VAT or similar taxes included in price paid by the Customer, provided however that regardless of the actual Sales Price, in no event shall the amount payable to Publisher for any sales of any Copy be less than __% of the Digital List Price.”

Gimmes  Security requirements  Preview access  Pricing and payment models  Duration of term/termination provisions

USE THIS INFORMATION TO GUIDE YOU THROUGH THE CHANGING LANDSCAPE

What has changed recently?

Challenge #1: The agency model

Publishers face new pressures with respect to pricing

Challenge #2: Pricing restrictions  How much control do you really have over your DLP?

Challenge #2: Pricing restrictions  How much control do you really have over your DLP?  Pricing tiers assigned based on print book price

Challenge #2: Pricing restrictions  How much control do you really have over your DLP?  Pricing tiers assigned based on print book price  Ebook pricing tethered to prices of other formats

OK: “The DLP shall not exceed the list price for the corresponding physical book.” NOT OK: “The DLP shall not exceed the list price of the least expensive format in which such Title is available.”

Challenge #2: Pricing restrictions  How much control do you really have over your DLP?  Pricing tiers assigned based on print book price  Ebook pricing tethered to prices of other formats  Automatic price reductions if item is offered for less $ elsewhere

Challenge #2: Pricing restrictions  How much control do you really have over your DLP?  Pricing tiers assigned based on print book price  Ebook pricing tethered to prices of other formats  Automatic price reductions if item is offered for less $ elsewhere  The distributor is not obligated to make an ebook available if it determines the price set by the publisher is “unrealistic”

#3: Distributors are casting wider nets

“[The content you provide must be] the same versions and editions... that you or your affiliates make available directly or indirectly to any ‘Similar Service.’”

Challenge #4 : Timing  How much control do you have over when you deliver this content to the distributor?

Challenge #4 : Timing  How much control do you have over when you deliver this content to the distributor?  New release ebooks must be available same day & date the new release is available to end users in any format.

Challenge #5 : Withdrawal  How much control do you have over withdrawing Available Titles from distribution?

Challenge #5 : Withdrawal  How much control do you have over withdrawing Available Titles from distribution?  Publisher can’t discriminate against distributor regarding withdrawal requests.

Lingering questions  What resources will you need to administer contracts with “most favored customer” (antidiscrimination) language? How will those provisions affect your ability to grow your business?

Lingering questions  What resources will you need to administer contracts with “most favored customer” (antidiscrimination) language? How will those provisions affect your ability to grow your business?  How will differences in international laws regarding copyright, price fixing and taxation impact the development of ebook distribution and the associated contracts?

Lingering questions  What resources will you need to administer contracts with “most favored customer” (antidiscrimination) language? How will those provisions affect your ability to grow your business?  How will differences in international laws regarding copyright, price fixing and taxation impact the development of ebook distribution and the associated contracts?  Have changes to the contracts outpaced changes to digital distribution itself? If there’s a gap, what accounts for the discrepancy, and what does that mean for your business?