Indie Authorship + PayPal = Scary Vulnerability

What PayPal Did

In February of this year, as part of an effort to “aggressively enforc[e] a prohibition against online retailers selling certain types of ‘obscene’ content,” PayPal tried to force Smashwords to stop selling books containing incest, bestiality, or rape (accessed 4/17/12). PayPal finally ended up backing down, but the story is worth pondering because it highlights the vulnerability of indie authors and their platforms.

First, keep in mind that PayPal’s threat to Smashwords didn’t say that its service couldn’t be used to pay for “obscene” content; rather, they said they won’t do any business at all with a retailer that sells such content. That’s bringing out the big stick, and Smashwords, which apparently would’ve had a hard time separating itself from PayPal’s payment services, was justifiably spooked. Founder Mark Coker emailed all Smashwords erotica authors on February 24 saying that incest, bestiality, and rape were no longer permitted under its Terms of Service. Books with such content would have to be removed immediately.

After an uproar from the blogosphere, petitions, anti-censorship advocacy, and so forth, PayPal rewrote its Acceptable Use Policy. From now on it will

focus this policy only on e-books that contain potentially illegal images, not e-books that are limited to just text. The policy will prohibit use of PayPal for the sale of e-books that contain child pornography, or e-books with text and obscene images of rape, bestiality or incest. . . . In addition, the policy will be focused on individual books, not on entire “classes” of books. Instead of demanding that e-book publishers remove all books in a category, we will provide notice to the seller of the specific e-books, if any, that we believe violate our policy.  (accessed 4/17/12)

This position strikes me as much more reasonable, if still potentially subject to abuse. Whatever — it’s a huge improvement, and Coker and the others at Smashwords are to be commended for negotiating for the change. And all those whose outcry strengthened Smashwords’s position are to be commended as well.

Visa Made Me Do It

Why did PayPal pursue its initial assault on Smashwords? According to another publicly posted email from Coker, PayPal was forced into it by credit-card companies. At first, I found this awfully hard to believe. If credit-card companies wanted to target “obscene” material, why on earth would they begin with independent authors publishing low-cost or free erotica on Smashwords? What about looking to the porn industry? No one really knows how big it is, but conservatively estimates it at $2.6 billion to $3.9 billion a year. Even these low numbers are enormous compared to the amounts being spent on Smashwords erotica. Furthermore, credit-card companies as arbiters of public morality? Really? If you asked me to name an outfit whose No. 1 concern was making money, whatever the social cost, I might well answer, “a credit-card company.” It’s hard to believe that American Express is all upset about Jane-Doe-40-something-working-mother purchasing the occasional rape-fantasy erotic novel for $1.99 on Smashwords.

Dollars and Sense

Erotica author Selena Kitt blogged about PayPal’s actions early on (before it started in on Smashwords, PayPal hit several other sites with the same threats), explaining that it really does come down to money. Kitt discovered that retailers specializing in pornography, sex products, and so forth are charged higher fees by credit-card companies because it’s more common for the charges to be contested. You know, your husband notices the $49.99 charge to Extra-Large Dildos, Inc., and instead of fessing up, you say, “I don’t know how that got on there! It must be a mistake.” Hubby calls MasterCard, and MasterCard has to eat the $49.99. That’s why credit-card companies might conceivably be interested in whether retailers are selling naughty-but-legal merchandise. It’s not a question of morality; it’s a question of dollars and cents.

Keeping that in mind, it makes perfect sense that at least one credit-card company, Visa, denied putting any pressure on PayPal, saying that “Visa is not in the business of censoring cultural product” and pointing to “PayPal’s recent blog post where it states that its own policies drove the decision” (accessed 4/17/12). According to Visa, you can use its cards to pay for anything that’s legal in the country in which the purchase is being made. They recognize that obscenity is hard to define, legally (accessed 4/17/12), but they don’t seem too worried about it.

This attitude is exactly the one I’d expect from a credit-card company. After all, if some state government thinks Joe Schmoe Cartoonist’s work is obscene and would like to see it banned, it goes after Joe Schmoe, not the issuers of the credit cards consumers have been using to buy Joe Schmoe’s graphic novels. So long as they don’t lose money accepting charges from the shops that sell Joe’s work, they don’t have any reason to worry.

So, if credit-card companies really did motivate PayPal’s actions, I’m guessing the link was quite indirect — much more related to PayPal’s in-house fear of being charged the higher fees credit-card companies extract from sex-merchandise retailers, and much less related to moral qualms or legal fears about obscenity.


But here’s what’s really disturbing about this whole thing: setting aside the question of PayPal’s motives, what’s clear is that the providers of sexual content being targeted — indie authors — were highly vulnerable. Smashwords’s independent authors have no major publishing company standing behind them. Jane Schmoe, an indie author putting her erotica up on Smashwords, probably can’t afford a big legal team and doesn’t have a PR department.

Furthermore, Jane Schmoe Indie Author is vulnerable because she’s not really “independent.” None of us are truly independent. A truism, I know. But indie authors are really in quite a difficult position — we’re trying to be independent, but inevitably we have to partner with retail sites, such as Amazon (which has already banned the content PayPal went after), and those sites have power over us. Even those who stick to sites like Smashwords (as non-corporate a platform as you’ll find, I think) can find themselves at the receiving end because Smashwords isn’t a stand-alone entity, either. It has to — or has chosen to — partner with sites like PayPal.

Indie authors’ vulnerability may be exacerbated by their edginess. After all, major publishers aren’t going to publish your erotica if it’s likely to get them sued for obscenity. There are no such restraints on indie publishers. No one is vetting our work to ensure it passes legal muster. That’s a good thing, I believe, but it creates challenges. Mark Coker gets to the heart of it:

Indie authors are the biggest publishers of erotica. Already, one retailer/distributor, Bookstrand, decided to drop all indies from their store. I can only assume they decided the angry authors were more trouble than they were worth. … The campaign at hand goes beyond erotica authors. It’s an indie issue. Indies are breaking the boundaries previously set by large traditional publishers. This boundary-breaking scares people. (accessed 4/17/12, ¶13)

If not for the internet uproar, would PayPal have backed down? Maybe not. The story got some coverage in the mainstream media, but perhaps not enough. Targeting one indie ebook platform at a time, they might very well have gotten away with it.

(FYI, Bookstrand had actually been subjected to the same PayPal threats as Smashwords — here’s one author’s account. So had All Romance Ebooks, according to Kitt.)

Indie Authorship + Savvy = A Way Forward

Perhaps some lessons can be learned from this whole mess. First of all, it’s important to try to understand what motivates a company like PayPal. Personally, I think the motivation in this case was money — specifically, fear of potential high fees being imposed by the credit-card companies for which PayPal serves as middleman. If it all comes down to money, we need to know it. If bad PR and moral arguments about the evils of censorship and the importance of free-speech don’t work, we can move to a brass-tacks approach: how much bigger do we need to make your slice of the pie in order to convince you to shut up and leave us alone?

It’s also to our benefit, I think, not to hold exaggerated ideas about how independent we actually are. We’re more independent than traditionally published authors in some ways, yes, but we still have dependencies. We need to know what those dependencies are and be able to assess the risks they pose.

Lastly, we need established mechanisms of resistance that can be kicked into gear as needed, ones that will function well in the leaderless, chaotic environment we inhabit (the web). When something like this happens, blogs need to get the news ASAP, we need to get the word out to mainstream media, a petition needs to be started, and so forth. In other words, exactly what happened this time needs to happen every time.

So thanks, PayPal: lesson learned? Maybe.