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Libraries and Ebooks - An Interesting Question

Jun 14, 2012   [permalink]

The Denver Post had an article yesterday about the difficulties libraries are having getting ebooks from publishers. They are either unable to get ebooks at all from many large publishers, or they say the terms offered are unfair.

As you probably know I'm CEO of an ebook publisher (ReAnimus Press - www.ReAnimus.com), as well as an author, with over 10 years background in ebooks, publishing, dealing with the major NY publishers, etc.

I want to say up front that I love libraries, and feel they're critical for a well-functioning democracy. I have a lot of fond memories of library visits and books I checked out as a kid. I still treasure the discard copy of Stranger in a Strange Land that the librarian gave me because the pages were falling out but she thought I'd like the book. (The pages literally fell out one by one as I eagerly turned each page.) I want to see libraries have ebooks available so people can be enriched by them, especially for those of limited means.

While publishers may indeed be hung up on piracy as the article mentions, I suspect that isn't really the fundamental issue preventing them working with libraries.

(Indeed, as an author and publisher, I'm not concerned about the economic impact of piracy. I sell DRM-free ebooks and to my knowledge even our most popular titles haven't been pirated. If they were to be, I'd suspect they'd mostly be read by people who wouldn't have paid anyway. My estimate is that piracy is no significant economic harm to book sales, cutting into them from 0% to at most 15%. [I haven't seen any evidence they increase sales; but I do believe that pirate reads don't represent significant lost sales, and are at worst like a sort of used-book-like impact.] I commend other publishers who are also moving toward DRM-free titles.)

Rather, I believe the heart of the library-meets-ebook matter is a concern that ebooks represent a significant change in the role of libraries and books. I.e., a concern for revenue — not just today, but extending into the greatly unknown future.

I'm not taking a position here — because I honestly don't know yet how I feel — but want to explain what I believe the concern is:

With physical books, a library has five definite factors associated with it:

1) It serves a very localized population. Most of the books checked out from a specific library location are from people within a few small miles of that location. If someone borrows from the Virginia Village Denver Public Library branch location on Dahlia St., chances are they live nearby, and don't live in remote suburbs like Westminster, Highlands Ranch, etc. (While, yes, there is inter-library loan, that isn't a large percent of borrows.) An elementary school library pretty much only serves the kids in that school. The American Library Association estimates there are over 120,000 libraries in the U.S. So the number of people a single copy of a physical book at a library is "serving" is typically a few thousand. (300 million people in US / 120,000 libraries = 2,500 people / library.)

The physical nature of print books means there is a certain inefficiency built into the system: If a copy of a book is sitting on the shelf in branch#1, but is checked out at branch#2, and a patron who wants that book is standing inside branch#2, chances are they walk away empty-handed. They aren't likely to drive to branch#1 to get it, nor are they likely to use ILL very often. That means a lot of libraries have to buy copies if they want to realistically carry it.

Thus, if you have a book that a library is likely to want at all, then a publisher can anticipate selling thousands of copies to libraries. For most books, except blockbuster bestsellers, thousands of sales are significant.

Now look at ebooks and libraries. If DPL buys an ebook copy, it serves everyone in the city of Denver, at a minimum. It isn't that the Virginia Village branch buys a copy. This reduces that inefficiency. But wait— Anyone in the state of Colorado can borrow ebooks from DPL. I don't live in Denver but I can borrow ebooks from them. Likewise Jeffco, and so on. So one ebook copy can serve a population of 4 million people. Then there are some libraries that serve anyone in the U.S. One copy there is serving potentially 300 million people.

This inefficiency of physical books is a fact of life, and the hyper-efficiency of ebooks is potentially a real impact on revenues. If publishers can't make a certain amount of money, they'll go out of business. Yes, ebooks cost somewhat less to create — no printing or shipping costs — but the costs for editing, cover art, etc. are roughly the same. The total costs for producing a quality ebook are let's say about half that of a print book. A lot of books are also financial failures, not earning back their costs, subsidized by the winners, and that doesn't change. (These are important: They're gambles on books the publisher thinks are important but they just don't end up selling. I'm sure none of us want publishers only purchasing sure-fire bestsellers; we want them taking chances on new authors, envelope-pushing books, etc.) As for the role of publishers vs. self-publishing authors, that's a discussion for another day, but for the purposes of this post, "publishers" essentially includes self-publishing authors.

Yes, libraries have to purchase more copies of popular titles, but not nearly as many as they would have to purchase physical copies of that same title. I've done mathematical models of this efficiency, and it has a real impact. So it's understandable that publishers could be concerned that they will sell a lot fewer ebook copies to libraries than they would sell physical copies, yet those fewer copies serve the reading needs of millions of people.

2) It's more difficult to check out a physical book than an ebook. The library for most people is not next door to them, so they have to walk or drive a certain distance to get there; and spend time walking to find the book; spend time checking it out; and almost double that to return it when it's due. (Not to mention if they come out empty-handed because it's checked out and they have to go back to try again.)

Time is money; driving the car to get to the library costs money. "Free" library books are not really "free." Borrowing a physical library book might run on the order of $5 in costs and time (assuming you value your time, since half an hour going to and fro the library is half an hour you can't do other things). That's close to the price of a paperback. Some people may value their time less, or live next door to a library, or ride a bike, but you get my drift. Borrowing a library book is not actually "free."

Now consider borrowing an ebook. You can sit wherever you are, lounging at home in your pajamas, using your smartphone riding the bus, at work, etc. and download an ebook from a library in — let me test this out — about 1 minute. Returning it? Happens automatically without me lifting a finger. That whole process costs vastly less in time/effort than driving/biking/walking to the library.

It's another example of the hyper-efficiency of ebooks vs. books. This really is close to "free."

Again, that has a potential impact on sales. If a publisher doesn't sell as many copies of ebooks because libraries make it vastly easier to read that book, then the publisher runs the risk of going out of business. And again, by "publisher" I include self-published authors (since in that case the author is the publisher). So the point ultimately means that authors need to earn a certain amount of money to pay the bills. If library ebooks have the potential to cut that down dramatically, then it's understandable publishers(/authors) are wary of them.

3) Physical books wear out. Ebooks don't. A physical book has a limited lifetime sitting on a shelf. I don't know what that number is, but I'd guess it's a few years of life. If it's a popular book that people still want, the library has to buy replacement copies. Not so with ebooks, which last forever. Again, libraries + ebooks = potentially less income.

4) Physical books compete for shelf space. Ebooks don't. A physical library only has room for so many books, so they have to retire ones to make room for new ones. Those retired are no longer available for checkout. If a patron wants that book later, it isn't available; so that person might have to buy the book, or if it becomes popular again, the library would have to buy another copy. Ebooks sit there forever, taking up almost no space at all. (Disk space on a computer server costs virtually nothing.) Again the hyper-efficiency of ebook lending has a potential impact on sales.

5) The borrowing pattern for physical books is well known, whereas the "future of borrowing" isn't clear for ebooks. By that I mean, for example, today the DPL only lends to Colorado residents, but tomorrow (or next year, or 20 years from now) they might decide to lend to anyone in the U.S. (like Philadelphia does) or to anyone on the planet. Would that have been anticipated in a publisher's agreement? If I sell a copy of an ebook to a library that they own forever, I have no real idea how they'll end up using it. I've thought of some not all that strange borrowing scenarios where a very small number of copies of a book could serve enormous numbers of borrowers. I don't know those will never come to pass, but yet I'm placing a copy in the library's hands forever. (Or at least 70 years after the death of the author, based on today's copyright law. At any rate, a very long time.) That's a huge risk. Technology changes so rapidly — remember, there wasn't a Kindle or an iPhone before 2007, barely an eyeblink ago — so it makes sense that there should be some licensing limitations for copies sold to libraries.

Even then, it's hard to imagine what kind of limitations would be broad enough and sufficient. There are always corky things happening. Not long ago Random House made a legal run at saying that the word "book" included ebooks in their old contracts, for example, so they could capture rights to old books for free and pay authors a pittance (royalty rates on print books being much less than for ebooks). (And that issue was never even legally resolved.) And I know of cases where publishers today are trying to apply rights acquired long ago that were meant for minor income streams like microfilm and now claiming those cover ebooks, which neither the author nor publisher anticipated back then (to the author's income detriment). Point being, who can know what the future of reading will be and even what the concept of "electronic rights" will mean in the future? So I do understand when publishers/authors want to tread carefully with agreements that allow open-ended use as libraries ask for.

It's sad but honest to say that libraries have traditionally had a certain high level of "friction" involved in the borrowing process that prevented them from replacing bookstores for print books. However, library ebook lending has the potential to reduce this friction so much that it risks undermining the whole balance of forces that enable authors to write books. Digital disruption is like that. (And I've certainly done my share of disruption too! But I tried to map out the consequences and address them.) So it isn't unreasonable to proceed with care.

Taking all these and similar other hyper-efficiency and unknown future risk factors into consideration means ebook library lending really is a sticky wicket. It makes sense for publishers to be wary, or do things like offer deals that expire after X number of borrows, or ask more money for copies, or otherwise impose restrictions that reduce the revenue impact of the hyper-efficiency inherent in ebooks. Authors shouldn't be forced to write books only for free. That would be a disservice to society. Yet libraries should somehow be allowed to continue their role as repositories of literature and written knowledge. Exactly how, though, is far from clear.

I'm in that boat. I haven't approached Overdrive yet with our ReAnimus Press titles because I'm not sure myself what the solution to these issues are.

So, what are we to do? I do want libraries to have ebooks available, especially to those of lesser means. It's critical to a democracy to have a well-educated populace, and books are the foundation of that.

What are ways to accomplish that goal? Ebooks that must be repurchased after X number of borrows or Y years? What would X or Y be? What others ways could we handle it?

With that, I'll open up the floor to your ideas...

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