Just prior to the Kindle launch, Library Journal reported that the President and the Executive Director of the American Library Association (ALA) met with Tom Allen, president of the American Association of Publishers (AAP), in New York. Undoubtedly this must have been an interesting conversation, and certainly one we hope will be followed by many others. But with two major publishers, Macmillan and Simon & Schuster, not yet making books available for lending, and with HarperCollins resistant to modify their 26-loan limit, it seems that publishers are still having quite a bit of trouble wrapping their heads around e-book lending. Eric Hellman writes that Macmillan CEO John Sargent has said, “You get the book, read it, return it and get another, all without paying a thing. ‘It’s like Netflix, but you don’t pay for it. How is that a good model for us?’ ”
Evidently that’s not a problem for Amazon. If the largest online retailer in the world has made the determination that library e-book lending is not deleterious to its revenues, why has it been so difficult for large publishers to renew their historically much-older library commitments?
Part of the reason is that Amazon can afford to see e-book lending as transactional data that informs patterns of future purchasing. Every Kindle e-book borrowed serves to inform Amazon’s sales and marketing departments and brings consumers to its website. Because Amazon distributes the e-book files, with Overdrive simply acting as a catalog provider for participating libraries, Amazon benefits from a significant amount of additional user traffic that drives up statistics, book reviews, annotations, and other valuable data.
In contrast, publishers see e-book lending from the perspective of lost unit sales. For trade publishers, e-books are not an opportunity to engage directly with their consumers because they have forsaken the ability to generate income from traffic, in favor of selling things. In essence, the whole value proposition of the internet: aggregating traffic, interest, and intentionality remains undervalued. From a longer-term revenue perspective, publishers should embrace e-book lending because, from the perspective, of a different business model – B2C – it generates value. As Mike Shatzkin has argued:
“Once publishers accept that being consumer-focused is essential to their long-term survival, it follows logically (although not automatically or instantaneously) that they need to think about discrete audiences on more than a book-by-book basis; that they need to gather those audiences on web sites and in mailing lists; that they need to publish books that satisfy them repeatedly, not occasionally; and that all these efforts will make more sense if each separate audience has a brand facing them with real meaning. ”
There’s one other thing about the entry of Amazon into e-book lending that I find quixotic. Libraries have been wondering just how much e-book lending contributes to e-book sales, in order to help justify business models that accommodate library partnerships. Guess who has that data: the organization that does both selling and lending. That would be Amazon.