Renting out the library

Peter Brantley -- December 9th, 2011

For librarians to endorse a sometimes awkward debate around business models, we must recognize that our organizations are in a difficult space in persuading publishers to continue providing ebooks for lending. The entire sales environment has been transformed, and the lack of physical barriers to digital access has a wide set of consequences for retailing as well as libraries. The “network imperative” permits innovative organizations to rethink models of supply and revenue; Amazon’s creation and promotion of the Kindle lending library is an excellent example of seizing this opportunity.

My recent note on alternative library models for ebook borrowing, At Close of Day, brought out two main currents: that an library agency aggregating contemporary ebooks could design more effective service models than the current system of distributed acquisition; and that one possible model for financial sustainability would be a partnership with publishers to utilize the reach of libraries to present an alternative retail outlet for ebooks.

However, there are other possible models that might address the economic conflicts threatening library ebook lending. One of the most prominent alternatives involves patron rental or Pay Per Use (PPU) scenarios, in which the library picks up the tab for the rental fee, preserving free borrowing for the reader. I’ve been in conversations recently which have made me look anew at this rental, or sometimes leasing, strategy.

Bill Rosenblatt has a wide-ranging analysis on public library ebook lending at “Copyright and Technology.” Bill’s essay covers many of the difficulties confronting libraries, and makes several cogent observations. One key assertion is: “The e-book publishing world may be about to split up into the equivalent of the music industry‚Äôs major and indie labels: major labels tend to make deals that maximize revenue and limit free promotion, while indies try for maximum promotion in hopes of getting revenue later. When you apply this dichotomy to publishers and e-books, you will see that libraries will inevitably get squeezed out.” In the mirror of this logic, my proposal for a “Central Agency” (CA) that aggregates library demand for digital books and facilitates sales, in part as a countervailing option to dominant online retailers, runs the danger of being unpersuasive.

A useful counter-example to a not-for-profit CA would be to envision a commercial entity filling this function, e.g. by Overdrive, in a re-engineering of its underlying business model. Overdrive currently maximizes revenue by encouraging distributed title acquisition by many individual libraries and small consortia. In a centralized model, it would optimize revenue by encouraging affiliate sales over an aggregated library, part of whose access is provided for free (by lending) as a loss leader. That is eerily similar to Amazon’s strategy, except that Amazon benefits by eliminating the library as a middleman, serving Kindle customers directly. Amazon’s model is superior, conceptually.

The consequence for libraries is not healthful. Rosenblatt suggests that without a change in the law, libraries will be unpersuasive in comparison to commercial sector alternatives. His recommendation would be to provide explicit support for renting ebooks through statutory licensing: “If publishers acknowledge the promotional value of library e-book lending, then they might be willing to accept a statutory license to lend e-books if they can negotiate a per-loan royalty rate in lieu of upfront purchase prices. The Copyright Clearance Center, for example, would be in a good position to manage these payments and royalty disbursements, just as ASCAP, BMI, and SoundExchange do for music.” Of course, there are many difficulties implicit in this proposal, including the difficulties of passing statutory licenses (or even voluntary ones); getting fee structures that would not overly compensate content owners while egregiously harming public libraries and their communities; and the inability of libraries to fulfill their goal of owning and thereby providing stewardship for books.

Another commentator, Joshua Greenberg, the author of a book on video rental, has noted in private correspondence the historical congruence between current stresses in the digital book market and the emergence of rental video distribution models. In 1987/8, the Rentrak company revolutionized access to movies by facilitating the rental of VHS tapes directly to consumers through the creation of a trusted auditing platform, serving as an essential mediator between studios and stores. In a manner not dissimilar to Rosenblatt’s suggestion but avoiding any changes in law, Rentrak enabled a shift in revenue compensation to a per-rental fee split between stores and studios, where stores ceased paying upfront for (physical) video content.

It is possible to imagine DPLA serving as a CA that fills Rentrak’s intermediary role for ebooks to the mutual benefit of libraries and publishers, while preserving free borrowing access for the end-user. An ebook CA could negotiate for per-rental fees that are lower for many libraries than the cost-per-circulation over many different types of books. Via a centralized ebook rental dispensary, public libraries would also benefit in cost reductions from lessened maintenance of physical inventory, damage and replacement liability, contents insurance coverage, and other factors. Irrespective of other metrics, Greenberg notes that a shift to subsidized rental rather from buying and lending could allow libraries to develop much more finely-tuned algorithms for rationing their collection budget across users and collections, while still using mechanisms like hold times to create “speedbumps” where necessary.

Whether libraries endorse a model of marketing partner and ebook sales front, or try to work out the pricing and policy kinks with ebook rental systems, innovation in library services is requisite to serious publisher involvement. While it is balming to consider the prospect of enshrining the right of digital first sale through legislation, the facts on the ground suggest that there would be significant dissension over what this would entail for copyright; First Sale’s boundaries remain unclear even for analog materials.

In the first part of the new year, there are several scheduled meetings that bring together librarians from both academic and public systems, publishers, policy advisers, and economists to begin discussion of the future of national library systems. Regardless of whether or not libraries carve a path for access to ebooks in the future, at least the challenge is finally being directly addressed.

2 thoughts on “Renting out the library

  1. Michael Ward

    The free public library buys a book, and lends it to its patrons. If there is enough demand, it buys more than one copy. This technology exists for ebooks as well as for printed books.

    All the discussion of licenses, rents, copyright clearances and such for library ebooks is all nonsense. The free public library is an important social resource and we can’t let it be destroyed by the greed of a few players. It may be necessary (and I am not a fan of this process) to resort to legislation to preserve our library lending rights.

  2. Dale Copps

    Peter,

    Your piece is a breath of fresh air to me. I have been writing about “The End of Libraries” for several weeks now. See the pieces at:

    http://alltogethernow.org/showtag.php?currid=85

    It is most gratifying to see serious consideration given to the awful prospect of the loss of our national public library network over the eBook lending issue. Something’s got to give, or it will happen. I hope these meetings you mention at the end of your piece bear fruit. My Google Alert should keep me up to date on that.

    I have come to the conclusion over the past few weeks that eBooks are for lending, not for selling (with sales of both digital and paper copies increasingly serving niche markets). And if a retail concern such as Amazon can provide a comprehensive, reasonably priced Netflix-type model for renting/leasing eBooks, public libraries are in peril.

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