To examine why Random House decided to jack up its prices to libraries for its ebooks, we should take them at their word. In the statement they provided to Library Journal, their reasoning is quite clear:
We believe that pricing to libraries must account for the higher value of this institutional model, which permits e-books to be repeatedly circulated without limitation. The library e-book and the lending privileges it allows enables many more readers to enjoy that copy than a typical consumer copy. Therefore, Random House believes it has greater value, and should be priced accordingly.
This messaging is all about the revenue Random feels they lose by allowing readers to borrow books for free, instead of purchasing books at high agency prices. Presumably, trade books priced at very high levels compensate for lost income. But higher prices means that many libraries will have to cut back their book acquisition, further restricting access to digital books, which is an obvious publisher goal of this strategy. Increasingly, the most popular titles are not going to be available at any library, and those that are, will be far more available in rich communities than poor ones.
In its statements, Random House officials are explicit about trying to derive maximum ebook revenue from libraries. As they informed Library Journal, ““We are requesting data that libraries can share about their patrons’ borrowing patterns that over time will better enable us to establish mutually workable pricing levels that will best serve the overall e-book ecosystem.” If that’s truly a desire of Random House, they’ve gone about it in a very odd way. Those data will not be available given the pricing constraints that publishers have themselves imposed.
There are very few data about the impact of ebook lending on retail sales, and to get optimal information we’d have to see experiments where the lending of frontlist ebooks with measurable demand in the marketplace was unfettered, freed from any constraints such as 1-lend/1-copy. Artificially restricting circulating copies means that part of the library supply curve is chopped off for popular titles. Additionally, imposing above-market prices further restricts supply, meaning that circulation data will be further biased on patron population characteristics, including ability to pay.
There is a concordant liability, as well: observers of library activity will not be able to ascertain how unfilled demand is met. In poor communities, readers will do without, or substitute with lower priced books. In well-funded communities, there may be greater spillover to book purchasing. None of this is readily available for real-world measurement. In either scenario, the additive benefits of marketing and promotion from library access will be impacted by reduced access in ways that we cannot predict; below a certain threshold, the diminution of these benefits might drop off rather suddenly as customers give up altogether on library access.
Furthermore, even with the addition of circulation data, Random House’s pricing cannot approximate an auction for the highest acceptable price for titles. First, variability in efficient market pricing for books is pronounced, dependent on title, genre, and audience profiles, making generalizations difficult. Additionally, market pricing is characterized by temporal fluctuation; most books are more valuable shortly after release, with outlying demand resulting from title re-release, film tie-ins, and other factors. Finally, when auctions are initiated with an artificial pricing floor, poorer bidders – unable to accept sub-floor pricing – cannot influence the outcome. If a book auction starts at $85 and I can only pay $35, those who can afford $125 will propel pricing to a level beyond what the overall market would have otherwise determined.
RH’s pricing is a very blunt instrument, insensitive to true demand over time as well as the library’s ability to pay. And there is the greater tragedy: publishers are obviously bent on reducing a social good to a economic commodity. As Barbara Fister notes in Inside Higher Ed, “Culture and knowledge, in this new publishing regime, are not common goods, they are intellectual property best controlled by corporations.”
When books are represented by physical goods, distribution is uneven, with a supply/demand mismatch. Pricing must commensurately be inefficient, resting at a lower level than what some markets could bear. There is a tremendous unexpected benefit to market inefficiency: equal access. When revenue is not maximized, social benefit from creative culture is obtained in the difference between actual revenue and its theoretical maximum. That gain is available to all: both those who could have paid more for that product, as well as those who could not. Because even libraries working with limited community funding could further subsidize access to the point of being free, the ability of the local community to produce the larger social benefit of open access to knowledge was fulfilled.
In a digital environment where profit can be more readily quantified, and market subsidies supporting access restricted or eliminated, the ability of libraries to subsidize higher origination costs is reduced in proportion to their fixed or declining budget appropriations. Further, increasingly digital content is not available at all, at any price. This historical transformation has the obvious result of eroding the local community’s ability to foster the larger social goal of equal access, and the possibility of individual advancement and learning. In other words, the increasing corporate control of access to culture tears at our social fabric, weakening the ability of our communities to support individuals against the harshness of our economic system.
Inflating the revenue of a book’s artistry not only serves to impoverish readers, but our social values as well. As our books get more expensive, we perversely impoverish our communities.