Publishers’ business model for lending ebooks at libraries

by Public Libraries on December 9, 2011

Kindle Fire

Amazon has just created the business model that book publishers should use with libraries for lending their ebooks.

Amazon has completely changed the ebook lending game with their KDP Select program that they launched yesterday.  The plan is to put all their Kindle Direct Publishing ebooks into their Kindle Owners’ Lending Library and then pay authors based on the number of times their ebook was borrowed.  Only it won’t be a fixed per use fee.  Instead, all the authors combined would be paid a fixed total amount and an individual author would get a percentage of that amount based on the number of times their ebook was borrowed relative to the total number of times all ebooks were borrowed over a set period of time.  It’s a usage based payment with a fixed budget.  This is exactly what libraries and publishers need.

Unfortunately, public libraries are stuck with their old mentality of building the biggest and best collection and getting the largest circulation.  Book publishers are stuck with their mentality of trying to not cannibalize their sales and trying to make sure their content does not get pirated.

Amazon is the first one to focus primarily on the end user without worrying about all the encumbrances that libraries and publishers carry.  The only thing that matters is what the customer wants and expects.

Customers that have an ereader are wondering if they can borrow ebooks from their local library.  One would think that since libraries carry physical books, they would carry electronic books as well.  Customers then go to their library and are excited to find out that they do loan out ebooks.

Unfortunately, that excitement doesn’t last long once they find out what they have to do to borrow an ebook.  First, they go to their library’s site.  Then they go to OverDrive’s site for their library where they search a very limited selection of ebooks.  Two of the major six publishers don’t even offer their ebooks at libraries and three of the other six have several limitations.  The customer then searches for their ebook and almost definitely doesn’t find it.  If they do find it, they notice that there are only a few “copies” available and they are already loaned out.  What is a “copy” of an ebook?  So they then add themselves to the waiting list and sometime in the future are able to borrow the ebook.  Checking out the ebook involves some steps at OverDrive and then is completed at Amazon.com in a process that is only slightly more difficult than buying an ebook at the site.

This is a ridiculous process that only exists because of the legacy concerns of book publishers and libraries.  In the world of ebooks, there is no such thing as a “collection”.  You either have access to the ebook file or you don’t.  There is no such thing as a “copy” either.  You either have the right to own or borrow the ebook or you don’t.  Libraries need to stop thinking about ebooks like they think about physical books.  Publishers need to start thinking about libraries as a valuable sales channel with large numbers of loyal readers that could become one of their largest sources of revenue.

Book publishers should shift to the same model for libraries that Amazon is using with KDP Select.  They should offer all their ebooks to any public library that signs up with them.  They could exclude a few super popular titles (Harry Potter, Twilight, etc.), but the rest of their titles would all be available for borrowing at the library’s site.

The publisher would charge a library an annual fixed fee for all of the card holders of a library to be able to access all of their ebooks.  The fee would be based on the average circulation per card holder for that library over the last year.  As ebook use becomes more prevalent the fee could be based on ebook circulation per card holder for the prior year.  This would allow libraries to budget a fixed amount for ebooks as a portion of their annual spending.

The publisher would essentially receive a licensing fee from the library that would allow that library to loan out its ebooks.  This would give the publisher a reliable revenue stream.  The publisher would take that revenue and set aside a fixed percentage to pay to the authors.  The publisher would then use usage data to determine how much to pay its authors.  Let’s say a publisher has 3 books (A, B, C) and those books are borrowed a total of 60 times over a year.  Pretend A was borrowed 40 times, B was borrowed 20 times, and C was not borrowed.  Author A would receive 67% (40/60) of the payment and author B would receive 33% (20/60).  Author C would receive no payment.

This model would give libraries certainty over their budgets, reliable revenue to publishers, and proper incentive to authors.  But the most important thing will be that the customer experience will drastically improve for everyone trying to borrow an ebook at a library.

Library patrons would be able to login to a site to verify that they have a valid library card and then have free access to just about every ebook on the planet with no wait.

This is exactly what Amazon is currently trying to do with its Kindle Owners’ Lending Library except that no “libraries” will be involved in the process.  Amazon will be the one loaning out just about every ebook on the planet for “free”.  Free if you pay for their annual Amazon Prime subscription that is.

So customers/taxpayers will soon be faced with a choice that could decide the future of ebook lending.  Will they pay Amazon an annual subscription for free access to almost every ebook or will they pay additional taxes for free access to almost every ebook through their library?  Unfortunately, libraries and publishers are currently making the decision to pay for Amazon Prime look very attractive.

{ 3 comments }

Lucy Browning December 10, 2011 at 7:35 am

I wonder if librarians and book publishers would be willing to do this with their e-books. This is so very different than how they are used to doing things.

Texas Bob December 11, 2011 at 4:46 pm

Wow. So it’s basically Amazon versus public libraries to see who becomes the Netflix of ebooks.

Dale Copps December 12, 2011 at 7:23 am

I’m not sure a fixed budget is desirable or necessary, but KDP Select is on the right track and you are right to say publishers and libraries should adopt it.

The public library/Overdrive model is, indeed, a ridiculous one and will spell the death of libraries if it isn’t replaced soon. I would replace it with one similar to the one you describe here, but I would replace the “budget” pricing with pay-per-use, as I describe in part II of my series, The End of Libraries (see URL bel0w). This strikes me as more equitable all around. Libraries pay for what they use and authors earn on the basis of what is actually borrowed, and not merely participate in a piece of a limited pie, and one which is very hard to calculate, I would think. (Amazon, I am convinced, is limiting that pie for KDP Select as an early cautionary measure, and until they can figure out a Netflix-type pricing model.)

Anyway, this is a great piece. I have been discussing these issues for several weeks at:
The End of Libraries

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