Wednesday, October 7th, 2009

Ebook economics: Are libraries screwed?

“Kindling” by Flickr user oskay

The advance of ebooks will no doubt bring much good. As often with technological change, we probably can’t even predict what wonderful new things will emerge! But we can see some serious dangers ahead, and try to deal with them. I see three major areas of concern: to libraries, to physical bookstores and to the freedom to read in unfree countries.

This post explores the first of these—the danger to libraries. There are, of course, arguments to be made about the viability of physical libraries in a digital age—that while libraries aren’t just buildings, the building still define much of what they do. That is not my point here.

Instead, I want to advance a pricing argument: that ebooks will end up costing libraries far more than paper books ever did.

Premise: Libraries will need a “library model” for ebooks.

A few libraries, such as NCSU have been experimenting with ebooks. Without exception, they are following a “consumer model,” buying a large pool of devices and then buying books locked to individual devices in the pool.

This model is great for experimentation—to test what patrons think of ebooks and figure out what to do with them—but it’s not a long-term solution. Digital books locked to individual physical devices are worse than physical books. That is, when you take out a physical book, one book is unavailable. When you take out a Kindle with 100 books on it, 100 books are unavailable. NCSU has bought extra copies when students need another copy in circulation. Obviously that’s not a long-term solution.

Because the “consumer model” won’t work, libraries will need—and publishers and ebook providers—will create a “library model.” The library model will involve a “site license” model—a pool of books, with rights to use them on X devices at a time. Publishers are already talking about this.

Thus, libraries and consumers will be using different models. The market will “split.” (I understand that Netlibrary and Ebrary, two library-centered ebook vendors, already used by many libraries, work this way now.)

Economic effect: Libraries are screwed.

  1. With regular books, libraries took advantage of the same deal regular people got, but extracted a lot more value of that deal. That is, a regular person mostly got a single use out of a book; libraries got many more uses. We didn’t think of it this way, but libraies had a “site license” of sorts—the so-called “first-sale doctrine.”

    With the first-sale doctrine sidelined by digital rights management (DRM), publishers will seek to extract the higher value of their books within a library context. This will cause prices to rise.

  2. With physical books, library price discrimination was impossible. Libraries and regular people bought the same stuff, and paid the same prices. If a given edition was pitched to libraries, its price was held in check by the availability of non-library editions. As a result, only purely academic titles had run-away libary prices—think Brill with its $300 monographs.

    Once the market is “split,” price discrimination is possible. Publishers will charge libraries more for the extra value they get because they can do so without hurting the consumer market. This will cause prices to rise.

  3. The cost of paper books have traditionally been held down by the existence of a secondary market. Copyright is, of course, a legal monopoly on the production of a given work, but once paper copies have been sold, new sales compete to some degree with the used copies out there. If you don’t want to pay $242 for Brill’s Collected Papers on Greek Colonization, BookFinder lists 25 used copies under $215.

    Because ebooks are non-transferable—and if such ability is added, it surely won’t allow a consumer to pass an ebook to a library under library terms—no secondary market will exist. Until copyright expires, libraries will have to go to a single source—the publishers who have the copyright monopoly. This will cause prices to rise.

  4. The “library model” will be inevitably pushed toward “rental” not “ownership.” As many have remarked, ebooks are already more like “renting” than “owning,” with no right of resale and at least the technical ability for the book to vanish at whim. Libraries, afraid of buying goods that a technological change or company bankruptcy will obliterate, will seek to avoid the “lock in” of ownership. Publishers will also see opportunity in offering large “packages” to libraries—packages that provide rental access to a collection that would take years to build up in a traditional buying-and-owning model.

    This logic is how libraries were pushed to renting their journals. It’s also at work in enterprise software, either de jure or—through regular version upgrade payments—de facto. Libraries will rent, not buy, their ebooks.

    The combination of monopoly and rental is dangerous. It’s how journal subscriptions have risen faster than inflation for 40 years, and spiked precipitously upward in the last decade. (The classic ARL graphic can be found here.)

    The logic of journals is the logic of the site-licensed ebook. Prices will rise unchecked. Some relief may come if the open-access movement goes past scholarly journals into other scholarly publishing—there’s really no reason Brill books need to cost $300! But this will take a while, and it will only affect scholarly titles.

    Rental means prices will rise.

  5. In the past, libraries could “coast.” Collection development was a long-term thing, and libraries could, if necessary, restrict their acquisitions budget in line with financial realities. When times are bad, you buy less. When times are good, you buy more. As long as you have both ups and downs, the library as a whole stays healthy.

    Rental will change this. Libraries will only be as good as their last subscription check. This will change the nature of collection development (in both good and bad ways), and give politicians new opportunities for both unsustainable budget growth and budget-cutting during crisis. This may not cost libraries more, but it will put their value on the knife-edge.

What do you think? I’ve started a discussion topic in the “Librarians who LibraryThing” group.


I’m sure there are lots of good arguments against this post. Here are two that came up as people read earlier drafts.

Jason Griffey argues (by Twitter) that prices will be kept in check by wide availability of pirated versions. This is a good argument. The counter-argument is corporate software. It’s not hard to get a free copy of InDesign or Photoshop, but corporations continue to shell out nearly $1,000 for each, because the penalties are so steep.

Another correspondent suggested the “dawning age of biblioplenty”—a world in which “millions of books will be available from almost anywhere”—will act to hold down prices, presumably through what economists call indirect competition.

Labels: ebooks, economics, kindle, sony reader

34 Comments:

  1. Roy Hayward says:

    Okay, I know this topic is getting older, but I looked at the new ebook reader the NOOK. It alows you to lone a book for 14 days. (during this time you can't read it yoruself.)

    Does anyone else see this as great for libraries? (as long as late charges aren't your source of funding.) Libraries can have a nook with all of their titles, lone them to a patron, and in 14 days, it is automatically returned!

    I like it.

  2. Tim says:

    The book can only be rented once per book.

  3. Anonymous says:

    What about the Vook (video/book)? Maybe people are heading that way instead, where they don't want to have to read the printed word, they want to see the pictures in front of them or have a combo of words pictures and music.

  4. Anonymous says:

    How would that differ from a real book, Tim?

  5. Anonymous says:

    Or are you saying it can only be rented once and then never again?

  6. Tim says:

    Right. Lend it once for 14 days to someone else, then you can't lend it again to anyone ever.

  7. Anonymous says:

    It will be interesting to see how this plays out. Truly the adoption of digital music was a result of the ability of computer user's access to illegally copied songs. With e-books this isn't the case so they hold no real value over buying an physical copy. The Hardware is expensive and the price point of $10 dollars isn't realistic when I can wait for the book to be discounted, or if I have to read it now, check it out from a library. In my mind libraries would be better served to stick with the physical book until they no longer exist which I doubt will come anytime soon. Even today music is released in both formats.

  8. Kathleen says:

    Libraries can still compete *if* privatization is avoided and *if* libraries can evolve into social gathering places with on-line book ordering ability through Powells, Amazon, etc.

    Revenues are all. Public libraries were originally started by the then uber-wealthy robber barons of the Golden Age, and came to be financed with real estate taxes (mostly). Some kind of revenues, by taxation, by retail operations, or some combination of the two, are going to be necessary.

  9. Tom Corbett says:

    I have always been perplexed why librarians, in general, are so anti-DRM. It seems to be that DRM that allows for expiration is the only way lending can work in an e-book world.

    Look at the Overdrive model. Libraries purchase multiple titles to keep the request queue at a reasonable level, just like with printed books. Publishers sell multiple copies, consumers queue for titles from the library or purchase the title outright if they can't wait. Win/win — and this avoids much of the economic problems that are described here in a DRM-less world.

    But if DRM is out the window (and this may be the case based on what's happened in the audio world) then the economic realities described here come into play.

    By the way, the Nook model for 14 day lending only works within a DRM environment that allows for expiration.

    My feeling is that we should as librarians advocate getting the Adobe ePub DRM accepted as a common option across all devices model so that we can continue separating the device from the content. This DRM allows for expiration and, therefore, lending. I don't think the economics change much in that environment.

  10. Blue Tyson says:

    Why should librarians be tech support for Adobe? Not to mention marketing advocates. In this ase, Adobe should be paying libraries.

    Why would libraries from countries that company is NOT from want to be beholden to them?

    The economics of it mean if there is a monopolist they could keep raising their prices on all ends. Or change their software because of a deal with computer manufacture X or operating system maker Y.

    All library software would need to do is this: only allow one bought copy of a book to be checked out to one person at a time, same as anything else.

    DRM free open formats mean any patron with any reading technology can use the book.

  11. Tom Corbett says:

    Quick stream of consciousness in response to Blue Tyson:

    DRM free really means libraries are out of the picture.

    The Adobe ePub format is becoming a standard across all devices but Kindle. These things happen in a market economy. Commercial enterprises are sort of a part of that real world.

    Library software managing access? One book lent at a time? For how long? How about one minute so that the title is available almost immediately for the next patron? Why should publishers ever accept that scenario?

    We don't run the show, the marketplace does. However, it might be necessary to promote some reasonable government regulation to make sure the market works with libraries.

  12. Blue Tyson says:

    Well no, 1 minute would clearly be silly.

    Would take a little longer than that to strip DRM to a satisfactory point, took, for DRMed books :)

    Libraries do need to force the issue though, I think – what is th law – if you buy a book, can you lend it?

    ePub may be becoming a standard, but that has nothing to do with Adobe as such – there is no need to have DRM involved with this particular format, or any format.

  13. Ray McIntyre says:

    Until an elibrary can resolve issues of provision of items to multiple users simultaneously (which a 'normal' library can simply by purchasing extra copies) then I cannot see how they can compete successfully with the older style libraries.

  14. Quasar says:

    Interesting discussion.

    Certainly as how I've watched the move to digital journals negatively impact my local academic library I'm rather anti-subscription when it comes to library collections. Add to that issues surrounding regional licensing agreements.

  15. Anonymous says:

    On the bright side, for books that are out of copyright there are more and more sources for DRM-free versions

    On the not-so-bright-side, no books that are not currently out of copyright will ever be out of copyright…

  16. prosfilaes says:

    On the not-so-bright-side, no books that are not currently out of copyright will ever be out of copyright…

    I get seriously tired of people saying this. In India, China, Japan, Europe and the Americas besides the US, new books are going into the public domain every year. In the US and Australia, a previous copyright extension has temporarily stopped new books from going into the public domain. But We, the People have a voice in this, and if our representatives try and proposal a new extension at the end of these, and we demand otherwise, loudly and vigorously, then the proposal will disappear.

  17. skittles says:

    Question: IIRC in UK & AUS(?), the libraries have to pay authors a “royalty” fee when books are borrowed? Why couldn’t that model work here in USA?

    If someone who knows & understands how that works could explain and give the pros/cons of the arrangement

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