A publisher counts its library ebook money.

Ebooks are hot, and libraries are noticing.

The public library conversation about ebooks is also heating up. Unfortunately, much of the conversation ignores a critical factor that makes ebook lending problemmatic. That factor is not luddism, but the simple fact that, for libraries, ebook economics doesn’t make sense.*

The $0.50 Circ. I’ve written on this topic in the past. My contribution today was for me to spend some time trying to figure out what it costs to take out a paper book from a public library. What, in other words, is the cost per circulation?

I did some quick work at the Institue of Museum and Library Services’ Library Statistics, which collects statistics from some 9,000 public libraries, and presents them in a simple, searchable interfact.

The data is pretty sparse, but it does include two critical data points: Total Collection Expenditures and Total Circulation. From these you can derive a third statistic, Cost per circulation.

For example, if the South Portland Public Library spends $78,038 per year on materials, and those materials are taken out 249,431 times, we can see deduce that the cost per circulation was $0.31.

All told, I surveyed 25 libraries, running down town names—eg., Portland, ME ($0.54), Portland, OR ($0.29), Portland, CT ($0.51), Portland, IN ($0.31)—as well as including a few big systems—eg., Dallas, TX ($0.48), Charlotte Mecklenberg ($0.50). You can see my spreadsheet here.

The average of all comes out at $0.50. I don’t think a much larger survey would change that by more than a dime in either direction.** (If you want to run the full numbers, and have a copy of Microsoft Access, ILMS has the data files.)

Unfortunately, this doesn’t get us all the way to a book circulation number. But it gets us close. Print circulation still makes up the majority of circulation transactions. And books are not the most expensive materials libraries circulate. So whatever the number, it’s near $0.50.

Come and get your half-buck! Cost-per-circulation is a critical number because it shows how much libraries are spending to satisfy their patron’s reading needs–ignoring staff, building, etc. If the switch to ebooks causes that number to rise, we can expect library budgets to rise as well. If it rises a lot, library budgets will rise a lot.

Unfortunately, to keep library budgets the same, ebook sellers will need to accept $0.50 for each library loan. That’s not just the publisher’s money. The same $0.50 must compensate the publisher, the author and the ebook seller—all of whose costs were figured into the previous $0.50 calculations. (You can perhaps begin to understand why publishers and authors have never liked libraries, although few will say it openly.)

This princely $0.50 is compared to what ebooks go for, on average, in the consumer market. Of course nobody knows the answer there, but Amazon has tried to get everyone to adopt a $9.99 price point for popular titles and the average must be on this order. So, in order to keep library budgets in line, ebook sellers will have to be willing to accept 1/20 of the revenue they could get from the consumer market.*** Even assuming some library buyers buy less than they would have loaned, that’s a daunting ratio.

The magic is over. Will ebook sellers accept the $0.50 deal? Of course not. To think optimistically in the face of such numbers is to avoid the problem. Publishers, authors and ebook sellers aren’t stupid.****

Libraries at least are smart. Libraries are so great because aggregated lending is a wonderfully efficient thing, wringing high value from low cost. By buying books for the whole community, and making them generally available, libraries managed to reduced the cost of reading to a paltry half-dollar, far less than a paper book ever cost. That was a magical time.

With ebooks, that time may be over.

Reply to “How is this in anyway different from the case with pbooks? Hardbacks normally retail well over $9.99, yet library shelves are filled with them. Somehow the publishers manage to survive with this.”

The difference is that publishers have never been able to stop lending–by libraries or anyone else. Like reselling, giving and inheriting, lending is a basic right we have so long as its not taken away. The only way to take it away is through a law (as applies to software rental) or a contract. Publishers actually did try posting notices inside books, preventing resale (see Bobbs-Merrill Co. v. Straus), but it was stopped. A real contract requires both sides to explicitly agree, and notices like that were ruled not to constitute a contract. In theory, bookstores could start requiring real contractings, only selling you a book on the condition you didn’t sell or lend it to someone else. Obviously, this would outrage people, so it’s never been tried.

eBooks make theory a reality. All the ebook licenses constrain gifting, reselling and lending, and most prohibit it entirely. The media change has largely obscured the shift. People know they can’t lend software, and indeed it makes a certain amount of sense. Digital goods are so frictionless an unlimited ability to lend, even constrained by a one-at-a-time rule, would quickly give rise to a massive lending clearinghouse, and a publisher would only sell as many copies of a book as were being read simultaneously at its peak.

As far as surviving, my post made no claims whatsoever about surviving. Publishing has always known that lending and resale cut into revenue, just as people who make snow blowers know that, if nobody could lend or sell a snowblower, more people would buy them. In the world of physical sale, lending and reselling are normal and, ultimately, built into the prices we pay. Just as snowblower manufacturers don’t go under even though my wife and I exclusively borrow our neighbors’, Publishers don’t either.

* This post only deals with public libraries. The issues are different for an academic library. Academic publishers have a much smaller “consumer” market, and academic libraries have much high cost-per-circulation. I suspect that academic libraries will transition to ebooks more easily.

** Obviously, real circulation involves books bought in previous years, but assuming neither number swings wildly around, you can estimate the cost per circulation very well from the collection expenditures and total circulation.

*** The only escape is in the notion that libraries don’t canibalize consumer sales. There’s certainly some effect there. If everyone had to buy their books, some people wouldn’t buy as many books as they used to take out for free at the library. But is this effect sufficient to overturn a 20-to-1 pricing disparity?

**** We have, of course, completely ignored the cost of the devices themselves. If libraries also lend the devices, their costs will go up still further.

The conventional rejoinder here, after calling me a luddite, is to argue that publishers are already willing to let Overdrive lend out some ebook titles in libraries. I contend that they were willing to experiment with it, especially considering how limited Overdrive is as a platform, and that in any case, when you add up all the fixed and variable costs, and divide by actual usage, Overdrive is actually quite expensive. It’s also worth noting that a recent COSLA report on ebooks noticed Overdrive is now refusing larger agreements, speculating:

“OverDrive won’t sell to the LYRASIS consortium and has begun to balk at statewide purchasing groups. Maybe this is for the comfort of nervous publishers who view ebooks as frictionless, ripe for piracy, or long-term profit losses as library products”