Electronic books and libraries - tenable?

Libraries are changing as digital media becomes more popular. The rise of the electronic book is the largest opportunity and threat to the usability of libraries. For example, as reported in the New York Times, Harper-Collins proposes to limit the number of times an electronic book can be checked out before they expire the license. Libraries are naturally concerned with self-destructing books.

The electronic book has stormed into the world of publishing. In 2009, only about 2% of all books sold were eBooks, far behind sales of trade paperback and hardcover books. By the end of 2010, that number had climbed to nearly 10%, and almost $1B was spent by US consumers on eBooks. There are widely varying estimates of the continued adoption rate, but all agree this trend will continue. One estimate is that 50% of the publishing market will move to eBooks by 2020. While the impact of online book sales and eBook distribution is clearly impacting brick-and-mortar bookstores such as Borders (preparing for Chapter 11 bankruptcy), the path ahead for lending libraries is muddled.

Chief among the challenges - large-scale purchase and lending of eBooks is largely prohibited by the Amazon customer agreement. Authors, publishers, and eBook vendors have yet to agree on a lending model which adequately protects their copyright and business models. Much as the music industry which came before them, the publishing industry is struggling with a very rapid market behavior change. Libraries are caught in the middle.

Libraries provide multiple values to communities, including meeting space, student study spaces, and their access to content including written, audio, and video content. Digital book content has the potential to allow libraries to significantly reduce the number of hardcopy books they retain, especially for books in significant demand. Libraries costs are dominated by library staffing, but new book purchases are an important component, representing about 15% of Palo Alto and Mountain View city library costs. Mountain View public library, for example, purchased 31,000 new book/media items, over 14,000 titles in 2010FY, at a cost of $770k. Each item in the collection circulates about 5 times per year (on average), so this represents over 150,000 media uses.

Libraries and publishers have been at odds over various issues through the years. In the 1970's, a significant conflict arose over the use of Xerox machines to copy excerpts of books and journals. The Supreme Court eventually ruled on the issue, establishing the bounds of 'fair use' which could be practiced.

Going to the economic root, how do authors thrive in the presence of libraries today? (OK - being an author isn't the easiest path to riches, but leaving that aside.) Consumers explore books at libraries, reading books they probably would not otherwise purchase. Libraries buy significant numbers of books, especially including books which don't sell in high volume. Consumers who do purchase books (rather than borrow them from libraries) may do so for various reasons, including permanence of ownership, time to access, and convenience.

Exploring the reasons for book ownership, all contribute meaningfully. Some people enjoy reading books when the mood strikes, and thus prefer ownership to borrowing. Others want to read a book as soon as its published, and purchase rather than waiting for a library copy to become available. Still others purchase in airports or other 'locations of convenience'. How do these motivations play in a fully digital era. "Ownership" becomes less important to immediacy and convenience, witness the drop in DVD sales as streaming video media becomes more highly available. The movie industry has tiered pricing based on time-from-release; movies are first available in theaters at prices comparable to paperback book prices. Months later, movies become available at lower prices in cable pay-per-view, and then finally become yet more broadly available on TV and in streaming form.

The same time-from-release model exists in the publishing world too, for books in high demand, with higher priced hardcover volumes arriving before lower-cost mass-market paperback books.

Interestingly, there are authors giving their digital book editions away for free in order to encourage physical book sales. Will this model work in the longer term? As more people read eBooks as their primary media, it authors may end up relying on donations and a 'shareware' model of income. Alternately (and in keeping with the video model), older books can be free or nearly free in order to encourage the purchase of the latest new books. This is compatible with the role of libraries as providers of all but the most recently published content. Consumers would still be incented to purchase access to the latest books. In addition, libraries could (and arguably should) continue to buy books for loan. Each eBook license purchased could reasonably be limited to a small number of simultaneous borrowers, especially during the first year after publishing. Authors and publishers could fairly set a price per license which varies/drops (even to zero) over time, much as video pricing works today. Libraries might reasonably wait to purchase multiple license copies until the cost of licensing drops.

Experiments in eBook pricing will continue as authors and publishers weigh the impact of electronic distribution on their businesses. Libraries and the largest distributors of eBooks will ideally be active participants in these experiments. Amazon's current lack of 'library-friendliness' opens a door of opportunity for other digital media titans, most notably Google and Apple, to step in. Like the music industry before it, the book industry is poised for change.

Libraries will 'peacefully coexist' with eBooks when publishers, distributors, and authors agree to adopt aligned rules of engagement.