Amazon’s new program sparks debate about e-book library lending

Article  by  Natalie HIDEG  •  Published 15.12.2011  •  Updated 23.12.2011
[NEWS] On Nov 2011, Amazon launched a new service offering its AmazonPrime customers free access to e-books on its Kindle products. Penguin reacted by pulling e-books from libraries. Four major publishing houses are now reconsidering their business models. Has Amazon’s move endangered e-book library lending?
The world’s largest online retailer is once again shaking up the balance of power within the publishing industry. Amazon had already alienated publishers by helping new authors bypass publishing houses via “CreateSpace,” a self-publishing platform for authors to expose and sell their work. On November 2, 2011 Amazon added fuel to the fire by introducing its very own e-book lending service, the Kindle Owners’ Lending Library, partnering with OverDrive[+] NoteOverDrive is the leading e-book distributer in US, in partnership with schools, libraries, and retailers.X [1], to offer its AmazonPrime customers free access to one e-book a month on their Kindle.
The arrival of Amazon’s Lending Library immediately sparked a long-overdue debate concerning e-book usage in libraries and the effect it could have on publishers’ sales[+] NoteUntil recently, library patrons were only able to check out e-books with a Sony Reader or Barnes & Noble's Nook; Amazon decided in April 2011 to make its device compatible with library technology.X [2]. Several weeks after the launch of Amazons’ program, Penguin Group, a top US book publisher, suspended e-book availability to libraries, primarily citing copyright security concerns. It rescinded its decision a day later, however, in response to uproar from irate librarians across the country, agreeing to provide access to older e-books, while withholding new releases and Kindle downloads from OverDrive’s catalogue. The company said it would officially review its electronic e-lending policy at the start of 2012.
Dekwua / Flickr

Four of the major publishing companies currently provide e-books to libraries in some shape or form. Hachette shares Penguin’s policy, providing access strictly to older e-books and reserving its frontline releases for paying customers. Harper Collins had provided access to all of its e-books until February 2011, when, faced with a confidence crisis in e-lending, it announced new guidelines for its lending partnership with libraries, notably requiring that libraries repurchase their e-books after 26 loans. Random House is currently the only publisher of the “Big Six"[+][3] to work freely with libraries in the expansion of their e-book collections; it believes that “a library book is a sale,” challenging the very notion of competition between library loans and physical book sales.
Simon & Schuster and Macmillan have so far refused to provide library access to their authors’ works. Macmillian CEO John Sargent called e-book lending “a thorny problem,” maintaining that working with libraries would be a bad business model for publishers.
The launch of Amazon’s Lending Library program is just the latest strain on an already tumultuous relationship with publishers. Ever since the retailer made its Kindle available to library patrons in April 2011, Penguin claims the “Get for Kindle” button on library servers directs book hunters directly to the Amazon site, bypassing firewall security put in place by OverDrive. With its own recently launched publishing division, Amazon is a direct competitor, and by increasing the presence of Kindles in libraries, Penguin is indirectly encouraging potential customers to shop at Amazon. Publishers in general are displeased with Amazon’s insistence on maintaining the older wholesale pricing model, which allows retailers to purchase books from publishers at the regular price, but to subsequently resell them for less in order to bring in more customers. Most retailers have recently switched to the agency model, which standardizes selling prices for all retailers. Publishers argue that their e-book lending policies are a decade old, and need to be revised to keep up with the growing popularity of the industry. Even those that agree to work with libraries acknowledge that more discussion about pricing agreements is necessary.
The American Library Association (ALA) condemned Penguin’s move, asserting that the clash between publishers and Amazon is “hold[ing] libraries hostage to a conflict of business models,” and that library patrons are paying the price. The Author’s Guild contends that Amazon introduced its library lending program in order to boost sales after the release of the new Kindle Fire, and that, despite the refusal of every publisher in the “Big Six” to participate in its library lending program, it audaciously included unauthorized titles in its catalogue. The Author’s Guild goes as far as to question the legality of the program, considering Amazon’s actions a breach of contract between retailers and publishers. Amazon, however claims that by paying the publisher for each e-book loan, it is within its right.
Advocates of e-book lending and librarians argue that working favorably with libraries on this issue is advantageous for publishers because libraries generally pay publishers more for e-books than for physical books. Consequently, spending on e-books “has doubled or even tripled over the last year," according to Carrie Russell, ALA's director of the OITP Program on Public Access to Information. A study published in October 2011 by Library Journal demonstrates the value of libraries for the publishing industry. The study brings together data and surveys collected from library patrons across the country, and claims that libraries can be effective in boosting book sales, acting as a partner for the publishing industry, rather than a threat. “Our data show that over 50% of all library users report purchasing books by an author they were introduced to in the library,” said Library Journal Executive Editor Rebecca Miller. “This debunks the myth that when a library buys a book the publisher loses future sales.”
As e-book lending continues to prove its status as a burgeoning industry, most publishers seem to be reconsidering the effectiveness of their current business models in an increasingly digital era, and are re-estimating the potential monetary value in providing access to their virtual material. Hachette is earnestly researching the possibility of increasing its visibility in the library e-book market, and Penguin said it will reevaluate its situation in January 2012. For the moment, Macmillan and Simon & Schuster appear to be the only two major US publishers intent on sticking to a rigid policy.

The ALA, hoping to help publishers make informed choices and to ensure the profitability of e-book lending, has hired Stanley Bensen, an expert in the economics of intellectual property law, to prepare a report due out in December 2011, comparing the different business models available to publishers. Depending on its findings, this report could potentially incite Macmillan and Simon & Schuster to reconsider their unyielding position, and to persuade the others in the “Big Six”, such as Penguin and Harper Collins, to reverse their newly-established restrictions on new releases.
In the wake of the crippling decisions by Penguin and Harper Collins on the future of e-book lending, libraries and private individuals are looking for alternatives in order to veer away from dependence on publishers. This controversy has pushed some libraries to consider their own e-book lending application – rather than working with content management and distribution companies like OverDrive – for content access with the device of their own choosing. For example, the Douglas Country library in Colorado is creating partnerships with publishers in order to provide e-books to patrons through the library’s homepage. This may not completely resolve the issues between publishers and retailers, but by eliminating the third party, libraries are hoping to facilitate the e-book loan process, gaining the confidence of publishers.
Another attempt to promote the e-book lending (and purchasing) business is being made by the soon-to-launch international online store Bilbary, which considers itself a test for publishing groups nervous that library e-book lending will hurt sales and online retailers will monopolize the industry. The start-up’s founder, Tim Coates, explained that his site will be dedicated solely to books and readers, hoping to “bring the skill of the bookseller and librarian” to a single site, without the consumer ever having to leave his or her couch. He hopes to assist libraries in their struggle to convince publishers that e-lending is good for the industry. “There has been huge sales growth in e-books this year and nobody wants to damage that,” Coates said. “In time, we think there will be lending, and here is a space where they can experiment.” Backed by private investors, he is already in final negotiations with all six major US publishers, and has agreements worked out with a number of academic publishers.
Depending on the outcome of the Author’s Guild campaign against Amazon, the problem might very well resolve itself. If Amazon cannot amass enough important titles in its program due to copyright infringement issues, the financial ramification of its Owners’ Lending Library on publisher’s sales might not be consequential enough for them to care. Although Amazon has more recently launched “KDP Select” (Kindle Direct Publishing), a program that allows self-published authors to provide access to their works through the Kindle Owners’ Library Lending program – indicating that perhaps it is in desperate need of titles to add to its catalogue, and is anticipating that the “Big Six” publishers will put up a fight.
Whether or not Amazon’s program is successful, recent digital evolutions have taught us that it is only a matter of time before publishers will be forced to adapt their economic models to be compatible with e-book lending – be it through retailers who tilt the balance of power, or directly in collaboration with libraries.

Photo credits:
- Screen shot of website;
- Screen shot of Penguin Group website;
- Circulating / Flickr.
  • 1. OverDrive is the leading e-book distributer in US, in partnership with schools, libraries, and retailers.
  • 2. Until recently, library patrons were only able to check out e-books with a Sony Reader or Barnes & Noble's Nook; Amazon decided in April 2011 to make its device compatible with library technology.
  • 3. Penguin, Random House, Harper Collins, Macmillan, Simon & Schuster, and Hachette.
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