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Public Library E-Book Lending Must Change to Survive December 4, 2011

Posted by Bill Rosenblatt in DRM, Law, Libraries, Publishing, Uncategorized.
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A few events over the past few weeks illustrate the downward arc that I have suggested is in store for public libraries in the e-book age.  First, Amazon introduced its own e-book “lending library” for members of its $79/year Amazon Prime service, which allows users to “borrow” one e-book at a time, with no due dates.  Second, yet another major trade book publisher, Penguin, got into a spat with public libraries over e-book lending.  Penguin stopped offering new titles and withheld Kindle access to all titles, out of unspecified security concerns with OverDrive (the service that powers most U.S. e-book library lending) and Amazon. (Penguin subsequently restored access for existing titles, but not for new ones.)

The Penguin incident is only the latest in what will undoubtedly be a long series of squabbles between publishers and libraries over e-book lending.  In fact, five of the “Big Six” U.S. trade book publishers are now either limiting their e-book licensing to libraries or not licensing at all — and the sixth (and largest), Random House, is reportedly reconsidering its library e-book licensing policies.  Such spats may well lead to a world of off-putting restrictions and confusion for libraries and their patrons.

Libraries have two fundamental problems here: they have less control over the situation than publishers do, and they are about to get some serious competition from the private sector.  An article in Publishers Weekly gives an overview of Amazon’s e-book lending feature and its implications for publishers and authors.  In a nutshell, the program is currently limited to a few thousand titles that originate either from Amazon itself or from smaller publishers that still sell e-books to Amazon under a wholesale model, as opposed to the “agent” model used by most major trade publishers, which forbids such activity.

But the Publishers Weekly piece only covers the impact of e-book lending on publishers and authors, many of whom are raising a fuss about Amazon’s program.  It says nothing about the program’s impact on public libraries.  The executive director of the American Library Association (ALA), Keith Fiels, has publicly expressed a lack of concern over the impact of Amazon’s lending program, given its limited range of titles and that it’s part of a subscription program that includes other features such as streaming video and free expedited shipping.  The ALA is more concerned about major-publisher moves like Penguin’s.

Indeed, public libraries are experiencing major growth in e-book lending, especially since Amazon joined the e-lending world by opening up its DRM to enable lending and integrating it with OverDrive’s library lending service.  Another piece of evidence that library e-lending is expanding is the entry of a Seattle-based startup called BlueFire Productions as the first serious competitor to OverDrive in the public library space.

At bottom, this is about two things: ways to make e-books available legally for free, and the promotional value of free distribution.   That’s why libraries should be worried.  First, consumers generally don’t care where they get free legal e-books, as long as they are available conveniently and can be read on their favorite devices.  Second, what Amazon has started as a limited service that’s only available to an elite tier of customers will surely become more widely available and with more titles, especially with competitors like Barnes & Noble constantly looking for ways to differentiate themselves from the market leader.

Amazon subsidizes the wholesale cost of e-books that it lends to Amazon Prime members. It does this to make its own services and devices more attractive, not to spur sales of those e-books. If and when B&N offers an equivalent feature, it will undoubtedly do the same.

If I were Keith Fiels at the ALA, I would be very, very afraid.  The e-book publishing world may be about to split up into the equivalent of the music industry’s major and indie labels: major labels tend to make deals that maximize revenue and limit free promotion, while indies try for maximum promotion in hopes of getting revenue later.  When you apply this dichotomy to publishers and e-books, you will see that libraries will inevitably get squeezed out.

The majors will make life increasingly difficult for public libraries through refusal to license or restrictive and confusing licensing terms.  Meanwhile, smaller publishers will “lend” their titles through Amazon and other e-book services — and will most likely be happy with the arrangement for the promotional value it gets them.  And some indie publishers will give their e-books away outright — through e-book retailers or through sites like Facebook — in hopes of getting exposure for their authors and selling hardcopy titles, just as thousands of indie musicians used to give away MP3s on MySpace.  And let’s not forget that e-book prices are often much lower than their hardcopy counterparts to begin with.

Then it will only be a matter of time until some publishing industry equivalent of Michael Robertson (the music industry’s digital provocateur) will create a search engine for finding free e-books from all of these sources in a single convenient place, storing them in an online locker, sharing them with friends, etc.

If you extrapolate from these changes, you can see how public libraries could become virtually irrelevant for e-book readers.

It’s all because publishers get to decide what e-book titles libraries may lend and (to some extent) under what terms.  Again, think of this in music terms: radio stations get the right to play whatever music they want under a license granted by law — a so-called statutory license.  Online equivalents of radio (e.g., Pandora, iHeartRadio) get similar rights.  Library lending of digital music is virtually nonexistent; radio remains the primary promotional channel for record companies.  Perhaps it’s time to think more carefully about public libraries in this light for e-books, as I’ll explain.

There is no equivalent of a statutory license for e-books that would allow libraries to lend them without explicit, title-by-title permission from publishers.  As I’ve discussed previously, libraries do get rights under Section 108 of the copyright law to lend e-books under certain conditions.  But because most publishers only give libraries e-books to lend as DRM-protected files with license terms attached to them, and Section 108 requires libraries to abide by those license terms, libraries can’t exercise those rights.  In effect, those rights have no value for libraries.

Libraries simply do not have enough leverage against major publishers and retailers to improve this situation in the private sector.  If they are to remain relevant in the e-book age, they are going to need to push for significant legal reforms, which both publishers and retailers will undoubtedly resist.

I previously suggested one option, albeit in a somewhat tongue-in-cheek manner: push for the Copyright Office to define an exemption to the law that criminalizes hacking of DRMs (Section 1201 of the Copyright Act) so that public libraries can legally remove DRM for the purpose of lending e-books if they repackage them with DRM to enforce lending terms.  However, this has two disadvantages: exemptions to Section 1201 only last for three years, until the Copyright Office considers a new set of exemptions, and publishers could push for stronger DRMs that are harder to hack.

The “cleanest” solution to this problem would be to enact Digital First Sale, i.e., an extension to Section 109 of the copyright law that lets anyone do whatever they want with digital downloads once they have acquired them legally.  (We had a great discussion on this subject at last week’s conference.)  Public libraries owe their existence to First Sale (on physical goods) in the first place.  But that won’t help for e-books as long as publishers distribute them with DRM and DRM hacking is still illegal; and anyway, as I discussed recently, Digital First Sale isn’t likely to happen anytime soon. Therefore it would be worth libraries’ while to investigate changes to the law that help them lend e-books while leaving Digital First Sale off the table.

One option would be to push for additional rights for libraries under Section 108.  At a minimum, Subsection (f)(4) would have to be relaxed so that libraries may lend e-books even if the licenses they come with forbid this activity.  This would be tantamount to a statutory license for libraries to lend e-books without explicit permission from publishers.

As a practical matter, this wouldn’t really change the way things are done today.  Libraries lend e-books through third parties like OverDrive, which already get e-books from publishers without DRM and package them with DRM — just like music and video retail services.  And provisions already exist in Section 108 that hold libraries liable if they make their own unauthorized copies of e-books.   OverDrive and its ilk use DRM to enforce one-copy-at-a time lending as well as the lending time limits that are in libraries’ own best interests.

This change in the law would improve the situation for libraries substantially.  However, the economics may have to change to make it palatable to publishers.  For example, libraries acquire e-books for their collections by paying for them title by title, just as they pay for printed books. Radio stations, on the other hand, typically get free copies of recordings from record labels but pay royalties to the music industry for playing them on the air.

If publishers acknowledge the promotional value of library e-book lending, then they might be willing to accept a statutory license to lend e-books if they can negotiate a per-loan royalty rate in lieu of upfront purchase prices.  The Copyright Clearance Center, for example, would be in a good position to manage these payments and royalty disbursements, just as ASCAP, BMI, and SoundExchange do for music.

This type of arrangement would enable libraries to maintain huge collections of e-books (through service providers like OverDrive and BlueFire, which would actually house and distribute the e-books) and thus serve the public well.  At the same time, the negotiations would have to resolve questions of how many copies of an e-book a given library could lend out concurrently; one copy per library doesn’t reflect the fact that big libraries acquire multiple copies of popular titles.  Is it possible for the numbers to defined so as to be fair to both publishers and libraries?  That would be a good question for the Section 108 Study Group, the venue for recommending changes to that section of the copyright law, which used to convene every five years but was disbanded by Congress after its last report in 2008.

A limited form of just such a statutory license-type solution has actually been suggested in the private sector already, in the proposed settlement to publishers’ and authors’ lawsuits against Google.  It includes giving public libraries rights to make every book scanned on Google’s behalf — over 12 million titles at last count — available on a single terminal within each library.  Libraries would not even have to pay for this.  However, this doesn’t allow e-books to be available outside of libraries’ physical confines, it doesn’t allow libraries to acquire multiple copies of e-books they want to make available to more than one patron at a time, and Google can withhold up to 15% of its scanned titles at its discretion.

The Google book settlement is still unresolved, but the terms in it show that publishers may be willing to grant libraries some limited e-book lending rights.  Libraries have complained about the “table crumbs” offered to them in the Google book settlement.  But unless they take action similar to what I’ve described here, those rights may be the best that public libraries can hope for as the e-book market expands.

Comments»

1. Dale Copps - December 5, 2011

Bill,

Nice piece. Couple points:

Library books are not free. Libraries pay for them and patrons pay for libraries.

“There is no equivalent of a statutory license for e-books that would allow libraries to lend them without explicit, title-by-title permission from publishers.” I wonder. In particular, I wonder whether publishers are not on a collision course with the First-Sale Doctrine, which, as you note, is what allows libraries to loan books at all. Amazon, in my opinion, is relying on that law in the case of those titles they have added to the Lending Library without an explicit agreement with the publisher. We will look for that court case to come up soon, I think.

Finally, it is not only public libraries that are in danger of obsolescence in the eBook world–it is publishers as well. I have proposed a method for both libraries and publishers to survive and thrive, and to properly serve their respective constituencies–patrons and authors–in my series, The End of Libraries. You will find your suggested solution above is mirrored to an extent in mine.

http://alltogethernow.org/showtag.php?currid=85

Finally, authors want readers and readers want eBooks. Facilitate that relationship and you will thrive. Inhibit it, and you are courting disaster.

Bill Rosenblatt - December 5, 2011

Dale,

Thanks for your comments. I read (somewhat quickly) your posts.

Unfortunately your ideas rest on an assumption that e-book lenders and sellers can rely on First Sale to do what they want to do with e-books – an assumption that (as I pointed out in a previous post which today’s post links to) is false. There is no such thing as Digital First Sale. A startup called ReDigi (in music) is trying to pretend that there is, but there isn’t.

Amazon does its free-lending-library thing because it wrote the rights to do so into its contracts with non-major publishers (and with authors who signed on directly with Amazon). Publishers accepted these terms. They needn’t with other online services.

If you go back and read my recent piece on ReDigi, you will see that the content industries are very highly motivated to make sure that Digital First Sale never happens. Given that both the content guys (major publishers, record labels, film studios) and the retailers (iTunes, Amazon, etc.) are dead set against Digital First Sale, you can bet that it ain’t gonna happen anytime soon. I will only change my mind about this if some tech powerhouse (say, Google or Microsoft) decides that it needs Digital First Sale (e-lending, “used” content marketplace) for some major business advantage (say, attract lots of traffic or make a commission on those sales)… maybe.

That’s why I think that small changes to Section 108 (which BTW is confined to text works and does not apply to audiovisual or other works), along with fair economics, are more workable than relying on Digital First Sale. Furthermore, I didn’t mean to suggest that libraries don’t pay for e-books or physical books; of course they do. What I’m suggesting is that they switch to a usage-based payment model, in the vein of radio stations or interactive music services. I’m not wedded to this particular economic model; I’m just suggesting it because it seems to be working for music. I’ve worked in both radio (old-fashioned terrestrial broadcast) and interactive digital music services, so I’ve seen it for myself.

– bill.

2. Marisol - December 10, 2011

This is a great piece to understand the current situation of e-lending in public libraries. But, you know anything of what is happening at the Academic Libraries level? The lending models are similar in term of licensing but the big difference is that academic books are not yet available for mobile devices, be e-readers, or iPad, iPhone, etc… But I am unclear what is the future of it since at the academic level we will like to have multiple users accessing the same ebooks (students working on their assignments) but that is very expensive, so one-time user is what most of the books are. But, the lending happen all in the computer, so we are unsure if users are really reading the books or just browsing and leaving without using. And academic ebooks are as expensive or more than regular books, so I don’t see the savings yet.

Anyway, thanks for the great piece!

Marisol

Bill Rosenblatt - December 10, 2011

Hi Marisol,

Thanks for writing. It’s unclear whether you come from the U.S. or not, so what I’m about to say applies mainly to the U.S., partially to Europe and elsewhere.

The situation for academic libraries is completely different from public libraries regarding digital content. There are services such as ebrary (now owned by ProQuest) that provide access to licensed e-book content from publishers on a time-limited basis (e.g. a few hours at a time) through their own user interfaces. There are other service providers such as Atypon, EBSCO, Ingenta, and HighWire Press that provide online access to journal content through web browser interfaces. All of this is done on a site-license basis, so that an individual (e.g. student) logs in to the service and gets access to whatever content the library has site-licensed. And some of the major academic and STM publishers have their own “digital library” services, such as Elsevier, Wiley, IEEE, etc. Access to these works on mobile devices is nascent but growing; as one example, Atypon recently released “Atypon for Mobile” which makes site-licensed content available on iPhones, Android devices, etc.

Where it gets interesting nowadays is that academic publishers that publish both scholarly works and textbooks want to get into electronic delivery through institutional libraries, and the policies towards content protection differ widely between the two. Briefly, scholarly works are meant to be distributed as widely as possible with no restrictions, while textbooks for higher ed (college/university) are “locked down” as much as possible because students are not willing buyers and take many opportunities to make unauthorized copies. And then there are some books that are both “scholarly” and used as textbooks; publishers can be conflicted about how to distribute these titles. We’ll see where this ends up in the coming years.

3. Joseph - December 14, 2011

Hi Bill,

I couldnt agree with you more. I ran the one of the first libraries in the nation that loaned Kindles and iPads. My goals were not what many of my colleagues assumed. I really wanted to start understanding the ecosystem and figure out a way to use our only weapon, Fair Use, to develop a more sustainable and long term model for ebook “purchasing” and lending. To that end I developed a simple iOS app that bypassed Overdrive and approximated many of its basic functions.
Here in the state of Colorado we have now taken that further than ever. Douglas County libraries has purchased their own Adobe Content Server and we have a couple of agreements with smaller publishers that get as close to “ownership” as anything we have seen to date. We are also working on agreements with more mainstream publishers. For more info you can read my Chapter in the second edition of No Shelf Required (due out in January).
Joseph Sanchez
Auraria Library
joseph.sanchez@ucdenver.edu

4. Todd Beals - December 18, 2011

Excellent article Bill.

I always love your insightful analysis – and thanks for inspiring me not to give up on the viability of a secondary market for digital media!

5. Bill Rosenblatt - December 19, 2011

Hi Todd,

Thanks for your comment – though I’m a little confused. Why would what I’ve written “inspire” you to pursue a secondary market for digital media? For example see my piece on ReDigi from a few weeks ago. I am deeply skeptical that a secondary market for digital content can exist at all. Even if libraries can somehow get the changes in the law that I describe here pushed through, the forces against Digital First Sale are very strong. Without Digital First Sale, a secondary market in digital copyrighted materials is only possible by getting explicit licensing agreements with copyright owners — agreements which most copyright owners would find not to their benefit.

Bill Rosenblatt - December 19, 2011

Joseph,

Thanks for writing. Peter Brantley had told me about what you guys are doing in Colorado. I get occasional calls from people who want to host their own e-book servers instead of using a third-party service like Overdrive, for similar reasons. But most of them don’t have the resources to do it.

However, I understand that your sites have “buy this book” buttons alongside the “borrow this e-book” ones. I would like to know more about that. Does the buy button apply to print or e-book? If the latter, is this a requirement from the publishers who are licensing material to you? Because I wonder if this might backfire. As I’m sure you know, you will end up with hard data about the promotional value of libraries in selling e-books. This data could possibly prove to publishers — especially the majors — that the promotional value is inferior to other ways of promoting e-books, such as giving away the first chapter on Amazon or whatever. If I were running a library, I would not want to have to justify my existence based on my library’s ability to maximize revenue for publishers. That’s not why libraries were put on earth.

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7. Teisininkas - March 29, 2012

Very useful article. I am writing a paper on E-publishing and aspects of copyright law, and lending is one of the aspects :)

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