My latest article on Forbes is a look into the future of subscription e-book services. Oyster, a New York-based startup that offers a Netflix-like e-book subscription service, recently launched a “standard” e-book retail site with titles from all major and many indie trade publishers. In the Forbes piece, I wondered whether this might be a sign that subscription e-book services might be slow to catch on — particularly since none of the three subscription e-book providers in the United States market (Scribd and Amazon as well as Oyster) have licenses to content from all of the “Big Five” trade publishers. In addition, a comparison of sales figures for e-books and digital music suggests that consumers are, at least for now, more interested in “owning” e-books than music downloads.
Then I got into an online debate with Ava Seave, a noted media industry strategy consultant, adjunct professor at Columbia Business School, and co-author of an excellent book about the media industry called The Curse of the Mogul. She raised an important point that I hadn’t considered: aren’t subscription e-book services hemmed in by competition from public libraries?
This led me to look at the latest data on Big Five trade publishers’ policies on e-book library lending. It turns out that they have liberalized their policies over the past couple of years. Now all of the Big Five license at least some of their frontlist titles for library e-lending, though most of them still impose restrictions on license durations (such as one year or up to 26 loans). In other words, the quiet war that has been going on between major trade publishers and public libraries for years has simmered down.
This means that public libraries could indeed be serious competition for subscription e-book services. (Subscription music services like Spotify, Rhapsody, and Beats Music don’t have this problem, because public libraries typically do not have large music collections for lending, nor do most people think of libraries as a place to discover recorded music.)
For publishers, public libraries and subscription services are best understood as revenue sources with two different models. Here is a table that summarizes the differences:
|Public Libraries||E-Book Subscription Services|
|Big Five catalogs||Most frontlist and backlist, according to library acquisitions||3 out of 5 majors (Scribd & Oyster), backlist only, limited titles|
|Revenue||Fixed, up to 3-4x consumer hardback||Royalty per user read, plus analytics data|
|License volume||Per unit; libraries license N units each||Unlimited units|
|License term||Often limited to 1-2 years or 26 loans||N/A|
Public libraries thus have bigger catalogs potentially available for e-lending, but individual libraries must “acquire” individual titles. They can acquire as many as they want, according to their budgets and the number of “copies” that they predict will satisfy their patrons without excessive waiting lists, but they must pay prices that range up to four times the consumer hardcover price. Subscription services get access to thousands of titles in unlimited “quantities,” but only — at this time — from limited backlist selections and not at all from Hachette or Penguin Random House (and Amazon’s Kindle Unlimited has no Big Five titles at all). On the other hand, subscription services can offer publishers lots of data about subscribers’ reading habits — data that’s unavailable to publishers from libraries, often by law.
The behavior that Big Five publishers have exhibited towards both public libraries and online services suggests that they will move slowly and gradually as these models take hold with the public. Publishers haven’t licensed their material to startups unless and until they have amassed large audiences; Scribd, for example, had grown to 80 million visitors when it finally got a deal with HarperCollins. Similarly, publishers have been slow and deliberate in licensing material to libraries through library platform providers such as OverDrive, 3M, and Baker & Taylor, which have been operational as far back as the early 2000s.
Contrast this with subscription music services: the first independent subscription music service was Rhapsody, which took less than two years to sign all of the (then) five major labels in 2002; and nowadays it would be commercial suicide for a digital music service to launch with anything less than all major-label content, minus the few remaining digital holdouts.
When viewed in this light, trade publishers’ dealings with public libraries don’t look like the kind of moral or public policy issue that many in the library community would like to portray it as (though there certainly are public policy implications, not least of which is libraries’ First Sale rights to lend material). Instead, the future of e-book access through both libraries and subscription services will depend on their effects on publishers’ bottom lines.
P.S. I predict that this competition will lead e-book subscription service providers to push for “freemium” models, a la Spotify or Hulu; some indie publishers might agree to this, as they have already done with Amazon’s Kindle Owners Lending Library, but the Big Five are likely to resist mightily. For one thing,this would require advertising revenue, an idea that has gotten severely limited traction in the world of e-books.