Hoopla Digital and HarperCollins Disrupt Library E-Lending

An announcement this week by hoopla digital and HarperCollins augurs big changes in the ways that public libraries make e-books available. It sets the stage for realignment of the relationships between publishers and libraries, and it could have longer-term ripple effects on the entire e-book market.

For more than a decade, public libraries have been able to “lend” e-books using a certain model: the library “acquires” a title through an e-lending platform such as OverDrive; the library then has one “copy” that it can make available to patrons at a time. The platform sends each patron a DRM-protected file that allows reading for up to the library’s lending period. If one patron has the e-book “checked out” then another patron can’t read it until the period expires or the first patron “returns” it.

The library technologist Eric Hellman calls this model “Pretend It’s Print (PIP),” while the industry term is “one copy, one user.” PIP is an apt term because the library pays a fixed price for the title, just as it would do if it were acquiring a print book, and the publisher can account for it much as if it were a sale. If a library wants to enable more than one patron to read the title at a time, it has to “acquire” multiple “copies.” (Meanwhile, “one copy, one user” may be a handy metaphor but has little to do with the number of copies of e-books e-lending services actually make.)

Hoopla digital, an OverDrive competitor, is a digital “lending” platform for libraries run by Midwest Tape, a leading supplier of library-ready physical media products (such as CDs, DVDs, and Blu-ray discs). It had been licensing digital audiobooks from HarperCollins since last year (as well as from many indie publishers). The new deal expands the relationship into e-books. HarperCollins will make over 15,000 titles available, though apparently not including frontlist titles.

What’s new here? Instead of libraries paying a fixed upfront price, as in the PIP model, they pay per “loan,” and there are no longer any limits on how many people can read an e-book at the same time. This is a boon to library patrons: it means that all titles can be available at any time, with no waiting lists. Otherwise the reader experience is much the same as with PIP, as is the technology used to deliver and display e-books.

The innovation is really on the financial and licensing side. At a basic level, this arrangement is risky for libraries. With the hoopla digital model, Libraries can’t budget for “acquisitions” as they have done with print books for centuries; instead they have to bear less predictable costs that rise and fall with demand for titles. At the same time, it enables libraries to license long-tail titles that they wouldn’t normally “acquire” because they don’t expect sufficient demand to make the one-time price worthwhile. That’s another benefit to users.

Publishers, meanwhile, get paid based on actual readership, not on a per-title basis. That’s good for them conceptually, because it makes libraries more like channel partners. In fact this model isn’t really new; it has been discussed for several years, and many indie publishers already support it.  Hoopla digital has offered it since 2014. So why are major publishers slow to embrace it?

One reason is author contracts. Many author contracts don’t provide for handling royalties on much other than simple book purchases. From the perspectives of rights management and royalty processing, both e-book retail and PIP library e-book revenues can be treated similarly to print book sales. Things get difficult for publishers when they license into access models that fall short of purchases: sometimes they have to pay authors for each access as if it were a purchase, even if a user only reads a few pages, because the author contracts won’t allow otherwise.

As Simon & Schuster CEO Carolyn Reidy admitted at a book publishing conference recently, that has been an obstacle to major publishers’ participation in Netflix-like subscription services like Scribd and Oyster, and/or it has been unworkable for the services themselves (e.g., Oyster shut down two years ago). Trade book authors typically own copyrights in their works and only license publishers for specific purposes, such as print book sales; so publishers have little flexibility to enter into innovative license agreements without having to renegotiate author contracts. And renegotiating author contracts is, to put it mildly, not scalable.

The other big reason for reluctance to license into these new models is that publishers and authors alike worry that making content available in smaller chunks or for limited times will harm revenues. We saw this happen in music, as individual track downloads displaced album sales and then subscription streaming displaced downloads — although streaming revenue has now grown to more than make up for losses in downloads.

HarperCollins is the perennial first mover among the major trade houses in embracing new digital business models. It was the first of the Big Five to license e-book subscription services as well as other innovative models such as P+E bundling. It’s surely happy to get revenue streams from libraries that follow the same demand-based patterns as their retail channels, even if it leads to challenges with author contracts and rights and royalties systems.

HarperCollins’s deal with hoopla digital should be a major turning point in big trade publishing’s relationship with public libraries. Already OverDrive and other e-lending providers have announced that they will support similar deals, and HarperCollins will license into all of those arrangements. In fact, OverDrive has given the new model a name: “Cost-per-Circ (CPC).” This is preferable to hoopla digital’s marketing-ese “dynamic content.”

Yet there are two ironies here. First, the CPC model could make the future for e-book subscription services even bleaker than it is now. If more publishers support CPC, you’ll get the equivalent of a “Netflix for e-books” service from your public library for free (or at least paid for with your tax dollars, euros, pounds, etc.). — so why would you pay $9.99 (Amazon Kindle Unlimited), $8.99 (Scribd), 7,99€ (Youboox, France), or 11,99€ (Skoobe, Germany) per month? In particular, HarperCollins surely understands that CPC will help publishers promote libraries as competition for Amazon.

The second irony is that CPC is tantamount to an e-book rental model. (When I asked Eric Hellman for a name for this model along the lines of PIP, he replied “it’s just rental.”) Some early e-book services in the U.S. offered rentals, which were met with indignant backlash from people who insisted that “ownership” was the only acceptable model — never mind that whether you actually own a downloaded e-book is debatable — and that rentals were some sort of evil plot to deprive people of their rights (although e-book rental has been successful outside the U.S., such as in Japan and South Korea). Now libraries are eagerly embracing rentals, albeit ones users only pay for indirectly through taxes; Hoopla digital has already signed up public library systems in Boston, Philadelphia, Chicago, San Francisco, and Los Angeles.

The big question now is whether major trade publishers will ever make their high-demand frontlist titles available through either of these models — library CPC or paid subscription. If publishers look at how the major record labels made their current hits available to interactive streaming services and then mostly failed in attempts to hold them back later (e.g. Taylor Swift’s clashes with Spotify), while the big movie studios have kept their windowing systems for theatrical releases largely intact, they’ll see that once they do that there’s no going back. Therefore it’s probably going to be a while before we see frontlist titles from Big Five trade publishers — even from HarperCollins — available to unlimited patrons at your local public library.

 

 

13 comments

  1. Bill, is this really new?

    How is this different from what Freading was doing six years ago – aside from now having a major publisher involved?

  2. That’s the difference. BIG difference. And as I point out here, hoopla has been offering this for 3 years too. I also believe (but am not certain) that OverDrive has been able to support CPC for a while too but have had few or no takers. This type of model has been discussed for years. I believe Robert Darnton proposed it in his book back in 2009.

  3. Yes, OD has offered this for a while. In fact, they signed the same deal as Hoopla (I’m working on a post).

  4. Yes, I mentioned that too…

  5. A pingback to this article gets more specific about those author contracts and confirms that something I’ve seen myself once (in one of my own author contracts) is common in trade author agreements: if the content isn’t sold (as a book, in the traditional sense), it’s considered “licensing” and the contract specifies — gasp — 50% royalty payments to the author, instead of the typical 10%. What’s unclear to me is whether/how publishers have been able to get away with paying “sales” royalties on retail e-book purchases, which (as we’ve discussed here; see https://copyrightandtechnology.com/2016/12/21/what-does-ownership-mean-in-the-digital-age/) are usually really “licenses” and not “sales” after all. Otherwise… no wonder publishers don’t want to license into these new business models.

    The pingback, from “Passive Guy,” a lawyer who has apparently done and/or handled many lawsuits over such contracts, is at http://www.thepassivevoice.com/2017/06/hoopla-digital-and-harpercollins-disrupt-library-e-lending/ (The Passive Voice) and is well worth a read, especially the older blog posts that he points to.

  6. Glinda Harrison · ·

    Reblogged this on The eBook Evangelist and commented:
    As much as I would like to be able to read any library ebook without waiting, this model has some sobering implications for library finances. I have read more than a few stories about libraries having to limit Hoopla downloads for patrons mid-month because of the effect of unexpectedly high usage by patrons on the budget.

    What do you think of the idea?

  7. […] Weekly: HarperCollins To Offer Multi-User E-book Access To Libraries, och Copyright And Technology: Hoopla Digital and HarperCollins Disrupt Library E-Lending. Att ett av USAs största förlag nu testar att erbjuda e-böcker till bibliotek under en modell […]

  8. Scott Green · ·

    In addition to e-books Hoopla also makes movies available on demand. So as a taxpayer I am paying for my neighbor to watch Jackie Chan in “Railroad Tigers” or Kate Winslet in “The Dressmaker” from home on all devices. Every time someone watches a movie on demand the library pays Hoopla (similar to Amazon rental). Seems like the library system has lost their way.

    I took a look at the Los Angeles Public Library Mission statement

    “The Los Angeles Public Library provides free and easy access to information, ideas, books and technology that enrich, educate and empower every individual in our city’s diverse communities.”

    In my opinion offering entertainment services similar to what Netflix or Amazon for FREE is not part of the above and NOT what taxpayers should be funding. The library system is setting themselves up for a big fall…

  9. And libraries have made movies available for checkout (on VHS, DVD, and Blu-ray) for many years.

    I don’t have an opinion on this myself, though I am curious how you would differentiate what hoopla is doing from “offering entertainment services similar to what you would otherwise buy at Target or Best Buy.”

  10. Scott Green · ·

    Bill, the big difference between the Hoopla model vs the “old school” model of lending VHS or DVD is that the lending practice serviced those that wanted to trek down to their local library to borrow a DVD that might be scratched or missing a disk. And I think that is why that practice never scaled to the adoption that we see with Netflix or Amazon Video. Those that wanted to take the risk and time to visit their public library (and maybe pick up something else while they made that trip) could. But for the majority that model was not convenient. But watching a movie on Hoopla is precisely the same as renting a movie on Amazon video or Google Play. Only difference is the consumer is using the Amazon account of their local library. And this “hoopla method”does not force the consumer to get off their couches and visit their local library and maybe see a sign that would cause them to join the “Summer Reading Challenge”.
    Regarding the entertainment services at Target or Best Buy, looking down the Hoopla catalog is not much different than browsing the aisles at the big box. Sure you are not going to find Star Wars but it definitely does not have the curated appeal or sensibility as you get when walking in your local library.
    I would have a much different attitude if libraries would have negotiated with Hoopla and similar services on terms that would be a “subscription basis” vs on a per title basis. As others have pointed out libraries can be on the hook for expenses that were not planned and might need to “pull the plug” mid way through the month. What a poor experience that will be for consumers.

  11. Well, apart from the problem of “pull[ing] the plug” (which I’ll get to in my next article), one big difference between the library and retail experience that you’ll see develop over time is catalog. Just as the movie studios and TV networks have taken a few years to get savvy about which shows they allow on which outlets (Netflix vs. Hulu vs. Amazon Prime vs. iTunes vs. cable TV vs. broadcast TV vs airplanes etc.), I think you’ll see analogous behavior with respect to e-book retail, subscription, and library services. Publishers are going to be pickier about which titles they’ll allow on these library platforms. It’s not going to be based merely on whether the title is more than 12 or 24 months old.

  12. […] Hoopla Digital and HarperCollins Disrupt Library E-Lending publishing copyrightandtechnology.com […]

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