Libraries Take E-Book Lending Fight into Antitrust Territory

The U.S. library community has gotten involved in the investigation that Congress recently opened into possible anticompetitive behavior by Big Tech. The American Library Association, the advocacy group for public and academic libraries, sent a letter to the House Judiciary Committee last week complaining of unfair behavior from Amazon as well as Big Five trade book publishers regarding e-book lending. This takes the long-simmering dispute between libraries and publishers out from the realm of copyright and into the realm of antitrust law.

The root of the dispute is that while libraries buy print books in order to lend them to patrons, they can’t actually buy e-books. Instead, they license the content from publishers and deliver it using an e-lending platform such as OverDrive or the New York Public Library’s SimplyE. This means that publishers can set whatever terms they want in e-book licenses to libraries–or refuse to license them at all.

The major trade book publishers have set terms on e-lending that are more onerous than the terms set on consumer e-book licenses through retailers like Amazon and Barnes & Noble. Consumers can “buy” e-books at prices that are typically lower than print, and e-book versions of new titles are typically released at the same time as the print editions. In contrast, libraries often have to pay prices for e-book access that are much higher than consumer prices, some publishers withhold new titles from library e-lending, and some publishers impose restrictions on the numbers of “copies” a library can e-lend and how long they can make them available for e-lending before they have to pay for them again.

Over the past few years, publishers gradually began easing restrictions on e-lending terms from what they had been in the early 2010s, (e.g., HarperCollins’s limitation of 26 “loans” per license) so that the Big Five mostly made their entire catalogs (including frontlists) available, though the high prices and some of the time limitations remained.

But more recently, publishers have begun tightening the restrictions again. Last year, Macmillan, one of the Big Five, tested a four-month e-lending embargo on new titles published by Tor, its science fiction and fantasy imprint. Then this July, Macmillan announced that it would implement a two-month restriction on new titles across its entire catalog, to take effect November 1. During the first eight weeks of a book’s publication, each library will only be allowed to license one “copy” of it for e-lending, at half the regular e-lending license price–which even then is more than double the retail e-book price. After that, libraries can license as many “copies” as they wish at the full price of $60 each.

The ALA announced an appeal to Macmillan’s CEO against the move last month. It started an online petition, which has garnered over 150,000 signatures at this time of writing. Online petitions are evidence of a lack of leverage; so the ALA has presumably been considering other steps it can take to ease the e-lending restrictions. The library community has been advocating for many years for a first sale right in digital files, so that they can be loaned (or resold or given away) just like print books. But those efforts have proven futile, as have efforts to establish special e-lending rights for libraries in Section 108 of the copyright law.

So the ALA has latched onto Congress’s antitrust review of the tech industry. Its letter complains of several things that Internet content services do to restrict availability of material that libraries have traditionally offered for lending (or use within libraries). This includes video content that’s exclusively available on streaming services like Netflix and Hulu: libraries are able to subscribe to these services, but it’s not possible to lend those videos as it is for content on DVDs or Blu-rays; it’s also likely not permissible to show the content to patrons in libraries, since the services’ terms of use forbid public display. The letter also cites some academic journal publishers’ practices of making certain high-prestige journals available to university libraries only if they also take subscriptions to less-popular journals.

The ALA’s positions on e-books and public libraries are the most relevant in the copyright context because of e-books’ nexus to first sale rights. The complaints cover e-lending restrictions and high prices, but they also mention an interesting fact that’s analogous to the exclusivity of video content on streaming services: Amazon’s publishing imprints make the company the No. 5 e-book publisher–effectively making it a member of a Big Six in e-books–and Amazon does not license any of its e-book titles to libraries for e-lending.

Indeed, and as the letter doesn’t mention, Amazon has long viewed public libraries as competitors in the ebook market. Amazon made a deal with OverDrive back in 2011 to make public library e-books (from other publishers) readable on Kindle apps and devices, so that library patrons could use the most popular e-readers to read their “borrowed” e-books. It also started something called Kindle Owners Lending Library to make selected e-books available for free “loans” to Amazon Prime members–encouraging people to use Amazon Prime instead of patronizing their public libraries. Beyond that, Amazon has apparently taken the position that e-lending leeches revenue from its own publishing imprints.

Big Five publishers, on the other hand, seem to be taking a page from the Spotify playbook. Spotify pioneered the idea of a free subscription tier that acts as a funnel to the paid premium level. It constantly tweaks the features, ads, and amount of music available on the free tier so as to maximize conversion to paid; as of April of this year, it has achieved an astounding 46% of active users (worldwide) who pay for their subscriptions, surpassing industry expectations by a wide margin.

It’s likely that the major trade publishers see public libraries as their free tier, even if Amazon doesn’t (Amazon probably views its own “Look Inside” feature as its free tier). Macmillan’s new restrictions are in a similar vein: by allowing libraries to get a single “copy” of each newly-published title, Macmillan will create a demand funnel for that title in the form of the waitlists at libraries; Macmillan is most likely betting that many people will get tired of waiting and purchase the titles before those eight weeks elapse.

If Congress decides to investigate publishers for anticompetitive activities regarding library lending, it will need to consider evidence of publishers’ marketing strategies for libraries as a sales channel. For their part, libraries will be in the best position to put their case once they acknowledge that publishers treat them that way and understand how.

 

2 comments

  1. Thanks as always for your insightful posts, Bill! As an avid ebook and audiobook lendee, forever frustrated by the seemingly nonsensical availability restrictions — library lending seems to be the one area where the advantages of digital have been completely obliterated! — your clarification and update is helpful.

    I’ve often wondered the extent to which Overdrive’s monopoly has limited services and availability. It’s clear that while the lack of competition in the library-facing DRM space inevitably impacts library staff and patrons, ultimately the inconveniences we experience can be attributed to publishers…

  2. Thanks John. It’s interesting to think about whether library digital access models would be any different if there were any innovation in that part of the DRM space.

    The question is which is the tail and which is the dog: the access *model* for digital materials (the license terms) or the access *method* (the DRM, or whatever other mechanism there might be). The way I’d answer that is to say that innovations in access *models* in trade book publishing (as opposed to higher ed and STM) are very few and very far between. Innovation in access *methods* might possibly be driving developments but for the usual problem: there’s no money in it. In other words, access models are the dog, access methods are the tail, and the tail isn’t wagging the dog.

    There are systems other than OverDrive that libraries can run themselves, which enable to do something different on the access *model* front: they can make their own licensing deals with publishers instead of relying on the ones made by OverDrive, which include the restrictions set by publishers (for all libraries that use OverDrive). An example of this is the NYPL’s SimplyE, which I’ve used. SimplyE can use multiple DRMs and it uses them in the same way that OverDrive uses Adobe’s DRM (or Amazon’s).

    Another example is the Readium LCP DRM that I helped develop, which is being used in libraries in Francophone Europe. It implements more or less the same access methods as the Adobe DRM that it’s meant to replace, and one of its chief selling points is much lower cost.

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