If you're not of the library world, let me explain what ebook ILL is and why it's not silly per se. ILL stands for Inter-Library Loan. In the print world, libraries have finite collections and they depend on other libraries to make sure that even if they don't have a book that a user needs, another library will step in and fill the gap. For the user, it means that their small library can provide them with books from a huge virtual collection. A book might take a few days to arrive.
There are significant costs involved in ILL. Most libraries charge the borrowing library a fee to cover the expenses of packaging the book and sending it to the recipient library. The fee might be 10 or 20 dollars, and it might be waived for closely cooperating libraries. At the same time, libraries pay the same fees to other libraries, so in the end, it all evens out. But many libraries run a significant surplus, rewarding them for smart acquisition policies of the past.
Library lending cooperatives have figured out that the combination of Amazon and modern warehouse logistics have partly upset the economics of ILL; a library can often purchase a used copy of a needed book on Amazon for less than ILL transaction costs (Especially with Amazon Prime!). But ILL is still an important part of the library ecosystem.
For digital content, the buy vs. borrow equation shifts back a bit. In principle, there's no shipping cost and modern databases can retrieve a digital item in milliseconds. But if a library can do digital ILL, what is to prevent libraries from sharing a resource so widely that only one library in the world needs to buy the item?
The solution that e-journal publishers typically use is the "print-and-ship" solution. In other words, a library is allowed to send articles from a subscribed journal only if they print it out first. The transaction is thus identical to what it was back in the dark ages of ink and paper and xerox machines. For publishers, the friction of print-and-ship discourages libraries from canceling subscriptions; besides, the big-deal model of bundling many subscriptions into one has been much more advantageous for publishers than the document-delivery model that ILL competes with. (Also, when they first went digital, journal publishers were poorly equipped to do article-by-article e-commerce.)
To see why it still makes sense for publishers to allow ebook ILL, consider what it is competing against: "patron-driven acquisition" (PDA). The core idea behind PDA is that a library doesn't buy an ebook until a patron shows up that wants to use it. For many books that libraries buy, this means that they don't buy the book at all, and for the rest, there might be no purchase until many years after publication.
It's often better for the publisher to encourage "just-in-case" acquisition, because the resulting revenue can be put to work immediately to publish more books. For books with low demand, inter-library loan encourages just-in-case acquisition by increasing the likelihood that somewhere, sometime, someone will need the library's copy of even the most obscure book.
eBook licensing with ILL has very similar economic characteristics as licensing to a library with many users. The larger the library, the more demand can be aggregated, and thus books can remain economically viable even at very low levels of user demand. In the limit of large user bases, ILL looks very much like the Open Access collective funding such as has been demonstrated by Knowledge Unlatched.
"Just-in-case" acquisition has benefits for libraries, too. Coupled with an effective archiving strategy, the library can make sure a resource doesn't disappear if a publisher has to withdraw an ebook title. Or perhaps the publisher goes out of business, or decides to change their business model.
But ebook ILL is still silly. Admittedly, the one-user-at-a-time licensing model has proven to be a useful conceit for selling ebooks. People are used to paying for a copy of a book, so it seems natural to buy a copy of an ebook. But stretching that model to inter-library lending turns the conceit into an outright lie. Just because one library has bought an ebook copy doesn't mean that they should be able to lend it instantly to anyone in the world.
Clinging to the pretend-its-print conceit when developing licensing models for "just-in-case" acquisition results in harmful misunderstandings for both publishers and for libraries. Publishers focus on sales substitution, and libraries misunderstand what they're paying for. Pricing and terms for such licenses will better benefit both libraries and publishers if the license is seen for what it really is rather than something it's pretending to be. There's no sense in locking in the negative attributes of the old when developing the new.
So maybe we need a new acronym. How about "Interacting Libraries License"?
ILL is dead, long live ILL.