Thursday, June 24, 2010

Inter-Library Loan Reinvented for eBooks and Just-In-Time

My graduate school training was in engineering and in physics. In engineering, you put things together and try to get them to work. In physics, you smash things (the polite term is "perturbation") to help you understand how they had been working. I still use these approaches to help me understand the things I write about. You can learn a lot about a system be noting the bits that squawk when faced with a perturbation of the system.

I got a lot of interesting feedback on my article on patron-driven ebook acquisition. It seems that this perturbation in library processes could have wide ranging effects far outside of libraries and book publishing. Coincidentally, the patron-driven model, along with other changes in the library/publisher ecosystem, was discussed last weekend at a meeting of the American Association of University Publishers (AAUP). Publishers Weekly has a nice report. (See also a report in the Chronicle of Higher Education.

The biggest perturbation being imposed on this system is of course the reduction of library budgets, which has come down quite painfully on university presses and their monograph businesses. Still, speaker Joe Esposito was surprised that the strongest reaction to his talk was to his prediction that libraries would make up a shrinking fraction of the university presses' sales.

It seems that there is worry that a contraction or restructuring of monograph publishing could have repercussions for how scholars obtain tenure in the humanities:
The fact that monograph publishing exists to support tenure and the structure of academic employment is an inconvenient truth that can no longer be glossed by either the Academy its associated University Presses. At some point the Academy is either going to have to stop expecting University Presses to fulfill this need, or find a more honest and transparent way of funding it.
if that's the worst thing that happens, well, what's the big deal?

It won't be a shift to patron-driven acquisition that kills off monograph publishing, however. My reasoning is that from the point of view of economics, patron driven acquisition is roughly isomorphic with the current system of just-in-case purchasing coupled with inter-library loan (ILL).

Here's how things work for print monographs. Suppose a university press published an obscure but brilliant scholarly monograph five years ago. It might have sold 100 copies for $100 apiece, most of them to libraries. At $10,000 gross revenue, it was hard for the press to make much profit, but occasionally they get lucky and make enough to cover the losses on the rest of their catalog. Now here's the problem: Over the five years, there were only about 100 scholars in the entire world that really wanted to read the monograph. Unfortunately, only 50 of them worked at institutions that purchased the book. The libraries of the other 50 didn't purchase the book because the selectors in their libraries weren't omniscient or perfect, and they didn't have mind-reading abilities or the power of divination. Or maybe the libraries used an approval plan that hadn't been crafted with the obscure field of this monograph in mind.

But those 50 others still got to read the monograph, because of inter-library loan. For some libraries, ILL is even a revenue center, because their costs to lend are less than the fees they charge. Although publishers made money from the 50 libraries that bought the book and didn't use it, they don't capture any of the revenue from ILL activity. The libraries that spent money to buy the book right away are partially compensated for that expenditure by ILL revenue or reciprocal loans.

Now let's think about what happens in a future where just-in-time ebook acquisition dominates. The 100 users still get to use the monograph, but none of them need to wait for an ILL transaction to go through. The costs are assigned to the institutions that actually use the work. If we assume that the price of the monograph is unchanged, the publisher's revenue is also unchanged; except it's pushed out to the time of usage, which can be many years, especially in the humanities. The time value of this revenue stream is reduced- it takes longer to make back the money spent on producing the book.

The compensation for the publisher is that the revenue continues for as long as the work is still used. The book doesn't go out of print. In addition, since users can discover the monograph more widely, and obtain it immediately, there is the possibility of making additional sales to users who would never have requested the title via ILL.

In a sense, the patron-driven acquisition model is souped-up ILL, with usage fees accruing to the publisher. The comments of Macmillan's John Sargent earlier this year that publishers would like to see fees for library ebook lending don't seem so controversial when examined under this lens.

It's worth thinking through a publisher's pricing strategy. If libraries persist in their preference to remove price as a factor in the patron's decision to use an ebook, then publishers have no incentive to cut costs and keep prices moderate. If libraries allow automatic purchase of any ebook under $100, then publishers will price all of their products at $99. A similar dynamic in the US health care industry has not worked well for consumers, to say the least. Indeed, one university press publisher writing about patron-driven acquisition and the AAUP meeting has opined that patron selection will lead to higher monograph prices:
What this Patron Driven Access model means to university presses is that our future is likely to include two things—higher prices and fewer titles.

It's clear that there would be winners and losers under a just-in-time acquisition system. Librarians don't always select what their patrons really want to read. Controversial works might do quite well, as should engaging but hard-to-categorize works and works that don't break new ground but are readable and useful. Dry, unreadable, redundant works that sell well today because of the author's fame or because they fit into a "hot" field of research will be losers. A work that today is unread because it's too innovative and ahead of its time will eventually find its time under the just-in-time acquisition.

The huge change for monograph publishers will be in the way they market their products. The emphasis will shift from pre-publication marketing to libraries towards search engine optimization and post-publication marketing directly to users. Famous professors may find themselves awash in free ebooks as monograph publishers jockey for key citations and mentions; social networks and subject specific communities will be prime targets of monograph promotion. Publishers will abandon library convention exhibits like ALA in droves; parties and receptions for librarians will disappear.

I suppose we should have fun with the current system while it lasts, even as there are new and more efficient things to build.
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1 comment:

  1. One problem with the economics behind this is that ILL is not always charged back: a number of libraries ILL between themselves with the notion that it all comes out in the wash. Further, ILL could be a significant revenue generator for some libraries; for instance, the British Library operates a document delivery service to the public.

    Another problem is that it creates economic incentives for publishers to fight ILLs. This has already happened in the licensing of e-journals, which sometimes prohibits ILL. That means that some libraries are scanning copies of the print article to lend -- even though they already have an electronic copy.

    Furthermore, library acquisitions are not just for today's readers--they are for readers into the future. Ownership is a key part of that (which is given the run-around in some ebook licensing schemes). While I see that this scheme could reduce OOP, what happens when a publisher goes out of business?

    I'm also still thinking about the impact on collection development -- there are still a few good selectors out there, not relying mainly on approval plans. It does seem to me that patron-based selection could be better than outsourcing to a run-of-the-mill approval plan.