Thursday, September 16, 2010

Can Libraries Work Together to Acquire eBook Assets?

Libraries like to work together. They also love to form structures to shape this cooperation. There are all sorts of library associations, consortia, coalitions, collectives, cooperatives and federations. One of the big international library conferences is that of the International Federation of Library Associations and Institutions. There is even an International Coalition of Library Consortia. There's not yet been much effort to federate the library consortia coalitions.

When I suggested last month that libraries ought to form an ebook acquisition collective to buy up ebook rights and make the ebooks available on an open-access basis, some readers misunderstood what I was suggesting. They thought that I was suggesting something similar to the  purchasing consortia that many libraries have formed to aggregate their buying power and obtain lower prices and standard terms from publishers. Indeed, a recent report (pdf, 3.4 MB) from the Chief Officers of State Library Agencies (COSLA) has proposed formation of a national ebook buying pool. But this report doesn't contemplate making the ebooks open-access, it assumes the buying pools would negotiate deals with existing ebook providers.

To make it clear what I'm suggesting, I'm going to refer to "ebook asset acquisition" instead of just "ebook acquisition". The asset to be acquired is nothing less that the right to distribute an ebook, to anyone, anywhere, without charge. Here's the way I think of this:
  1. The mission of libraries should be to provide access to books to anyone in their community without charge.
  2. To fulfill that mission, libraries should be trying to acquire all the rights needed to give unfettered access to ebooks to anyone anyone in their community without charge.
  3. Community access to ebooks is in many ways incompatible with business models in which restricted access to ebooks is sold to consumers. It doesn't make a lot of sense to pretend that ebooks have the same usage characteristics as print books.
  4. Rational publishers should be willing to sell off ebook rights outright if the price that exceeds the present value of the ebooks expected revenue stream.
  5. The amount of money libraries currently spend on books of all types would be sufficient to acquire outright many works, particularly those sold primarily to libraries.
  6. The way for libraries to meet the publishers' price for these ebook assets is to organize into a collective that aggregates the total demand and acquires ebook rights.
  7. Therefore, an ebook asset acquisition collective out to exist. Why is this not happening?
To some extent, it IS happening.

Frances Pinter, the publisher at Bloomsbury Academic, gave a keynote at the O'Reilly Tools of Change for Publishing conference this past February on her proposal for an "International Library Coalition
for Open Books".

Pinter sees a funding model through the eyes of a publisher, which I'm not, but the idea is pretty much the same. A mechanism that enables open-access to scholarly monographs while keeping the enterprise of publishing economically viable would be of great benefit to society at large.

After the previous post, I got feedback that publishers would be very hesitant to sell off ebook rights; publishers view their intellectual property rights as "part of the company" and divesting of this rights would be a "liquidation strategy". I was surprised at this view. I would have thought most publishers are more interested in the production and launch of books than in servicing them in perpetuity. From a business point of view, books are like the loans made by banks. You put out money up front, and make that money back as a stream of payments.

The banking industry has advanced far beyond the view that holding assets is their core business. Banks that originate the loans don't service them any more, they sell off the loans so they can make new loans. And, no that's not what led to the banking crisis. Publishers of all stripes should likewise be willing to cash in their book assets and use the proceeds to produce new ones.

Another type of feedback I got was that the logistics of buying and selling ebook rights could be difficult. For example, how would a publisher plan print runs and promotion? If a print run had just been paid for, the publisher would be loathe to sell off ebook rights. If a book was due to be published in February and announced in a Spring catalogue that goes to press in December, when might it be sold to a library collective, and how quickly would the collective be able to decide?

There are a couple of answers. First of all, smaller print runs and more POD minimize the risk of printing too many books. This is happening anyway. Second, I assume that publishers can build in print risk to the price they ask for. If printing is really only 25% of first copy cost, well that's only 25%. Supply chain markup is as much as 50%

I'm a pretty strong believer in markets. I imagine that a library collective would help to create a more efficient market for publishing assets which are  deployed awkwardly in the current system. Nothing would force publishers to accept any disadvantageous price for an asset.  The library collective would weigh the price and quality of each asset before deciding, presumably using automated systems,  which ones to acquire collectively. Building internet-based markets is a technology that is reasonably well understood; librarians are familiar with automated purchasing systems and with collaborative selection. It shouldn't be too hard to put an expiration date on an publisher's offer to sell- we've all heard of eBay.

I expect that there will be a variety of product life-cycles for ebooks. The typical midlist book today spends some time on bookshelves before being returned to the publisher or set out on the discount racks. Its life may be extended on Amazon; used-bookstores enter the channel without contributing any revenue back to the publisher. The typical library-acquired title might have had a "toll-access" run of a year or so; the publisher could capture the most eager purchasers using delivery systems using DRM. Most libraries would wait for the book to be acquired by the collective at a discount and made open-access. This market market segmentation is similar to the hardcover/paperback model which adds efficiency to the current market.

Some publishers might try to sell ebooks even before the book is published; they might even succeed. Some books won't get bought at any price, let alone at the cost to produce them; others would probably be acquired even at an obscene profit margin for the publisher. Some things never change.

The biggest uncertainty with a system that allows libraries to collectively acquire ebook rights (including the rights to give them away!) is size of the revenue lost to free-riders. The free riders would be of two types; libraries that don't participate in the system, and book buyers not associated with libraries. The share of sales made by university presses outside of libraries varies from press to press, but some presses indicate that as much as 70% of their sales occurs outside of libraries. This share has increased over the last decade or so, thanks to new sales channels such as Amazon and tightening library budgets. One possible solution to this issue would be to open the collective to consumers; I will write more about this in the future.

Then there's the issue of libraries that would choose not to participate in funding the acquisition collective but would still benefit from the ebooks liberated by the collective. If an ebook rights acquisition collective comes to pass, we'd really find out how much libraries like to work together!


  1. Interesting idea. It would be good to see someone who knows a whole lot more about economics than I do actually model this.

  2. Wait, why would a publisher sell you the right to distribute an e-book to "anyone, anywhere, without charge." Once they've done that, if you choose to distribute to anyone who wants it on the planet, for free, then they'll never sell an e-book again. They've sold you their entire digital business on that book. I guess if you offer to pay them more than they think they're going to make on the book ever, maybe. Am I missing something?

  3. Yes, Jonathan, you'll need to pay them the total value of their discounted digital revenue stream into the future. This may sound prohibitive, but there are some additional considerations.

    1. You have to deduct all the future selling expenses and supply chain markup i.e. it's not the gross revenue stream, it's the net.

    2. If library acquisition budgets are squeezed to zero and consumers reject paying for DRMed ebooks, then publishers' total future digital revenue stream might not amount to much.

    3. Businesses where you cash a small number of large checks are easier to run than businesses where you cash a large number of small checks. (IMHO)

  4. How about we publish academic books - we pay our money to develop them and then set them free? No business involved, just investment, which libraries make in books all the time. Only we'd actually be able to control their availability in future.

  5. Barbara, there's certainly a role for libraries on the publishing side; that's not new. The problem really is one of resource allocation- given limited resources, what is the most efficient way of deploying those resources?

    Allocating resources to publishing operations is quite risky; the skill of book selection, which is well nurtured in libraries, is quite different from the skill of book development, which is to some extent the prediction of what books, if they were produced, would turn out to be most valued and needed by a community.

    The biggest problem with the library-captive open access publishing model is a lack of market discipline. There's no penalty for producing books that no one wants to buy, either because they're of poor quality or because they're too expensive.

  6. .... having watched Frances Pinter's video, I see that's more or less what she proposes, only with library consortia commissioning the work through publishers.

  7. then again, if it's open access you can afford to put money in good books that have a niche audience.

    I think we can parlay our acquisitions skills as librarians into acquisitions skills editors have, but with an eye on the greater good that editors have but can't afford to exercise.

  8. Barbara, individuals can certainly make library-publishing transitions, and many do, but what about their institutions? How does a library allocate resources between its publishing activity and its library activity? Other than inserting a sponsor aggregation layer such as a coalition or collective, how could you focus an OA publishing organization on the needs of its global stakeholders?

  9. For "why is this not happening", my naive view would be that there's some kind of prohibitive startup cost (e.g. difficulty of collective action, not having the idea in the first place -- ignorance, of course, being the most absolute of costs).

    For publisher reluctance to sell (again, naive view) I wonder if the existence of ebooks itself doesn't underlie part of the reluctance. As in -- when ebooks came into being, there was suddenly this option to monetize the back catalog in an entirely new form, possibly one unforeseen when those books were originally written and contracted for. Perhaps the publishers are nervous about potential future distribution channels or media which they would lose the ability to exploit if they free their ebooks, and (especially with so much still being up in the air about *ebook* economic models) they are very nervous about pricing that kind of risk. (This is going to look identical, from some angles, to the argument about not wanting to liquidate their assets, but different from others.)