Towards the Post-Privacy Library?

I have an article in this month's Digital Futures, a supplement to American Libraries magazine. The full issue is an important one, so go take a look. In addition to my article, be sure to read the article starting on page 20 entitled "Empowering Libraries to Innovate" in which I am quoted. Here's the web version.

I'm reprinting the article here so as to have a good place for discussion.

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Alice, a 17 year old high school student, goes to her local public library and reads everything she can find about pregnancy. Noticing this, a librarian calls up some local merchants and tells them that Alice might be pregnant. When Alice visits her local bookstore, the staff has some great suggestions about newborn care for her. The local drugstore sends her some coupons for scent-free skin lotion. She reads "what you can expect..." at the library and a few months later she starts getting mail about diaper services.

Unthinkable? In the physical library, I hope this never happens. It would be too creepy!

In the digital library, this future could be happening now. Libraries and their patrons are awash in data that really isn't sensitive until aggregated, and the data is getting digested by advertising networks and flowing into "big data" archives. The scenario in which advertisers exploit Alice's library usage is not only thinkable, it needs to be defended against. It's a "threat model" that's mostly unfamiliar to libraries.

Recently, I read a book called Half Life. Uranium theft, firearms technology and computer hacking are important plot elements, but I'm not worried about people knowing that I loved it. The National Security Agency (NSA) is not going to identify me as a potential terrorist because I'm reading Half Life. On the contrary, I'd love for my reading behavior to be broadcast to the entire world, because maybe more people would discover what a wonderful writer S.L. Huang is. A lot of a library user's digital usage data is like that. It's not particularly private, and most would gladly trade usage information for convenience or to help improve the services they rely on. It would be a waste of time and energy for a library to worry much about keeping that information secret. Quite the opposite, libraries are helping users share their behavior with things like Facebook Like buttons and social media widgets.

Which is why Alice should be very worried and why it's important for libraries to understand new threat models. What breaches of user privacy are most likely to occur and which are most likely to present harm?

A 2012 article in the New York Times Magazine described a real situation involving Target (the retailer).  Target's "big data" analytics team developed a customer model that identified pregnant women based on shopping behavior. Purchases of scent-free skin lotion, vitamin supplements, and cotton balls turned out to be highly predictive of subsequent purchases of baby diapers. Using the model, Target sent ads for baby-oriented products to the customers their algorithm had identified. In one case, an irate father whose daughter had received ads for baby clothes and cribs accused the store of encouraging his daughter to get pregnant. When a manager called to apologize, the father was somewhat abashed. “I had a talk with my daughter,” he said. “It turns out there’s been some activities in my house I haven’t been completely aware of. She’s due in August. I owe you an apology.”

Among the companies collecting "big data" about users are the advertising networks, companies that sit in between advertisers and websites. They use their data to decide which ad from a huge inventory is most likely to result in a user response. If I were Alice, I don't think I would want my search for pregnancy books broadcasted to advertising networks. Yet that's precisely what happens when I do a search on my local public library's online catalog. I very much doubt that many advertisements are being targeted based on that searching ... yet. But the digital advertising industry is extremely competitive, and unless libraries shift their practices, it's only a matter of time that library searches get factored into advanced customer models.

But it doesn't have to happen that way. Libraries have a strong tradition of protecting user privacy. Once all the "threat models" associated with the digital environment are considered, practices will certainly change.

So let's get started. In the rest of this article, I'll examine the process of borrowing and reading an ebook, and identify privacy weaknesses in the processes that advertisers and their predictive analytics modeling could exploit.

1. Most library catalogs allow non-encrypted searches. This exposes Alice's ebook searches to internet providers between Alice and the library's server. The X-UIDH header has been used by providers such as Verizon and AT&T to help advertisers target mobile users. By using HTTPS for their catalogs, libraries can limit this intrusion. This is relatively easy and cheap, and there's no good excuse in 2015 for libraries not to make the switch.
   
   
2. Some library catalogs use social widgets such as AddThis or ShareThis that broadcast a user's search activity to advertising networks. Similarly, Facebook "Like" buttons send a user's search activity to Facebook whether or not the user is on Facebook. Libraries need to carefully evaluate the benefits of these widgets against the possibility that advertising networks will use Alice's search history inappropriately.
   
   
3. Statistics and optimization services like Google Analytics and NewRelic don't currently share Alice's search history with advertising networks, but libraries should evaluate the privacy assurances from these services to see if they are consistent with their own policies and local privacy laws.
   
   
4. When Alice borrows a book from a vendor such as OverDrive or 3M, it monitors Alice's reading behavior, albeit anonymously. At this date, it's very difficult for an advertiser to exploit Alice's use of reading apps from OverDrive or 3M. Although many have criticized the use of Adobe digital rights management (DRM) in these apps, both 3M and OverDrive use the "vendorID" method which avoids the disclosure of user data to Adobe, and at this date, there is no practical way for an advertising network to exploit Alice's use of these services. Here again, libraries should review their vendor contracts to make sure that can't change.
5. If Alice reads her ebook using a 3rd party application such as Adobe Digital Editions (ADE), the privacy behavior of the third party comes into play. Last year, ADE was found to be sending user reading data back to Adobe without encryption;  even today, it's known to phone home with encrypted reading data. Other applications, such as Bluefire Reader, have a better reputation for privacy, but as they say "past performance is no guarantee of future returns".
   
   
6. If Alice wants to read her borrowed ebook on a Kindle (via OverDrive), it's very likely that Amazon will be able to exploit her reading behavior for marketing purposes. To avoid it, Alice would need to create an anonymous account on Amazon for reading her library books. Most people will just use their own (non-anonymous) accounts for convenience. If Alice shares her Amazon account with others, they'll know what she reads.
   
   This is a classic example of the privacy vs. convenience tradeoff that libraries need to consider. A Kindle user trusts that Amazon will not do anything too creepy, and Amazon has every incentive to make that user comfortable with their data use. Libraries need to let users make their own privacy decisions, but at the same time libraries need to make sure that users understand the privacy implications of what they do.
   
   
7. The library's own records are also potential source of a privacy breach. This "small-data" threat model is perhaps more familiar to librarians. Alice's parents could come in and demand to know what she's been reading. A schoolmate might hack into the library's lightly defended databases looking for ways to embarrass Alice. A staff member might be a friend of Alice's family. Libraries need clear policies and robust processes to be worthy of Alice's trust.
   
   

In the digital environment, it's easy for libraries to be unduly afraid of using the data from Alice's searches and reading to improve her experience and make the library a more powerful source of information. Social networks are changing the way we think about our privacy, and often the expectation is that services will make use of personal information that's been shared. Technologies exist to protect the user's control over that data but advertising networks have no incentive to employ them. I want my library to track me, not advertising networks!. I want great books to read, and no, I'm not in the market for uranium-238!

A Rational Framework for Library eBook Licensing

Since the Redigi decision made it clear that there is no right of first sale for digital content in the US, it's been much easier to think up realistic doomsday scenarios for public libraries in the US. Why should a publisher let a public library lend an ebook if Amazon or some other competitor were to offer much better terms? How would our public library system, saddled with difficult-to-use systems and unfavorable contracts, ever hope to compete?

Back when HarperCollins first announced that it would only let libraries lend their ebooks 26 times before they would expire, there was widespread outrage from the library community. Looking back on that, it seems pretty clear that a lack of consultation and poor customer communication fueled the furor. By itself, the lending limit could have terrible long-term consequences for libraries, but as part of a wider, well-thought out framework, it could be useful component.

I've been doing a lot of thinking about this over the last 3 years, and I've decided it's time to float a comprehensive proposal for how libraries and publishers might work together on ebook distribution to benefit the entire reading ecosystem. eBook lending as implemented to date has been founded on a combination of irrational fears and outmoded processes. We deserve better.

Behind this framework is a set of assumptions.

1. Library ebook distribution must sustain and increase the total population of readers; this is a prerequisite for a healthy book publishing industry.
2. Patron discovery of ebooks in libraries must connect effectively to ebook sales.
3. Library distribution must become much more efficient, and overhead must become much smaller for ebooks than it is today for print books and ebooks.
4. Long term preservation of ebook availability must be a joint undertaking of libraries and publishers.
5. The economic models used for library ebook distribution must provide incentives for libraries and publishers to promote points 1-4.

I don't pretend that people won't disagree with some or all of these 5 assumptions, but if any of them are false, then, I think there will be NO distribution of ebooks through libraries. I also recognize that not all books are alike; even if library distribution works for some ebooks, it's unlikely that it will work for every ebook.

So the fifth assumption is what this post is really about. Given 1-4, what should an economic framework look like? Here are the features of a model that makes sense to me:

1. Decoupled pricing. An ebook license that allows for lending makes the ebook more valuable, so why shouldn't it cost more than an individual, non-transferable license? I can't say whether Random House's 300% markup for libraries is excessive, but why not let the marketplace decide? For new, super-popular ebooks, maybe 500% markup makes sense. On the other hand, maybe ebooks that need exposure should have an 80% markdown because libraries might turn them into bestsellers.
2. Rate limits instead of DRM. Patron license embedding.  I've written about this before. This may take the most convincing, but in thinking about the imperatives of effective discovery, low distribution overhead, and long-term preservation, I've concluded that there are no alternatives to major change in library distribution technology.
3. Circulation charges after an initial period. Most books are bought in the first year of publication. Today, libraries "deaccession" books to match their declining demand. But there's no reason for a library to deaccession an ebook, so for most books the global supply for any given ebook will eventually exceed global demand. If the library can cut its transaction cost from ~$2 per circulation to $0.20 per circulation it seems fair to reward the publisher with part of the difference for developing books with long term value. 
4. License transferability/InterLibrary Loan. Libraries rely on interlibrary loan to expand the scope of their collections and meet special needs. But ebook loans can be instantaneous, so digital ILL can compete directly with backlist sales. If the transaction costs (currently ~$10) for ILL can be squeezed down to $1 or so, there's plenty of margin to provide a transaction payment to the rights holder for the privilege of doing so. 
5. Patron-funded purchases. Libraries are tight on funding even as they need to completely transform what they do. Their biggest asset is a huge reservoir of public goodwill. At this pivotal juncture, their ebook offerings are characterized by long hold queues. Why can't a library patron buy an extra copy for the library and jump to the front of the queue? Why don't publishers offer "Buy for your Library" buttons on their catalog pages? The reasons are complex, but it's mostly a case of "we haven't done that before". But if it doesn't happen I just can't fathom how library discovery can effectively plug into publisher commerce.
6. License durability. If libraries are expected to "buy" ebooks, it should be pretty much for keeps. If the publisher for some reason has to revoke a license without cause, the library should get a refund of the license price.
7. Archival copies. Libraries need to do a lot of things with books other than lending. Indexing and archiving are good examples. The saddest thing about the most successful library ebook distributors today is that libraries don't get access to unencrypted ebook files. If libraries are to offer effective discovery and archiving of ebooks, they need access to the files. Seems a no-brainer to me.

There are a bunch of parameters to plug into this framework; here's my guess as to what they should be:

• Rate limits: One authenticated user per two weeks.
• Circulation fee: $0 for the first year, after the first year, 2% of purchase price or $1 whichever is greater. 
• ILL fee (publisher share): 5% of purchase price or $2, whichever is greater. 

A rational ebook lending framework would mean big changes for both the book publishing industry and the library industry. Even if a HarperCollins decided today that this was an attractive way forward, it would be hard-pressed to find a way to implement it, because libraries just don't work that way. So it seems a bit far-fetched at this point. Based on the iBookstore fiasco, it appears to be illegal for big publishers to even talk to each other, let alone drive business model changes. It's good that a library group is still trying to figure it out.

Maybe some small startup company could try some sort of pilot program.

Wattpad Usage is in the Ballpark of US Public Libraries

Billion Reasons Why, a novel
by xXdemolitionloverXx
on Wattpad

While working on another article, I came across this bit of data. Wattpad, the reading and writing community that's sort of a YouTube for stories, claims that its users are spending 3.5 billion minutes per month on the site. That's a number so big that I had no context for it.

So I wondered, how many minutes per month do people spend in their public libraries? There's a lot of data available for US public libraries from IMLS. In 2010, the most recent year for which data is available, 1.57 billion visits were made to US public libraries, or about 131 million visits per month. I have no idea how long an average library visit lasts, but let's say it's a half hour, then the total minutes of "user engagement" by US public libraries would be about 3.9 billion minutes per month. Roughly the same as Wattpad.

Maybe we should also count the time that readers spend at home with a library book, 30 minutes might be a serious underestimate. (see update) Also, Wattpad's usage is spread out internationally- they are the top mobile site in the Phillipines, for example. So its usage within the US is probably quite a bit less than public libraries. But it's also concentrated in certain demographics- teenage girls, for example. And it continues to grow at a solid pace.

Update: Karen Coyle point out in comments that you could also estimate library user engagement by looking at circulations. By that measure, assuming an average of 4 hours of reading per book, you get that US public libraries are about 8 Wattpads of engagement.

Any way you look at it, that's a lot of reading going on.

Big Library Read Diary: Four Corners of the Sky

Although the first Big Library Read (BLR) started on May 15th, it wasn't until yesterday that I got Four Corners of the Sky onto my iPad. Four Corners is the book that Overdrive is making available for free in librararies around the world- at last count 7500 of them! My local library Montclair Public, is part of a regional consortium, BCCLS, that decided not to participate in the Big Library Read in its first incarnation. There wasn't enough advance notice for BCCLS  to participate in such an initiative and do it well.  "BCCLS doesn't enter into such endeavors half-heartedly and felt that a two week window wouldn't allow us the time and effort a project like this deserves" BCCLS Library Services Director Arlene Sahraie told me. I hear similar things from other libraries.

The rapid roll-out of Big Library Read shows up in other areas. I haven't seen a single mention of the program in the mainstream media; it's an initiative with historic implications, in my view. On the other hand, when the program's impact is studied, there won't be the confounding effect of non-library promotion.

On GoodReads, you can see the sudden, but modest effect of the program:

 We'll soon see if that's a one-time bump or the short end of a hockey stick.

I looked into other libraries where I would be entitled to library privileges. In New York City, where I have business, NYPL isn't participating, which might account for the lack of MSM interest. I applied for a card from Queens Public Library, one of the most innovative public libraries anywhere, which is participating in BLR, but I would have to show up in person to get the card approved. So I went to another New Jersey library which approved me for a card. They're a member of a different consortium, eLibraryNJ, that's participating, so I'm finally set to start reading. 

I'm interested to see if online conversations develop differently if an ebook is available to large numbers of people. So I've going to keep an online reading diary on this blog. There are 55 chapters of 4 corners, and I have a 2 week checkout period to work my way through it, so that's 4 chapters a day. We'll see how I do. It's good that I have the full 2 weeks even thought the program ends next Saturday. With BEA and IDPF on my plate, I won't have that much time.

I'm also going to collect here all the online conversations centered around this BLR that I can find, especially blog posts. So far, I haven't seen anything develop. So feel free add yours via the comments!

• My Diary
• Through Chapter 4
• Chapters 5-9
• Chapters 10-14
• Chapters 15-28
• Chapters 29-34
• Chapters 35-38
• Chapters 39-41
• Chapters 42-48
• Finished
• Blogs
• nothing yet
• Twitter: 
• #biglibraryread 
• @michaelmalone10
• Facebook: 
• Chat with Michael Malone
• Michael Malone Page
• Goodreads
• Four Corners of the Sky
• Anne Arundel County Public Library discussion
• Huntsville-Madison County Public Library discussion
• The Four Corners of the Sky Book Discussion (AACPL, Maryland)
• Lower Macungie Library discussion
• LibraryThing
• Reviews

Crossing the Street in India

It sounds funny to say, but the thing I'll remember longest about my two weeks in India is learning to cross the street. When I first arrived, I didn't dare. Not only do they drive on the wrong side of the street, but they also drive on the right side of the street, the middle of the street, and on various surfaces that would not be considered streets here in New Jersey.

The protocol for pedestrians and motorists to coexist was not apparent to me. Pedestrians seemed to cross the street with minimal regard for traffic; the cars unaccountably seemed to miss them at high speed. After a few days of watching this dance, I screwed up my courage and crossed in the wake of some elderly women in saris. By the weekend, I was crossing on my own; the key seemed to be steadiness- a sudden move could fool a three wheeled "auto" or motorcycle carrying a family of six into your path. Motorized vehicles in India always have to be on the lookout for the vegetable cart, cow, goat, dog or camel that might need to share the roadway.

I learned a lot about other things, too. Last Wednesday, I gave a lecture for the Bangalore chapter of the Society for Information Science. My talk was titled "Why Libraries Exist: Transitioning from Print to eBooks." I've been working on this talk for a while (based partly on this post); but this was the first time I've given it publicly; I'll be giving versions of the talk twice in February.

There were lots of questions and much discussion. There are so many differences between conditions in the US and in India regarding ebooks. Not only are adoption rates very different, but there are potential ebook applications in India that had never occurred to me.

For example, while e-reader adoption is negligible in India, it may well be that textbook distribution via e-readers may happen sooner in India than in the west. In India, textbooks are a government-run enterprise. Government agencies produce, print and distribute textbooks throughout the country; owing to the country's huge population, the number of textbooks printed is quite large. Getting the right textbooks to remote locations can be a real logistics challenge. If e-readers could be made cheaply enough, there would be many advantages and potential cost-savings in their use for textbook distribution. Compared to laptops and desktop computers, e-readers pose smaller demands on electrical infrastructure; the demand for mobile phones even in rural areas has already spurred the introduction of portable chargers (hand-powered and solar-powered).

Public libraries in India are under-utilized compared to their counterparts in the west. One of the people attending my talk was Dr. M. S. Sridhar; he asked some very penetrating questions about the effects of ebooks on readership. He asked the audience to raise their hands if they were a member of a public library. Only a few hands went up. He later sent me a copy of a column he had written for the Deccan Herald (61 (24) 24 January 2008, DH Education, p II.)

During last four decades, the percentage of American population having public library cards has increased almost three fold from about 25 to 72. On the contrary, in a progressive state like Karnataka, after 40 years of enacting a comprehensive Public Libraries Act and establishing 5000 libraries, we have not been able to reach more than 2% of the population. A poor market penetration of public libraries over half a century of National Library Movement!

If my thesis about the economic forces behind "why libraries exist" is really true, then book sharing mechanisms ought to arise in any free-market society. If so, then why is there so little utilization of public libraries in India? Is it the lack of a "reading habit"? Given  the stories I heard about even poor domestic workers making great sacrifices to send their children to expensive schools that teach English; I have my doubts about this. Perhaps it's due to a widespread availability of inexpensive books; I didn't see that in the bookstores I visited. My guess is that informal book sharing  mediated by family, clan, school and work relationships are filling the economic niche left by public libraries that fail to connect with their communities.

Having survived numerous street crossings and a 26-hour ocean and continent-crossing journey to get back home, I have a better appreciation of the many ways that societies will negotiate the print-to-digital book chasm.

Library Journal: Explosive Change in the Library

One more essay is up at Library Journal:

As the library staff collected across the street at their designated meeting spot, they heard a loud noise and saw a smoking manhole cover in front of them pop. Later, they found that an underground explosion had lifted and broken a concrete floor of the library, buckling walls and blowing doors off their hinges.

The latest news on the Morristown library is that the local power company, whose lines were probably the cause of the explosion, can't figure out how to get a new connection wired, causing further delay to the reopening.

After writing this piece, it occurred to me that there ought to be established an "Emergency Response Digital Public Library" that could be deployed wherever and whenever needed. A library that experiences a loss by fire, flood or other disaster such as Morristown's has enough work on its hands in trying to clean up the mess and to re-establish service to be able to provide for all of its community's library needs. A large number of libraries on the gulf coast simply closed in the wake of Hurricane Katrina.

Certainly many publishers would be willing to provide free licenses to content is such situations- not only would it generate good will, but it would expose audiences to all the good stuff they have to offer. In fact, aggregators such as EBSCO and Proquest have made content available this way; but to my knowledge, there's not been a library organization to organize and promote the content for patrons of libraries that have experienced disaster loss. The Health Library for Disasters is a good example of what's posssible, though with a much narrower focus.

An additional benefit of establishing an emergency response digital public library would be that it could serve as a laboratory for libraries as they make their own transitions into digital information. Extensive "instrumentation" and careful compilation of statistics and usage patterns could be used to improve non-emergency digital libraries.

Too often, people are willing to donate money to relief efforts when a disaster occurs, but the infrastructure needed to absorb that aid doesn't exist. Modest expenditures on preparation before a disaster occurs can greatly increase the effectiveness of that aid. It seems to me that a broad-based digital library would be a useful part of that preparation.

Are Public Libraries in a Death Spiral?

The year and a half that I worked for Intel was marked by a sharp recession in the semiconductor industry. Most of the industry was plagued with a boom and bust cycle; during the busts, most companies laid off staff. Intel had at that point managed to avoid layoffs, and Andy Grove, Intel's hard-charging President, wanted to protect that record. He came up with a program called the "125% solution". As an alternative to layoffs, Grove asked Intel employees to work 50 hours a week instead of 40, without a pay increase.  We were told that we would work our way through the recession by developing new products.

The management of the Technology Development division, where I worked, had a hard time with this plan. At the meeting where they explained the program to us, they anticipated the obvious question. "No, this doesn't mean you should cut back your hours to 50 from the 50-80 hours some of you have been working." Even so, most of us were relieved that there would be no layoffs, and the line workers felt the same way.

I apologize in advance if this article comes off a bit Grove-ish, but I've become increasingly worried about the future of public libraries. It's not just the large library budget cuts that seem to be pandemic across the country (see the list below if you need any confirmation) but it's the way that budget cuts are preventing preventing libraries from addressing the fundamental changes that are occuring in the ways that people interact with books.

A favorite budget-cutting tactic of public library directors seems to be curtailment of opening hours (with branch-closing a close second). To me, this seems like the worst possible thing for a public library to do. It's as if Andy Grove had told us that we needed to get rid of 25% of our customers. Public library funding comes from the public, and the best way to convince the public that their library deserves more funding is to get the public inside the library doors.

Public Broadcasting is a good example for public libraries (and a competitor for donor support). Does public radio turn off their transmitter when they need money? No, they put on specially good programming and have pledge drives. My local library puts donor names on bricks; I'd like to see libraries put donor names on opening hours.

Tough economic times are exactly when public libraries are needed the most. The assistance that libraries offer to people looking for work, training for new occupations, learning to read, or finding social networks makes public libraries valuable parts of their communities, but that doesn't happen when the doors are locked. I can imagine a future where public library services are online and always open, but that's not today's reality.

One argument for cutting hours might be that the visibility of these cuts makes it easier to restore funding when the economic cycle turns. This may have been true in the past, but I think that the funding that goes away this year will never come back. The way most people access information has changed profoundly since the last economic downturn. A library that reduces its hours is just training its public to meet information needs elsewhere, and that public isn't going to rush back. The library's funding will get cut again and again, and eventually it will have to close its doors.

The public library of the future has to stop being about collections and start being about helping people and communities. Google can't be a physical place where people offer access, assistance and education for the internet and the information it accesses; local public libraries CAN be.   It's these "new" directions that will attract renewed public support and funding into the future. But library directors struggling to deal with budget cuts will find it hard to also reposition their services to meet the needs of an increasingly internet-based society.

Although I don't like cutting hours, it's not like there are lots of alternatives. Libraries with slashed budgets have painful cuts to make. Difficult choices will be made on acquisitions, staff, buildings, user fees, organizational mergers and consolidations. If you're involved with a library that's going through this, don't give up.

Intel survived that recession, and gave us beer mugs to celebrate the end of the "125% Solution". But it didn't escape the endless spiral of economic expansion and contraction. The next contraction cycle combined with competition from Japan to force Intel to lay off many workers and re-examine its businesses. Intel left the DRAM business to focus on microprocessors. You can read the rest of the story...in the library. (Or at Amazon)

Funding cuts in libraries (thanks to Gary Price at ResourceShelf, the Library Journal Funding Page, and LISNews for many of the links):

• Philadelphians protest library cuts
• New York Area Libraries face budget cuts
• Troy, Michigan library to close
• Los Angeles libraries cut hours
• Toledo Ohio library cuts
• DC Library reduces staff
• Pasadena library may sit empty
• Fair Lawn New Jersey cutting hours
• Salem Wisconsin library cutting programs
• Dallas, Texas
• Decatur, Illinois budget cuts
• Birmingham, Alabama budget cuts
• Wilkes County, North Carolina cuts staff
• Siskiyou County, California Library likely to close
• Prescott, Arizona library cuts hours
• More cuts in Bakersfield California
• Job cuts at Shenandoah County Library
• New Boston library president pushes branch closings
• Montgomery County, Maryland budget cuts force library to re-evaluate mobile services
• Illinois library system layoffs
• Alliance Library System, Illinois cuts services
• Shawnee Library System, Illinois
• Youngstown, Ohio funding shortfalls
• Las Vegas, Nevada reduces service hours and staff
• Lewis & Clark Library System forced to suspend services
• Illinois Regional systems cut
• Indianapolis, Indiana may close branches
• Tacoma, Washington library in crosshairs
• Jacksonville, Florida cuts hours
• Houston, Texas library system to cut hours
• Mineral County, West Virginia to cut hours
• Hoboken, New Jersey faces cuts
• Dallas, Texas libraries slashed
• Pomona, California library to cut hours
• Kansas City libraries propose cuts
• Hood River, Oregon Library to close
• Charlotte Mecklenburg to close branches
• Portland, Maine to close branches
• Lexington, Kentucky library to cut staff
• Muncie, Indiana to close locations
  

Why Libraries Exist

Imagine a world in which you share every book you buy with nine strangers, and you don't buy nine of every ten books you read. What would that world be like?

If you're a librarian, you're probably thinking it would be a reader's paradise. If you're a publisher, you're probably thinking it would be an author's nightmare. If you're an economist, you're probably computing demand curves, and concluding that both librarian and publisher have got it completely wrong.

Demand curves are used by economists to characterize the market for products. They plot the the amount the market would buy for a given price. For example, the market for a book would show that many people will buy books at a low price, and few will buy the book if it has a high price. If you are an exclusive seller in a market, as most publishers are, you can choose any price you like, but your revenue will be maximized if you choose a price somewhere in the middle of the curve. For the demand curve shown, the best price for the book is $10, which results in 1000 sales, for a revenue of $10,000.

What happens to the demand curve in our hypothetical everybody-shares world? The sales go way down of course, but the people willing to get the book for $1 will get to read books priced at $10. The people willing to spend $10 will be able to read the book even if it's priced at $100.

If the publisher took economics in college, he would look at the demand curve and price the book at $100 instead of $10, and guess what? The publisher revenue would be $10,000, or exactly the same as before! Since the publisher doesn't have to incur the printing costs of the larger print run, he makes more profit.

Is this realistic? Librarians can't have missed the fact that books meant for the library market are invariably priced at five times what the book would command in the trade market. On the other hand, if publishers were better at math, well... they'd have become bankers, and we'd probably all be better off in 2010 than we are!

The real world makes things complicated, and economists like UC Berkeley's Hal Varian studied these situations in the 90's. They wrote lots of interesting articles, including ones filled with math (pdf) and others fit to be read by librarians and publishers. Varian included the effects of transaction costs, production costs and the different values of owning and sharing, and found that library-like sharing benefits both publishers and consumers when the transaction cost of sharing is less then the marginal production cost:

1) more books will be read; 2) consumers will pay a lower price per reading; 3) the sellers will make a higher profit; and, 4) consumers will be better off.

To put it another way, libraries can be economically justified if the cost to lend a book is less than the cost to produce and sell a book. As I discussed in my previous article, the Institute of Museum and Library Services publishes a survey (available here) that tells us that US public libraries performed 2.17 billion circulation transactions in 2007 at an operating cost of $8.86 billion dollars. If we ignore all the other services that libraries provide, that gives us a cost per transaction of $4.09. So public libraries are inherently beneficial if it costs more than $4.09 for publishers to make, sell, and deliver an extra book.

Varian also notes that consumer sharing also yields benefits when consumer preferences are heterogeneous. Some people want to read the book the day it comes out; other people are perfectly happy to wait until the paperback comes out, and others will prefer to get it from the library. This heterogeneity allows market segmentation, which improves the efficiency of the market. The book publisher can charge $30 for the hardcover edition, but can still make money off of people who are only willing to pay $10 by issuing a paperback a year later. The publisher even makes money from library sales that allow use by people not willing to pay anything for book!

Libraries benefit society in many ways, but it's important for both publishers and librarians to understand the economic role that libraries have played in the book industry- they benefit everybody, publishers, authors and readers, by aggregating demand and helping to segment the market.

Next... ebooks.

The Rock-Star Librarian and Objective Selector

You probably can't name any musical performers from the 18th or 19th century. But you've probably heard of Enrico Caruso. Caruso had a sharp business sense to go along with a legendary voice, and he took advantage of cutting edge technology to make his voice heard by more people than perhaps any other human before him. He earned millions of dollars from the sales of his recordings before his untimely death in 1920. He was the first rock-star opera singer. 

 In my article about the changing role of public libraries in the ebook economy, I observed that libraries would have a diminished economic role when most books had become digital. How will the the role of librarians change when this happens?

Librarians have already seen their roles change drastically as library operations have moved onto the internet. Cataloging has changed profoundly, reference has been googlized and pre-internet licensing was almost nonexistent. But these changes have occurred in the context of relatively stable institutions. In what ways will the technological shift to ebooks transform both the role and the context of librarians?

Here's one possibility: objective selection.

I mentioned tropical fish farmers as an example of a group with distinctive information needs, and thus in need of a specialized collection of ebooks. Someone needs to do the selection. But why limit the luxury of customized collections to obscure trade groups? Shouldn't knitters be able to support a custom-selected ebook library? what about bass guitarists? Erlang programmers? Hula dancers?

Some book publishers imagine that their future is tied to the development of "verticals", or units that specialize in a single subject and thereby develop strong relationships with their audience. They imagine developing libraries of digital content to satisfy market needs and selling these libraries by subscription. And while this is likely to be a sensible strategy, it is at the same time rather limiting. It seems to me that the libraries that best serve the consumer's needs will be built by objective selectors, not marketing mavens.

The importance of objective selection is borne out in today's book business, in which the the most powerful person is Oprah Winfrey. Her viewers trust her to select books based on their merit and her good taste, rather than their profit potential. A book selected for Oprah's Book Club will rack up hundreds of thousands of sales.

The reason the transition to ebooks could amplify the role of selectors is that new models for selling books are possible. In the print world, you would never think of buying a collection of 1000 books at any price, even if it was selected for you by Oprah herself. In the e-book world, one could easily imagine wanting to buy subscriptions to 1000-book collections- not so much to read, but to keep on the computer and the iPhone just in case.

If you accept the idea of the thousand ebook libraries and how you would market them, you are inevitably led to the concept of rock-star librarians. Collections can't be marketed by specific content, or else there would be cannibalization of single-item sales. Marketing of collections would have to be centered around the selectors. Think how much some people would pay to have Warren Buffett's librarian selecting their thousand ebook libraries! Selectors would no longer be anonymous John Does. They would develop their own followings, their own brands, their own communities. These communities would not be bounded by geography; a top selector would reach patrons around the world, just as Enrico Caruso's voice did.
If you're a publisher, your first reaction is probably that this is nonsense, and that publishers would be better positioned to develop brands and communities. Why would publishers ever offer discounted ebooks through objective selectors, let alone allow a percentage for the selectors to live on? The reason, of course, is the demand curve. Objective selectors will earn their economic keep by helping to aggregate demand and segment the market. Their libraries will provide access to books that the consumer needs but wouldn't buy on their own; those are the sales that publishers will try their best to keep to themselves.

Having an objective intermediary between consumer and publisher could have other types of benefits, most notably privacy. Librarians have a strong code of ethics surrounding the rights of patrons to read without fear of having someone looking over their shoulder, and these values could be built in to a ebook selection and collection platform. Publishers may well find it easier to sell certain kinds of content when it comprises part of a discreetly selected library.

It could happen. The other possibility is that punk rock stars could take jobs now and then as librarians. That could happen, too.