Monday, March 08, 2010

eBooks for Public Libraries: Is the current business model sustainable?

In my previous post, I questioned if the whole eBook business model -- where public libraries are customers -- was sustainable.

I offer no answers nor earth-shaking mind-bending insights; only opinions :)

In essence, I suggest it's a question of managing costs.

First, what is the current business model where eBooks and public libraries are concerned?
Basically it works like this: The public library enters into a contract with an 'eBook vendor'. The contract is usually a license, where the vendor allows the public library to access the vendor's eBooks. The public library pays the vendor a fee, and there may be other technical restrictions for access (e.g. IP address, number of concurrent access).

Depending on the vendor's delivery platform, the eBooks may or may not be able to be downloaded to an eBook reader. The license fee has to be renewed at the end of the contractual term (meaning, access is terminated if there's no payment).

Why I feel there may be problems with the current eBook business model for public libraries
The main reason is that in the current eBook supply model, public libraries don't own the eBook copy (unlike the case for print books). The First-sale Doctrine does not apply.

Public libraries don't buy eBooks, not in the sense of owning then. In truth, public libraries pay a fee which we're able to pass on the right of access to our members.

Or to put in another way, public libraries are paying (on behalf of its members) for the convenience of accessing e-versions of the book.

The eBook vendors also impose a limit to the number of digital copies. I'm not privy to NLB's or any other libraries' contracts with their respective eBook vendors. But from the access policies, it's clear to me most eBook vendors do not allow unlimited access. Which means if the public library wants to obtain more digital copies, they need to pay more.

In short, it's about cost.

Costs of use of eBooks goes up rather than down
The more our users demand for eBooks, it's likely the cost will probably go up rather than come down.

It's simple math:

Let say the printed book (pBook) costs $10 and the eBook costs $2, or 5 times cheaper than pBook (in most cases, e-versions cost less than the paper versions).

Although the pBook is physical while the eBook is in bits and bytes, the eBook vendor isn't going to allow the library to make infinite copies. So the eBook is really a digital item treated and handled like a physical object, limiting its access.

And let's assume the pBook is loaned out for an average period of 10 days. Same as eBook (remember, the vendor forces the library to treat the eBook like a pbook).

In 300 days, both the pBook and eBook will circulate 30 times. The cost per pBook is $0.33 while the eBook is $0.06.

The eBook is cheaper, you say?

Ah, but the library owns the pBook and is free to let it circulate for another year. Or make it two more before it deems the pBook too worn to be kept. The pBook would have circulated 90 times. Or it costs $0.03 per loan.

The ebook, on the other hand, would have cost a total of $6 over three years (the public library has to keep paying the vendor each year, remember?). That will mean its cost per loan has increased to $0.07.

Plus we've not considered that users have to buy their own reader. I'm an optimist but even then I don't think it's possible for the public library to provide eBook readers for every of its members.

This means the eBook circulation is likely to be even less than the pBook. For a popular title, the pBook is definitely going to cost less.

eBooks are a cost-item, not an asset
For pBooks, it's an asset item whose cost of investment is amortised over time and with use. For eBooks, given the current business model, public libraries can only treat it as a cost item.

On the balance sheet it is a liability rather than an asset.

Time out...
Of course there are problems with my simple explanation above. Not all pBooks enjoy full circulation anyway. I've also neglected physical storage costs, or inventory holding costs.

Ah, but in reality, public libraries make do with their existing space (that's why we 'weed' collections to make room). This means the infrastructure cost for physical storage is amortised and again you have decreasing costs over time. In fact, the annual reports and financial statements of most -- if not all -- public libraries show that the largest chunk of the operational costs are staffing rather than assets.

All things equal, the eBook will cost the library more to provide compared to pBooks.

A different (cheaper) eBook business model for public libraries?
One of my colleague likes to say that the current reality for public libraries all over the world is a shrinking budget. I agree. Even for Singapore, that will be true.

Yet another reality is that the number of public library members -- who find the eBook format attractive -- will increase. More readers will expect the public library to provide eBooks (I'm not talking about replacement of pBooks, but the demand for eBooks).

But what then, would be that different business model for public libraries? The eBook vendor will charge a lump sum access fee, and allow unlimited copies for the year? Or allow buyers of eBooks to donate their eBook copy to the public library?

And still ensure that the eBook vendor/ publisher/ author still maintains a profit?

Or could public library members, who wish to have that added convenience of eBooks, share part of the costs? Where they pay just a little bit, as a premium service. That's possible if we view eBooks as an alternative format to print.

A question of balance
In the longer term, my bet is that eBooks will be more expensive than print, where public libraries are concerned. There are some who say the cost of eBooks are understated as it is.

Public libraries will have to calculate the total cost of service provision, and ensure that there's a balance between cost expenditure and asset investment.

A company like Apple, whose customer base is global, has the clout to force book sellers to lower prices. Public libraries don't. So the only way is to manage our own costs in view with our customers' use, demand and expectations of our collections and services.

A question of public commitment
When Andrew Carnegie set up a foundation to help establish public libraries, one requirement was that the people and government had to be willing to fund part of the operating costs.

His foundation's initial investment would have covered the building and the collections. The library owned the books and was free to lend them out as many times as people would want to borrow. There was no burden on him to constantly feed money into this black hole called a public library.

However, suppose Andrew Carnegie was told that his one-time donation was good only for one year. After that he would need to continue paying the eBook vendor to enable access to the eBooks. The more people used his library each year, the bigger the hole it burns in his pocket.

I bet Andrew Carnegie would think twice about setting up the public library in the first place.


  1. Hi Ivan

    This is interesting.

    Just some thoughts on my end.

    1) I know of readers who use eBooks without the eBook readers, they just read on their PCs, so it is not necessarily true that users have to buy their own readers or libraries have to provide.

    2) I would add that one limitation of eBook collection is that it is not selected/determined by our own librarians, hence, this collection is likely duplicated at every other countries' libraries as long as they subscribe to the same package, therefore ignoring the unique reading needs of the community of that geographic region.

    3) For economies of scale, it would be wonderful if unlimited copies or at least many more copies of the highly reserved pBook titles in libraries can be made available for users for a certain time period. This could be a collaboration between library and vendor to promote a series of such titles and negotiated with terms favourable for libraries. I remember in the past, we used to buy multiple copies of a popular title (e.g Da Vinci Code) but after the popularity faded (maybe 1 year?), we ended up with so many copies on the shelf and we have to weed them out. To me, that's a waste that can be made better if fad titles can be complemented by eBooks.

    The way I see it, cost of eBooks will go down over time in the long run.

  2. Hi Ivy, thanks for adding to the conversation. I like your point about how a mix of e-versions and print of the same title can help resolve some problems of "Best Sellers" being popular for a while, and then becoming a physical liability. And the e-version is likely to be cheaper than print, so more e-copies can be licensed for that period. So that may save money for the library (by not buying the more expensive print copies) and save shelf-space.

    Will eBooks licensing costs be lowered? I think that will happen only when more eBook vendors (whose customers are libraries) come on board. Competition tends to drive costs lower. I can't say I'm that optimistic, but I sincerely hope you're right and I'm wrong :)

  3. i agree with that competition tends to drive costs lower of ebooks

  4. You have some great information on this blog! You really go into depth regarding the subject and topics you cover. I would have to agree about the problems with eBooks and the financial feasibility of buying them for libraries.

    Thanks for the info. and great blog!

  5. The model that you describe for e-books certainly makes them seem unreasonable for public libraries. That's not the model I've seen in the US from Amazon, though. The one-year limitation is not part of that model. What I suggested to one of my readers who wanted to donate a Kindle to the library is that the library loan out the Kindles (to adult patrons who sign a special contract). Typically, a book will come with six simultaneous device licenses (some have fewer: some are unlimited). Let's say the e-book is $9.99, and the p-book (paperbook) is $15. For $9.99, six patrons at a time can have the e-book. That's $1.67 per simultaneous use. The p-book is $15 per simultaneous use. The p-book will decay over time: the e-book won't. The EBR (E-Book Reader) will decay over time and there will be loss or theft (although the borrower can be held responsible for those, just as they can be with p-books they borrow). However, two e-book purchases as I've described (6 for $9.99 instead of 6 for $90) saves the cost of the replacement device ($180-$19.98=$160.02...the lowest priced Kindle is $139 in the US).

    Your article is well-written, and I enjoyed reading it. It just isn't the only possible model.

  6. Hi Friends,

    Thanks for the great article mentioned, business model of ebooks also implies to niche topics & content quality on which ebooks are made and for the target customers. Due to advancement in technology from iphones,ipads to kindle information at finger tips is a lucrative business. I was going for a vacation to mauritius but I didn't knew anything about the places to visit,rules for visa, how can i save few dollars while my visits and all the prequisites I searched on internet for mauritius vacation and found a great ebook on and I just purchased this ebook within seconds got an instant delivery in my mailbox and studied sitting in plane knowing everything about Mauritius. So this is the power of ebooks.



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