Amazon Lending Publishers a Hand With New Library?

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amazonBy Jeremy Greenfield, Editorial Director, Digital Book World

Retail and bookselling giant Amazon Inc. is giving readers another way to obtain books, but is it good for publishers?

The Seattle-based company announced its Kindle Owners’ Lending Library yesterday, a program that offers Amazon e-reader owners who are also Amazon Prime subscribers the ability to borrow from a limited selection of books for free: one title at a time and up to one every month; new titles can’t be borrowed until old ones are returned.

Good for Kindle owners who have Prime? Undoubtedly. Good for publishers? Perhaps, say publishers and observers.

Proponents of the program say that the library will help publishers surface and sell more back-list titles, learn more about their readers desires and habits and provide a new revenue stream.

“This will be really good for authors and readers, as it will increase the visibility of these titles, will help make them easier to discover, will help longer tail sales of the books, will help publishers uncover what readers really want, and what they don’t,” said David Nussbaum, CEO of New York-based book publisher F+W Media, which is a charter member of the lending library. (Full disclosure: Digital Book World is a property of F+W Media.)

Publishers leery of the program – and sometimes of Amazon in general – worry about initiatives that may drive down the perceived value of books, how authors might be compensated for books that are borrowed, and Amazon’s overall dominance in the marketplace.

“Nothing in the big six’s contract with authors covers stuff like this. In the big six’s view it wouldn’t help sell books and is a threat to their business model,” said Thad McIlroy, a Vancouver-based electronic publishing analyst, speculating on the viewpoints of big publishers, though he believes that the lending library is ultimately good for publishers.

Many major publishers contacted for this article declined to comment, including Hachette, Penguin and Random House, whose head of corporate communications, Stuart Applebaum, told Digital Book World in an email, “We are not commenting on this, as we don’t publicly discuss, even for background, retailer initiatives in which we don’t participate.” Some publishers did not respond to requests for comment before press time.

“This is a new model…[and] obviously requires some thought,” said Dominique Raccah, publisher and CEO of Sourcebooks, a Naperville, Ill.-based independent book publisher.

Sourcebooks is not yet participating in the lending library program, citing “questions” about the program, including how authors are compensated and its effect on pricing of books in general.

Russel Grandinetti, Amazon’s vice president for Kindle content, said that in the digital age, book publishers should look for more and new revenue streams and that the Amazon Lending Library model isn’t so different from other ways content companies monetize their products.

“Sometimes I go to the movies and pay for it and sometimes I watch a movie on cable,” he said. “When you go home to watch a movie on cable, is it free or did you pay for it?”

Some publishers may simply not be ready for this model in book publishing, said George Burke, founder and CEO of eBookFling, a West Long Branch, NJ-based start-up that allows its users to lend books to each other through Amazon’s and Barnes & Noble’s lending-enabled functionality, which allows some books to be lent between users. EBookFling currently has about 12,000 books in its catalogue.

“As you know, the book industry is quite old and very slow to change,” he said. “It’s just a matter of time before more publishers come on board.”

Burke cited author compensation as a potential hurdle for publishers when it comes to lending, but said that other industries had adopted a similar model and book publishing would eventually, too.

“Both the movie industry and the music industry have moved that way,” he said. “Spotify and Rhapsody have flat fees worked out with record companies. And Netflix pays flat fees to movie production houses for access to their catalogues.”

About 5,000 books are currently available in the lending library. Notable titles include the Hunger Games series, Fast Food Nation and Moneyball. Only readers who own Kindle devices and are Prime subscribers can borrow books from it, locking out Kindle app users on other devices, which The Wall Street Journal reported as a “restriction” intended to juice Amazon device sales.

A New York Times analysis of some of the books available showed that none are current Times’ top-20 best-sellers, followed by the observation that “traditional publishers are obviously leery of this program.”

They shouldn’t be, said McIlroy, who contends that author compensation issues and other challenges holding publishers back will eventually be overcome and that Amazon’s lending library will only increase in size until eventually all publishers, including the largest houses, participate. Its libraries that should worry, he added.

According to McIlroy, Amazon may seek to replicate and replace many functions of public libraries and “they [the libraries] couldn’t be more short-sighted not to fight this tooth and nail,” he said.

The libraries, however, are not worried and welcome this new development, according to the American Library Association, a Chicago-based trade association for librarians.

“I see it as yet another alternative – absolutely not a replacement – for the ways in which libraries have provided access to content,” said Maureen Sullivan, the association’s president-elect. “It’s going to appeal to people who own a kindle and are able to invest their money in these services.”

 

Lent Without Consent?

There are two revenue models for publishers whose books are lent in the Amazon Lending Library. Some are paid a flat licensing fee for a curated catalog of titles; others are paid the wholesale price for every book sold.

In his email newsletter yesterday, publishing observer and owner of PublishersMarketplace.com, Michael Cader, contends that the books being paid for by Amazon individually are in the lending library without the consent of the individual publishers. In this thorough take on the lending library, Cader outlines some publisher concerns and analyzes some of the other issues involved, like the number of Prime subscribers who may own a Kindle. Click here for more.

(Full disclosure: Publisher’s Launch, a property owned and operated by Cader, is a co-presenter of Digital Book World Conference and Expo 2012.)

Write to Jeremy Greenfield

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4 thoughts on “Amazon Lending Publishers a Hand With New Library?

  1. I own a custom publishing business and am not yet sure how I feel about this. It’s also not clear how the compensation works or when/how this will be available to smaller publishers like us. I’ve always liked the idea of libraries lending books, because it’s a great way to capture the interest of new readers. Some will finish the book and buy a copy to keep, or may purchase other editions of an author’s books. With Kindle lending, I’m afraid the reach is too broad and could hurt book sales. Obviously Amazon doesn’t think so or it wouldn’t be making this available to the public (or at least to Prime users). I still feel like I need to sit with this idea a bit. Thanks for the article.

    • Hey Stephanie–

      Thanks for the comment!

      As I understand it, publishers are being compensated in two ways right now:

      1. Some publishers are being paid a flat fee for access to certain books from their list for the lending library

      2. Some small percentage of books are being paid for by Amazon at wholesale price each time they’re lent out

      I hope this helps!

  2. It is very unclear how much publishers are being paid for lending. The flat fees from all I have been able to extract are set by Amazon. If they paid small publishers the wholesale percentage on each lending that would be more fair to publishers. Amazon only wants to push Kindle – not help publishers stay alive. I see lending as a way to push Kindle and nothing more.

    I fear Amazon is the 800 pound gorilla in the room that no one wants to talk about.

    • Sorry for taking so long to respond to this, Lisa.

      I think that the publishers who are participating probably have a clear idea of how they are being compensated. We on the outside don’t really know. The publishers whose books are in the lending library without their express consent also probably have questions about compensation and the effects the lending library might have on their business.

      What’s much less clear, I think, is how others in the supply chain will be compensated, like authors, agents and so forth. I think that some of the reactions among the community — from agents, for instance — bears this out.

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