Tag: eBook licensing

Books are Not Floor Wax and Road Salt

One would think this is obvious, particularly to a librarian, but perhaps not to Douglas Lord, President of the Connecticut Library Association (CLA). In a letter addressed to the state assembly advocating passage of H.B. 6829, Connecticut’s version of similar bills proposed (and shot down) in other states to address alleged unfairness in eBook licensing to libraries, Lord writes:

It is very important to note that this legislation has nothing to do with copyright, it is a matter of contract law. In the same way that taxpayer funds are treated preferentially with all other state contracts – from floor wax to vehicles to road salt – the same should be true for electronic content. [Emphasis included]

Although the Connecticut bill does not require publishers to license to libraries in the state, it contains several provisions defining various publishers’ licensing models as “unfair trade practice,” which is tantamount to a state compulsory license, which means H.B. 6829 is preempted by the Copyright Act. So, it has something to do with copyright law. In fact, although I am sure Lord does not sincerely equate books to floor wax and road salt, his disregard for the unique cultural value of the former may explain his absurd allegation that copyright law is not implicated in a state bill about contracts. Every contract negotiated for the use of copyrightable works rests upon the author’s exclusive rights enumerated in Section 106 of Title 17. So, Lord’s declaration is either intentionally misleading or naively misguided.

Notably, Lord’s letter reiterates the ambiguous rationale that has been proffered by every advocate of these bills in every state so far—i.e., the difference between the retail price of an eBook purchase compared to the licensing models that publishers offer to libraries. He states, “Consumers pay, on average, $12.77 for eBooks from retailers like Amazon. The average cost for a public library for the exact same product is $45.75.” Indeed, if one does not look beyond those two numbers or gather any relevant community information, the price comparison looks outrageous, even extortionate.

But to address this issue, I did my best to examine the market in my own region served by the Mid-Hudson Library System and found that a) less than one-third of the MHLS community accesses the library system for books of any kind; and b) that the average eBook cost per read is ~$1.06. And apropos the big picture for the taxpayer, it is notable that maintaining a library’s collection—both physical and electronic—is usually a fraction of its operating costs. To quote my post looking at MHLS:

The data collected in the Institute of Museum and Public Services (IMLS) Public Library Survey reveals that libraries’ costs are increasing for personnel and general operating expenses while costs are trending downward for collection materials—especially the cost of ebooks and audiobooks. Noting that most libraries spend an average 10% of their annual budgets on their collections overall, an article in Wordsrated summarizing the IMLS Survey states, “The drop in price per item is due to library collections becoming increasingly digital. This is because the price per digital item has declined significantly. All while the average cost per book increased 10% since 2003.”

While $1.06 per read does not seem extortionate, I do not claim to know whether that price is “fair to the taxpayer” in New York or Connecticut or anywhere else. But that’s my point. No advocate of these eBook bills, to my knowledge, has attempted to demonstrate a critical need for this legislation based on cost/benefit numbers, which is odd when one is alleging unfair use of public funds. And I suspect that’s because these bills are not directed at solving a real problem but are instead the hobbyhorse of anti-copyright activists like Jonathan Band and Kyle Courtney. Consequently, it is no surprise that advocacy of these bills, including this letter from CLA, repeats the vague tautology that publishers are extortionate and usually ignores the interests of authors.

Here, Lord goes a step further and claims that “Authors get no added royalties or income from these sales.” Not true. Authors’ contracts include revenue from eBook licensing to libraries, and the author’s percentage of eBook revenue is usually higher than her cut from physical book sales. Plus, those percentages typically increase as sales go up, advances are covered, etc. So, I am not sure whence Lord’s assertion comes, but it is consistent with the logic behind this bill—that books are like other commodities, and the author’s pecuniary interests are not directly associated with her copyright rights.

As I’ve repeated in nearly every post on this topic, the libraries should be careful what they wish for when it comes to eBook licensing and, if they hope to remain relevant, should avoid putting too many eggs in the digital basket. The logic is not hard to follow. If 90% of the cost of keeping libraries open is not about the collection, and the digital collection grows too large, how long before taxpayers figure out that facilitating eBook loans can be done with a website and without those expensive buildings and librarians? After all, some taxpayers may think that a former library would be a handy place to stockpile floor wax and road salt.

Photo by: AndreyPopov

What Problem Do Those eBook Bills Address Anyway?

In late December, New York Governor Kathy Hochul vetoed the state’s library ebook bill, acknowledging that the law would be preempted by the Copyright Act. In mid-February, a district court in the State of Maryland, responding to a lawsuit filed by the Association of American Publishers (AAP), ordered a preliminary injunction suspending that state’s ebook law, also on preemption grounds. Recognizing which way the wind was blowing, Kyle Courtney of Library Futures Foundation drafted a letter on February 1 to the House Committee on Corporations of the Rhode Island State legislature proposing amendment to that state’s bill, writing:

…we are advising, based on the current landscape involving litigation and vetoes of similar eBooks laws in other states, that you consider friendly amendments below that will effectuate enough changes in H7113 to help avoid running afoul of the challenges documented below with respect to activities in other states.

What follows is a recommendation that Rhode Island remove one paragraph demanding that publishers license to libraries et al., which the footnote describes as the language in direct conflict with federal law. However, the remaining provisions of the bill still invite a preemption challenge because they presume to dictate terms and pricing models to publishers in conflict with the principle that copyright protects the author/owner’s right to decide the manner in which a work is made available. Hence, the provisions that would remain in the RI bill, as well as nearly identical bills in five other states, may still be construed as unconstitutional state compulsory licenses.

As Courtney’s letter emphasizes, the strategic approach taken by the various lobbying organizations pushing for these bills is to present the subject in the context of state contracts while seeking to remedy a consumer protection problem—namely, the alleged “unconscionability in licensing” practices by the publishers. But so far, the organizations lobbying for these bills have yet to support the accusation that current ebook licensing regimes are extortionate and/or that they are causing a disruption in a library system’s ordinary capacity to serve its community. And that’s to say nothing of presenting a compelling case in every state in which these bills have been introduced.

It is no surprise the American Library Association (ALA) et al. have not presented a thorough argument, because it would be a hell of lot of work. To assess whether a given market is underserved (in any context) requires a considerable amount of research and evidence, including counterfactuals, polling, budget analysis, etc. In this instance, it would be a rather large data-science project to manage and model all the relevant inputs, like overall reading trends, library-use trends, preferences for digital vs. physical materials, and cultural and economic data, to determine whether, and where, the ebook borrowing market is underserved and conclude that the licensing models are the cause.

Instead of doing any of that homework, what associations like LFF and the ALA have done instead is to compare the consumer price of an ebook purchase (e.g., $18) to a library price of an ebook license (e.g., $55 for 2 years), then cry foul and draft legislation to resolve this apparent injustice. But if state lawmakers are going to accuse the publishers of unfair practices to justify a law that flies in the face of the Copyright Act, it should demand more evidence than these two numbers alone. Or if state lawmakers are going to elide all complexity in favor of blunt metrics, then why not simply recognize that three times the price to make an ebook available to fifty times the readers hardly sounds like extortion by any reasonable definition?

The Mid-Hudson Library System

Although I certainly do not have the resources or data-science chops to do the kind of research mentioned above, I did a little digging into the Mid-Hudson Library System (MHLS), which serves my home region, just to see what I could learn.

One of 23 systems in New York State, MHLS comprises 76 small-town and public-school libraries in five counties with a total population of more than 686,000 (~ 258,000 households) earning a median income of about $76,000/year. The 2021 budget for the library system was just under $4 million, a little more than half of which comes from statewide and local taxpayers. In 2021, MHLS spent about $90,000 (2.25% of its budget) on digital lending materials, through a few different marketplaces, and presumably using more than one licensing model.

For example, OverDrive, one of the major marketplace platforms where librarians license digital materials, makes ebooks available under three different licensing models. Through Simultaneous Access, certain publishers offer package deals for multiple titles up to a certain number of loans. In the One Customer One Use model, presumably for back catalog or less popular books, the licenses never expire. And the model most often used by the major publishers for the most popular books is Metered Lending, which offers one or two-year licenses and/or limits the number of loans per license.

In 2021, MHLS ebook circulation was ~ 314,000, and the first three months of 2022 are tracking toward a similar total. Even at the unrealistic frequency of one book per unique patron, that would be less than 1/3 of the total population in the system, which likely says more about demand than it does about supply. In fact, at the national level, although ebooks and audiobooks continue to occupy a greater percentage of a library’s collection, print book borrowing is still 518.92% higher than ebook borrowing as of 2019.

Looking at the catalog, it appears that MHLS offers about 10,000 ebooks (70% fiction/30% nonfiction), presumably under more than one licensing model. But even if all 10,000 were licensed under Metered Lending at a rate of $55 for two years, this amounts to a cost of about $1.07/year per household in the system. Alternatively, we can estimate that a two-year license of $55, at a maximum rate of one loan every two weeks ($55 / 52 readers), is a Cost Per Loan (CPL) of about $1.06.

So, the numbers available do not seem to justify even a hypothesis that ebook licensing is unduly burdensome or is resulting in underserving the MHLS community. And the overall demand nationwide for borrowed ebooks hardly justifies the rhetoric of the lobbyists, who would have us believe that a literature-starved public is suffering on the libraries’ virtual steps at the mercy of the big publishers. When an expenditure is just over two percent of the operating budget, one must step back and look more holistically at the question presented.

Collections Are a Fraction of a Library’s Expense

The data collected in the Institute of Museum and Public Services (IMLS) Public Library Survey reveals that libraries’ costs are increasing for personnel and general operating expenses while costs are trending downward for collection materials—especially the cost of ebooks and audiobooks. Noting that most libraries spend an average 10% of their annual budgets on their collections overall, an article in Wordsrated summarizing the IMLS Survey states, “The drop in price per item is due to library collections becoming increasingly digital. This is because the price per digital item has declined significantly. All while the average cost per book increased 10% since 2003.”

The statistical trends in the IMLS Survey suggest that libraries are going through a lot of transition these days—as collections become more digital, as physical spaces are adapted to provide more programs and services, and as overall reading and borrowing habits continue to shift in the market. Change in any system presents both opportunities and challenges, and it is a safe bet that not every local library will, or can, adapt in the same way. But if the data show that ebooks are, as of 2019, “the cheapest material in a library’s collection,” then why on Earth is this the moment to lobby for these ebook bills in the states?

The answer to that cannot be, “Well, if the prices were even lower, we could do more.” Yeah. That’s how everything in life works. But for one thing, as much as publishers and authors care quite a bit about library patrons, it is not incumbent upon them to outright subsidize the libraries as they navigate the changing landscape—let alone by mandating that the publishers remain bound by old models so that libraries can adapt to new ones. That’s not a symbiotic relationship.

Looking forward, neither the libraries nor the publishers can say what the trends will be in five or ten years, but the libraries should be cautious about putting too many eggs in the ebooks basket. What happens to the relevance of the seventy or so local libraries in MHLS if the system plays an outsized role as a conduit for ebook lending? Don’t at least some taxpayers or prospective donors in each town begin to wonder why they need to keep paying the librarians and maintaining the buildings? Perhaps the local librarians should look at the data and ask whether ALA, LFF et al are doing them any favors.

Of course, knowing the track records of the people behind these ebook bills, it is fair to doubt that they are trying to solve a problem at all but are instead pursuing a broad, anti-copyright agenda. The tone of Courtney’s letter, for instance, makes clear that he (and his colleagues) object to the legal doctrines on which the NY and MD bills were opposed and that his recommendations to RI are a begrudging pivot in strategy to achieve the same ends by a slightly amended rationale.

But to oblige any copyright owner to make a work available under terms mandated by state law invites substantial conflict with federal law and the authority of Congress alone to amend that law. Consequently, no state legislature should embark on such an adventure without a compelling and thorough analysis of the problem allegedly being solved. And so far, the lobbyists for these ebook bills have presented little more than a melodrama barely worth reading at any price.

Amazon Fades from the ebook Legislation Narrative

Before I let the topic of these state ebook lending bills go for a bit, there is one aspect of this story that should not be overlooked. I was thinking about it when I saw a tweet criticizing Governor Hochul’s December 30th veto of the New York version of the bill. Media professional and professor Dan Gillmor, who has over 46,000 followers, summed up the sentiments of many when he wrote…

Mr. Gillmor’s hyperbole is an example of that blinkered view which finds it sensible to vilify publishers while ignoring authors, as if the interests of two were not intertwined. But the comment also reminded me that the force still driving this willful blindness is a belief that internet platforms can and should obviate the need for intermediaries like publishers. What’s especially funny about that idea in context to this story is that it was the monopolistic conduct of one internet platform—Amazon—which served as a major predicate for advocating the ebook bills in the first place. For instance, in Maryland, which passed its bill into law and now faces litigation by the publishers, all the supporting letters in the record contain the following:

For example, Amazon and Audible currently have between them over 20,000 “exclusive” titles. They will license these titles – which include high demand content by J.K. Rowling, Margaret Atwood, Alice Walker, Dean Kootz, Neil Gaiman, and others – to consumers, but not to libraries.

The headline of a Washington Post article from March 2021 (when the eBook bills were still percolating in state legislatures) identified Amazon as the publisher refusing to license titles to libraries. And as the AAP complaint against the State of Maryland notes, “The Maryland act’s legislative history and public statements by state legislators and public officials reveal some very specific concerns about this company.” The complaint adds that legislative sponsors specifically and repeatedly cited Amazon, but then avers, “… there is no contention that publishers more broadly are failing libraries. Nor is there any question that the marketplace for library ebooks and audiobooks is flourishing.”

After passage of the Maryland law, Amazon Publishing signed a deal with Digital Public Libraries of America (DPLA) to make their ebooks available to U.S. libraries, and it is reportedly negotiating terms to make its Audible audiobooks available as well. That’s a good thing, but we should not lose sight of the distinction between Amazon and the major publishers, who were not withholding their ebooks from libraries. Because whatever drove Amazon’s decision at the time (strategy for global domination?), it must be viewed as an outlier unique to that leviathan of a company and not aligned with the rest of the industry whose core business is still book publishing.

The library associations highlighted the conduct of one tech industry publisher as a reason to promote legislation that would divest individual authors of their copyright rights. Thus, despite the claims that these bills are not anti-author, a major prong of the argument for them boiled down to this:  Amazon behaved like a monopoly, so authors should pay the price. And this aspect of the story is transformed from the absurd to the grotesque when we remember that Amazon was among the platforms once touted by copyright critics as an antidote to the “gatekeeping” engaged in by publishers.

As the ebook bills gained momentum in four states—NY, MD, MA, RI—the Amazon predicate faded into the background to the extent that now, according to observers like Gillmour, the story is all about the publishing “cartel” quashing “reasonable” legislation solely directed at the price of ebook licenses for libraries. A couple of problems with this narrative, though.

The first is that, even if the libraries have a sound complaint about the cost of ebook licenses, that’s a subject for negotiation and not grounds for a futile attempt to legislate away the rights of authors. Second, if the libraries want to make a case for calling the current terms of ebook licensing unreasonable, they need to at least do some math. It is not enough to just compare the ebook purchase price to the library ebook license price and declare the difference extortionate on its face.

Because whatever the ideal cost of ebook licenses should be for libraries, the current rate of approximately three times the consumer price for ebook purchases is not as unreasonable as the library associations make it seem. The simple fact is that lending an ebook to multiple readers is a different market from selling an ebook to one reader. Let’s do a quick, back-of-the-envelope review for context.

A two-year license fee of $65 provides free access to an ebook to roughly 52 readers at a cost to the library system of $1.25 per reader. But based on the rhetoric employed by the library associations, they seem to want the same 52 readers to be provided access at a cost of about $ 0.29 per reader, but even then, not really. Because digital materials never wear out, what the libraries actually want (i.e. unlimited licenses at consumer purchase rates) is for the authors and publishers to make titles available until that per reader cost approaches zero. Clearly, there is a threshold when too low a fee would cannibalize the market for ebook sales, which would end the market for ebooks, period.

For further context, keep in mind that one reason the libraries claim a right to buy, rather than license, ebooks is that they are used to buying hardbound copies and loaning them to their communities. But here, the library associations are comparing apples and oranges and not taking an honest account of cost to the library system for providing its services. Because a physical book requires infrastructure and labor to maintain, a $30 clothbound copy, for instance, may cost the library around $1.44 per reader to serve the same 52 patrons.[1] The broader point is that the two-column argument the ALA et al presented to state legislators is not a full picture.

Finally, I would add that libraries will not stay relevant in a world where they put too many eggs in the digital lending basket. At the point at which one’s “library” experience is little more than tapping a button to access a book through an electron reader, the relationship with the individual library evaporates rather quickly. If the library associations were to take a serious read of the landscape, they might consider whether Amazon’s original refusal to license its titles has something to do with that company’s strategy to replace publishers, libraries, and any other distribution channel it doesn’t control. Because that’s the real battle of the digital age, and to that end, the libraries and publishers should be allies.

[1] Based on a staffer making $10/hr and spending three minutes managing a book for a single patron. The actual per read cost is likely higher.