Within the past month, Hachette Book Group replaced its perpetual licensing model for libraries with a two-year ebook and digital audiobook lending model. Simon & Schuster eliminated perpetual licensing on digital audiobooks and replaced it with two-year licensing, announced per-circ pricing for select ebook titles, and made additional changes to its library ebook model. And audiobook provider Blackstone Publishing announced a new 90-day embargo on sales to libraries, leading to a boycott.

With multiple publishers announcing new and generally more restrictive and expensive licensing terms at the same time, rumors have circulated through the library field that what’s driving the moves is Amazon promoting the narrative that library ebook lending is partly responsible for declines in retail ebook sales. Multiple sources have raised the issue with LJ off the record during the past year, beginning when Macmillan began testing a four month embargo for libraries licensing new ebooks published by its Tor imprint, and continuing when Penguin Random House (PRH) replaced its perpetual access model with two-year licenses. Thomas Mercer, SVP Digital Products for bibliotheca, provider of the cloudLibrary digital lending platform, recently went on the record.

“Amazon continues to put pressure on publishers by sharing data with authors indicating libraries are the cause of lost digital retail sales,” Mercer said. “Their argument is that every loan at a library is a lost sale. While I don’t believe this to be true, and I don’t think many publishers believe this to be true, the pressure is causing major publishers to reconsider their library model.”

Representatives from Amazon denied the rumors, while acknowledging that the company does share comprehensive data with publishers about their titles, including consumer sales, subscriptions, and Kindle ebook circulation at libraries via OverDrive. According to Amazon, it has been sharing this information for years, and the company views it as part of a normal relationship between a publisher and a retailer. Citing the relationship with OverDrive, representatives said that Amazon supports library lending, particularly for patrons that would not otherwise have access to content.

“We believe that public library lending is very important to society and, among its many benefits, helps increase literacy and provide[s] authors and their books with broader audiences,” an Amazon spokesperson told LJ. “Publishers make their own business decisions regarding library lending.”

EMBARGO RESULTS

In a recent interview with sci-fi author Jason Sanford, Fritz Foy, president and publisher of Macmillan’s Tom Doherty Associates, discussed initial results from the Tor embargo, offering a few insights into the data that publishers may be using to determine these changes to their library licensing models.

Foy explained that the test was initiated because, while libraries were responsible for 45 percent of the imprint’s digital reads, library sales accounted for only 15 percent of revenue.

“What we were seeing was really reaching a tipping point where we’d have to explain to our authors that while your readership is growing, your royalty statement will be getting smaller and smaller,” Foy told Sanford.

Foy added that, following the embargo, all but one Tor title had higher consumer sales during the test, compared with a control group of titles at Macmillan’s Minotaur imprint, offsetting any sales losses from libraries. Although that might sound like ominous news for libraries, Foy said that Macmillan has been in communication with the American Library Association (ALA) and individual library systems, learning how small library systems often deal with significantly higher per-circ costs than large urban systems with titles purchased under the same licensing agreements, for example.

“We sort of backed into terms that were [a] disincentive for smaller libraries carrying our books,” Foy told Sanford. “I can’t tell you what our solution is because we haven’t enacted it yet, but we’re getting close. We presented it to three groups of libraries, about 30 all told, and we’ve gotten some good reviews and some mixed reviews but so far no really bad responses. We’re trying to come up with a solution that works with everyone long-term.”

EARLY RESPONSE

In a series of press releases, ALA officials expressed concern about these changes, announced the re-establishment of the Digital Content Working Group (DCWG) to focus the organization’s analysis and advocacy efforts. And during the ALA Annual conference in Washington last month, the organization resolved to launch a joint working group of representatives from ALA; the Urban Libraries Council; the Association of Specialized, Government, and Cooperative Library Agencies; Chief Officers of State Library Agencies; the Public Library Association; the Library Information Technology Association; the Association for Library Collections and Technical Services; and the Reference and User Services Association to advocate for a variety of digital content models, “explore all fair options for delivering content digitally in libraries,” and lobby Congress to explore digital content pricing as a factor influencing democratic access to information.

Separately, the Washington Digital Library Consortium last week announced a six month boycott of Blackstone Audio to protest the company’s new embargo period for libraries. But, since first-sale doctrine does not apply to ebooks or digital audiobooks, libraries are at a disadvantage when negotiating licensing terms for this content.

Instead, the field generally has argued that public libraries play a vital role within the publishing ecosystem, benefiting publishers by facilitating the discovery of new authors and genres for patrons and offering reader recommendation services. Barring sales of ebooks to libraries—as several Big Five publishers did prior to 2014—making licenses unaffordable to libraries or introducing embargo periods for digital content would eliminate the local marketing efforts that thousands of libraries conduct on a new title’s behalf.

“Libraries help with discovery of titles, we help promote titles, and of course we buy titles,” Michael Blackwell, director of St. Mary's County Library, MD, and Communication and Advocacy Work Stream, ReadersFirst, told LJ. “We’re at a bit of a loss as to why these changes are happening,” he added, questioning why major publishers have so rarely consulted with libraries prior to testing embargoes or altering licensing terms.

The Panorama Project, a multi-partner library and publishing industry initiative, was launched last year to quantify the impact that libraries have on book and author discovery, brand development, and retail sales. Its initial “Community Event Impact Report” found that an OverDrive “Big Library Read” event in April 2018 had a significant impact on sales of Jennifer McGaha’s debut, Flat Broke with Two Goats: A Memoir of Appalachia. 130,000 library patrons nationwide checked out the ebook during the two-week event. But also, during the two days following the event’s conclusion, the title’s Amazon Kindle rank rose from below 200,000 to a high of 7,833, according to data from OverDrive, Sourcebooks, and the NPD Group’s DecisionKey. This strongly implies that many patrons either bought the ebook because they did not finish it during the checkout period, purchased the ebook as a gift after reading it, or learned about the title through online library marketing and opted to purchase it through Amazon. The Panorama Project is currently researching the impact of reader recommendation services and other topics.

While not broken out by ebooks specifically, LJ’s Generational Reading survey on Gen-Z strongly supports the role of libraries in driving book purchasing behavior. Nearly half, or 49 percent of respondents, said that they had later purchased a book that they had first borrowed from the library, and 76 percent said that they had later purchased another title by an author they discovered at the library.

LOOKING AHEAD

Amazon denies that it is attempting to pressure publishers over library licensing terms and asserts that sharing comprehensive data is part of a normal relationship between a publisher and a retailer. But the company obviously has an outsized presence in the publishing ecosystem. Any major action the online retailer takes will result in a major reaction in the market.

In an interview last summer, OverDrive CEO and chairman Steve Potash noted that Amazon had introduced a significant influx of Kindle Direct–published and indie ebook titles to the market in recent years. This has almost certainly had an impact on the broader market for ebooks, but no one outside of Amazon has access to the sales data needed to determine the scale of that impact. Potash said that it is likely substantial.

“Amazon has indicated that its fastest growing catalog of ebook sales [is] self-published authors, and they are adding 100,000 new titles,” Potash said. “This clearly explains why big New York trade houses, when they look at their ebook retail sales flattening or declining, this is the cause.”

But while publishers have little individual leverage over Amazon, they currently have total control over their digital licensing terms for libraries. In order to ensure uninterrupted access to ebooks and digital audiobooks for patrons, the field may have to once again convince many publishers that libraries are indispensable partners—that embargo periods could hobble book launches and other marketing efforts, and that pricing libraries out of renewing expired licenses will likely do lasting damage to discovery and, ultimately, sales.

Blackwell said that libraries will need a sustained, collaborative advocacy effort to establish such a narrative.

“I believe, when more and more titles became available [from Big Five publishers], even if the pricing wasn’t good, or we didn’t always like the terms, a lot of libraries became complacent,” he said. The attitude in the field became “we’ve got access now…and we didn’t keep up the advocacy [or] the public media campaigns.”

Talks with publishers should also emphasize the need for flexible licensing models, and ways in which that could benefit publishers. “What we, at ReadersFirst encourage publishers to consider, and some medium-level publishers I think are listening…give us two options: a perpetual [license], where you can charge more for it and we’ll buy some of those, and metered,” he said. “We’ll buy more [metered licenses] while there’s demand. We’ll probably spend more money with you, but that will allow us to better allocate and use what funding we have.”

Vendors—whose business depends on publishers’ continued willingness to sell digital content licenses to libraries—are committed to advocacy as well. OverDrive provided initial funding to launch the Panorama Project, which now includes advisory council members from PRH, the Audio Publishers Association, Ingram Content Group, Sourcebooks, Open Road Integrated Media, ALA, NISO, and OverDrive.

In response to a request for comment regarding Hachette’s announcement last month, OverDrive representatives sent the following statement, which echoes some of Blackwell’s comments: “We believe publishers and authors are best served by enabling flexible and multiple ebook lending access models for libraries and that unbiased research supports this belief. Implementing a two-year term limit caps the ability of libraries and schools to support the authors published by Hachette Book Group. We encourage librarians, educators, vendors and readers to join us in our advocacy work to share with publishers the vital role they have in the building of a literate society that supports the art form of writing.”

Mercer told LJ that “bibliotheca will continue to advocate on behalf of libraries for equal access to content. Most libraries are frustrated by these changes, but I would rather we continue to work with publishers to find a sustainable model, rather than have them potentially exit the digital library market entirely.”