Today’s post is adapted from an article I first published in my paid newsletter, The Hot Sheet.
Of the many changes wrought by the pandemic on the publishing industry, one of the most dramatic has been on library circulation. OverDrive, the biggest US distributor of digital materials to libraries and schools, saw lending increase by 33 percent in 2020; as libraries closed and stopped ordering print materials, many shifted their budgets to digital collections. But buying and lending digital materials poses challenges for most library budgets.
Ebook and audiobook prices and restrictions have increased over time, making it more expensive for libraries to circulate digital materials. The New Yorker recently covered what the costs look like for an institution such as The New York Public Library: For Barack Obama’s A Promised Land (Penguin Random House), the library system bought 639 one- and two-year licenses for the ebook, paying a total of $22,512. Each copy of the ebook can be lent to one person at a time. (The consumer ebook sells for about $18 per copy.) As of August 2021, the library has spent less than $10,000 on 226 copies of the hardcover edition, which retails for $45 but sells for about half that on Amazon.
As seen in the example above, Big Five publisher titles typically have to be renewed after a specific number of lends or a set time period of one or two years. Assuming library budgets and collections move to majority digital, there will not really be such a thing as a permanent collection anymore, but more of an ever-shifting collection. Librarians have been vocal about their frustration, and Maryland notably passed legislation requiring publishers to license ebooks under “reasonable terms.” The Association of American Publishers has condemned this and the law likely cannot stand given federal laws related to copyright. Still, Congress is applying pressure and asking questions of publishers.
So how do authors fare in all this?
Traditionally published authors are paid when their books sell to libraries regardless of format, usually at the same royalty rate that’s paid out for a retail sale. However, library unit sales may not be known to authors, as they’re often mixed in with retail sales on royalty statements. Complicating matters, what the consumer pays and what the library pays for an ebook may not be the same. Digital licenses can be as much as six times the consumer price and they expire.
For the examples below, we’ve used a mid-range list price to calculate payout. Publisher’s net and author’s net aligns with industry standards for Big Five, but these are approximate—contracts and agreements obviously vary. Note that big publishers often sell ebooks on an agency model rather than a wholesale model, which gives them control over pricing.
| List price | Publisher’s net | Author’s net | |
|---|---|---|---|
| Consumer ebook sale (agency model) | $14.99 | $10.49 (70%) | $2.62 (25%) |
| Library ebook license (agency model) | $55 | $38.50 (70%) | $9.60 (25%) |
| Library ebook license (wholesale model) | $55 | $27.50 (50%) | $6.87 (25%) |
| Hardcover sale (library or retail) | $27.99 | $13.99 (50%) | $2.79 (10%) |
In 2019, Steve Potash, CEO of OverDrive, revealed that for at least one Big Five publisher—Macmillan—libraries saw 79 percent of their ebooks expire because of a time limit, not because the limit of 52 checkouts was reached. OverDrive’s data in fact suggests that the average Macmillan title is checked out just eight and a half times during a two-year license.
So, is the author receiving fair compensation for digital library lending?
At Digipalooza, Sari Feldman (a retired librarian and past president of the American Library Association) moderated a panel with Mary Rasenberger, CEO of the Authors Guild, and Skip Dye, the senior vice president of library sales and digital strategy at Penguin Random House, to discuss, in part, compensation for library sales. While the Authors Guild does not take a position on what the best business model is for lending, they seek compensation that’s sufficient to cover any potential loss of ebook or audiobook sales. Rasenberger said she recognizes that not every loan from a library represents a lost sale. Still, one goal of the Authors Guild is to make sure that ebook and audiobook lending do not replace too many sales, with an emphasis on too. She said, “It is a balance between making sure readers have the access they need and the bottom line.”
Rasenberger says libraries help ease industry problems with piracy, because readers who knowingly read pirated books, to avoid paying for them, will sometimes borrow from libraries instead. (A research study conducted in 2020 found that book pirates also buy books and use libraries.) However, some publishers fear consumers might get into the habit of using their library as they would an unlimited subscription service instead of visiting a retailer to purchase. In 2010, before most Big Five publishers even sold or licensed ebooks to libraries, Macmillan CEO John Sargent called library ebooks “a thorny problem” for publishers. “It’s like Netflix, but you don’t pay for it,” Sargent said. “How is that a good model for us?”
Rasenberger was not anti-library, but she said, “It’s just important to have some roadblocks other than the need to return that ebook, so that it doesn’t become too easy for readers who can afford to buy ebooks.” Rasenberger believes the current licensing model, which produces hold times, works. But if the library market becomes flooded with ebooks with no hold times, the balance could be upset. In other words: Rasenberger worries about the potential impact on author incomes from ebook sales if libraries could buy ebooks at consumer prices, keep them on a permanent basis, and loan them out an unlimited number of times. (This was the model years ago, but no longer.)
Libraries collectively spend about $1.5 billion each year on their collections.
That’s about 9 percent of traditional (consumer) publishing revenues. When we reached out to Robin Bradford, a longtime librarian who currently works at a rural library system in Washington state, she said, “Libraries spend so much money in product—and money in staff time—trying to give publishers money.” She says she tries to buy as many copies as she thinks her system will support. “Instead of buying the bare minimum, I try to buy the maximum.” She will purchase print copies, the digital audiobook, the ebook, and even a large-print copy of the same title if it is available.
Also, librarians handsell books on a massive scale every day, in person and online. A statistic that’s often shared by library advocates: libraries outnumber McDonald’s locations in the US. This translates into a marketing staff for publishers. “Bookstores are beloved for doing this, and libraries—nothing,” Bradford told us. She said if readers don’t like the books they purchase, they may or may not try that author or genre again, but library borrowing remains low risk. “You can check out things that sound interesting, things that look intriguing, things someone told you about … all kinds of things you wouldn’t pay money for sight unseen.” Similarly, librarian Jessamyn West told us, “I work in a library in a small rural market, and it’s amazing watching basically every new book fly off the shelf, no matter what it is.” Many studies, such as the Immersive Media and Books 2020 report and those from BookNet Canada, have shown that library users are also purchasers and will buy some formats and borrow others.
A final note
One of the most interesting things about the panel with Rasenberger and Dye was the simultaneous chat happening amongst librarians. One attitude—expressed by more than one participant—was that if authors aren’t earning enough from library lending, perhaps they need better contracts with their publishers. Sadly, there was no interplay between Rasenberger and Dye on this issue, although in the past Authors Guild has campaigned for higher royalties on ebooks to ensure payouts are fair when compared to earnings from other formats.
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Jane Friedman (@JaneFriedman) has nearly 25 years of experience in the media & publishing industry. She is the publisher of The Hot Sheet, the essential newsletter on the publishing industry for authors, and was named Publishing Commentator of the Year by Digital Book World in 2019.
In addition to being a professor with The Great Courses (How to Publish Your Book), she is the author of The Business of Being a Writer (University of Chicago Press), which received a starred review from Library Journal.
Jane speaks regularly at conferences and industry events such as Digital Book World and Frankfurt Book Fair, and has served on panels with the National Endowment for the Arts and the Creative Work Fund. Find out more.