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Summary:

The fact that none of the six major book publishers are taking part in the “Netflix for books” lending program that Amazon just launched for the Kindle is another sign that the industry is more interested in retaining power than adapting to a changing business model.

The big six book publishers are already behind the eight ball when it comes to the digital disruption of their business: Amazon, for example, is not only helping writers distribute their books without needing a publisher at all, but is also moving in on the traditional players by signing up authors itself. So what do these publishers do? Try to compete by offering more digital features and benefits for writers? No. They drag their feet and resist adapting as much as possible. Case in point: Amazon launches a lending program for the Kindle, a kind of “Netflix for books.” How many of the major publishers are involved? Zero.

Amazon announced the new service on Wednesday, and it gives Kindle users access to a virtual library of e-books, although they can only borrow one per month. The service, which the Wall Street Journal leaked news of a couple of months ago, is only available to those Kindle owners who belong to Amazon Prime — a kind of loyalty program that offers a number of benefits (including free shipping) to members for $79 a year. The lending library isn’t available to users of Kindle apps on other devices, which makes it pretty clear that the company is using it in part to lock users into using its devices, so that it can then feed other types of media content through that pipeline.

Number of major publishers taking part? Zero

The selection of books that can be lent through this new program, however, is exceptionally small:  just 5,000, which may sound like a lot but isn’t really. Although it includes some best-sellers such as Moneyball, there aren’t going to be that many well-known books to lend because none of the six major publishing houses is participating in the program. Is that because Amazon asked for onerous terms of some kind, or proposed a deal that the publishers simply couldn’t stomach for some reason? Possibly.

Publishers may also be leery of playing ball with the company that’s eating their lunch in so many different ways. For every publisher who takes a positive step like Simon & Schuster did recently, by trying to add features that could help authors understand the business better or connect with their readers more easily, there are plenty of others who are probably cursing Amazon for ruining the industry — by trying to get them to lower prices on their books, for example, or by going directly to popular authors like Tim Ferriss and Barry Eisler and signing them to lucrative deals, and making traditional publishers look bad.

It it’s more likely, however, that the major publishers balked for the same reason they lock down lending on e-books of all kinds — even those that are lent through the library system, where some require that libraries buy new copies after a certain number of loans (which often makes me wonder: if libraries didn’t already exist, would publishers allow them to be created?). Much like newspapers are doing with paywalls, book publishers seem to be trying desperately to maintain the control they used to have so they can prop up their traditional business model. As the original WSJ story about the lending program noted:

Several publishing executives said they aren’t enthusiastic about the idea because they believe it could lower the value of books and because it could strain their relationships with other retailers that sell their books

Industry apparently not interested in adapting

Here’s a hint for publishers: Book prices are going down whether you like it or not, and trying to maintain artificially high prices for electronic books is a losing strategy. In some cases — as self-published authors like J.A. Konrath, Amanda Hocking and John Locke have demonstrated — dropping the price of an e-book can produce sales that are orders of magnitude larger than they otherwise would be. That’s clearly a good thing, just as allowing more authors to reach readers via programs like Amazon’s lending feature is a good thing. But publishers are still not interested.

As we’ve described before at GigaOM, the whole concept of a book is being disrupted by the web and by e-readers like the Kindle. There are magazine-length Singles, books made up of blog posts and tweets, and in the future, there may even be books that allow authors to interact with readers and update content dynamically. But are traditional publishers interested in any of this? Apparently not, even though many of these developments could result in them ultimately selling more books.

Instead, they would rather try to maintain their grip on the industry as long as possible, and fight Google when it tries to expand the audience for their products, and moan about how piracy is their biggest problem. Good luck with that strategy — it worked pretty well for the music industry.

Post and thumbnail photos courtesy of Flickr users marya and Mike Licht

  1. It’s a situation sadly repeating in a lot of industries right now – but the traditional publishing companies certainly have a method of crap-tastic decision-making that astounds by most standards. Adapt or die, as the old phrase goes, and why they insist on maintaining failing policies in some desperate hope of maintaining a stranglehold they no longer possess…mind boggling.

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    1. Totally agree, Chris — thanks for the comment.

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  2. I get the point of this article, but keep in mind that Amazon isn’t necessarily looking out for the best interests of the publishers, authors, musicians, app developers, etc, when it comes to stuff like this. These sorts of deals they have don’t usually carry the same revenue splits as a regular sale of said product. New eyeballs that aren’t *paying* eyeballs don’t really mean much to an author or publisher, especially since the book business doesn’t typically make money in other ways such as advertising.

    There are already stories of app developers not seeing any sustained improvement in app sales after their app was featured as the free app of the day, and in turn they have to spend untold amount of money to improve their back-end infrastructure to handle all of the new “customers” who downloaded their app for free. The same is probably true of this new book lending feature. My guess is that Amazon doesn’t provide the same royalty to the publisher or author when a customer borrows a book, as as such, the value proposition for participating in this program is pretty tenuous. Though I like a lot of Amazon’s services, I worry that they are being very aggressive in such a way that isn’t sustainable in the long term. This is mostly about locking customers into Amazon’s ecosystem.

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    1. I agree with Joel on the real goals of this. I just took out my first library Kindle loans, only for Amazon to try to sell me the book afterwards with this lure: “If you purchase The House of Wisdom: How Arabic Science Saved Ancient Knowledge and Gave Us the Renaissance from the Kindle Store or borrow it again from your local library, all of your notes and highlights will be preserved.”

      And Amazon is storing my notes on my loaned books? Hmmm….

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    2. Thanks, Joel — I agree that Amazon may not be doing this in the interests of publishers, but I think it is in the interests of authors. And let’s face it, many of the things that publishers do aren’t in the interests of authors either — like taking most of the revenue.

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      1. I think it is perfectly obvious and legitimate that Amazon is doing this to acquire customers and create sales. That is a good thing. Innovation and disruption in the market ultimately leads to better experiences, lower prices and more choice. Most importantly, to the companies that either create the wave or ride, more aggregate value is created for all involved.

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      2. Without knowing the terms of the deal for participating in this program, I can’t say whether I agree or not. They can’t be offering much on the revenue split given the yearly subscription price for Amazon Prime.

        The reason I say that Amazon may be too aggressive here is because I don’t think the $79/yr price is sustainable for all that they are offering. I know consumers love it right now, but look at what is happening to Netflix and you can kinda figure out where this could go. People get comfortable with certain pricing structures, even if it is unsustainable in the long run. I think the price change Netflix did was reasonable, considering I’m not getting any less for my dollar than I did before they launched their streaming business, but many consumers don’t see it that way, because they got used to having the streaming side for free (or viewed other way around, paying for the streaming, getting the physical media side for free).

        I think people could get used to the $79 price to get free 2-day shipping, unlimited movie streaming, and up to 12 books a year, but I *guarantee* you it isn’t going to stay that way. This is a loss leader to get people locked into Amazon’s ecosystem, and once they are the clear market leader, it’s going to become increasingly apparent that this pricing is a teaser rate, and it will be difficult to increase the price without creating dissatisfaction with consumers.

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    3. Hi, Mathew. I read over the “Kindle Owners’ Lending Library for Amazon Prime Members” page on amazon.com ( http://www.amazon.com/gp/help/customer/display.html/ref=hp_primeland_koll?nodeId=200757120 ). I’m trying to understand the use case and how this is beneficial to all authors. I cannot find good data on the number of books read by Americans; the best I could find quickly was the ap.org 2007 poll “PROJECT #81-5681-1″ ( http://bit.ly/who-reads ). Of the 73% of Americans who say they read at least one book in the past year, the mean number of books read was 20.4 and the median was 6.5.

      According to my reading of the program details, I can borrow one book at a time and can only borrow one book per calendar month. If published books were ubiquitously available on the service, the average american could have over half of his reading needs satiated — provided he’s able to space out his requests throughout the year.

      How much money can an individual author get from Amazon for those borrowings by an Amazon Prime customer? I do not see an answer to that question. It’s clear the compensation would be a tiny fraction of what the author would get if the reader actually bought a print or e-book version. The author — and the whole industry — is essentially betting that the “buzz” caused by those low-revenue “lendings” will cause lots of sales of the book. And if those people who are influenced to read the book are also Amazon Prime customers, then the marketing cost has very little upside to the author.

      The main possibility I see for this service having a significant impact on authors is if the Kindle itself causes a huge uptick in the average number of books read by an individual: if devices like the Kindle actually pull us away from other activities and return us to reading. That is possible, but I don’t believe that it’s likely.

      It’s also dismaying that Amazon has fractured their Kindle service: there are books that are readable by any of the Kindle readers, and books that are only readable on Amazon-manufactured devices. I could understand requiring an Amazon Prime customer to own one Kindle device, but I don’t understand why shutting out other reading devices is in the best interest of anyone but Amazon.

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  3. “They would rather moan about how piracy is their biggest problem.”

    Mathew, I’m getting the impression that those who complain about piracy feel they are quite powerless to do anything about it. Do you agree?

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    1. I agree they probably feel that way — and I think they are right.

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  4. Mario Gutierrez Thursday, November 3, 2011

    Downloadable music all over again — industries with a long history of “old boy” relationships, poor distribution logistics and executives who are resistant to change. It’s basic math: Cut the price by 50% but double the distribution and you break even on revenue. Moreover, you get rid of supply chain problems like over-printing or under-printing, unsaleables (damaged books), etc. which more than covers the costs associated with the technology / hardware. The problem is these executives don’t understand the model or the technological infrastructure so their knee jerk reaction is fear of losing the golden goose.

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    1. I agree, it not just a matter of cutting costs and increasing distribution. New technologies and market disruption surface new business models many of which are not obvious, especially to those that want things to stay like the simple olden days!

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  5. We are overdue to reform the copyright limits. Anyone up for the 14+14 years originally enacted in the USA?

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  6. I really don’t understand this article? Why should the publishers opt-in to this Kindle lending library when the only company that benefits is Amazon as it gets more people to sign-up for Prime accounts at 79 quid a pop. This reduces the publishers content to a free give-away that devalues the work by the authors.

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    1. Have you never heard of companies boosting the awareness of their product with free samples? Same principle.

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      1. Here’s what no one is talking about but should be: Self-publishers. This program will not benefit small self-publishers. Will amazon at some point force self-pubs to give books for free to this lending program? Many of them will only ever appeal to a small audience and need those dollars. No amount of free downloads will help them profit. Notice how none of the successful self-publishers are commenting on this huge Amazon story. Why? Because they’re aren’t sure what it means for their future and they are very worried.

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      2. Hi, Mathew. I don’t see how the word “sample” is even remotely appropriate in describing this service.

        I read through the details of the Amazon Prime lending agreement; a user gets access to one book per calendar month. Twelve books a year is very close to the mean number of books that the average American reads. The service is not giving a sample of those books; it’s giving you access to the entire content of the book. If the service were ubiquitous, a penny-wise user could get a significant chunk of his book reading for free through this service.

        I’m also dismayed that books in the lending program are only readable on Amazon’s hardware. Amazon has now fractured their reading service: all Amazon e-readers are equal, but some e-readers are more equal than others.

        Authors should be skeptical that the service will actually generate buzz for those “free samples”. If the service becomes widespread, than thousands (or millions) of titles would be competing for any marketing bump created by the service. It is clear that the service will promote Amazon’s marketplace — and Amazon’s own readers. I can’t quite tell who else would benefit in the long run.

        You clearly think this is valuable. Could you spell out the use case how you think that would work? Any value in marketing has to be weighed against readers who would use the service to read books for free that they would have bought.

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  7. Publishers are not needed in the ebook future. What are they needed for? You don’t need to print a paper version of the book so their entire printing press isn’t needed. Typesetting? Any word program can do that and any writer can shape up their page assignments within only an hour or so. Editing? You can probably open your window, throw a brick in any direction, and hit an English major that can do that for you. More realistically, you can hire them from guru.com, freelancer.com, and a lot of other job listing websites. You don’t need to give them a cut of your profits and they won’t want it. They’ll take cold hard cash everytime. And not a lot of cold hard cash either. So, again, what do you need a publisher for? Don’t say “PR” as any author will laugh in your face if you do. Publishers don’t help authors with PR and haven’t ever … except for their bestsellers and they don’t really need the help.

    However, Amazon is only a stop-gap between now and ebook’s future. The future of ebooks is free. Free by inserting ad pages between chapters and the authors getting paid by advertisers by how many people download their books. This is where literary agents can still survive and flourish IF they go out and line up advertisers for their authors. If they don’t, they go extinct like the publishers. Given this, I think the real future of ebooks isn’t with Amazon but with Google. If Google can morph its current AdSense program to place ads in between chapters in ebooks, Amazon will die off with the publishers … unless it comes up with its own AdSense-like program.

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    1. If the future of ebooks is free, then the future sucks. I know that model works for a lot of people–webcomics artists, for example, who can make up for the lack of direct revenue from their work by selling t-shirts, prints, and compilations, in addition to ads. If you’re just a writer, however, being unable to get direct payment for your work is murder. It particularly kills any long-form work that can’t (or really shouldn’t) be serialized.

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    2. I don’t really want advertisements in books. I would rather pay a nominal amount to avoid ads to be honest. I could maybe deal with it in the way Amazon does with the Kindle, but not *inside* a book. Before you know it books are going to be overrun with product placement written into the storyline, and banner ads mid chapter in the center of a page.

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  8. Have you ever *read* a John Locke book? Believe me, he’s not threat to the Big 6.

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  9. It’s all about self-preservation when you feel your industry is being “attacked”. To us it looks like progress, but to book publishers it looks like a new brat is in town trying to bump them out. Evolution isn’t for everyone!

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  10. publishers don’t understand a lot of things. they don’t seem to realize that libraries are customers. they’re also missing the part where libraries provide free ‘long tail’ marketing of their in-print-but-no-longer-new-hotness material. another part publishers are missing, is that they’re not ‘competing for eyes’ in the same way as the tv networks and internet sites are. the reason: book people always end up purchasing *far* more books than they will ever be able to read in a lifetime. and the book people know this, and laugh about it all the way to their favorite book/content-buying venue. publishers’ competition is not libraries and amazon prime. it’s tv and videogames and netflix. (because the internet is just another place to buy books, right?) and it’s the fact that reading is on the decline among young people. that is the thing that should still be keeping publishers awake at night. not libraries and lending.

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  11. So old media (in this case, book publishing) just gave the new media (in this case, blogger Matthew Ingram) yet another excuse to bash them, as if we haven’t read enough about this already.

    I get the sense that Inggram hates the old media, that he’d just as soon see all old media die off, and that he feels such a future is inevitable.

    Well, if it truly is inevitable, why so much whining about them in the meantime? Let them die off and be done with it.

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  12. Don’t assume that a lack of big six publisher participation in this means they don’t like the lending model. If those publishers are like me, they object more to the *financial* model involved, not the concept of a lending program. After all, platforms like Safari Books Online and Books24x7 have offered this sort of borrow-not-buy model for years and plenty of publishers participate. The key difference: They offer a pay-for-usage model, not a flat fee. I summarized my objection to the flat fee model here: http://oreil.ly/uiobz2

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  13. http://bestsellersbuy.com
    The lending library isn’t available to users of Kindle apps on other devices, which makes it pretty clear that the company
    thanks

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  14. Tiffany Kennedy Tuesday, November 29, 2011

    My bf got me a Kindle Fire for my birthday and I love it. It’s lightweight and easy to use straight out of the box. The first thing I recommend anyone with a new Kindle do is install the nook app. We got our instructions from http://www.kindlemad.com through google.

    It basically unlocks all the Android marketplace apps and unlocks the device. Super happy!

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