1. Jack Donohue Massachusetts Library Trustees Association
eBooks Update
Jack Donohue
Massachusetts Library Trustees Association

2. Background

3. “The 7 Inch Vending Machine”
Traditionally you had: Author  Publisher  Distributor Reader
Now you have: Author  Publisher  Distributor eBook  Reader
eBooks become a source for not only for published material, but also a merchandising portal (books, electronics, clothing, etc.)

4. Digital Rights Management (DRM)
Might be more appropriately called Digital Restrictions Management
DRM: allows books to be “locked” or not.
Can control number of uses, length of usage, where the software is used, etc.
When an ebook file is downloaded from a retailer it is locked to the user's registered device.
Each eBook reader has its own DRM software

5. DRM Restrictions
Libraries oppose uses of DRM that lock readers to specific ebook formats. Libraries and readers who lawfully acquire content should be able to read that content on any device.
Libraries oppose DRM that is used to track specific individual reader behavior - what they read, when they read, and where they choose to read it.
Libraries and readers need new technology that protects and expands access to ebooks and other digital content.
Libraries and readers need consistent standards and formats that enable, rather than restrict, reading across devices and technology platforms.

6. Types of Digital Rights Management
Active
prevents content from being read or copied to unauthorized devices.
Content is encrypted so the user is tied to one reader
Technically, fairly easy to “break”
Passive
Usually watermarks to allow tracking back to the source
Hybrid
DRM restricts the number of computers that can be authorized to access and load content, but there is no limit to the number of readers that can be loaded from those five computers.
The content is locked to a specific library,
Simplifies loan process.
Limitations of the license not overly restrictive

7. Popular eBook Formats Kindle Proprietary format All Kindle devices
Kindle Apps for PC, Mac, iOS, Android, etc
Kindle Cloud Reader is a web app that lets you read your Kindle books through some browsers
Google’s Chrome
Apple’s Safari

8. Popular eBook Formats (cont.)
ePub
The ePub format was developed as an industry-wide standard for eBooks.
Its uniqueness is in how it combines standards to provide a solid formatting foundation for eBooks of just about every shape and size.
Can be read on any hardware that supports the ePub format
Windows and Mac computers with Adobe Digital Editions
Barnes & Noble NOOK and NOOKcolor
Sony Reader devices
the iPad/iPhone/iPod Touch in iBooks and in other apps
Google eBooks

9. Marketing Models wholesale model agency model
Publishers usually sell a title to retailers for about half the list price.
Retailers can then sell the book at any price.
agency model
Lets publishers set the e-book price
Gives “selling agent” a percentage commission
Publishers sell directly to readers rather than through a retailer.

10. Marketing Models Applied
Amazon/Kindle uses the wholesale model where retailers can sell the book at any price. (Kindle)
Apple-Nook-Sony use the agency model publishers set the e-book price. Publishers sell directly to readers rather than through a retailer. (ePub)
When Amazon launched Kindle in 2007 and priced all books at $9.99, competitors rushed to match or beat the price. Publishers, the DOJ said, feared that "Amazon and other retailers would demand that publishers lower their wholesale prices, again compressing their profit margins."
Apple's iBookstore entry used the agency model, and gave Apple a 30% commission as the selling agent.

11. “The Lawsuit”

12. Justice Department’s eBook Lawsuit
The U.S. Justice Department argued that the five publishers, which also include Macmillan and Penquin, met privately, agreeing to raise the price of many best selling e-books that would be read on Apple's new iPad.
Prices ranged from $12.99 to $ well above Amazon's popular $9.99 on best-selling e-books.
The suit contends that the publishers set those prices after Apple negotiated to offer the books on its bookstore -- but only if the publishers agreed to the higher prices for Amazon and others.
Another item that caught the DoJ’s attention was the Most Favored Nation (MFN) wording, common in all agency contracts, in which a publisher guarantees that no other retailer could set prices below what was set for Apple.
The publishers then renegotiated their arrangements with Amazon, which abandoned the lower prices.

13. Perspectives

14. Chief Officers of State Library Agencies (COSLA) eBook Feasibility Report (6/10/2010)
We’ve seen a rise in demand for eBooks and had people write us specifically for ePub format. (p. 24)
Assure Access: cooperate for quality
The ePub standard resolves issues with proprietary formats that make it impossible to use some eBooks on any reader. (p. 28)
The worse problem is how eBooks are wrapped in a variety of ways for digital rights management (DRM), forcing a connection between the format and the device. (p. 28)

15. Independent Publishers Position (see: In E-Book War, the Independent Publishers Strike Back)
“If the agency model is effectively banned, Amazon will have the ability to price whole categories of e-books below cost in a way that is likely to drive out competition from other less deep- pocketed booksellers as well as brick and mortar booksellers. DOJ, however, has completely ignored the Independent Book Publishers. DOJ never contacted or sought to collect information from the Independent Book Publishers as part of its investigation that led to the filing of the lawsuit at issue. And the proposed settlements demonstrate a lack of understanding of the Independent Book Publishers and, indeed of the publishing industry as a whole. By effectively banning the agency model for the settling publishers, the proposed settlements would harm rather than enhance competition-- enabling one large retailer (Amazon) to regain a monopoly or near monopoly position through below-cost pricing.”

16. Daring to Cut Off Amazon By DAVID STREITFELD April 16, 2012
The Educational Development Corporation, (EDC) announced at the end of February that it would remove all its titles from the retailer’s virtual shelves
It eliminated $1.5 million in annual EDC sales

17. The Positions

18. Libraries and Publishers Strengthening the E-Reading Ecosystem
Libraries Position
Libraries and Publishers Strengthening the E-Reading Ecosystem
ALA President Maureen Sullivan at the Association of American Publishers Fall Meeting in New York City
09/27/2012
We must build on the long-standing, successful partnership between publishers and libraries.
Ebook strategy: We must focus more on the future.
How can publishers and libraries leverage technological advances to develop services that will best meet the future needs of our communities?

19. Strengthening the E-Reading Ecosystem (cont.)
We must address immediate needs. Libraries serve people now, and ebook growth is explosive.
The policy of some publishers to prohibit ebook sales to libraries is unacceptable.
On balance, libraries tend to see current ebooks as providing less functionality and value than print books. As a result, increased prices do not make sense.
ALA, however, doesn’t accept the proposition that an ebook price that is a multiple of the print price is justifiable or fair.
ALA urges strategic action.
If publishers and libraries don’t figure it out, some other entity will.

20. The Problem for the American Association of Publishers
Peter Balis from Wiley is quoted by DBW as asking “When will the ALA come to publishers with best practices and ideas for potential models for e-book lending?”
As the AAP noted in its response to Sullivan’s letter, “…unlike ALA, the AAP cannot “convene, debate, and reach consensus on [business model] issues” because of antitrust laws.
The AAP is unable to ask and answer that very question!

21. Sullivan’s Response
To respond to Peter Balis’s (Wiley) question about business models Sullivan noted three requirements for library ebook lending:
(1) “all ebooks are available under some terms”;
(2) “enduring rights are available in some form under some terms”; and
(3) “the ecosystem of delivering content is integrated within how libraries function.”
Balis response:“It has to come from you and it has to be a lot more specific than what I’ve heard here. I challenge you with that.”

22. The Conundrum
Library groups want answers and direction from publishers
Publishers can’t answer those questions or make those recommendations because of the DoJ’s lawsuit
ALA states that “If publishers and libraries don’t figure it out, some other entity will.”

23. Sample eBook Purchase (through Overdrive)
The Secret Circle: The Initiation and The Captive Part I Author L. J. Smith Publisher Harper Collins, 2011
Pricing (as of 10/10/2012)
Amazon/Kindle $7.49
Barnes & Noble $7.99
BooksOnBoard $5.43
Adobe ePub; $7.99 $5.43
“* We recommend Adobe ePub for all purchases. ♦ This format's price is set by the publisher and is not subject to discounts or rewards specials”
If you click on Buy for Kindle! It sends you to Amazon
Overdrive is moving readers to commercial sites
Overdrive receives compensation
Libraries can choose to have Overdrive include or exclude those external links

24. Recommendations Support ePub as the preferred ebook format
This removes one hardware platform having an advantage over another
This has been recommended by several independent library groups
Have publishers :
design DRM to allow reading any ebook on any hardware platform that supports ePub
transferable DRM
License ebooks to allow unlimited lending per license

25. Implementation
Library groups support only ePub format at some future date
Moves toward eliminating hardware dependency
Gives libraries more leverage to help create a more consistent, fair and economical DRM environment
Those hardware manufacturers that don’t support ePub can create reader software to support ePub during transition
Does not exclude hardware from continuing to be able to support proprietary formats

26. Addendum
On July 27 the government litigator collected public comment at a hearing to address the question of whether federal settlements are in the "public interest“
Ironically the litigator’s name is John R. Read.