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ALA's Report to Congress on Libraries and the Ebook Industry: A Primer
Posted On November 19, 2019
ALA recently made a case to Congress that the ebook publishing industry has been engaging in anticompetitive behavior at the expense of libraries and library patrons. Congress has been involved in an ongoing series of hearings and work sessions exploring competition issues in various digital marketplaces and reached out to ALA for its views on competition issues involving ebooks, academic journals, textbooks, and other digital library resources.

The ALA report, issued on Oct. 15, criticizes a wide range of “unfair behavior by digital market actors” and emphasizes the need for updated “public policies” that more effectively address the digital environment. If changes do not come, ALA warns, “America’s competitiveness and our cultural heritage as a nation are at risk.”

The report arose out of a sequence of recent and concerning developments in the ebook marketplace as it applies to libraries, with a particular focus on a decision by Macmillan Publishers, one of the five largest publishing houses in the U.S., to impose an embargo on new ebook sales to libraries. The embargo, which went into effect Nov. 1, only permits a library to obtain one digital license for a popular press ebook for an 8-week window after the book is released. The single-copy limit applies regardless of the size of the library system. At the end of the 8-week window, the library can purchase additional licenses. Macmillan asserts that the embargo is necessary to balance library access with revenue expectations.

A Change in the Rules

However, the concerns of ALA and the library community go well beyond this recent action and reflect a changing marketplace for ebook publishing that both libraries and publishers are struggling with. The physical book market is straightforward. A library can purchase single or multiple copies of a book and lend the book out to as many patrons as demand requires. Only one patron at a time has access to the book, but over the course of the book’s time in the library, dozens of patrons or more can read it—and likely not purchase it. Eventually, as demand fades, unneeded copies are sold or given away. Federal law protects libraries through the first sale doctrine in copyright law, by which the first purchaser of a copyrighted work has full rights to lend, donate, or resell it as they see fit.

The same rules apply to academic literature as well. Libraries purchase journal subscriptions and make them available to users. Federal law also protects libraries’ ability to make limited photocopies to meet patrons’ research and interlibrary loan needs.

In the digital world of ebooks and ejournals, the rules are different, including both federal law and marketplace forces. Legally, ebooks and ejournals are licensed rather than sold, so the first sale doctrine does not apply. Licenses, which are a form of contract, also allow the publisher to set different terms for different purchasers, including different pricing, time limits, and user restrictions.

Publishers have been applying all of these terms to library ebook licenses with increasing frequency. The ALA report details a number of models that publishers have engaged in with regard to ebooks, ejournals, and textbooks.

In the ebook marketplace, ALA singles out Amazon Publishing as the worst offender, in that Amazon essentially refuses to allow libraries to obtain licenses to make Amazon books available for lending. Amazon is identified as the fifth largest publisher for ebooks, and ALA notes that it includes a number of “high-profile authors.” Consumers, ALA asserts, are compelled to purchase those titles directly from Amazon, making them available “only to people who can afford to buy them, without the library alternative previously available to generations of Americans.”

ALA also points out “abusive pricing” by the Big 5 publishers; library pricing can be four or more times higher than consumer pricing and often has term limits on the license. Extended terms could cost eight times the consumer price, and in one example, a 20-year license was priced at 40 times the consumer price.

When discussing the academic marketplace, the ALA report focuses on “Big Deals”—the sales of journal bundles, often on multiyear contracts. These bundles can monopolize library budgets at the expense of single monographs and other purchases. (Disclosure: As the director of a large academic law library, I have approved a number of these Big Deals when our collection development and financial teams have recommended them. We have several ongoing at the moment, while others have been allowed to lapse, depending on the collection and budget circumstances at the time.)

Another aspect of the digitization of academic content is the inclusion of license terms that can restrict access. In the analog world, journal contents are available to anyone who visits the library, as well as interlibrary loan customers. Digital content license agreements may restrict access to a limited userbase of students and faculty members, undermining the availability of this information to the broader walk-in and interlibrary loan community.

What It’s Really About

The publishing industry has not yet weighed in on ALA’s report or submitted its own report to Congress. In an October letter to the librarian community, Macmillan CEO John Sargent asserts that the 8-week embargo—what the publisher calls “windowing”—is necessary to “balance the needs of the system in a new and complex world.” The “pre-digital world” had “friction in the market,” including the time, transportation, and potential fines associated with borrowing a physical book. Sargent writes that the current system, in which readers perceive the ebooks as “free,” has no such friction, and windowing should provide a similar level of friction that “the publishing ecosystem” needs in order to support itself.

Therein lies the core of the conflict. The publishers rightfully require a certain revenue stream to fund the continued publication of new works, to identify and support new authors, and to develop new delivery systems, such as ebooks. Macmillan claims that prior to a test involving Tor, one of its imprints, libraries accounted for 45% of “digital reads,” but sales to libraries only accounted for 15% of revenue. During the test, the imprint did see increased consumer sales, although exact figures were not released.

ALA states that libraries are an equal partner in supporting new authors and that restrictions such as the one proposed by Macmillan will hurt “discovery, reading choice, literacy, and the simple love of reading.” Libraries are willing, the ALA report notes, “to pay a fair price for fair services” and have spent more than $40 billion on digital content in the past 10 years.

The congressional review of ALA’s position is part of a larger review on competition in digital markets and the concentration of power in a “handful of gatekeepers.” While much of the review is focused on FAGA (Facebook, Amazon, Google, and Apple), the broad breadth of the investigation and the request made to ALA suggest that Congress intends to explore a wide range of issues, including the ebook marketplace.

George H. Pike is the director of the Pritzker Legal Research Center and a senior lecturer at the Northwestern University School of Law. Previously, Pike was director of the Law Library at the University of Pittsburgh School of Law, and held professional positions at the Lewis and Clark Law School and at the University of Idaho School of Law, and was a practicing attorney in Idaho Falls, Idaho. Pike received his B.A. from the College of Idaho, his law degree from the University of Idaho, and his M.L.S. from the University of Washington. He is a member of the American and Idaho State Bar Associations, the American Association of Law Libraries, and the American Intellectual Property Lawyers Association.

Email George H. Pike

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