Books, Business Models, Commerce, Marketing, Technology, World of Tomorrow

Amazon, PDA, and Library Sales for Books

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Here’s the hypothesis: virtually all academic libraries buy print books from Amazon, and within a few years, virtually all academic libraries will have PDA programs in place. At some point these two trends will intersect, beginning a significant restructuring of the marketplace.

Let’s start from the beginning. Although no one thinks of Amazon as a library wholesaler, just about every librarian I have spoken to tells me that his or her library buys some books from Amazon. In some cases the number of these books is said to be significant, in some instances the number is small. Larger libraries may occasionally dip into Amazon’s inventory when a rush order is needed, but smaller libraries may order from Amazon routinely, in part because of price, in part  because of overall service.  One librarian wrote me recently to say that her library purchased all of its print books from Amazon.  I don’t know how exceptional that library is, but it is clear that Amazon is now a meaningful and growing force in provisioning academic libraries.

As publishers watch their sales through Amazon continue to grow, they may wonder where all those books eventually end up. It’s a good question, for which Amazon alone has the answer, and Amazon ain’t talking.  My guess is that Amazon is fulfilling sales to individuals (essentially in competition with other retailers such as Barnes & Noble), sales outside the U.S. (where it can be hard to source English-language texts), and sales to libraries.  A sales report that lists Amazon as an “online bookseller” tells us very little since Amazon has a reach and ambition that goes far beyond anything this industry has ever dreamed of before.  The question is, online bookseller to whom?

We can imagine, then, a continuum, with the largest ARLs on one end, and community college libraries on the other.  In between we have smaller ARLs, some pubic institutions, and liberal arts colleges.  Amazon’s sales along this continuum are not spread evenly, and there are some bumps here and there, but it’s fair to generalize and say that the smaller the academic library, the greater Amazon’s role.  That’s to speak of Amazon’s position purely in relative terms, however.  Since the major ARLs are so much bigger than the libraries at smaller institutions, it’s possible that the actual purchases by the major ARLs from Amazon are higher in absolute terms than the sales to the smaller libraries, even though Amazon is less important to a large library than to a small one.  The fact is that we don’t have the data for this.  It would be great if would get it, though, but that is in the future.

Curiously, we have a somewhat similar situation with PDA.  My interviews with people in the PDA supply-chain suggest that there are now about 500 PDA programs around the world.  (If anyone has better or more recent data, I would like to know about it.)  That number is likely to grow very quickly in the next year or two; we shouldn’t be surprised to see it double, as library consortia are now sending out RFPs to vendors.  This means that 20-30 libraries could come on stream with PDA from a single sales call.  It’s not impossible to imagine that there will be 1,000 PDA programs in place by 2014 and to project further into the future and state that all libraries will someday be working with PDA.

Here again, however, libraries will take to these new PDA program in various ways.  (By the way, if it’s not clear, I am only talking about formally published books here, the output of publishers like university presses and such firms as Palgrave Macmillan and Routledge and the intellectually serious titles from such trade houses as Random House and Basic Books.)   The very largest libraries, for example, may lean toward traditional collection-development programs, using PDA only in areas deemed to be nonstrategic to their collections.  Smaller libraries, on the other hand, may opt to use PDA exclusively, preferring to develop a library based on access to community demand rather than one that is in itself a cultural monument.  And the libraries that sit between the biggest and the smallest will have differing levels of involvement with PDA, depending on the nature of their institutions, their philosophy of collection-building, and the personal outlook of their senior staff.  PDA, like Amazon’s sales to libraries, is, in relative terms, more important to smaller libraries than to big ones, but in absolute terms, we just don’t know, as the purchasing power of a major ARL could make greater purchases and rentals from its nonstrategic PDA program than can a small library, where PDA is central to the institution’s operation.

So, Amazon and PDA alike:  very important to the small guys, less important to the big guys.  But a factor for all libraries great and small.

And that’s where the analogy breaks down because of this one stubborn fact:  Amazon is selling print books to libraries, whereas most PDA sales are for ebooks.  Amazon, of course, would like nothing better than to take its Kindle catalogue to the library market, which would gobble up those titles greedily, but publishers, rightly fearful of Amazon’s growing dominance, are loath to grant Amazon the requisite rights to make library sales and lending possible.  As for print PDA, yes, it is a factor in the library market today, but it’s a small one.  Most of the time when a library has a print PDA program in place, it is as a fallback when the digital edition of a title is not available.

I imagine that there is a head of library markets for Amazon who is thinking about this, and this individual is not happy.  The library book market is said to be about $1 billion in the U.S. (but does anyone know where that figure comes from?), and here is Amazon, the leading purveyor of ebooks, and there is the library market, which is prepared to move to a largely digital solution much more rapidly than consumer markets–and Amazon’s ebook program is locked out of that market.  Amazon being Amazon, we should look for a bold solution.  This is, after all, the company that bought Alexa, Lexcycle (maker of the Stanza reader), Audible.com, Shelfari, and so much more.  We should not be surprised to see Amazon’s strategic problem solved with a flourish of the checkbook.

Of course, Amazon could in theory enter the library market for ebooks directly without an acquisition, but I doubt it will for the simple reason that Amazon would have to round up the publishers one by one to get digital rights (since the current rights for the Kindle consumer offering don’t apply to library lending), and publishers will resist this.  And this is one of the key arguments for an acquisition strategy:  it is far less expensive to make a small number of shareholders of the acquired company very, very rich than to take the time and trouble to negotiate with thousands of publishers.

Amazon would not be acquiring a PDA company for the software platform to deliver PDA programs.  For Amazon’s engineers, building a content-management system of that kind would not be much of a challenge, perhaps an assignment they would give to their summer interns. What it would be acquiring is a list of customers and contracts that are already in place with publishers.  Such an acquisition would put both libraries and publishers into a tight spot.  Would a library drop a service simply because Amazon owned it?  I don’t see why, especially if Amazon brought to this new venture the same commitment to customer service that we see in the consumer market.  As for publishers, who have more reasons to resist, they would have to unwind current PDA contracts with the new owner (that is, Amazon).  But these contracts are already earning money for publishers.  It is one thing for a publisher to say, I am not working with Amazon now and I don’t want to; quite another to say, Well, I already have PDA revenue coming in, but I am going to be a defiant hero and cancel my contract with Amazon, putting me in a position to miss my budget this year and have to crawl before my Board of Directors, pleading for mercy.  With Jeff Bezos, as with the Borg, resistance is futile.

The purpose of this meditation is not to deliver yet another angst-filled blog post about the horrors of capitalism or the stifling of free speech or any other of the over-the-top fulminations that characterize so much talk about books today; nor is it an attempt to drum up some lucrative M&A business (but I would be happy to have lunch . . . ).  Rather the point is to come up with scenarios against which strategic plans can be made.  Publishers now have a glimpse of what Amazon is likely to be doing with consumer book markets and now should be thinking about a significantly restructured library market.  The question is, What investments should be made today to ensure a publisher’s viability and growth in the years ahead?  May I suggest a newfangled online bookstore?

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About Joseph Esposito

I am a management consultant working primarily in the world of digital media, software, and publishing. My clients include both for-profits and not-for-profits. A good deal of my activity concerns research publishing, especially when the matter at issue has to do with the migration to digital services from a print background. Prior to setting up my consulting business, I served as CEO of three companies (Encyclopaedia Britannica, Tribal Voice, and SRI Consulting), all of which I led to successful exits. Typically I work on strategy issues, advising CEOs and Boards of Directors on direction; I also have managed a number of sticky turnarounds. Among other things, I have been the recipient of grants from the Mellon, MacArthur, and Hewlett Foundations, all concerning research into new aspects of publishing.

Discussion

7 thoughts on “Amazon, PDA, and Library Sales for Books

  1. Your speculation about Amazon acquiring some PDA companies seems not so far-fetched in light of Blackboard’s recent acquisition of some open-source LMS companies, as reported in InsideHigherEd today. It would indeed be a plausible strategy for Amazon to pursue. But I suspect the reaction would be as mixed as it is to Blackboard’s move, with many skeptics questioning Blackboard’s motives and its end-game. The dilemma would be greatest, perhaps, for those university presses that have jointly set up a number of ebook aggregation subscription services like UPeC. Already some presses are worried about putting some of their titles into those aggregations because they could undermine the revenue stream from print paperback sales; they will have similar worries about allowing Amazon to sell such titles through a PDA system. I don’t think most presses now are very happy about the huge market power Amazon has in scholarly publishing, so I expect that any move Amazon makes in this direction will give rise to even more angst in this community.

    Posted by Sandy Thatcher | Mar 27, 2012, 9:43 am
  2. Joe, you might be interested to know that in my middle-sized ARL library we do the majority of our firm orders with Amazon. (Our second biggest source for firm orders is YBP, which is our primary book vendor overall and our provider of approval-plan services.) One of the great things about Amazon is that it’s not only a source for newly-published books, but for used ones as well — and in these times of steadily-constricting budgets, we in research libraries find ourselves increasingly willing to buy used copies in good condition for a few dollars instead of new copies in mint condition at ten times the cost. I don’t know if that fact is going to help publishers of scholarly books sleep any better at night.

    Libraries’ increasing willingness to buy used books is, I think, another trend that could end up causing significant (if slow-motion) disruption in the marketplace. Then there’s the question of what kind of future the used book market has if the marketplace moves decisively in the direction of print-on-demand…

    Posted by Rick Anderson | Mar 27, 2012, 10:00 am
  3. There are a few challenges with Amazon getting into the library market, at least if they want to do it right. Amazon is known for acquisitions, that works in many areas, but in a market such as the library world, where you need communication and customer support, I see amazon falling flat on its face. After zappos, the customer service went from the best to downright horrible, you could tell it was owned by amazon compared to before when it was independent. That’s the same that will happen if they acquire a company working in PDA. Which brings up another point, who would they acquire? ebrary is owned by proquest, Myilibrary by ingram, YBP now owns a large share of PDA business with EBL or ebrary, which is really quite new for YBP since they bought Blackwell, which is what helped them gain dominance, until that purchase they struggled. 3M has a PDA approach, but I doubt they would sell. EBL is one option, they are the only one privately held still, but I think amazon would do more harm then good buying them, not sure they would sell as well, but then again, it’s all about money. Which will bring up more issues in libraryland; push back is already there on $$, pricing, etc and I actually could see pubs pulling titles from a company acquired by amazon for PDA. Pubs don’t like amazon’s lending practices now, not that it is all their fault, overdrive is just as much at fault, their system is not impressive at the least.

    As Sandy said, Univ Press’ have their own things going on, you have project muse at Johns Hopkins. I just don’t see Amazon doing it well, sure pricing might be low, but a revolt will and is coming on amazon’s dominance. Plus you forget about public libraries, what about k12 libraries? Sure libraries buy print content, but often the annoyance on k12 end is processing, little time to do those things is not something they go to amazon for unless it is really a need, plus you know integration into amazon’s current structure for acquisition and collection development would need to occur.

    On a person note, I hope it never happens, between amazon dominance and google dominance on things, were pushing the envelope. In the end, are we really thinking about the user in these scenarios or just simply what is easier for the library. Who knows, maybe I’m wrong, but adding amazon to the mix won’t help anything, it will be more headaches, it will evolve into the google bookscan area where it fails, or has lawsuits, overall wasting time and money.

    Posted by eBookNoir | Mar 27, 2012, 10:35 am
  4. I am not sure that Amazon sees the PDA market as something to jump into yet. When you consider that the actual PDA sales are less than 3% of any of the big book suppliers current annual revenue, it may be too early to spend much time in developing or buying a PDA company. If you look at Amazon’s inventory of companies many of them with serious software talent, building a PDA application in the current Amazon platform would be a weekend effort for one of their summer internees. I would hope that Amazon develop more library specific services including better tax programs, electronic invoicing and forget about PDA.

    Posted by Dan Tonkery | Mar 27, 2012, 10:49 am
  5. Joe, they seem to be missing from the world you depict (maybe you count them under PDA system or service suppliers), but what do Proquest/ebrary, EBSCO/netLibrary, Cengage/Gale/Questia, Swets and the like fit in? How would the business that libraries do with these players shift to Amazon (if Amazon doesn’t buy one or more of them)? Most scholarly publishers and, I suspect, a fair range of more purely commercial publishers have committed ebooks on one or more of these platforms.

    I remember Rick Anderson’s speaking at an ALPSP conference in Oxford (UK, not Mississippi) and saying that the multitude of platforms for ebooks was a thorn in the side of the library community. If for the near future, the best enhanced ebooks are on the iPad, how will the library community feel about providing support to patrons presenting their Kindles, Kobos, iPads, Nooks and Sonys (alphabetically ordered here in deference to the librarians in the Kitchen)?

    Posted by Bob Bolick | Mar 27, 2012, 10:50 am
  6. I have a mixture of feelings about all of this. Of course it isn’t helpful for the EBL team to read such speculation but I guess that it will only become more common as EBL continue to successfully deliver solutions for libraries and publishers in this fluid and exciting environment. EBL’s independence is entirely healthy position as it allows EBL to keep ahead of the curve and facilitate solutions at a personal level for our partners in libraries and at publishers of all sizes. There is no large-commerce imperative to systemize the communications process. And, when all our previous constants appear to be shifting, the nimble independents amongst us provide a powerful and compelling offer based on evidence and not marketing proposition. As one small academic publisher put it to me, it sometimes feels like they are having to embark on the publishing version of the Lewis and Clark expedition in their spare time and with no Jefferson funding equivalent. Whilst EBL do not claim to be the Sacagawea equivalent we have in the majority of cases been here before and can offer significant guidance, experience and feedback from peer institutions and publishers. Whilst the discourse around PDA is of ‘new frontiers’ there are many libraries that have engaged with PDA on a large scale for many years and, as some argue, they have engaged in part with PDA in the print environment since the first ILL in the 1880’s.
    Regarding Dan’s comments, EBL’s pedigree in the area means that our PDA revenues are considerably higher than 3%. As the technology is inherent in the EBL model and not an eleventh hour addition to the platform. If other suppliers have adopted the model so recently then it follows that the revenues will be proportionately low. My only real contention I have is that developing PDA for Amazon, “…would be a weekend effort for one of their summer internees.” Development-wise this may be true but to fully accept this assertion would be to vastly underestimate the need for empirical data and usage statistics to enable long-term sustainable PDA programs for both the library and the publishers. It is not just about building the capability, it is about the appropriate application of the tech to enable appropriate PDA usage within collection development policies and in sync with the budget available. To assume that you just build the tech and then release it to the wild severely underestimates what has been required for the many successful PDA programs that are already running around the world. Not only successful in regards to enabling patron access to vast amounts of new content but maintaining – and in many cases increasing – book spend for the publishers.
    So my feelings are mixed and I know that it is uncomfortable for any of the EBL team to have their potential futures discussed in a forum. What I think we all know is that these people with their knowledge and experience are crucial to any successful publisher-vendor-library partnership whatever the flavor of industry change at any time. Whilst you could question whether having the best technology is the key component of delivering successful PDA programs, having the ability to apply that tech and tailoring it to the library requirements through experienced individuals is without question.

    Posted by Mark Huskisson | Mar 30, 2012, 8:23 am

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