PDA (The Office)
PDA (The Office) (Photo credit: Wikipedia)

I have been writing a lot about PDA over the past several months, mostly with an eye toward how PDA will affect publishers. This is the opposite of how PDA is usually talked about; it’s generally discussed in the context of library efficiency. If I am a librarian, will implementing a PDA system increase the effectiveness of library acquisitions? Will PDA save my library money? There are other reasons to implement a PDA system (at the top of the list is presenting a larger selection of resources to patrons), but few libraries study PDA without some hope of making better use of each acquisition dollar. This can be conceived of as a zero-sum game: when libraries win, publishers lose.

What I would like to do now is think about how publishers can, at the very least, minimize the negative impact of PDA and possibly even turn PDA into an advantage.

To reiterate: PDA takes the just-in-case collection-building model and turns it on its head. By not purchasing books until a patron requests them, a library moves to a just-in-time model. For publishers, this means that some books will not get requested and hence will not be purchased; and it means that even those books that do get purchased may not get purchased until later, putting a squeeze on cash flow.

To some extent, the business environment will do some of a publisher’s work for it. As I noted in an earlier post, the actual practices of many librarians concerning PDA are far more moderate than many publishers fear. Few librarians, if any, are moving to all-PDA programs, which means that some books will still get purchased the old-fashioned way. For many librarians, PDA will be just one acquisition tool of many. For example a library may decide to make an outright purchase of individual print books or e-books — or both (print makes for a good archival copy); or a library may determine to purchase large aggregations of ebooks, essentially the Big Deal model for journals moved over to the world of books; or a library may have a PDA program running alongside large aggregations and firm (traditionally acquired) sales of individual books. Thus, while PDA puts downward pressure on a publisher’s library sales, it doesn’t drive those sales into the ground.

A particularly intriguing offset to “PDA negativism” is the relationship between PDA and inter-library loan (ILL), which I have discussed before. ILL is, or was, an essential feature of a world dominated by print books. Print books went out of print, making them hard to find for a patron if the title was not already in a library’s collection. (Some publishers believe that libraries use ILL for print books simply to save money, and no doubt that is true in some instances.) The ILL systems that sprung up are costly; some estimates put the cost of borrowing a book through ILL at $25-$50 per copy, and not one penny of that money flows back to publishers and authors. If publishers could find a way to monetize ILL, perhaps by replacing ILL with a superior program, it would be a big win.

So let’s imagine a world of e-books. A publisher can simply insist on licenses for e-books that do not permit ILL — which they can’t do with print because once a library purchases a print book, it can do whatever it wants with it. At the same time, a publisher can put most or all of its titles into PDA services. This means that a library that wants to borrow a book for a patron can now get it directly from the publisher or PDA vendor. A short-term loan from a PDA vendor for an e-book can cost less than ILL for print books, plus it has the benefit of generating revenue for the publisher and author. Libraries will not like having ILL rights cut off, but if the titles are available through PDA, this could be a winning solution for all concerned.

This leads to an important step publishers should take, and that is to support as many PDA vendors as possible. The reason for this is that not many libraries are likely to sign agreements with every single PDA vendor. If a publisher only has its titles with one PDA vendor, and if a library chooses not to work with that vendor, the publisher could be locked out of that library system entirely. This will lead to lost sales and may frustrate librarians who now have no way to get access to those titles.

Or perhaps the library will do what so many of them do now: place an order with Amazon for a print copy.  Amazon is something of the world’s secret library vendor, with virtually every library purchasing at least some books there, especially when quick delivery is necessary. Now, is it in a publisher’s interest for that order to flow to Amazon? Maybe not, for two reasons. First, the publisher is more likely to have a higher margin on a digital book than on a print book, so substituting Amazon’s print sale for a PDA electronic sale hurts margins. Secondly, some publishers give Amazon a better price on their books than they give to book wholesalers, so when a sale is lost to a PDA vendor and is moved over to Amazon, the publisher gets a reduced margin. Yes, it is perplexing that Amazon, a retailer, can sometimes get a better deal than a wholesaler, but in fact that is the case. Amazon breaks all the rules. Working with PDA in this context can actually enhance a publisher’s income.

One problem with the term “PDA” (and its sister “DDA,” for demand-driven acquisitions) is that much of what this new service is about is not acquisitions at all but rentals. A library may implement a PDA system that allows a certain amount of free use of the material (e.g., free viewing of the table of contents and a few pages), a greater amount of reading for a rental or use fee, and outright purchase (with the unlimited use that comes with that). That rental income is something new. Let’s say a student wants to look at something in a book, but can’t find that book in the library because the library has not purchased it and there is no PDA system in place. That means a dissatisfied student and no income for the publisher. But with PDA, that student may get to look at the book and trigger a rental fee. If other students do the same, those rental fees can add up and even exceed the total price of the book. In some cases, librarians will do what publishers fear:  decline to purchase the book and then simply pay nothing for something that is never used or a small amount for when the book is used only slightly. In other cases, more people will use the book because of its presence in a PDA program, at least partly offsetting any decline in income.

An unintended consequence of PDA is that it will drive up book prices. Publishers will raise prices not only to offset the lost sales from PDA but also to offset the delay in sales for books that a library ultimately purchases. Some of these increases will be masked in the migration from print to digital formats, as the two formats have different cost structures. But PDA will inevitably make books more expensive. This means that libraries that are introducing PDA to save money will experience only short-term savings. Another unintended consequence, perhaps the most serious of all, is that widespread implementation will likely result in many books simply not getting published, as their specialized content will not drive enough usage to support them. No price increase can offset the drop in income when a title only circulates a few times in all the world’s libraries. This gives new meaning to “patron-driven acquisitions”: the patron, by failing to request a title, sends a signal up through the value chain to the editors, who then decline to make certain editorial acquisitions. In effect, we end up with a market-driven editorial program.

What PDA does do that is emphatically in a publisher’s interest is greatly increase the number of titles that a patron can view in the library catalog. Let’s imagine a scholarly book publisher that produces 100 new titles each year. One library purchases 25 of these titles.  When a patron at that library’s institution searches the library’s catalog, he or she sees those 25 titles, but not the 75 that the library did not purchase.  With PDA, however, the patron may see all 100 titles represented in the library’s OPAC by virtue of the PDA program. This leads to increased sales of those titles that the library may otherwise have passed over. Some publishers report a pick-up in sales of the deep backlist because of PDA. If there is a single thing that is good about PDA for publishers, it is that PDA will greatly increase the discovery of the publisher’s books; and what better way to market a scholarly book then inside a library’s catalog?

The opportunities for publishers with PDA don’t stop there. One way to view PDA is that it puts a bookstore inside a library’s OPAC. It’s a special kind of bookstore in that the requestor (the library patron) and the purchaser (the library) are two different entities. It’s not a big leap of the imagination to think of expanding the titles in a PDA offering to include not only titles that the library is willing to purchase but also titles that can be purchased by individuals on their own account. In effect, libraries could place mini-Amazons within their catalogs, providing a new service for their patrons, a new revenue stream for publishers, and referral commissions for themselves.

The idea of a bookstore within the library is not as far-fetched as it may seem. Although some librarians are doubtful that such a service would work well in their environment, and other librarians are concerned about the commercialization of an essential library service, library service providers are contemplating just such a  program now. Such a service will not vie with Amazon for selection, but it will provide titles that fill in holes in the library’s own collection, holes that for whatever reason the library chooses not to fill itself.  For publishers this opens up the prospect that the nations 120,000 libraries may someday add specialized online bookstores to their many other services, creating perhaps a dozen new bookstores for every one that is closing in the bricks-and-mortar world.

To summarize the “PDA offsets”:

  • Libraries are not likely to go to all-PDA programs and in any event, PDA programs will be phased in over time
  • PDA will help to monetize ILL for e-books, providing a new revenue stream
  • Across-the-board support for PDA vendors will make publishers’ titles ubiquitous in library catalogs
  • PDA may improve margins by taking away low-margin Amazon print sales and replacing them with average-margin digital sales
  • Short-term rentals will enable publishers to monetize brief interactions with their books
  • Publishers will raise prices
  • PDA leads to a broader representation of a publisher’s titles and to enhanced discovery
  • PDA can lead to the creation of bookstores within a library’s OPAC

These various PDA offsets are not going to make PDA a source of sales growth over the short term — over the short term, PDA will hurt sales — but over time the sales lost to PDA will likely be recovered and even enhanced.

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Joseph Esposito

Joseph Esposito

Joe Esposito is a management consultant for the publishing and digital services industries. Joe focuses on organizational strategy and new business development. He is active in both the for-profit and not-for-profit areas.

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Discussion

10 Thoughts on "A Publisher's Strategy for Patron-Driven Acquisitions (PDA)"

Useful analysis, Joe. I wonder whether an applicable pattern for the timing of the impact can be found in publishers’ experience over the past 30 years of just-in-time stocking by wholesalers/retailers and the increasing use of POD. How rapidly has the average “laydown order” shrunk for different categories of book?

Just happen to be at MLA in Seattle and had a chance yesterday to talk to some book suppliers and the view of PDA is all off the record but the total sales by three of the major suppliers is far less than has been reported. One vendor that has over 400 active PDA accounts reported very poor sales. The bad news for publishers is not PDA itself as it is doing very little. What is really happening is the serious reduction in buying books in general. Library budgets are still in free fall and under pressure that is still impacting book publishers more than journal collections. I know there are many libraries that have reduced their book buying by $100,000 or more. So PDA while growing is only serving to reduce expenditures. Publishers and university presses should continue to plan for a weak sales atmosphere. While Joe continues to put lipstick on this pit bull, it is still a pit bull.

Dan, you make it sound as if your intepretation of the data (“libraries are just buying fewer books generally”) and Joe’s (“PDA, by its nature, leads to fewer purchases”) are mutually exclusive. Why can’t both be true? Maybe PDA “is doing very little” in terms of sales partly because libraries have less money for books (i.e. because of budgets), and partly because PDA leads to fewer purchases (i.e. it’s structurally disruptive).

Also, do you have any data for your assertion that library budgets are still in free fall? My impression from talking to colleagues is that for most of us, budgets have flattened out and remained more or less stable at roughly 2009 levels. That’s certainly the case at my institution. But that’s just me and my peers — to your knowledge, are collection budgets still falling at steep rates in most cases?

Well Rick I only have data on what larger ARL libraries are spending in terms of databases, e-journals, and books. I have current data from book and journal suppliers, a few major publishers and some major aggregators. Database sales are very strong and growing, there is pressure on e-journal packages but renewal rates are still strong (2012 subscriptions). The area hurting is print book sales. This area is down the past three years and is still slow. The initial rush of libraries buying large publisher packages of e-books has also stalled. Libraries are focused on buying title by title eBooks. My data from multiple sources shows a reeducation in money allocated to buying books. Again my data comes from the top ARL libraries. The 1st quarter sales of 2012 are not impressive. My point is simple…. With PDA the system will further reduce library spending and may not be a good thing for publishers to support. In Joe’s article he was presenting a position that PDA is a good thing…..and I just question that logic.

OK — so when you say “library budgets are still in free fall” it sounds like you mean that spending on books is falling precipitously, not library budgets themselves. (FWIW, at my library book spending fell as far as it reasonably could between 2008 and 2010; we’ve stopped cutting the book budget because we just can’t cut it any more. Now we’re canceling journals.)

But without trying to speak for Joe, I think you’re greatly oversimplifying his point. I don’t hear him saying that PDA is either a “good” or a “bad” thing. He has pointed out both positive and negative impacts of PDA in the posting above and in others he’s written. I hear him trying (along with all of us) to make sense of its likely impacts, which are already various and complex, and will probably continue to be both complex and unpredictable.

Dan, I was not suggesting that PDA is a good thing. In the short term it is definitely a bad thing for publishers. My point is that over the long term, there are several ways to offset the impact of PDA at least in part. The ability to monetize inter-library loans is an entirely new revenue stream. The margin improvement by switching out sales from Amazon is a real gain. And we simply don’t yet know what the implications are for enhanced discovery through the presentation of many more records in library catalogues.

Another way for publisher’s to offset the impact of PDA is not to participate. I have heard of libraries that are adjusting their approval plans and switching from approval to PDA on publishers who provide that option. What I have not heard about is libraries outside of Colorado who are shutting down their entire approval program in exchange for PDA.

There have been a lot of innovations in publishing where those who adopted those innovations first benefited the most: like the Long Tail, POD, and Google Books. But as many of those innovations became widely adopted the advantage the early adopters had quickly disappeared. The Long Tail is an excellent example. When you’re one in a thousand, your chances of making a sale are much better than if you’re one in million. Everyone rushed everything they could back into print to take advantage of the long tail. Soon that tail was so long that it was far more than the public had an appetite for. Now it’s filled mostly with self-published tripe. So we’re back to wishing for better curation. I suspect that’s going to be how we think about PDA, or more accurately the collections that result from it, in the future.

In this particular instance, this is an innovation I’m willing to watch for a while because so far, there is a lot less risk in not participating. I love the idea of PDA for my backlist. It doesn’t make sense to me, or for the scholarly communication ecosystem to include our frontlist. I would still benefit from PDAs potential to monetize ILL if I were allowed to limit it to backlist. It was interesting to hear Dan’s “anecdata” about early sales. I’ve told a particular PDA vendor to let me know when he had some usable data about the impact on frontlist. That was well over a year ago. I’m wondering if they still don’t have it or if they’d rather not share it, with publishers anyway.

PDA sounds like a consignment deal for libraries: they get to have available to their patrons a vast number of titles, and no payment is made to the publisher until an order is placed. If this model had been applied to retail bookstores, we’d probably have many more of them still in existence. The challenge is particularly great for those stores, like University Press Books in Berkeley or the one that tony ran in State College, that specialize in stocking scholarly books, which do not sell in large number or very quickly.

This model is foolish for both publishers and libraries. Publishers lose their biggest, most reliable sales, and libraries become a commericial jumble of patron whims. Lose-lose-lose.

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