Report: Amazon Considering E-Book Rentals For Prime Members

Amazon (NSDQ: AMZN) is in discussions with publishers about launching an e-book rental system for Prime members, according to the WSJ. But it is unclear whether any publishers have agreed. And the idea raises a lot of questions.

According to the unidentified “people familiar with the matter,” the rental library would consist of older titles and Amazon Prime members, who already pay $79 per year for free two-day shipping and access to streaming video, would be able to use it. The article says book publishers would receive a “substantial fee” for participating, and Amazon might limit the number of titles Prime members could read for free every month.

It’s unclear whether any publishers have agreed to participate. Some publishing executives, also unidentified, said that they are worried about devaluing books and about hurting their relationships with other retailers.

The model is being compared to Netflix (NSDQ: NFLX), but that’s not really accurate because it appears from the information provided in the article that Amazon Prime members would not have to pay any additional fees to get access to at least some e-books; this would just be an added perk included in the $79 annual fee they already pay. What this really sounds like is a library. Many libraries are now lending e-books and would presumably not be so hot on having Amazon as a competitor. (The Kindle is supposed to start supporting library borrowing this month.) One obvious difference is that libraries are nonprofits and Amazon is a huge retailer.

It seems odd to me to lump this in with Amazon Prime without charging any additional fees. I guess I didn’t feel that way when Amazon started offering streaming video to Prime members, partly because I was accustomed to the Watch Instantly video that came free with my Netflix subscription (not anymore, of course) and partly because I don’t really use Amazon’s streaming video whereas I imagine that I would use e-book lending heavily (so not paying more for it doesn’t seem fair). It’s possible that Amazon wouldn’t want to charge additional fees for e-book rental because the library would at first probably be quite limited (it is easier to imagine only small, tech-y, niche publishers signing on early, with the “big six” not coming around until later, if at all) and because, if this article has it right, the library wouldn’t include frontlist titles. Also, of course, Amazon would be paying publishers that “substantial fee,” whatever it is. So in a way, this would just be Amazon acting as the middleman as usual, except that the end result is free for Prime customers.

Lots of people, me included, would be very happy to pay a monthly fee for a service like this, but there are obvious difficulties in figuring out what that fee would be. It seems tricky to have it increase as the library gets larger (how many more publishers and what types of publishers would have to sign on before the price would go up?) and that’s clearly something Amazon has thought about.

Some other questions:
–Wouldn’t author contracts have to be rewritten to allow this or would Amazon somehow manage to lump itself in as a library?
–Would authors see any payments at all?
–Would readers be able to read the books on all Kindles and Kindle apps?
–How old would the older titles be? Is there a year cutoff?
–What are some of the ways that publishers could use this as a promotional tool? Would they be able to set up their own little “storefronts” within the library, with branding? They could call attention to an author’s older titles, for instance, that are free for checkout as a way to get readers to buy her new book? (This is something publishers are already doing with some series.) What are some other ways that Amazon could entice publishers to possibly agree to this?

I want answers to all these questions RIGHT NOW but it sounds as though this is really in the extremely early stages. I’ve asked Amazon and a few publishers for comment and will update this post if I hear back.

Google (NSDQ: GOOG) has previously intimated that it is considering an e-book rental service. 24symbols, a Spanish company, is currently experimenting with e-book streaming.