Why Might A Publisher Pull Its E-Books From Libraries?

Following yesterday’s news that Penguin, citing security concerns, is pulling its new e-books from libraries–and making none of them available for library lending through Kindle–many are wondering why the publisher would do such a thing. (Penguin and Random House had been the only two “big six” publishers to offer unfettered access to e-books through libraries; now Random House is alone in doing so.)
Here are some possible reasons, none of which are “Penguin is stupid and is trying to make itself obsolete”–but all of which are a response to high demand for e-books in libraries, and I might argue that attempts to curtail or impede that demand are, at a minimum, counterproductive.
»  Penguin is mad about Amazon’s deal with OverDrive and is retaliating. If you have a Kindle and have checked out a library book on it, you will notice that clicking “Get for Kindle” sends you to straight to Amazon’s website instead of having you check out the book from within the library’s site. Here’s how it looks:

When I click “Get for Kindle,” I’m directed to this page on Amazon’s site (click to enlarge):

Notice anything? Yeah, it looks an awful lot like an Amazon (NSDQ: AMZN) shopping page and I have to be logged into my Amazon account to get the book. Publishers Lunch notes, “Though OverDrive had promised in April that patrons’ ‘confidential information will be protected,’ in implementation their program is an engine for turning library users into Amazon customers.” (Publishers Lunch also notes that, since libraries had already bought the e-books from Penguin, it’s surprising that Penguin is simply allowed to withdraw access to them.)
And a lot of people are checking out library books through Kindle. The NYPL’s Christopher Platt recently told Publishing Trends that since Kindle added library lending, “Our average new patron registrations have more than doubled from 80 a day to 172 a day. Average daily e-book checkouts increased from 1,161 to 1,511 [23.2%]. Kindle downloads account for 33% of that use” (Kimberly Lew, Publishing Trends, November 2011).
*Note: Some have suggested that Penguin is mad about the Kindle Owners’ Lending Library (for Prime members), and that’s why it’s pulling its e-books from libraries. As far as I can tell, this is false and doesn’t make sense. Penguin’s books aren’t included in the Kindle Owners’ Lending Library (despite what this AP article says), nor are books from any of the other big six. I guess it’s possible that Penguin is just mad about the Kindle Owners’ library in general and is pulling e-books in some kind of indirect retaliation, but that makes less sense than any of the other reasons cited here.
»  Penguin thinks people are checking out e-books from non-local libraries: I currently hold four different library cards: One for the New York Public Library (I currently live in Manhattan), one for the Brooklyn Public Library (I used to live in Brooklyn), one for the public library in the city where I went to college, and one for the public library in the town where I grew up. As far as I know, all of these cards are still active and I could use them to check out e-books from any of the libraries, even though I do not live in four places. Steve Potash, the CEO of OverDrive–the leading distributor of e-books to libraries, and the company that Penguin is contracted with–acknowledged in a letter (PDF) posted on blog Librarian by Day to the company’s library partners earlier this year that some publishers (not just Penguin!) are worried about library patrons gaming territorial restrictions:

…[O]ur publishing partners have expressed concerns regarding the card issuance policies and qualification of patrons who have access to OverDrive supplied digital content. Addressing these concerns will require OverDrive and our library partners to cooperate to honor geographic and territorial rights for digital book lending, as well as to review and audit policies regarding an eBook borrower’s relationship to the library (i.e. customer lives, works, attends school in service area, etc.). I can assure you OverDrive is not interested in managing or having any say in your library policies and issues. Select publisher terms and conditions require us to work toward their comfort that the library eBook lending is in compliance with publisher requirements on these topics.

Say I really want to check out Mindy Kaling’s new memoir as an e-book and the waiting list at the NYPL has 193 people on it. There’s not much to stop me from finding that e-book at a library in another state and checking it out. I can do this all from my computer, without leaving Manhattan (or my desk). I don’t know how to do it without a valid library card number and login (I haven’t done it, by the way) but I’m sure someone else has figured that out. A publisher might worry that the more libraries a user has access to, the less incentive that user has to go to a store and buy the book. On the other hand, just because gaming the system may in some cases technically be possible doesn’t mean that many users will do it.
»  Penguin is worried that e-book checkouts from libraries will cut into sales. This is of a piece with the lack of reinforcement of geographic restrictions. Again, here’s Potash:

Another area of publisher concern that OverDrive is responding to is the size and makeup of large consortia and shared collections. Publishers seek to ensure that sufficient copies of their content are being licensed to service demand of the library’s service area, while at the same time balance the interests of publisher’s retail partners who are focused on unit sales. Publishers are reviewing benchmarks figures from library sales of print books and CDs for audiobooks and do not want these unit sales and revenue to be dramatically reduced by the license of digital books to libraries.

In other words, publishers (not just Penguin!) may be concerned that libraries are making e-books so available that nobody needs to buy the books in either print or e-book form. Judging by my own experience on long library e-book waitlists, as well as the generally not-great selections of e-book titles that libraries carry, I can say I don’t think we’re close to the problem of a library cutting into sales any more than it has ever done. Publishers, of course, license e-books to libraries, for money; it’s not as if libraries get them for free and give them away. But since print books are more expensive than e-books, publishers may also be concerned that libraries are buying e-books instead of print books.
Gary Price, the librarian who runs the excellent INFOdocket.com, pointed me to the OverDrive letter above, posted at Librarian by Day. Thanks, Gary.
To conclude, are any of the above good reasons to pull e-books from libraries? Lots of people won’t think so. But they are reasons that apply to many publishers, not just Penguin, and it’s unclear how they will be resolved.