Prof. Randal C. Picker, University of Chicago Law School
March 26, 2012

As I am fond of reminding people, faculty offices at my work home, The University of Chicago Law School, surround the library.  I walk out of my office into book stacks.  So it can hardly come as a surprise when I say that I had occasion last week to check a book out from the library and read it.  I have been doing that for most of my life.  I will also confess that in reading the book, I took out my highlighter and emphasized particularly interesting passages.

That is a library no-no, but I do take some comfort in the fact that my highlighter was my finger and the book, Kitchen Confidential by Anthony Bourdain, was a digital book checked out from Amazon’s Kindle Library.  No physical books were harmed by my reading and highlighting.

We are entering the age of the private library, or, perhaps I should say returning to it.  In 1731, Benjamin Franklin formed a privately financed library that would become The Library Company of Philadelphia.  (Still in business today, the company is online here.)  Franklin gave what he termed a “short account” of the library in a July 13, 1741 note.  Fifty individuals contributed 40 shillings each to create the initial capital for the library company and they were each to contribute 10 shillings per year on an ongoing basis.  By the time of Franklin’s note, the library company was up to 70 members.  Members of the library could “borrow a Book for 2, 3 or 4 Weeks, leaving his Note for double value….”  And non-members were given borrowing privileges as well, also subject to leaving a bond for borrowed books and for “paying a small Acknowledgment for the Reading.”

On Nov. 2, 2011, Amazon announced a new Kindle Owners’ Lending Library.  Unlike Google Book Search, another private library effort, Amazon’s venture is a true lending library.  Prior to the launch of Amazon’s library, it was rumored that Amazon would launch a Netflix for books.  The Netflix model is a fixed number of DVDs out at a time, with a new DVD mailed out as soon as one is returned.  For a fee of course and not for free.  But Amazon’s library is actually much more limited than that: You can check out no more than one book at a time and only one book each month.  Yes, 12 books for an entire year, though you can’t beat the price: free to Amazon Prime customers.

That seems like a library that only readers who linger over their books could love, so why does Amazon impose such severe borrowing limits?  To answer that, we need to look at how Amazon gets books into its library and how it pays for those books.  A library, of course, needs books.  Amazon had approached the Big Six publishers to try to reach a deal with each to include books they published in the library, but each declined to participate.

Book publishers have long been skeptical about libraries so it is hardly surprising that they would feel especially so about a new library type.  The basic fear, as articulated by one publisher regarding Amazon, is that “we do not want lending to replace selling.”  If books are sold for a set price to all purchasers, efficient sharing of books could lead to reduced sales.  Books can be shared by making used book markets efficient and book industry insiders have long been unhappy with Amazon for facilitating used book sales.  But book sharing is exactly why libraries exist and a library run by a for-profit entity like Amazon might lead to especially efficient book-sharing.

But shuffling around lots of physical books would be expensive.  Not even Netflix really wants to be Netflix anymore, as its failed plan to hive off its DVD business as Qwikster made clear.  Amazon is driving the transition to e-books with its Kindle platform and so an Amazon library would be digital from birth.  That makes content acquisition much more complex.  You buy physical books and can do with them as you please, but Amazon has contracts for it to get e-books and those contracts might impose limits on which books Amazon could add to its library.  That seems to be the case, though it is hotly contested as to what exactly the contracts permit as between Amazon and the publishers and between publishers and authors.

Amazon announced its new program as having “thousands” of books to borrow, including more than a 100 current and former New York Times bestsellers.  Amazon’s press release indicated that for “the vast majority” of titles, Amazon had reached a deal with publishers to include their books for a fixed fee.  In other cases, Amazon was buying a copy of the ebook at a wholesale price each time the book was borrowed.  This isn’t efficient book sharing at all, it is just the opposite.  In an effort to demonstrate the value of the library, Amazon was buying books at wholesale and giving them away to Amazon Prime customers.  And even in doing this, some publishers contended that Amazon had overstepped the publishers’ contracts with Amazon, while authors claimed the same about publishers.

Amazon has greatly expanded its library by offering inducements to its authors – authors publishing through its Kindle direct publishing platform – to participate in the program.  What kind of inducements, you ask?  Amazon has offered , for 2012, a $6-million carrot to be split by authors based upon library downloads.  Authors would have additional commitments to Amazon, but $6 million should capture a lot of attention.  That is more than a third of the entire 2010 budget for the City of Chicago libraries for book and material acquisition.

We are at the early days of the new private libraries.  Amazon’s library is part of its tightly connected book ecosystem and it isn’t clear where that is headed.  But the examples of Google Book Search and Amazon’s new library suggest that we need to reconsider our conception of what a library is today.  That matters for copyright legislation and probably in a host of other areas.  This rethinking of libraries will almost certainly take us back to the roots of libraries and that great library entrepreneur, Benjamin Franklin.