With the ever-increasing importance of libraries as a way readers can discover new authors and books, and with the growing popularity of digital access, the time has come for a close look at libraries and e-book licensing.

It’s important to recognize that most libraries license, rather than buy, their e-books because the first sale doctrine does not apply in licensing contracts. (For those who need reminding, the first sale doctrine is the section of copyright law that states “once a product is sold, the original creator/owner gives up all rights to preventing that copy from being resold,lent, rented, or otherwise conveyed to another person,” as John Palfrey noted at the The Digital Shift.

When the issue of e-book collections came up, publishers opted to license e-books to libraries instead of selling them, not only because libraries are a distinct market, but because the publishers wanted to maintain the one patron/ one book per rental paradigm, with an expiration date filling the role of print’s inevitable wear and tear. This decision came after a fairly long period when publishers grappled with the best way to mimic their print deals in e-book deals with libraries.

As this table I constructed shows, the Big 5 have a few ways of handling e-book licensing contracts:

Another alternative is charging per use, as the music downloading service Freegal does, despite the criticism that this is usually pricier for libraries, making budgeting more difficult.

For smaller publishers, the most popular choice is the one user/one e-book perpetual use contract with lower markups than Random House and Hachette use.

To get licensing contracts, libraries generally contact the digital departments in larger houses and the sales departments in smaller houses that don’t have digital departments.

When contracts expire, library databases can generally autorenew e-books, which makes it easy for libraries to maintain their digital collections.

Current Facts and Figures

Today, 95 percent of US public libraries have digital collections, but there’s concern that these collections aren’t varied enough. At 3M, Collection Development manager Heather McCormack says, “We find that there’s probably not going to be a deepening and a widening of e-book collections if price points are going to remain on the higher end of the spectrum, even if it is for perpetual ownership.”

And there does need to be a deepening and a widening. Right now, according to the 2014 Survey of E-book Usage in the Public Libraries from Library Journal, adult titles make up 71 percent of the average library e-book collection, with young adult books accounting for only 14 percent and children’s books accounting for only 15 percent. The large majority of available e-books are bestsellers, and the price points are high.

Information about prices comes from the Douglas County Libraries in Colorado, which publishes a monthly report of New York Times bestsellers that covers both large retailers and libraries and both print and digital books. The numbers show clearly that the Random House and Hachette model for e-books is the most unlikely to promote collection expansion because it entails the highest prices for bestsellers. For example, Mean Streak, published by Hachette, sells to OverDrive and 3M for $78.00 while regularly listed at $12.99 by Amazon and Barnes & Noble.

“Libraries have paid high prices for ‘library’ versions of books for ages,” said Stephanie Chase, director of the Hillsboro Public Library outside Portland, WA, of the pricing differential. “Why should this format be any different?”

Still, libraries seem increasingly committed to e-books. According to the Library Journal survey, libraries spent about 7 percent of their budgets on e-books in 2013 and approximately 8.6 percent in 2014. Projections indicate that they will spend 14 percent on e-books five years from now.

Comparing e-book usage reports for 2013 and 2014 makes it obvious that this trend is far from over, even though e-book demand is leveling off. The question is no longer whether libraries will have e-book collections; it’s whether or not they’ll be able to compete against other e-book lenders such as Kindle Unlimited and Oyster while working within the limits of their budgets.

Chase seems prepared and determined to provide her patrons with e-books if the demand is there. “If my patrons would use it and want it in e-book format, and the demand warrants the format, I want to provide it,” she says.

Perhaps publishers would be wise to promote e-book collection variety in libraries by licensing as many of their titles and authors as possible, but this can happen only if they make their contracts work better with library funds.

Connections and Collections

In a recent presentation, Library Journal VP, Group Publisher Ian Singer talked about what he calls the retail connection. During the preceding six months, Singer reported, 73 percent of print borrowers and 78 percent of e-book borrowers bought books. “We found they use the library to find out what to read next,” he explained. “They purchased titles by authors they had discovered at the library and they purchased copies of the titles they had previously borrowed.”

This retail connection has been encouraged in recent years as libraries added purchase functions to their sites. And Singer notes that library patron numbers are increasing because of the decrease in brick-and-mortar bookstore locations (there are 17,078 public library locations and 7,300 bookstore outlets).

With fewer bookstores and a high retail connection percentage, libraries are clearly an important channel for reaching new readers. In McCormack’s opinion, the ideal e-book licensing contract for libraries and publishers is one that provides for an expiration of some kind and for lower price points than contracts generally now offer. If publishers keep the prices low and tie in expiration, she thinks “there would be more of a diversification of e-book collections, which probably would be better in the long run for librarians, for patrons, and for publishers.”

Jen Donovan is an editorial assistant for the Market Partners International blogs Publishing Trends (publishingtrends.com) and Publishing Trendsetter (publishingtrendsetter.com), where more of her articles can be read. To reach her: donovan@publishingtrends.com. This article is derived with permission from Publishing Trends, published online by Market Partners International.