October 19, 2016

Penguin Random House Announces New Ebook Terms of Sale for Libraries

Penguin Random House LogoPenguin Random House today announced a new unified, companywide terms of sale (TOS) policy for ebook licenses sold to public, school, and other libraries working with approved ebook vendors in the United States and Canada. Effective January 1, 2016, all Penguin and Random House adult and children’s frontlist and backlist ebook titles will be available under the one-ebook, one-user, no loan cap perpetual licensing model that has long been employed by Random House.

The one-year lending cap on Penguin ebooks will be discontinued, and library prices for all Penguin Random House ebooks will range from under $20 per title to a newly set maximum of $65 (both USD and CAD), reduced from the current Random House maximum of USD $85 and CAD $95. In a statement to the press outlining the new terms, the company added that “as with our e-book pricing for consumers, Penguin Random House’s suggested pricing of e-books for libraries will be variable and flexible” and announced plans to periodically offer limited-time special value pricing on select titles, with the first such promotion scheduled to begin with the launch of the new TOS on January 1.

“We want this transition to our new terms to be as easy and as smooth a process as possible for our library partners, and my team and I have been working closely with all the various digital aggregators who sell our titles to libraries to achieve this. Any Penguin or DK titles purchased prior to January 1, 2016 will be honored under the existing one-year loan cap,” Skip Dye, VP of library sales for Penguin Random House, told LJ.

Although digital files, including ebooks, are not protected by first sale rights that apply to physical media, such as print books, CDs, or DVDs, Random House for years has consistently described this library licensing model as an “ownership” model, notably supporting a library’s right to transfer any ebook titles purchased from the company between different lending platforms maintained by approved vendors. The publisher continued to maintain this stance in its press announcement, in which it also reiterated the company’s logic for selling libraries ebooks at a significant markup over retail:

“The key determinant with Penguin Random House library e-pricing is the opportunity for the full and permanent ownership of our titles purchased for their collections, which can evolve into a potentially unlimited number of library patrons borrowing that ebook in perpetuity. Print books, which suffer wear and tear from repeated lending, need to be replaced through repurchase. Ebooks do not.”

Dye elaborated, explaining that “the marketplace is evolving continually and the broader availability of e-content to libraries has seen the greatest change in the past four years. We had the unique opportunity when Penguin and Random House merged to live for two and a half years under two different models. Our decision to unify under a perpetual model was based upon extensive and broad-ranging conversations with librarians, our wholesale partners—and also by reviewing recent studies, in particular those conducted by LJ.”

These perpetual licenses have benefits for long-term digital collection development, but many librarians have expressed frustration with the way in which premium pricing for bestsellers affects a library’s ability to make popular titles available during periods of peak demand.

“Libraries will be pleased that the combined Penguin Random House license will ensure perpetual access to e-titles, and all will be glad the previous ceiling of $85 per title has been reduced,” American Library Association President Sari Feldman said in an official statement for the organization. “But I also know many of my colleagues will miss the flexibility of paying near-consumer prices for e-copies they may not wish to maintain indefinitely, and some will be unable to afford to provide access to the e-books their communities seek.”

In one example that drew mainstream media attention, Cuyahoga County Public Library (CCPL), OH, spent $23,000 (0.02 percent of the library’s collection budget) on 780 ebook copies of Random House imprint Vintage Books’ massive hit Fifty Shades of Grey.

“At the height of its popularity, the holds for this book here were in the hundreds,” CCPL assistant marketing director Robert Rua told a Cleveland Fox affiliate in 2013. “It was a title that customers really want, so we purchased enough copies to address that strong demand.”

At press time, a spot check of CCPL’s catalog indicated that the library had 294 ebook copies of the title available, out of a total 313 perpetual licenses, indicating a predictable and significant decline in demand for the title. Weighing the temporal nature of bestseller demand and holds versus the cost of new, hardcover bestsellers has always posed a challenge, but the higher cost of these perpetual licenses may continue to give additional pause to libraries with smaller acquisition budgets, even as they work to promote the availability of popular ebooks for their patrons.

Many libraries praised Random House for continuing to license ebook titles during the years when other major publishers shied away from the sector. During that time, the publisher’s titles have also regularly appeared on lists compiled to illustrate the significant disparity between prices paid by consumers and libraries for ebook bestsellers. But even as a climate of general dissatisfaction over the expense and limitations of ebook licensing terms has persisted while the market has evolved, opinions regarding loan caps seem to have improved in some cases.

Notably, citing concerns about content preservation as a core mission, many libraries initially boycotted HarperCollins beginning in February 2011 when the publisher announced its non-time-restricted 26 loan cap on library ebooks, which are sold to libraries at prices comparable to retail. While not quite endorsing that model, many libraries that did not participate in the boycott later told LJ that the loan caps had not been exceeded for many purchased titles, indicating that the model may provide flexibility for purchasing ebook bestsellers. Penguin’s former one-year lending cap—which necessitated a maximum 26 two-week checkouts within a calendar year for a similar return on investment, and expired regardless of the number of checkouts—was more restrictive than the HarperCollins loan limit. But with the new TOS for Penguin titles, libraries now must consider the tradeoff between near-term affordability and long-term licensing benefits.

“We place a higher value on our author’s content in granting perpetual access for institutional lending,” Dye said. “Penguin Random House’s new pricing model is competitive with other publishers, and we additionally are granting full ownership for each title purchased. Also, let’s again note that we have lowered our top-pricing considerably effective next month.”

Libraries may also be encouraged by the mention of the new “limited-time special value pricing” plan for Penguin, which Dye described as an extension of the promotional pricing program already in place for Random House ebooks. “We are in the process of compiling the title list for the promotional pricing initiative concurrent with our terms launch,” he said. “It will be comprised of new New York Times bestsellers, award-winning titles, and in-demand adult and children’s backlist titles and book club favorites.”

The lowered price cap for Random House and the plans for new promotions for Penguin ebooks indicate that Penguin Random House views libraries as a valued partner going forward, and is responding to some degree to the market’s ongoing concerns about ebook pricing and affordability. In July, major ebook vendors including OverDrive, Baker & Taylor, 3M, and Odilo told LJ that they have seen an increasingly positive view of library ebook lending among major publishers during the past two years, and that these publishers appear to be willing to experiment with a variety of licensing terms, especially when there are marketing opportunities such as book clubs or reading events associated with recent bestsellers.

“Librarians are a key connector for us,” Dye told LJ. “Through recommendations and reader’s advisory, librarians help introduce new authors to new readers. Specific to e-content, I see the greatest challenge for a patron is discoverability, and Penguin Random House partners with librarians to assist with and support discoverability. From our #askalibrarian, to ensuring our metadata is rich with search terms and reader information, Penguin Random House wants to make it easier for patrons to find our titles—no matter the format.”

Matt Enis About Matt Enis

Matt Enis (menis@mediasourceinc.com; @matthewenis on Twitter) is Associate Editor, Technology for Library Journal.

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