It’s hard to remember a time when Netflix didn’t seem like a good idea. The company opened its first distribution center, in San Jose, CA, in 1998, and initially aimed to create the typical Blockbuster experience: Each rental was $4, plus $2 for postage, and there were late fees. In a 2002 interview with Wired magazine, the company’s founder and CEO, Reed Hastings, described the pre-2000 Netflix as “a typical Internet company…an ugly financial story, with not much hope of breaking even.” But when the company switched to its now-familiar subscription, no-late-fee model in 1999, it took off, delivering 100,000 DVDs by October of that year. It shipped its billionth DVD (Babel) in February 2007 and today has 8.7 million members and over 100,000 titles, with plans ranging from $4.99 to $47.99. The company’s Amazon.com-like recommendations feature is used by 60% of members to select their DVDs, and its revenue-sharing agreements means that film studios are invested in the company’s success. Netflix was named the Retail Innovator of the Year by the National Retail Federation in 2007.
If people like using Netflix for DVDs, they’ll love a similar service for books, right? Books take up space, and just because you want to read one doesn’t mean you want to own it. Book rental is not an entirely new concept—bookstores like Hastings and Vroman’s have attempted it in the past—but online book rental is. Companies like BookSwim, Booksfree, and Paperspine hope to be Netflix for books.
“Renting is trendy, affordable, and convenient,” says Georg Richter, CEO and Senior Adviser of BookSwim and formerly EVP and COO of Bookspan. The company’s VP Marketing, Eric Ginsberg, says, “If you want to get [a hot new] book from your local library, it can take six or twelve weeks to get to the front of the list. The average New York Times bestseller is $26 and that’s more money than people want to spend.”
But listen up, publishers: As studios have profited from working with Netflix, you can profit from book rentals. “Working with companies like Paperspine offers publishers a way to directly compete with the used book market,” says Dustin Hubbard, CEO of Paperspine. “We believe our service competes much more directly with the used book market and book-swapping sites on the Internet than with the new book market. The used book market is a multi-billion-dollar-a-year industry all by itself. Publishers should follow the lead that the DVD industry has already established [by] supporting both business types, buy and rent. [By working with companies like Netflix], the DVD industry essentially eliminated the used DVD market.” By supporting book rental companies, Hubbard says, publishers have a way to fight back “against the large and growing used book market that is currently costing them millions of dollars a year.” Along with revenue-sharing programs, he suggests co-marketing of new titles, promotion of author events, and paid search results on book rental sites. Paperspine has been working on these initiatives with several small publishers since last summer and is also negotiating with larger publishing houses.
None of the book rental companies Publishing Trends spoke with would reveal their membership numbers, but Ginsberg says BookSwim broke its first-year membership goal within six months and tripled that goal within a year, and Booksfree was recently named to Inc. Magazine’s list of the 5,000 fastest-growing privately held companies in America.
BookSwim, Booksfree, and Paperspine all operate similarly. Each company charges a monthly rate for a certain number of books, with free basic shipping both ways. In most cases, though not all, basic shipping means USPS Media Mail, which can be slow. “Books usually arrive within 3 to 9 days, but due to the unpredictable nature of…Media Mail, occasionally some shipments may take up to 4-14 days to arrive because of postal delays,” says BookSwim’s website. “Patience is a virtue!”
That’s a line you won’t find anywhere on Netflix’s website. While the company does ship its DVDs via the USPS, each of those red envelopes weighs less than an ounce, so shipping is inexpensive—and because of the company’s many distribution centers (10 by 2002, over 40 by 2007, over 50 today), almost 95% of customers receive their next DVD the day after it’s shipped. Nor does Netflix also have to answer the following question, which is found in some form on all the book rental companies’ websites: “Why not just go to the library?”
Oh yeah, libraries, those places where book rental is free. There are late fees, wait lists for popular titles, and limited selections, but library cards are free. Many libraries already offer books by mail to at least some patrons, and library systems that work with OverDrive can automatically purchase more copies of a title (subject to budget restrictions) if the wait list for it gets too long. So how do book rental companies solve the library problem?
“You have to be very careful when you talk about libraries,” says Doug Ross, President and CEO of Booksfree. “They’re so important and wonderful.” BookSwim’s site notes, “BookSwim is a terrific supplement for avid library users, as BookSwim encourages members to use the library if/when possible.” And Hubbard says, “Libraries have never responded poorly to the idea. We all have a common cause of love of literacy and helping people promote that.” BookSwim donated 13,000 books to the Newark Public Library when they moved their offices to the city, and they piloted a book club program with the North Texas Regional Library System. “We have a lot of different books that, for a time, are very popular, and then after a time are less popular,” says Ginsberg. “It makes sense for us to bundle those books together in a way that libraries can [loan] a bunch of them at a time.”
But another way book rental companies may regard libraries is as community centers that have been sidetracked from their original purposes. Ginsberg says a large part of his last job, in PR at a library in New Jersey, was “getting people to realize that the library is not just books.”
“Publishers have helped libraries focus away from [their] primary objective, which is education, research, and helping people, and [libraries] have gotten more into the entertainment business,” says Ross. “When you go into a library, more than half the space is taken up with entertainment product [books!]. Mass market paperbacks and hardcovers are all over the place and there’s a little bit of room where kids can go in and do research and use computers.” In December on a blog called Strollerderby, Miriam Axel-Lute wrote that what bothered her most about book rental services (besides that they were competing with free) was “the idea of abandoning the library,” adding, “I think with the right savvy, libraries are up to the task of competing with even an improved book rental service.” Ross commented on the post, identifying himself as Booksfree’s CEO, with a message that read, in part, “Encouraging members to use alternative cost effective services such as Booksfree would still save the consumer substantial $$$$ while freeing up libraries to better perform their essential services. One could reasonably ask if it is wise to use public money (taxpayer) and grants to provide free entertainment rather than services more beneficial to the general public.” A librarian wrote in response, “We are first and foremost institutions for the provision of the printed word in multiple formats.”
And libraries are forging ahead with those new formats. In January, the Cleveland Public Library (CPL) system worked with OverDrive to become the country’s first public library system to offer ebook downloads in the EPUB format. The books can be downloaded to the Sony Reader or read onscreen with Adobe Digital Editions. Patrons browse the digital library catalog for titles, check them out with their library cards, and download them to their home computers. The files expire automatically at the end of the lending period. The library also offers, through OverDrive, MP3 audiobooks that, like all MP3 files, can be downloaded to iPods. In total, there are 28,600 digital titles in CPL’s collection. Amy Pawlowski, CPL’s Web Applications Manager and formerly Partner Services Manager at OverDrive, says patrons are taking full advantage of the new digital offerings. “I think that’s because we launched this so early, and our patrons accepted it as so cool from the beginning,” she says. “As we added new formats and increased the collection size, they were already familiar with the technology to begin with, so learning one more step was not particularly difficult for them.” When CPL launched its MP3 program, she says, “We were prepared to get completely slammed with support questions. We got none. Within two days, the 200 titles were all circed out.” There are now 604 MP3 books available, and the library adds more weekly.
Pamela Turner Taylor, CEO of Total eSource and formerly Director of Audio Services at Ingram Digital and Director of Content Reserve at OverDrive, agrees that libraries are a great place for patrons to try ebooks because “they’re [not] investing money and buying a file, so it’s a good way for them to experiment and try it out.” And as library users become increasingly familiar with digital formats, that can “help support even the commercial enterprises. Publishers should be looking for incremental revenues from the books they’re already promoting, showing the authors that it may be modest at first but they’re going to be earning additional royalties from the digital versions.”
So will libraries eventually become people’s main source of digital reading material and audiobooks? Will book-rental sites eventually become their main source of old-fashioned reading material? “As a society we have reached the epoch of clutter, and we’re starting to shed it,” says Ginsberg. “As we move into the twenty-first century, people are a little more secure about who they are and much more interested in getting what they want out of life. As the cost of living goes up, the size of our living quarters goes down, and people are interested in not being completely crammed out of their own place.”
And if you fall in love with a book and want to read it more than once? “You can always rent it again later.”
