Planet Money - The E-Book Wars

Episode Date: November 11, 2022

In 2019, a group of librarians (quietly) stormed the offices of a major publisher, Macmillan, to protest a controversial policy on e-books. On this show, how a tiny change - a book on a screen - threw an industry into war with itself.Subscribe to Planet Money+ in Apple Podcasts or at plus.npr.org/planetmoneyaLearn more about sponsor message choices: podcastchoices.com/adchoicesNPR Privacy Policy

This is Planet Money from NPR. Kathy Giorgio knew she wanted to be an author at an early age. When did you start writing? Oh lordy. I started writing basically as soon as I could. I used to copy the pictures out of my picture books and then rewrite the books the way I felt they should be written. Kathy would change the plot points, come up with new dialogue,

make the kids' stories she was reading a little more intense. There was a book called Flip Runs Away Again, and it was about a colt, a little horse, and I changed it into a murder mystery. So who murdered who in the little colt? The colt actually was the murderer. Oh, wow. He murdered a very nasty cow that was in the little cult? The cult actually was the murderer. Oh, wow. He murdered a very nasty cow that was in the field. Did the cow have it coming? Is that what we're saying here?

The cow had it coming, for sure. Kathy's murderous cult story goes unpublished, but she writes other things. She first publishes something, a serialized short story, when she's just 15 years old. Now Kathy is what you might call a working author. Her books are not on the bestseller list. She teaches to help make ends meet. But she's published a lot of writing too. Short stories, poetry, essays. My first book was The Home for Wayward Clocks, and it was a novel, and it was published in 2010, the year I turned 50.

Congratulations. That's great. Thank you. She's written 13 books since. And people are reading them. They buy them at bookstores, listen to them on audiobook, borrow them from libraries. But a couple of years ago, that last thing, the borrowing from libraries, it became a little more complicated for Kathy because of something very specific, e-books. More and more people have started borrowing e-books from libraries. And when you're borrowing a book, you are not buying it. Kathy actually saw her royalties take a hit,

and she's like, I think it's because of all these e-books. I noticed a difference when they started going to the libraries. I mean, it wasn't a huge amount. It didn't exactly knock me down in income level or anything, but you still notice it. This has put Kathy in a place she never expected to be, conflicted about the friendly library. Libraries are wonderful things, but it is so much easier to lend out an e-book than it is to lend out a hard copy book. So if everyone is giving your book away,

how can you ever hope to make a living as a writer? Even though it impacts her bottom line, authors like Kathy don't get much say in this issue. I think we all feel a little bit helpless, you know. It's going to be a fight between these two, publishers and libraries. Publishers who sell books like Kathy's and libraries who put them in the hands of millions of readers. sell books like Cathy's and libraries who put them in the hands of millions of readers. E-books have turned former allies into bitter enemies, fighting over every penny. Hello and welcome to Planet Money. I'm Dave Blanchard.

And I'm Amanda Aronchik. Every industry has had to reckon with a digital version of itself. In the world of books, the technological transition has been brutal. And now all the players feel like they are fighting for their very right to exist. Today on the show, how a tiny little change, a book on a screen, threw an entire industry into war with itself. You may have heard our episodes about starting Planet Money Records, but you didn't hear everything. How about Money Planet Records? Econ Pops? Squirrel Tunes?

Naming a record label, for instance? Harder than it sounds. Elastic Good Records. Now that's what I call lucrative IP. Nice. I also like Alan Greenspun Records. That's pretty good. That's a very good one. Inside the launch of Planet Money Records.

That's in our next bonus episode. Sign up to hear it and support public media in the process at the link in our episode notes. Now we are going to hear from the two sides of this war in the book world. There's the libraries and the book publishers. We're going to start with the libraries. Libraries are led by people who want to get information to the public. People like Michael Blackwell. When he was younger, he was thinking about what

to do with his life, and he had this lightning bolt moment. I know I love to read. I'll become a librarian. So he did it. He became a librarian, And now he's the director of a county library in Maryland. But librarians don't actually do what he thought they did. I've never been paid to read on the job. Libraries sit around reading books. That would be a lovely career, wouldn't it? Oh, it would. But Michael didn't get to read books in a comfy chair all day.

Regardless, he still loves his job. And when he started as a librarian, book world was peaceful. Libraries and publishers living in harmony. Which is kind of amazing if you think about it, because the library is a strange beast. It is an institution that gives away things you'd otherwise have to go pay money for. Like, how are libraries even allowed? things you'd otherwise have to go pay money for. Like, how are libraries even allowed? Shouldn't that violate copyright law? Michael says, nope.

In fact, library lending is protected by copyright law. We own that content. We can freely lend it to anybody. And that's a legal protection, right? Yes, that's enshrined in the Copyright Act. This is called the first sale doctrine. Someone who buys a book can do whatever they want with it. They can display it, they can lend it, they can sell it. And this rule is why these strange things called libraries can exist.

This arrangement has been true for so long that no one in the book world questioned it. The ecosystem was in balance. This was when libraries mostly dealt with physical books. Then, in late October 2008, the e-book, a new technology that had been trying to find its way for a few years, finally gets its moment. Its Oprah moment. Hey, Oprah!

All right, so here we go to Kindle class. Oprah hosts a Kindle class with, who who else but Amazon CEO Jeff Bezos. Now, they're on stage and the studio audience, they're each dutifully holding Kindles. Bezos is trying to explain how to use this new device. It's like weirdly bad at it. To wake it up, you hold down the Alt key. The Alt key is the one on the bottom left. And while you're holding the Alt key down, press the font size key.

It's on the lower right. Oprah's looking a little skeptical. She keeps having to translate from Bezos into English. After a few minutes, though, Oprah appears to be convinced. Yeah, Kindles seems like a great new way to read books. Unbelievable. It's fantastic. I hope you guys enjoy it.

I think you will. Thank you. With that sprinkling of Oprah's magic dust, the e-book had finally arrived. But with it came this problem, which upset that balance that libraries and publishers had found. Because, of course, e-books are different from physical books in two specific ways that are really important for libraries. Number one, e-books never wear out. Electronic files have infinitely long lives. And I'd never really thought about this, but physical books have a shelf life. Michael, the librarian, He knows this well. A typical circulation period for a quality hardcover, somewhere between 30 to 100 circulations, and it's probably going to wear out.

What are some of the worst things that you've seen when you've gotten a physical book back at the library in terms of wear and tear? Oh, well, you know, the brand new book with the coffee stain on it, dog behavior books that come back chewed up. And I have seen that. It didn't work. Yeah, potty training books that you're wondering exactly what is on them.

God. Now, e-books, they exist up in the cloud, away from the menaces of coffee and puppies and peeing babies. Okay, so that's one key difference between e-books and physical books. The second difference, a physical book can only be lent out to one person at a time, which means if libraries want to lend them to multiple people at once, they have to buy multiple copies. But an e-book, in theory, a library could buy one copy, put it up online, and thousands of people could read it at the same time,

which starts to seem a little unfair to authors. Thousands of people sharing one single library book? So libraries and publishers collectively agree. Let's all just pretend that e-books are still book books, subject to the rules of the physical world. Because the physical world, that has worked for us for generations. Now, because e-books are digital, they don't fall under the same copyright rules as book books. Instead, like a lot of digital media, they are handled by licenses. So instead of being able to buy an e-book, we have to license it under terms set by the publisher. And librarians and publishers agree to some restrictions on those licenses.

Restrictions that make e-books more like book books. First, they agree to limit the number of people who can borrow an e-book. One person using it at a time, the same way that one person would check out a physical book at a time. If libraries want to give the book to multiple patrons at once, they will have to buy multiple copies. And second, libraries can't just lend out an e-book infinitely. There's a limit. For example, HarperCollins books can be lent out 26 times. After being loaned out 26 times, the e-book disappears from the library's catalog, the same way that a book book would eventually have to be taken off the shelf when it wore out. The library will have to buy the e-book again if they want to keep lending it out. Okay, so libraries and publishers have found a new balance. It's a little weird, but it works.

Then in the mid 2010s, Michael watches as something changes. Two big things happen. Number one, publishers push the price of their e-book licenses way up. E-books used to cost about the same as physical books, which for libraries was 15 or 16 dollars. But at that time, they start climbing to $50 or $60. And publishers add what Michael felt at the time was this totally arbitrary new term. The license is going to expire after two years, even if no one checks that book out. For a small library like Michael's, this means he suddenly has to spend way more money on e-books. We've got fairly limited budget.

It's about $400,000 a year. Basically, if you spent your entire catalog budget on e-books, you would get 8,000 books, basically, in a year. Whereas with a physical book, you could, you know, buy almost three times as many books. That's correct. At this point, librarians are getting angry. Then in 2019, there is another huge change. One of the major publishers, Macmillan, announces that it is going to introduce what librarians called an embargo. Macmillan said when a new book comes out, libraries can only get one copy of an e-book for the first eight weeks after release,

which is like obviously the biggest time for a new book. This would mean that a lot of library users would go to borrow that new book they're super excited about, and then they would join the waitlist. And people would look at, well, I'm number 2,342 on the list for this in, say, a large library system and be discouraged. Michael is like, this crosses a huge line. Libraries have always been able to decide what books they want to buy. Libraries exist to give people access to those books. And now Macmillan is saying, we decide what books you can access and when. And Michael's like, what?

Just so publishers can rake in more money? To Michael, this plan threatens everything libraries stand for. We can no longer fulfill our basic mission of sharing information. And it basically completely undermines the library's reason for existing. So Michael and a group of librarians decide they are not going to take it anymore. The American Library Association starts a petition. The goal? Get Macmillan to back down. Drop the embargo.

They get over 160,000 signatures online. And then they're like, let's bring these digital signatures into the physical world. They print out all the signatures, thousands of pages, and stack them up into boxes. Then, on October 30th, 2019, the librarians storm Macmillan's offices in Manhattan. By which we mean they very respectfully, presumably quietly, hand-deliver boxes of signed petitions. These are, after all, librarians. petitions. These are, after all, librarians. Word comes up from the lobby that there's a bunch of people outside delivering their boxes of signed petitions to, you know,

horrible John Sargent at Macmillan. This is horrible John Sargent at Macmillan. He was the CEO of Macmillan at the time, and he was the man behind the embargo and the price hikes and all of Michael the Librarian's e-book problems. At that moment, October 2019, he is public enemy number one for America's librarians. At the peak of it, I was probably getting 15 or 20 letters a day. And they were nasty, you know, pure vitriol. But John, he defends everything he did in this e-book fight. After the break, we hear the publisher's side of the story. So we've heard the library's side of the story.

Now it's time to hear the publisher's side, or at least a publisher's side. John and Macmillan was the most aggressive of the publishers when it came to library e-book lending. Other publishers were maybe more diplomatic with libraries. But most of the big shops have followed similar policies of raising prices on e-books. similar policies of raising prices on e-books. And we'll preface this by saying that a funny thing with this story is that everyone at some point talks about how much love they have for all the other parties involved. Authors love libraries. Publishers love libraries. Libraries love authors. And everyone hates Amazon. Amazon supports NPR and pays to distribute some of our content.

John, the publisher, he says he loves libraries too. A ton of people in publishing had grown up spending their time in libraries and hugely passionate about libraries. So it was always a, the thing was always, we love libraries. We want to do everything we can to support them. But, John says, that feeling the libraries had that this whole system was a threat to their existence? He's like, no, no, no. Libraries are a threat to publishers. John's problem with e-books and libraries? It is too darn easy to get them. That really becomes true for John in the 2010s,

when a new app comes along called Libby. Libby, for those who don't use it, is an app that lets you search your library for e-books and then easily sync them and send them to your e-reader. The app makes it incredibly easy to borrow books and place holds, much easier than when books were all physical. In the old days, I want to check a book at a library. I get in my car, I drive over there, I go into the library. I find the book. I take it to the front. Take it home. I'm three quarters of the way through. My two weeks is up. What am I going to do? I got to get back to the library and check it out again. There's a waiting list. I can't do that. And then, okay, I'm just going to keep it. And then here comes your library

fine. With eBooks, there is none of that. Suddenly, it's free and it's frictionless. Frictionless. Great for readers, bad for publishers, John says, because people can so easily get the book without paying for it. Sure, sometimes there's still a wait list, but some people have figured out ways around that. I have a friend right now who has 11 library cards, never waits for a best-selling book, used to spend $500 a year on books, hasn't spent a penny. John says that there are some library branches that only require, like, a cell phone number, no proof of residency. So some people take advantage of that.

Dave? Some people. I mean, I have to admit that I am one of those people on a smaller scale. I have a library card in Portland, Oregon, where I live, and I also have one in Washington, D.C., where I used to live. If something isn't available in Portland, I can maybe get the e-book from the DC library on Libby. Dave hates authors. Anyway, not long after Libby took off, John remembers a meeting of the digital team at Macmillan. They're all sitting around and they are fixated on this one chart. There's a line showing how many e-books are being borrowed from libraries. Each month that line was pretty steady. And then suddenly it started to

curve and then the curve got steep and then it got steeper. And you could see month by month, the curve was not only going up, it was getting steeper every month. And you looked at the graph and you'd say, oh my, if this keeps going, it's going to be really bad really fast. John's like, six more months of this, more and more people getting their e-books from libraries, that's people not buying books, and we're going to be out of a job. If no one's buying books, publishers can't survive, bookstores can't survive, writers can't survive. That author who writes great mysteries, who sells 30,000 copies instead of 300,000 copies, he's not going to have enough money to write anymore. He can't make a living writing.

Of course, we have heard a similar story in the music industry. It is harder for musicians to make money in the age of streaming. John worries that that's what's happening here, that libraries are like the Spotify of the book world. So he decides we have to make it harder for people to borrow e-books from libraries. Overdrive, the company that makes Libby, they reject John's conclusions here. They told us Libby allows people to discover new books and authors, and they argue Libby and libraries help drive sales of print books and e-books. And most everyone in the book world agrees that the transition to digital hasn't been nearly as complete as it has in the music world. People still love to buy book books.

But John, looking at that chart, still sees the growth of e-book lending in libraries as a huge threat. So he has an idea about how to slow it down. Libraries, you know, they are not rich. And the thing that we realize is libraries only have so much money. Right, they have a limited budget. And as long as we kept the prices high enough,

they wouldn't have the budget. This is that moment when Michael the librarian saw his e-book prices start to surge, when he realizes that his library's catalog is going to be a lot more expensive and therefore a lot more expensive and therefore a lot smaller. That's exactly what John, the publisher, wanted. He says it was key to Macmillan's survival. The next thing John did was the big one, the thing that librarians called the

embargo, where they had to wait to buy new bestsellers. John, he calls it windowing. There's a window of time when libraries can't buy these new books. When John announced it, he said in the U.S., 45% of Macmillan's e-book reads were borrowed from libraries. John's like, look, this is how the movie business has done it forever. Something comes out, you want to see it, you can't get it on day one. You're supposed to pay to see it in theaters first. That's how movie studios make money. Why shouldn't book publishers do the same thing?

Librarians did not see it that way. This to them was the nuclear button, and they became quite intense about it. Now we are back full circle to the moment when the world of John, the publisher, slams right into the world of Michael, the librarian. The moment when librarians bang down the door of John's office with their boxes of petitions. We tried to convince John to tell us all about the effect that protest had on them. I'd prefer not to comment on that. What did you guys do with all those boxes afterwards? Probably best if I not comment on that either. John, we have so many questions about all those signatures.

Let's put it this way. I guess it's fair to say the physical signatures had no effect on me whatsoever. The librarian protest fails. John and McMillan are unmoved. The windowing policy stays in place, and librarians will just have to deal with it. Now, this all goes down in October 2019. Obviously, a few months later, the world changes. Of course, everyone has their March 2020 story, and for Michael, the librarian, it was pretty awful. He had to close his library. We put out on social media and our website, and we literally locked the doors. Did you put a sign up on the window?

Yes. Oh, yes. The library is closed due to pandemic conditions. We'll be open as soon as we can. We regret the inconvenience. How was it putting that up? We, I did, I'm probably going to do it again here. I cried. It was so hard.

For Michael, what could be worse than people not being able to use their local library? And then he realizes this e-book fight just became more important than ever. With libraries closed, e-books were suddenly the way that everyone could access books. Now, Michael has only become more motivated. He's become an organizer with a group called Readers First, which pushes for easier and less expensive access to e-books. He actually got Maryland lawmakers to introduce a bill to try to force publishers to lower their e-book prices for libraries.

And then, kind of amazingly, it passed unanimously. But within a year, a judge struck it down. Victory was fleeting. So Michael and other librarians around the country are still pushing for new laws. John, the publisher, he's obviously against any law like that. He says the government shouldn't be setting prices for e-books. Libraries and publishers are just going to have to figure it out for themselves. That is, if they can work together after all of this bitterness.

The days when everyone in the book world just loved each other, those are long gone. At least when it comes to e-books. Authors are really divided by this. Some have come down on the side of libraries, some on the side of publishers. And Michael the Librarian says that these players do all still have the same goal and that there should be a way to work it out. Publishers are not the bad people.

Librarians are not the bad people. Authors are certainly not the bad people. are not the bad people. Authors are certainly not the bad people. Ultimately, we're all part of a great enterprise of providing quality information that is essential in a pluralistic democracy. There has been one ray of hope, one small concession. When the pandemic hit, John, the publisher, sent out a letter on Macmillan Letterhead. It was about the windowing policy, a.k.a. the embargo. And given how many words have been flying around on that topic, it is a very short letter. Two paragraphs. He writes, there are times in life when differences should be put aside.

The letter then goes on to say, basically, OK, we get it. People need access to e-books right now. So we are going to back down. We'll get rid of windowing, at least temporarily. It's a peace offering. John has since left Macmillan. The librarians, they're still bracing for the return of the windowing policy or other changes to e-book licenses. So far, though, that windowing policy has not been reinstated. Do you have a favorite part of the tax code?

A subsection you just can't stop talking about at cocktail parties? Maybe it's benefited you personally, or maybe it's appalling to you personally. Whatever it is, we want to hear about it. Send a voice memo to planetmoneyatnpr.org. You can also find us on social media. We are at Planet Money. Our show today was produced by Sam Yellowhorse-Kessler with help from Willa Rubin. It was mastered by James Willits and edited by Sally Helm. Jess Jang is our acting executive producer. Thanks to Rose Friedman, Ruth Spiro, Drew Richard,

Doug Preston, Mary Rassenberger, John McKay, Terry Hart, and Miranda Childers. I'm Dave Blanchard. And I'm Amanda Aronchik. This is NPR. Thanks for listening. And a special thanks to our funder, the Alfred P. Sloan Foundation, for helping to support this podcast.