This is an excerpt from the upcoming second edition of The Global Indie Author, slated for release in October 2012.

A new war is brewing over ebooks, this time between libraries and publishers. Libraries want to be able to buy an ebook once and loan it in perpetuity, “just like with print books,” they argue. This is, however, nonsense: physical books deteriorate, get lost or stolen or damaged, and must therefore be replaced. Digital books do not unless the format becomes obsolete, which is unlikely to happen with the open-source ePub.

Some publishers have thus refused to make their ebooks available to libraries, others only back titles. Some publishers are selling a licence that must be renewed after a specific number of loans, while other publishers are selling the ebook as the libraries wish but at a steep price.

The publishers that do sell to libraries generally use a distributor such as OverDrive, which hosts the collection and the checkout for the library: it is actually the distributor, not the library, that sends the patron the ebook, secured with DRM, then removes the ebook from the patron’s device after the prescribed loan period. This method is cheaper for the library because it does not have to manage the collection or the checkout system. Instead, depending on the publisher’s terms, the library pays the publisher again only if the number of loans exceeds the initial licence or if they want to make additional copies available to patrons. (I would suspect there are ongoing fees, paid to the distributor, associated with managing the checkout system and fees paid to Adobe for each loan, but I cannot confirm what or how much is paid.)

In contrast to this, the Douglas County Libraries in Colorado have developed their own model whereby they purchase ebook collections on a pay-only-once basis, take possession of the digital file, then house and manage the collection themselves on their own servers using Adobe DRM, which the library itself invests in. This allows them to loan the collection in perpetuity without paying any further distributor fees or publisher royalties.

In a similar move, the 220 libraries of the Califa Library Group, a cooperative serving libraries in California, is seeking to ink deals with smaller publishers to buy blocks of their titles for a one-time fee that transfers ownership of the file to the library. In other words, what they have been unable to accomplish with the large publishers, Douglas County and Califa hope to achieve with smaller, perhaps hungrier publishers.

Previously for the indie author, accessing the library market had been a non-starter: none of the distributors would touch indie books, or we did not meet their minimum titles requirement, or we could not afford their fees. Smashwords became the first aggregator to land library distribution, signing on with Baker & Taylor and Axis360; however, the agreements allow the libraries to pay for each file only once and can then lend them multiple times (the Smashwords site does not say how many times; thus perpetuity is implied) though only the one copy at a time. After Smashwords and the distributor take their cuts, authors are paid a mere 45% of list for these sold-in-perpetuity library sales. (There is also a deal with 3M Cloud Library but details are not yet known.)

Smashwords then inked deals with Douglas County and the Califa group, as well as The Internet Archive, under the banner of Smashwords’ Library Direct option. The three deals will see the client buying en masse a collection selected from among the top 10,000 bestselling titles available from Smashwords authors. These Library Direct agreements raise the question about the value of the deal to the individual author versus the aggregator. Smashwords’ CEO and majority owner, Mark Coker, has advised authors not to have great expectations because the value of the deals to the author will only be a few dollars, likely less than $10.00 (this is based on three books selling for $3.00 each, but after Smashwords’ cut the royalty will actually be around $6.00). The value to Smashwords, however, is considerably higher: the three deals have a combined value of nearly $100,000, with a net royalty of almost $70,000 for the authors. That translates into almost $30,000 for Smashwords but only $6.00 for you.

Moreover, Coker has been encouraging his authors to lower their price for libraries so as to enable them to buy more titles, and has implemented a change to the site’s Channel Manager that provides the option for the author to set a separate price for libraries that is not visible to the general public and therefore allegedly out of reach of retailers’ web crawlers. But while that is great for the libraries (they get more titles for the same amount of money) and it is great for Smashwords (it increases the chances more libraries will seek to do business with them), it means even lower royalties for the authors. It also has some concerned that Amazon (or other retailers who use the agency model) will nevertheless find out the price libraries are paying and consider that another “retail channel,” effectively allowing Amazon to exercise their price match policy.

The response to Library Direct has been mixed. Some Smashwords authors feel the deal is blatantly one-sided, while others see all library lending, no matter the terms, as a great way to reach new readers who will then hopefully go on to buy the author’s other books; some of these same authors view Library Direct as on par with offering free books as loss leaders, a common practice among indie authors.

The library deals are new territory for the indie industry, and it will be interesting to hear from authors whose ebooks are selected by Library Direct customers how this impacts overall sales and improves author visibility. It is too early to tell if Library Direct, or any of the library agreements, will be good for indie authors or just another way writers will be robbed yet again.