Washington D.C. Public Library Case Study

Washington DC’s 37% rate of functional adult illiteracy reflects one of the most underfunded and underutilized library systems in the country. In 2004, former DC Mayor Anthony Williams launched a task force in 2004 to examine the DC Public Library (DCPL). In November 2006 the Mayor’s Task Force Report was released, envisioning that:

“Revitalized libraries will offer fresh collections of current books and media, useful standard publications, multilingual materials, GED and SAT practice books, historic documents and records, pertinent online databases, and digital content.”

Unfortunately, listing digital content last is symbolic of the vision for DC libraries. In the 370 page Technical Report, e-books are mentioned only seven times in reference to the future of DCPL collections. Here some of the few excerpts that lay out technology vision for the DCPL in 2010 and beyond:

“[Page 21]: The library should license digital content and make it available to registered borrowers whether they are in the library or using the collection from their home. E-books, digital audiobooks, videos-on-demand, and other digital content should be available for downloading to a customer’s personal computer, PDA,or MP3 player. …

[Page 60]: A ‘virtual branch’ is fast becoming a necessary facility for successful public libraries serving large populations. … A virtual branch can be a full-service location for searching licensed electronic databases, getting answers through an interactive reference service, downloading digital books and audiovisual content, using learning software, and participating in online programs such as presentations and discussions about books and topics of current interest. Also, items in the library’s physical collections can be reserved and, when available, shipped to the user – with any fees charged to the user’s account or credit card.”

It all sounds pretty high tech until you hit on idea of shipping books around the city. In any case, if you’ve lived in DC for long, the vision of a virtual branch probably sounds like science fiction. In fact, the 2010 vision for the DCPL is based on technology that has been used in public libraries around the country for years.
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Playing Catch Up

Several companies including NetLibrary, Overdrive, and Ebrary already have partnerships with public libraries around the world. All three offer a system for libraries to purchase e-books and popular audio book titles, though the technology is not cheap. NetLibrary has a rather shocking price structure. According to LibraryJournal.com:

“NetLibrary… now with more than 100,000 titles, has maintained its one book–one user access model. The company offers two primary purchase models based on title-by-title selection: libraries can subscribe to an ebook by paying the list price of the book, plus an annual access fee of 15 percent of the list price, or libraries can ‘own’ an ebook by paying the list price plus a one-time access fee of 55 percent of the list price.”

Unfortunately, the lack of a significant discount for subscriptions will encourage libraries to purchase e-books. If the library purchases a title, e-catalogs lose many of the advantages of digitization. For example, if econo-star Steven Levitt is heading to Seattle to talk about Freakonomics and 100 people want to read his e-book at the same time, they’ll have to wait. The King County Library System can only lend out 5 of his e-books at a time. E-books are made of 1s an 0s, not hardwoods and glue, so why not simply pay the publisher every time the virtual book is checked out?

Although the NetLibrary subscription model is extortionary, subscription e-books are the ideal model for libraries. E-books require few human resources: three weeks after you check out an e-book, it is automatically “returns” itself to the library by deleting itself (spooky, eh?). A subscription service ensures that libraries pay publishers only when e-books are checked out, so no dollars are wasted on lonely, unread books sitting on dusty shelves. Best of all, 10 of your best friends can check out a copy of the e-book at the same time, eliminating excuses in your book club.

While a subscription service might seem to favor the publishers of bestsellers, it also provides increased exposure to authors of obscure or out-of print books - the so-called long tail. If libraries pay only when e-books are loaned, then there is no reason to limit the size of their virtual catalog. A proper e-book subscription service that costs a public library no upfront fees also reduces guesswork in collections management, enabling a smooth transition in budgeting for a dedicated e-library.
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Leapfrog: DC Should Pursue the First True Virtual Public Library System

DC Public Libraries suffer from several problems that make them an ideal test case for launching a real virtual library: huge deferred maintenance costs, an aging central library, and a population disillusioned by years of neglect to local libraries.

DCPL is too far behind the technology curve to play catch up. Instead they should leapfrog technologies. Statastic proposes that new DC Mayor Adrian Fenty and DCPL Director Ginnie Cooper consider a bold experiment in virtual collections.

The DCPL should start phasing out the acquisition of new paper books in 2008, with the goal of e-books making up no less than 90% of new acquisitions 2013. By 2017, the DCPL should have digitized 90% of its existing collection and sold the millions of hardback books in its stacks to help generate revenue. This will reduce required square footage - and overhead costs - of neighborhood libraries, eliminate the frustration of missing books, and create more space for the computer terminals that are sorely lacking.

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Advantages to the DC Virtual Library

One of the most obvious advantages to a virtual library is the 24-hour access to books that might otherwise be checked out or unavailable. It could also expand the size of the DCPL available collection from 2.7 million volumes to as many as 32 million - every title in the WorldCat system. More titles mean more attention from residents, which increases reading and circulation.

In a city with 17% of its residents and 30% of its children living in poverty, it might seem that DC is not well-suited for e-books. After all, how would someone living in poverty afford a $300 e-reader? And how would they download a book with access to the Internet? Statastic expects the prices of e-readers featuring e-ink to drop to less than $75 within 5 years (we already have $100 laptops), and less than $40 by 2017.

Under this plan, the DCPL would phase in heavily subsidized or free e-readers for every low income DC resident. Children could also use these e-readers in the public schools where textbooks are in such short supply making it impossible to assign homework from textbooks. And assigning a hot new technology like e-readers to under-privileged citizens might just spark their interest in reading.

With the advent of Google Books, do we need a virtual public library? Many DC residents with their own e-readers and home Internet access will soon have access to millions of Google e-books. But the digital divide is real and if public libraries aren’t centrally involved in digitization of books, the gap will widen. As the high-income, early adopters turn toward e-books, wealthy taxpayers might see less value in funding the DC Public Library System (if this is even possible). This would exacerbate already grave funding shortfalls, leaving an underclass with an ignored and outmoded library system.

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E-book Public Library Budget

Free e-readers, millions of e-books… sounds expensive, doesn’t it? Actually it could save taxpayers millions of dollars. The DCPL proposed budget for 2007 is $43 million, of which $19 million is for reference and library collection services. Facilities make up another $9.4 million. All three of these categories will have enormous savings if transitioned to an e-books catalog:

• 1. Book Sale: Bound books would be liquidated, with proceeds dedicated to digitizing rare books and subscription to an e-books catalog.
• 2. Deferred Maintenance: Neighborhood libraries that have been already been closed or that suffer from huge deferred maintenance costs would be sold and replaced by an increased number of smaller, leaner e-libraries that offer better neighborhood access to computer workstations, distribution of e-reader and training and reading programs. Neighborhoods with little Internet access would be served by DCPL e-book kiosks (more on this below).
• 3. Staff reductions: With fewer books to re-shelve and a 24 hour virtual library online, collections and maintenance staff could be reduced. As D.C. Library Renaissance Project Director Robin Diener recently commented: “We have evidence of incredible abuses — people who work for [the library] and draw a salary and rarely come to work. It’s a no-work culture.”
• 4. Private Partners: The DCPL should pursue technology partners such as Google or Yahoo which will be naturally be drawn to the cutting edge, high-profile project of digitizing the library system of the nation’s capital.
• 5. Private & Public Grants: The DCPL’s innovative virtual library experiment will also attract attention from major donors such as the Bill & Melinda Gates Foundation as well as federal grants.

By 2017 when the DC Virtual Library System is in place, there will be some new expenses (2007 dollars):

• 1. New Staff: Tech savvy staff capable of managing a virtual catalog and training patrons on the use of e-books, e-readers, and online catalogs. The new, more expensive staff hired will be offset by staff reductions due to reduced maintenance and collections services (e.g. re-shelving). Reference librarians will still be necessary, though they may take on new roles dispensing valuable advice through online forums. It’s even easy to imagine 24 hour access to an online librarian.
• 2. Subsidized E-readers: Assume that students would be issued e-readers at school. The DCPL would purchase e-readers for any adult with a household income of less than $35,000 per year. Nearly one-third, or about 184,000, DC residents would qualify for free e-readers. If new e-readers are issued every 2 years and the price of e-readers averages $40 in 2017 (it is more likely to be about $15 to $20), it would cost the city about $3.7 million annually to supply free e-readers. Other ways to help defray these costs are to require a deposit or small co-payments from those above the poverty line.
• 3. E-book Subscriptions: Circulation in all DC public libraries is about 1.1 million books. If the DCPL can reach a circulation rate similar to Seattle’s, residents would be checking out 6 million e-books per year, or about 1 book per month for every reading-age citizen. If the DCPL cut a deal with publishers to pay $2 for every book checked out from its libraries, it would cost the DCPL $12 million per year to maintain its e-book collection.
• 4. E-book Kiosks: For residents in neighborhoods with limited home Internet access, DCPL could provide e-book kiosks near public areas like schools or community centers. Pre-distributed e-readers would have RFID technology that identifies the DCPL account. The customer would simply touch the e-reader to kisok to log in. After selecting a title, the user holds the e-reader next to the kiosk for a free wireless download of the e-book. Installation and maintenance could be covered by corporate advertising on the outside of the kiosk.

The total new expenses of subsidized e-readers plus e-book subscriptions is equal to about $15.6 million. Compare this to the $19 million being spent on collections and references this year alone.

It’s important to remember that not all books, documents and historical will be digitized, so there will be still be a need for a central library, whether it is the renovated Martin Luther King, Jr. Library in downtown DC or the new one proposed by the DC Mayor. Either of the central library proposals are would cost about $275 million according to city estimates. Statastic doesn’t prefer one proposal over another, but it is imperative to rethink the needs of a central library with e-books as the heart of the collection.

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Unknowns and Opportunities

There are two unknowns in creating the world’s first truly digital library: 1) are publishers willing to negotiate lower e-books subscription rates, and 2) will the DCPL create its own e-book collection or outsource it?

One major pre-condition for this proposal to succeed is that subscription e-book prices must be negotiated downward. Publishers and authors must be made to understand that low-priced e-book “rentals” in public libraries will increase readership. Publishers will sell higher volumes of e-books, and they can count on a reliable revenue stream.

It is not cost effective for the DCPL to digitize its collection from scratch. Google has already inserted themselves into the e-book value chain and Google is far and away the leader in the number of titles digitized. In fact, Google may be the only corporate partner for creating a virtual public library. According to Jeffrey Toobin in this week’s New Yorker, because of publishers’ lawsuits against Google, they might be the last company to digitize the world’s books:

Google’s advantage may well be cemented if the company settles its lawsuits with the publishers and authors. … [Lawrence Lessig , Professor at Stanford Law School said], “The publishers will get more than the law entitles them to, because Google needs to get this case behind it. And the settlement will create a huge barrier for any new entrants in this field.”

Google will complete digitization of the 6 million books at the University of Michigan by 2010 - the same target year for the DCPL’s modernization. The DCPL should approach Google immediately to negotiate a partnership for the DC Virtual Library.

Are DC residents feeling lucky?

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If e-books have been a commercial flop thus far, then how do Americans access books? In 2004-2005 we were divided equally between purchasing 2.3 billion books and checking out 2.4 billion books from libraries. Libraries remain a critical steward of our world’s knowledge. But even as the world wide web has made information more global, most libraries remain local in their focus.

For librarians, it must seem that the web has turned information gathering on its head. The Internet is a heady young fellow, self-obsessed, self-referential, and unflinchingly modern in its focus (see right). Libraries house history, centuries of wisdom buried deep in stacks, and even deeper in the un-searchable text of yellowing book pages. So how can libraries remain relevant?

Let’s first examine the mission of public libraries versus the mission of major search engines. The following excerpts are from the mission statements of several major libraries and a certain web giant - see if you can distinguish between them (hover over or click the link for the answers):

A. “Helping people advance knowledge to enrich lives”

B. “…to organize the world’s information and make it universally accessible and useful.”

C. “…to sustain and preserve a universal collection of knowledge and creativity for future generations.”

D. “…collecting, cataloging, and conserving books and other materials…. to serve as a great storehouse of knowledge… and to function as an integral part of a fabric of information and learning that stretches across the nation and the world.”

E. “…to create a comprehensive, searchable, virtual card catalog of all books in all languages that helps users discover new books and publishers discover new readers.”

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Private Sector Libraries

Clearly the missions of Google (and other search engines) are converging with those of the leading libraries. Google recognized this as an opportunity and launched the Google Library Project in late 2004. The project started with five major library partners, but has since extended to 11 libraries in three countries. Google is digitizing the contents of prestigious libraries such as Harvard, Stanford and Oxford, increasing access to tens of millions of unique books that were once accessible only to a small, elite group.

Google spends between $10 and $30 for every book it scans. The entire project, which will span at least a decade, will only cost Google the equivalent of its 4th quarter profits in 2006. Not a bad investment for the web giant.

Google has already made these books available on its Google Book Search, a fascinating portal that for the first time in human history opens up rare and not-so-rare books to anyone in the world. Not only are these books are fully text searchable, Google has recently announced an integration with Google Maps, making librarians, technologists and Google-philes giddy. No more leafing through musty books to find a quote or location.

Google’s Library Project is distinctive from several others such as the Open Content Alliance sponsored by Yahoo and Microsoft because Google is barreling ahead and scanning copyrighted texts. This has not only provoked lawsuits, but more importantly, it has also provided a necessary impetus to publishers and libraries to address the issue of how to manage copyrighted books in the digital era.

Google Book Search allows full text search for copyrighted works by simply telling you that the terms you searched for are in the book. Google then provides a tantalizing “snippet view” of the text as if it was torn right from the page. If you want to read the whole book online, however, you’ll have to wait. Rather than selling the e-book, Google paradoxically directs you to amazon.com which will happily mail you a hardback in 5 to 7 days for $21.95.

This is about to change dramatically. On January 21, 2007, Google announced to the Times of London that it would launch an e-book service. Details are murky, but it seems likely that users will be able to purchase all or part of copyrighted books. I can only reiterate that pricing matters. With e-books, publishers can increase the exposure of previously obscure books and eliminate publishing costs. Ideally, this will increase profit margins and create significant savings for consumers. Because digitized books are easily divided, e-books could lead to a new model of micropayments enabling consumers to purchase only what they need, be it a chapter, a paragraph, or even just a quote.

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Public Library Reactions

Google’s mission is not without its critics. Jean-Noël Jeanneney, president of France’s Bibliothèque Nationale wrote a plaintive book called Google And the Myth of Universal Knowledge warning of Anglo-Saxon cultural imperialism and the risk of market-driven libraries:

“As anyone who uses Google knows, what is intrinsic to all the information it provides is hierarchization. Even if there are many pages of results, the searcher rarely goes beyond the first few. …The profit motive will necessarily promote one product over another.”

As long as there have been publishers with a marketing budget, there have been attempts to woo readers. And while the psychological effect of publishers’ advertising cannot be stopped at the door of library, our French friend would like to see it diminished.

There is some merit to this view, but not much. Libraries and library science will continue to weigh market forces against intellectual ones, but this new digital medium should not be made the culprit. If a library were to license, buy, or rent the contents Google’s digital library, couldn’t they simply reorganize it in a neutral, intellectualized way that would make even Mr. Dewey Decimal proud? Or should the public libraries simply create their own digital library system from scratch?

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Public Library Initiatives

Most libraries do see the upside to digitizing their libraries or they wouldn’t be working with Google. In fact, Google recently gave a $3 million grant to the Library of Congress for its World Digital Library Project in conjunction with UNESCO. The project is focused on improving web access to rare materials that, “…are physically stored in geographically dispersed locations, and which, when brought together with other collections through cross-national and cross-cultural multilingual search and browse capabilities, will yield new knowledge and insights.”

The World Digital Library may sound ambitious, but its scope is much more limited than that of Google Books. It will focus primarily on the long end of the tail: rare cultural treasures that most of us don’t use, rather than popular literature that most of us check out from our local libraries.

So we have the ivory tower approach and the commercial approach. Caught in the middle are the libraries that most Americans use.

Is Google the only answer? To be sure, they have a massive head start (see statastic below). In a decade they may have more books in their digital collection than any library system on earth. But if there is true intellectual concern about the earth’s largest library being in the hands of a profit-driven company, why not launch a public initiative? Can the U.S. government even afford it?

It’s all about priorities. If the U.S. government decided to scan and digitize every one of the 65 million books on earth, it would only cost about $2 billion. That’s less than we are spending for one week in Iraq, and it’s less than kids (I presume it’s kids) are paying for cell phone ring tones each year. We can afford it; so far, we just haven’t chosen to.

Even if the public sector did spend resources digitizing, libraries would face copyright issues. Tomorrow I will look at that as well as e-books initiatives at local libraries. And later this week, a case study that imagines the The DC Public Library in 2017.

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Sources and assumptions: Google has not disclosed the number of books it is digitizing or its timeline for completing the project. Early in the project Google claimed that it would scan 3,000 books per day. This figure was used for the low estimate. The high estimate was based on expanded date searches (1500 to 2007) on Google Books that returned about 4.5 million books. This was extrapolated back to the beginning of the project to find the scan rate, which was then used to project the high estimate. Statastic believes that the high estimate is probably more accurate because the 3,000 books per day figure referred to a contract with only the University of California library system. The fact that Google continues to add libraries to the project indicates that Google is likely to accelerate the scanning rate.

In 2004, C.K. Prahalad, a professor at University of Michigan’s Ross School of Business published the groundbreaking book “The Fortune at the Bottom of the Pyramid.” The basic thesis is that multinational corporations (MNCs) have concentrated their sales and marketing efforts on the richest citizens of the world while ignoring the 4 billion consumers who live on less than $2 per day at the Bottom of the Pyramid (BOP).

He asserts that introducing market choice to the poor will free villagers from local monopolists, creating a virtuous cycle of consumer access and improved product quality. MNCs that sell products in this enormous, underserved market stand to make hefty profit. And, as more and more companies turn their attention to the BOP, competition will drive private sector innovations that address the needs of the poor. By giving MNCs an economic stake in this market, they in turn will draw the attention to problems of governance.

Although the work is primarily empirical and draws too heavily from examples in India, the BOP argument is an intriguing one. It eschews the notion that concentrating on the poor should be relegated to a secondary “corporate social responsibility” initiative and takes an integrative approach to the private sector achieving what non-governmental institutions and multi-lateral lenders such as the World Bank have not: pulling billions out of poverty.

We should applaud the BOP adherents for their novel approach, an approach that too closely resembles the idealism typical of a first-year Peace Corps volunteer. It is only after the corruption, complacency, intestinal ailments, and constant economic opacity have wrung out the initial naiveté that the discussion becomes interesting.

And a dose of cynicism is exactly what Professor Aneel Karnani - also of the Michigan School of Business - introduces in a recently-released working paper, “Fortune at the Bottom of the Pyramid: A Mirage.” He asserts that:

“Rather than focusing on the poor as consumers, we need to view the poor as producers. The only way to alleviate poverty is to raise the real income of the poor.”

Professor Karnani’s basic thesis is that BOP de-emphasizes the role of government in providing basic services and that we must focus on building the capacity of the world’s poor by focusing on government failures in education, health, and infrastructure.

Unfortunately, non-governmental organizations have been focusing on failures of government for decades. Billions of dollars have been spent flying experts around the world to bolster child immunization rates, build water delivery systems, and advise on bankruptcy reform. As you can see from the map above, the last 27 years have been lean ones for many in the bottom of the pyramid. This is not to diminish individuals’ efforts or passion. It is only to acknowledge that it is a very difficult goal and multi-lateral institutions do not have a recipe, much less a consensus, of how to foster economic growth.

One of the positive side effects of the BOP argument is that it makes MNCs stakeholders in a new and underserved market. To be sure, there are fatal flaws in the logic and research initiated by Prahalad. But MBAs are new to development and we should embrace that wide-eyed optimism even as we critique shakey methodology.

Is there a Market at the Bottom of the Pyramid?

Karnani points out one inexcusable fallacy in Prahalad’s work: market definition.

Prahalad used the World Bank’s estimates for the number of people living on an income of $2 a day or less (poverty), and $1 a day or less (extreme poverty). Both poverty measures are at purchasing power parity (PPP).

Why is PPP important? Because no matter where in the world you spend $1 PPP it buys the exact same goods, regardless of local price. So that $1 PPP that the extreme poor earn in a day will buy you one loaf of bread in the U.S. Actual prices are much lower in developing countries, so that same loaf of bread might only cost $.10. The market at the bottom of the pyramid will not pay MNCs in PPP dollars; it will pay them in local currency, as Karnani explains:

“[Prahalad] claims that the BOP potential market is $13 trillion at PPP. This grossly over-estimates the BOP market size. The average consumption of poor people is $1.25 per day and assuming there are 2.7 billion poor people, which implies a BOP market size of $1.2 trillion, at PPP in 2002.

“From the perspective of a multi-national company from a rich country, profits will be repatriated at the financial exchange rates, not at PPP rates. In that case, the global BOP market is less than $0.3 trillion, compared to $11 trillion economy in the US alone – making the BOP a difficult place to look or a fortune.”

Another problem is that the poor spend about 80% of their income on food, clothing and fuel. Suddenly the $300 billion market at the bottom of the pyramid shrinks to $60 billion of disposable income at current exchange rates. Spread amongst 2.7 billion people, that’s about a nickel a day for disposable income.

Karnani also takes issue with the number of poor:

“Prahalad states that there are more than 4 billion people with per capita income below $2 per day at purchasing power parity (PPP) rates…. Most researchers argue that the World Bank already over-estimates the number of poor people, with some researchers estimating the poor at 600 million (The Economist, 2004).”

There’s no shortage of poor, I’m afraid. Sanjay Reddy and Thomas Pogge of Columbia University have written a persuasive paper that critiques World Bank calculation of the number of poor in the world. While they give no new estimate, it’s likely that the world’s poor have been undercounted:

“There is some reason to think that the distortion is in the direction of understating the extent of income poverty.”

So the bottom of the pyramid is left with billions of poor who have no money. Does this invalidate Prahalad’s entire thesis? More on that tomorrow.