Will Amazon's Lending Library Help or Hurt Novelists and Book Publishers?

Early this morning, Amazon

announced its first venture in the world of e-book rentals: the

.

Designed exclusively for Amazon Prime subscribers who own a Kindle (sorry, iPad users – the Kindle App alone will not suffice), the Kindle Owners' Lending Library allows consumers to borrow one book per month without any due dates. Amazon can only offer this option because the books are digital; the company isn't loaning consumers much more than a small e-book file, which will be deleted the moment you choose a new book to borrow. These restrictions – only one book per month, and only one book at a time – is a great way to prevent readers from abusing the system. But it also raises some questions as to what the future of book publishing might look like. Amazon's venture into e-books has already made a significant impact on the industry, more so than the reported impact that

. Many publishers have grown to accept Amazon's digital strategy. But the

reports that none of the six largest publishers in the U.S. are participating in Amazon's latest venture, fearing that it could negatively impact future sales. But will it? It's not as if this is a free-for-all; Amazon purposely implemented two restrictions to prevent it from becoming just that. If consumers were content to read just one book a month, there might be something to worry about. However, those who purchase a Kindle do so because they wholeheartedly love to read. For them, 12 a year would never be enough. Where will the rest of the books come from? Amazon.com, of course, which is the company's obvious goal. According to the Wall Street Journal, Amazon is content to pay a flat rate (or in some cases, the wholesale price for each book borrowed) in exchange for the right to give the book away. Amazon believes that this will drive more consumers to its Prime service and to its Kindle e-readers. If the freebie strategy ends there, then book publishers have nothing to worry about. The problem I see – if any – is that Amazon will expand on this concept with the goal of attracting additional customers and additional forms of revenue. Amazon isn't giving away these books for nothing; it's doing so because it likes the idea of having millions of customers who pay an annual fee of $79 to subscribe to Prime. Assuming this new venture is a success, Amazon may start to think about what could be done to squeeze an extra $20 out of Prime subscribers without causing a

. The answer wouldn't be to raise its annual rates; rather, Amazon could feasibly offer different Prime plans that expand on the content already received for subscribing. One option would be to introduce a special version of Prime for heavy readers, allowing them to borrow books more frequently and hold more than one at a time. To Amazon, this wouldn't be a huge deal because the publisher fees are likely so low that the increase in Prime revenue would more than make up for the added expense. The same may not be true, however, for book publishers. Amazon, like most other companies in the digital age, wants consumers to be okay with the idea of paying continual (monthly or annual) fees for something we do not own. Cable companies like Comcast

and Time Warner

have been doing this for years. Now Spotify is successfully doing it with music (others have tried and failed); OnLive is attempting to do it with video games (others tried and failed); Amazon, Hulu and Netflix

are doing it with films and TV shows; and now Amazon is bringing the digital rental concept to e-books. While there are physical book rental services like

and e-book sharing sites like

, the Kindle Owners' Lending Library is the first major push into the realm of e-book lending. Long-term, Amazon may very well persuade us to spend an additional $20 a year (or more) to gain unlimited access to its “free" books. This is what every tech company is after: guaranteed monthly or annual profits. But I don't think that this is the future book publishers want. For better or worse, the days of digital ownership may be numbered. Consumers may ultimately choose to rent everything. If that's the case, and if publishers are to benefit from this venture, they either need to form their own e-rental services today, or get in good with Amazon to ensure that tomorrow's fees are comparable to what they would have been if people were purchasing their books individually.

If you're bullish on Amazon's latest venture, consider this trade:

If you have doubts about this new e-book offering and think that traditional digital sales will reign supreme, consider these alternatives: