As rumored back in September, Amazon (NASDAQ: AMZN ) is indeed opening the very
first commercially operated eBook library . The Kindle Owners Lending Library
works a lot like Netflix (NASDAQ: NFLX ), if you replace videos with digital
editions of popular books. Subscribers to Amazon Prime, the companys premium
subscription service that also grants access to a library of streaming movies
and TV shows, as well as discounted shipping rates on physical goods, will be
able to borrow books from the library for a month at a time. According to
Amazon, the library will offer thousands of titles, including bestsellers like
Moneyball and Water for Elephants , with publishers like Scholastic (NASDAQ:
SCHL ), Bloomsbury and Simon & Schuster. The Lending Library is one more feather
in the expansive cap that is Amazon Prime. Amazons premium subscription service
is gaining new content support by the day. Disney (NYSE: DIS ) announced Monday
that it is re-upping its streaming video contract with Netflix but it also is
bringing the same ABC and Disney Channel content to Amazon Prime . While Amazon
doesnt reveal its Prime subscription figures (much like its Kindle device sales
numbers), Piper Jaffray analyst Gene Munster estimated in September that Prime
has grown from 2 million subscribers in 2009 to 5 million in 2011 . The Lending
Library should lure in existing Kindle e-reader owners to the service a boon
considering Amazons revenues increase 1.5% for every 1 million new Prime
subscribers, Munster says. With the Lending Library, though, Amazon is (no pun
intended) playing with fire. The eBook trade is a rapidly growing business, but
a young and fragile one. Total eBook sales in the United States have grown
1,300% since 2008 , with sales across the entire e-publishing industry totaling
$878 million in 2010. For Amazon, which announced in May that it sells 105
eBooks for every 100 print books , that growth is exciting but it isnt exactly
filling the company coffers with loot. Amazon pulled down $10.88 billion in
total revenues last quarter ( a disappointing quarter at that ), so the eBook
trade clearly isnt raking in a huge percentage of the companys sales. The
Lending Library could stunt Amazons eBook trade before its greatest earning
potential is met. Russ Grandinetti, Amazons vice president of Kindle content,
told Independent.ie in April that the average Kindle owner buys three times as
many books as the average Amazon customer. That average Amazon customer at the
end of 2010 was spending $60 per year on eBooks more than three-quarters of the
$79 annual subscription to Amazon Prime according to Forrester analyst James
McQuivey. Given the aforementioned rate of growth for eBook sales, it seems
Amazon could be making more than the cost of a Prime subscription with eBooks
alone especially off current Kindle owners. Why limit that opportunity by
giving away access to books that customers already have proven theyre willing to
purchase individually? Endangering its own growth is dangerous enough, but
Amazon also has to worry about how diminishing individual eBook sales will make
the Kindle store appear compared to Apple s (NASDAQ: AAPL ) iBookstore and
Barnes & Noble s (NYSE: BKS ) Nook business. If publishers see stronger
individual sales from there, they might be tempted to offer those businesses the
sort of exclusive content deals Amazon currently enjoys . For consumers, the
Lending Library is one more appealing feature of Amazon Prime. For AMZN
shareholders, it represents a risky change to a growing, promising business. As
of this writing, Anthony John Agnello did not own a position in any of the
stocks named here. Follow him on Twitter at
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