Searcher The Millennium Issue Volume 8, Number 1 • January 2000

“And Now, a Word from Our Sponsors...”: Alternative Funding for Libraries
Steve Coffman —FYI, County of Los Angeles Public Library

Traditionally, we librarians have tied our fortunes to those of the institutions we serve. Academic libraries serve the faculty and students at a particular college or university, public libraries, the citizens of a particular community, and corporate libraries, the needs of a specific company or organization. These linkings may have represented marriages of convenience, but, on the whole, they have worked well for many years. We provided our schools and communities and corporations with the books and other information resources they needed, and they provided us with the resources we needed to do it. Generally our profession has served our institutions well, and while we may not have gotten rich off the deal, we never really had to worry about starving either. If either party ever regretted the arrangement, there wasn’t much they could do about it anyway. After all, whoever heard of an institution divorcing itself from its library and bringing in a new one  ... or vice versa?

All of this worked fine, as long as the library was the only game in town, with no other reasonably competitive source of information to take its place. But such is no longer the case. Today, the institutions we serve can choose from a whole wealth of information sources, including everything available on the Web, online and traditional bookstores, proprietary databases, and much more — and some institutions have begun to choose these sources instead of their libraries. Apple Computer, for example, which once supported one of the foremost corporate libraries in the country, shut its library down in favor of the Web and commercial information sources on employee desktops. The Riverside County Public Library System recently separated from the Riverside City Library with which it had been affiliated for many years, contracting with an outside commercial firm to provide its citizens with library services.

The writing is on the wall. The fundamental assumption that the library and the institution it serves are inseparably beholden to one another is quickly being undermined. Corporate libraries have always operated at the discretion of corporate executives, but now public and academic libraries face competition for their roles. Librarians can no longer take their institutions or their support for granted. To succeed or survive in this brave new world, we must stand on our own two feet. The most critical challenge facing librarians as we enter the Third Millennium is how to generate revenue that can replace the institutional support we once assumed would never stop.
 

In Our Face
Developing a whole new funding model for an entire profession would be a huge challenge, even under the best of circumstances, but it is only one of the serious challenges facing libraries today. Each of us could probably tick off some of them on our fingers easily enough, but Peter Young summarized them nicely in his article, “Changing Information Access Economics, New Roles for Libraries and Librarians,” [Information Technology and Libraries, June 1994]. Sadly, 5 years later, most of the challenges still stand snarling outside library windows.

Young says, “Fundamental changes in the economic structure of library and information services over the past several decades are forcing a fundamental reexamination of the values and policies that serve as the basis for our practices and services.”

He sees four major problems:

Increasing Costs. Between 1963 and 1991, costs of books and serials increased 218 percent and 307 percent, respectively, while budgets increased only 33 to 35 percent.  The situation worsens for public libraries, which spent only about 15 percent of their budgets on books and content of any sort nationwide, and in some states, such as California, that figure slumped down below 12 percent. It will be difficult for us to remain a viable source of books and information to those we serve if we can hardly afford to buy anything.

Increasing Availability. Our money doesn’t go as far as it used to … just at a time when there is lots, lots more to buy. The amount of information available and sought by clients has grown explosively, driven by increased publishing due to the constant development of new research areas and fields of study in the academic area and by the development of new information distribution technologies, such as the Internet, that allow all of us to have things in our libraries we could never have before …. if we could just find a way to pay for them.

Increasing Competition. Everybody has heard how the growth of the Internet threatens to bypass the library as a distribution mechanism. We have already seen the implications this growth had for the library at Apple. Even for traditional library service, outsourcing supplies direct competitors, such as Library Systems and Services Inc., which took over the Riverside County system. Meanwhile new commercial ventures such as Barnes & Noble, Borders, and others have co-opted the friendly reading room of the ideal library and re-packaged it into beautiful retail stores that often have more books and better hours than our library facilities offer. No wonder writers like Sallie Tisdale and others, not to mention a growing number of our patrons, see the new super bookstores as a lot like libraries — only better.

Stagnant or Declining Revenues. Young points to “a growing reluctance or inability of public support sources to provide sufficient resources to maintain our libraries as they are … to say nothing of meeting the demands for new services and resources … or to respond effectively to our growing competition.” No need to dwell on this one for anyone who lives in California, the birthplace of the Proposition 13 tax limitation movement. While some communities have begun to open up their taxpayer wallets to libraries, e.g., the recent bond election in Seattle, the big picture shows stagnant or declining revenues. Publicly funded libraries also find themselves facing increasing competition from other critical public sector institutions, such as education, prisons, and healthcare, for the very limited amounts of public funding available. The situation should only worsen as people come to think of the free Web as the primary information utility and begin to question why they should continue to pay taxes to support what appears to be an inferior information source housed in a building downtown, possibly in an area that nobody goes to much anymore.

Not a very pretty picture. The situation cries out for innovative solutions and new approaches to how we think, what we do, and how we will pay for it. As a profession, we need to reach out for radical thinking to find those solutions.
 

Intrapreneuring
Gifford Pinchot studied how small, entrepreneurial firms with limited resources and lots of big, new ideas outperformed large corporations having massive amounts of capital, people, and technology at their disposal. He found the primary assets for the small firm lay precisely in those fresh ideas and a fire in the belly that supplied enough energy to trump the massive resources of a hide-bound corporation. To compete effectively with small, aggressive upstarts, Pinchot found large corporations needed to foster some of the same free-wheeling, rule-breaking, entrepreneurial approaches to problems. He labeled this approach “intrapreneuring,” because it exercised the individualistic entrepreneurial mind-set inside a corporate culture. He also went on to make lots of money lecturing about how to do it.

Pinchot came up with a test to help people assess if they had what it took to be an intrapreneur and to create innovation within the organization. Here are some of the questions he posed.

Pinchot’s Test
1. Do you think about business ideas while driving to work or in the shower?
2. Do you get annoyed by other’s incompetent attempts to execute your ideas?
3. Do you get in trouble from time to time for doing things that exceed your authority?
4. Does your desire to make things work better occupy at least as much of your time as fulfilling your duty to maintain things as they are?
5. Do people often tell you that you need to get a life?

If you answered, “Yes” to all of these, you look good for intrapreneuring. [To find out more about your intrapreneurial talents, check out Pinchot’s Web site at http://www.pinchot.com.]
 

Intrapreneurial Projects in Libraries
Whatever you want to call them — intrapreneurs, innovators, peak performers, mavericks, or loose cannons, the library profession sorely needs them, because there is no room anymore for “business as usual” policies at any library or information organization. The only thing we really know for sure at this point is that what we are doing now is not what we will be doing in the future. What approaches might work? Let’s look at three innovative models for improving the way librarians deliver services and fund costs. The first of these, the use of fee-based services in libraries, already has a long and controversial history in our profession. In the other two, we’ll examine how we might take advantage of the Public Broadcasting System’s funding models for raising revenue and the super bookstore operating models to reduce costs.
 

Fee-Based Services in Libraries
When it comes to fee-based services, I have some personal experience to offer. My staff and I operate FYI — the fee-based information and research service of the County of Los Angeles Public Library. For some years, I have read and listened to those who claim to have found a “quick fix” for all of us in fee-based services. Having worked with fee-based services since 1988 and having made a lot of speeches about these services during this period, I have to tell you that neither I, nor any of my colleagues running the more than 400 other such services in libraries around the world, have ever thought fee-based services represent a quick fix to general library funding challenges. Heck, FYI has been around for more than 10 years now, and we’re still trying to get it right. I do not see fee-based services as presently constituted as offering a significant source of net revenue for most libraries.

However, I do see fee-based services as an integral part of modern library service. And those who avoid offering them on — in my opinion — wrong-headed professional ethical grounds do a disservice to their patrons and their communities.

Let me explain. The primary purpose of FYI is not to soak our patrons for whatever we can get from them. The County of Los Angeles Public Library created FYI for the same reason almost all other libraries with fee-based services created theirs. We wanted to find a way to offer our community a broader range of information products and services than we could otherwise afford to provide for free.

At FYI, our motto is, “The Best Information at the Best Price,” and to us, the best price is free, whenever possible. But when free service is not possible, then we owe our patrons the best possible information at the lowest possible cost. See Figure 1 for a more graphical picture of this.

The inside circle in this diagram represents basic library services. Here we provide everything patrons might expect to find in a traditional library, from book lending to children’s story times, and we provide it for free. This is the model at the County of Los Angeles Public Library and at almost any other public library that operates a fee-based service. But we don’t turn our backs on patron information needs when these needs reach beyond our tax resources. When a patron/client comes to us and asks for a patent or trademark search, custom demographic reports, or any of the dozens of other products and services FYI offers, we help them: The fee-based service supplements basic library offerings; it doesn’t substitute for them.

How do we help our clients?

These services are not designed to generate a profit, nor should they be. The purpose of the service is to improve access to information, and it contradicts that purpose to add on extra fees for revenue generation.

Most librarians managing fee-based information services try to recover the overhead costs of providing the service, but nothing says we even have to do that. In fact, I could make a better case to justify subsidizing the overhead costs of providing a demographic report for a businesswoman getting a new venture off the ground than for subsidizing the overhead costs to circulate yet another copy of a best-seller.

Just so you don’t get the idea that this represents just another deviant philosophy dreamed up in L.A. (AKA La-La-Land), let me point out that this same model has been used by all kinds of other public and non-profit institutions for some time now.

Take my daughter’s school, for example. If anything is even more critical to the functioning of a democracy than the library, it would be the public schools. Mountain View School, which my daughter attends, takes that responsibility very seriously. The school provides excellent educational services using taxpayer dollars. However, Mountain View also provides a range of fee-based services to meet the needs of parents and students that go beyond the basic educational function of the school (see figure 2).

For example, the school offers a reasonably priced school lunch program for those who want to eliminate the hassle of trying to prepare a nutritious brown-bag lunch while getting the kids out the door on time. There is an excellent after-school child care program for parents who don’t get back home until 6:00 in the evenings. And the school offers a broad range of after-school classes, such as jewelry making, “Fun with Stamps,” and the like, to supplement the basic educational program and to give the children a chance to have a little fun besides.

Like the library, the school offers all these services at very reasonable fees. The school doesn’t make a profit, but the school’s mission to offer programs its customers want is fulfilled.

You could claim, as some have, there is no place for fees in publicly supported institutions, but you would have a tough time getting anyone in our valley to agree with you. Parents are just happy that they don’t have to get up at the crack of dawn every day to pack a lunch for their kids and that there is somebody at the school to take care of their kids until they get home at 6:00.

In short, traditional fee-based services can do a lot to help libraries and other institutions provide a broader range of services. But fee-based services are not a panacea for all that ails us, nor a quick fix, nor a significant source of revenue for libraries.
 

The PBS Model
Overall, public libraries have done a pretty miserable job of developing new revenue sources of any kind. A Public Library Survey from the National Center for Education Statistics with 1996 data showed that public libraries still depend on the government till for 92 percent of their revenues. The situation is not much better for academic libraries  and is actually worse for most corporate libraries, which rely almost exclusively on parent companies for funding. As always, some exceptions prove the rule. The Research Libraries of the New York Public Library rely almost entirely on a massive endowment, not taxpayers, for their funding.

But on the whole, the evidence indicates that if we want to explore new revenue opportunities for libraries, we will have to look outside the library field. The good news is, we don’t have to look very far.

Literally hundreds of thousands of public and quasi-public institutions hustle regularly to raise revenues and to find new ways of supporting and expanding programs. These include such venerable institutions as the Smithsonian, which offers free admission but maintains dozens of well-stocked retail stores, issues a catalog of goods for sale, publishes a magazine, and maintains a travel program, among dozens of other ventures. Many other museums have developed similar revenue programs. Public schools and universities have developed a wealth of new revenue programs, ranging from extension classes, to retail stores, to private training classes for corporations, to branded athletic gear. The same and other funding go to orchestras, parks and recreation departments, municipal art galleries, and thousands of other cultural institutions which have learned it is best not to rely too heavily on the public purse in order to grow and to thrive in this society. Each of these public institutions receives some tax support, but all of them still hustle to raise money. We librarians could learn from them.

The Public Broadcasting System (PBS) constitutes one of the most interesting examples, in part because of many shared similarities with libraries. Like us, PBS gives away most of its basic programming for free. Like us, the primary mission is educational. Like us, PBS is fundamentally a local institution rooted in the social, educational, and cultural fabric of hundreds of communities across the country. We both provide universal access and lifelong learning to all Americans, regardless of location or circumstance. The noncommercial character, editorial integrity, and independence form part of the PBS service commitment to the public. That last sentence comes directly from the mission statement of PBS, and I consider it a mission statement that any public library director would happily issue.

And like us, back in the ’70s, public broadcasting was primarily funded by tax dollars. The difference is that back in the ’70s, PBS saw the handwriting on the wall and resolved to do something about it by going after individual contributions with on-air pledge drives and station memberships. Membership databases were exploited to seek out additional donations and bequests.

PBS broadened its service areas and its audiences: A larger audience means a larger fund-raising base. PBS also paid closer attention to what the market wanted.

PBS went after corporate money, both through grants and through “enhanced underwriting,” which gives corporate sponsors greater exposure on shows. PBS has gotten involved in all sorts of commercial activities, including the following:

In addition to the individual initiatives cited here, PBS has very effectively exploited its network potential. Instead of each station going it alone, when a successful program is developed, it is made available to other stations so that each station benefits.

Finally, PBS takes the funding issue seriously. The Corporation for Public Broadcasting has set up a Future Fund Grant Program designed especially to support programs to help stations prepare for financial independence. One of the first grants under this program went as seed money for a new Public Radio Book Source program, which will work much like the Public Radio Music Source venture.

Now let’s look at the results of these initiatives. By 1996 public broadcasting stations had increased “Other (non-tax) Sources” by 23 percent, to the point where theses sources now account for more than half of all PBS funding.

With tax revenues remaining relatively stable, this represents real increases to station budgets.
 

We Too
There’s nothing that Public Broadcasting has done that public libraries cannot do.


What If You Ran Your Library Like a Bookstore?
Another approach — reducing costs while maintaining or increasing service. There are two ways organizations can get more money: one is to raise it, like Public Broadcasting, and the other is to keep it, i.e., cutting costs and doing more with the money you already have.

Here we have a lot to learn from others…particularly bookstores. In the March 1997 issue of American Libraries, I published a highly controversial article called “What If You Ran Your Library Like a Bookstore,” in which I compared the operating costs of a typical chain bookstore with those of a comparably sized library. Bottom line: The average chain book outlet costs less than half to run per hour than a library. When we looked at what added value the library provided for all that additional cost, it wasn’t much — at least, not much that the patron appreciated. (When I say this article was controversial, American Libraries received more letters in response to this piece than any other in their history — and all were threatening, from what I hear.)

Let’s take a close look at what would happen if we operated a public library like a bookstore. Basically that would mean replacing the high-priced staff the library employs with the staff operating the bookstore. What would happen? What would be the consequences?

So, as you can see, libraries and bookstores have many basic functions in common.

The shift to a bookstore model would introduce major differences from traditional library operations:

The purpose of this exercise is not to suggest that we should eliminate cataloging and reference services. However, library directors committed to traditional library service might ask themselves which kind of management model patrons and taxpayers would prefer — a library like they have now or a library more like Barnes & Noble.

If we choose to continue reference and cataloging, we should examine these two areas of service closely and ask ourselves if both need to be as costly, if we could not find better and less expensive ways of providing these services, and, most importantly, if we couldn’t make them much more effective and functional.
 

The Bottom Line
These are just three intrapreneuring models for public libraries.

In exploring these models, I think we have uncovered a few lessons for intrapreneuring in general.

1. To think outside the box, look inside other boxes. The public library is not a unique case. All kinds of other institutions exist for similar purposes and in similar environments. We can learn from them.

2.  Question the status quo. The library is a tradition-bound institution. If you want to change the system, question the unquestioned assumptions as your first target. Do we need to do reference the way we do it? Does it need to cost as much as it does? We need to ask fundamental questions and, if necessary, to gore sacred cows.

3. We don’t have to go it alone. With a few happy exceptions, such as OCLC and some consortia, too often library managers have acted as autonomous and isolated institutions — trying and often failing to do everything on their own with very limited resources. When we don’t have all the resources we need to develop really excellent programs, we need to partner with other institutions in the private and public sector to develop successful solutions together. When we build something that works well, we need to make it available to other library managers. That way we can both help our friends and generate more revenue for ourselves.

Finally, the major difference between libraries and the other institutions I have examined in this article is that the others all seem to be out there hustling — trying, failing, succeeding, creating new programs, looking for new source of money, or trying to increase revenue from existing sources. All librarians must give up regretting the passing of a comfortable status quo. In most cases, there is nothing we could have done to save it; in some cases, it wouldn’t be worth saving anyway. We need to focus on new initiatives, on innovation, on intrapreneuring.

To survive and then flourish in the coming years, we need to hustle. No one can say now whether we will ultimately succeed, but even if we do fail, at least it won’t be from lack of trying….

And who knows, maybe if we are not afraid to change the system and we work real hard and the Information Gods smile upon us, we will all thrive in the Electronic Age. But even if we fail, going down swinging will look great on the resumes we show to our new bosses, the ones who will double our salaries.
 

Steve Coffman is Director of FYI, at the County of Los Angeles Public Library (http://colapublib.org/fyi).
His e-mail address is: coffman@cerf.net
 

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