Cash-strapped states and the rapid advancement of e-books could spell the end to the public library over the next 10 years, turning the community institutions into kiosks at the local mall.
“A public library earns a measly couple of bucks on a long overdue book, an intra-day loan, sales of very outdated books, and from parties that hold instructional classes like defensive driving,” said Brian Sozzi, a retail analyst for Wall Street Strategies Inc. for six years. “On the liability side of the balance sheet, a public library shells out funds for the salaries of librarians and other staff, utilities, books, and various equipment.”
Sozzi, who normally analyzes the likes of Walmart and Target , was inspired to write to clients about this trend after noticing the rapid rate of change in the migration of resources to the Internet among the companies in the industry he covers. (Plus, he loves the public library as a quiet place to work on his notes.)
Brick and mortar retailers such as Saks and JC Penney have been closing stores in the past year and focusing more on their online presence. The most recent example is Nordstrom , which agreed to buy online retailer HauteLook for as much as $270 million in stock last month. Bookseller Borders group has filed for bankruptcy.
But you thought retailers had it bad. The Wall Street Journal reported Wednesday that there will be as much as $100 billion in municipal defaults over the next five years, according to Nouriel Roubini’s consulting firm. To avoid that crisis, states are going to have to look to cut costs in ways that used to be politically off limits because of their benefits to the community.
States are already cutting back hours drastically for public libraries. In 2010, 25 states reported a decrease in public library hours, with Ohio among the worst with a 63 percent cut in hours, according to a report by the American Library Association. A year before, just five states reported a decrease in total library hours.
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Meanwhile, inexpensive e-readers and multitasking tablet computers continue to catch on like wildfire, leaving little reason for the general public to take the time to drive to a library and check out a book that may not be there. In turn, this is also cutting back on the very little revenue libraries brought in to begin with. There are, after all, no late fees for e-books.
The new Amazon Kindle sells for just $139 on the company’s web site. The next version of the iPad, the fastest growing consumer electronic device ever, was unveiled Wednesday by Steve Jobs personally. Not only an e-reader, it is a multimedia juggernaut sporting two cameras and the same $400 price tag of its predecessor.
Sozzi says the best case scenario for the community is that public libraries are transformed into “Internet cafes similar to the ones where gamers spend hours in China.” The cafes would have e-readers for those who could not afford them but also a subsidized Wi-Fi to download a book for those that do. The file, licensed by the state, would expire after a set amount of time.
The worst case scenario is that “all public libraries are shuttered, with state governments devising an e-book database to be tapped into for a fee,” the analyst said.
If you want to stave off this trend, you do not have to visit your public library like Sozzi plans to do this weekend to work on his latest piece, but at the very least you can return that overdue book you’re using as paperweight.
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Trader disclosure: On March 2, 2011, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s "Fast Money" were owned by the "Fast Money" traders; Seymour owns (AAPL); Seymour owns (BAC); Seymour owns (BP); Seymour owns (F); Seymour owns (FXI); Seymour owns (GE); Seymour owns (GM); Seymour's firm is short (POT); Seymour firm is short (SU); Seymour's firm owns (TTM); Finerman's Firm Is Short (IWM); Finerman's Firm Is Short (SPY); Finerman's Firm Is Short (MDY); Finerman's firm is short (XRT); Finerman's firm is short (IJR); Finerman's Firm Is Long S&P Puts; Finerman's Firm Is Long Russell 2000 Puts; Finerman's Firm And Finerman Own (AAPL); Finerman's Firm Owns (BAC) Leap, Finerman Owns (BAC); Finerman's Firm Owns (BBY); Finerman's Firm And Finerman Own (BP); Finerman owns (C); Finerman Owns (GOOG); Finerman's Firm And Finerman Own (HPQ); Finerman's Firm Owns (IBM); Finerman's Firm Owns (JPM), (JPM) Leap; Finerman Owns (JPM); Finerman's firm owns (M); Finerman's Firm And Finerman Own (MSFT); Finerman's firm owns (TGT); Finerman's Firm Owns (WMT); Terranova owns (VRTS); Terranova owns (C); Terranova owns (UPL); Terranova owns (ABT); Terranova owns (MS); Terranova owns (PBR); Terranova owns (BAX); Terranova owns (TEVA); Terranova owns (CVI); Terranova owns (RSX); Terranova owns (SU); Terranova owns (CNQ); Weiss owns (WFT); Weiss owns (BTU); Weiss owns (MEE); Weiss owns (DVN); Weiss owns (COP); Weiss owns (HK); Weiss owns (AAPL); Weiss owns (QCOM); Weiss owns (MSFT); Weiss owns (CSCO); Weiss owns (MXIM); Weiss owns (HBAN); Weiss owns (JPM); Weiss owns (FAS); Weiss owns (AGU); Weiss is short (X); Weiss owns S&P puts
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