Netflix for books

PW reports that at least two companies are trying to copy the Netflix business model for books -- i.e. "loaner" books are mailed directly to you to read and return when finished in exchange for a monthly subscription. Booksfree has been around since 2000 and has 96,000 titles in its library. Last month it claims to have mailed out some 40,000 packages to its subscribers. BookSwim is a younger company and only has a few hundred subscribers at this point, but unlike Booksfree it does carry hardcovers in its library.

This is an interesting business model, and it sounds like Booksfree has perhaps found a viable niche for itself. But I suspect the market will prove too small for multiple players. Shipping costs (especially for hardcovers) would seem to be a significant obstacle, and there isn't likely to be much economies of scale as a company's subscribers and library grow. Also, with direct-to-consumer retailers like Amazon keeping consumers' costs down through free shipping promotions and heavy discounting (e.g. see this regarding Harry Potter), the demand for a rent-and-return service will face pressure a lot of pressure. Finally, to the extent that e-books are finally beginning to gain traction, they will also mitigate the need for this kind of service.