Just a thought, but I think to a certain extent, a need for libraries will always exist, but essentially online libraries will fulfill a greater and greater role in the future. One thing though is that I think the notion of the lending library might be a concept that does not translate well into the digital age.
That being said, I think Project Gutenberg and the like definitely are a good start at developing a good online library. For books whose copyright has expired, there is no real need for such a library to loan books. Perhaps DRM could be used to allow books to be loaned, but ultimately, as has been discussed here and elsewhere, DRM really doesn't stop piracy and furthermore, there is no real incentive for Publishers to cooperate with Libraries.
So here are some thoughts.
1. Paper books are probably never going to die entirely. So certainly libraries may remain as lending sources for paper books.
2. Perhaps users can get dedicated library readers. Such readers would allow a user to download a book to the reader and it would delete itself after a certain period of time or after one read (which ever came first). The key would be that it would not allow uploading of the book to a different medium.
3. Perhaps copyright should return to its original roots. I think it is pretty clear that very few books remain very profitable for publishers to keep in print more than 10 years after their publication. Furthermore the few that are profitable actually serve as a disincentive for the production of more books (how many Salinger books have been published? The guy is able to live off of the royalties from Catcher in the Rye... even though there are reports that he has written many, many manuscripts). My dream is that copyrights would fall back to 10 years from first publication. Libraries might not be able to lend books that are still in copyright, but such books might be available for reading on computers in the library and once their copyright expires, will be made freely available via a standard online library. Of course such a policy will never likely be enacted... after all, the publishers would prefer to see 90% of what was written in the last 70 years remain out of print than let the 10% that remain profitable for decades fall out of copyright.
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Bill
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