Very simple: make it possible to loan a digital book to a friend. Not authorize the same book simultaneously across multiple computers on the same account, but actually de-auth it from one and give it to someone else.

IMHO the first service to do this becomes the dominant eReader format and here’s why: this is the last inadequacy that still drives people like myself to purchase physical books. The reading experience of eReaders has become adequate in every other respect and has other added advantages like search, portability, convenience of sync across multiple devices, instant gratification of being able to download immediately, etc.

I use the Mac client to read Kindle books now and I’ve tinkered with the Apple iBooks. Both are comparable but neither offers this ability to pass a book on after you read it. If there were limitless lending then it could be argued that it would wreck the eBook market and create a secondary blackmarket of people scalping loaned eBooks. But it would also cement that provider’s eBook format as the dominant format and force everyone get an account on their system. Because they still control the auth/de-auth lending process they could mitigate this problem by throttling the frequency or absolute number of times a book could be lent.

This opens a lot of doors. A lot more people would start buying eBooks knowing they could later loan them (for me personally there would never be reason to purchase a physical book again). Once everyone is using their format they make it so easy to purchase new books that whatever sales they lose from people passing on a loaned copy would be more than made up for in new eBook sales. They gain the opportunity to sell into a massive new base of account holders who are lured in initially by the prospect of a free book loan from a friend who already has an account. And they get a HUGE amount of useful data from tracking the reading behaviors and the lineage of lending. Lastly, they enable a crazy new capability if they make it so annotations can be separated from the lent copy and shared across other copies. For instance I would love to be able to subscribe to Derek Sivers’ book markups and flip on his annotations to see the notes he made while I’m reading one of the books on his list. This type of “co-reading” makes it possible to read not just the author’s message but select people’s takeaways inline.

With the release of iTunes 10 and the Ping service, Apple has finally added a social layer to its media player. I would expect eventually the social layer which is being rolled out around music will extend to all forms of their digital content be it a book, movie, TV show, song, podcast, or whatever comes next. Once the loaning capability is baked in, game over. Amazon should preemptively strike and enable this for all current Kindle owners. Turn all the old eBooks currently collecting dust on the proverbial digital shelf into a powerful, free viral campaign for its current subscribers to signup their friends.

Is there a flaw in this strategy or does this seem like an obvious move to anyone else?