Publishers love variable fee rates. Consumers prefer flat fee rates. Such is life. I don't understand why they are not looking at the renting as advertisement. It would be interesting to see if sales go up as a result of the borrowing. The other problem is that there really is not very many books available (5,000 sounds like a lot, but if you can't find anything...). The last problem is that it is at most one book a month. I can read a substantial book in 3 days.
Of course in this case Amazon is in the middle, right? Suppose publishers demand to be paid by usage. Amazon can still charge their customers a flat fee--it just moves the risk of mis-setting the flat fee onto Amazon rather than the publishers.
Also, consider the incentives that a flat fee system sets up for publishers and writers: if you get paid per title rather than per reader, you're motivated to flood the market with books not to try to write a few really good books that lots of folks want to read.
Your second point is key: the fixed fee plans compensate poor writers as much as excellent ones. With that argument, I think publishers could sell a variable fee.
Maybe there's a slightly more middle ground--pay based on the number of peak _simultaneous_ borrows in a period. Just as a library would have to pay for each physical copy lent, is it too Luddite to suggest Amazon do something similar? Not pay for each borrow, but based on the peak simultaneous borrows?
I don't believe the goal at this point is to be the Netflix equivalent of books. This is an incentive to get people to sign up for Amazon Prime which should translate into sales across the other realms (purchasing, videos etc..). If you look at one book a month that's about $6.50 per month which might still be making Amazon a profit depending on their margins, especially if they purchase other products as a result. This is a stepping stone and a feature of Amazon Prime only - it's not for people that read 10 books a month nor is it to replace their book library.
