A few days ago, Penguin pulled out of its partnership deal with OverDrive, the largest provider of ebook and audiobook lending to libraries. OverDrive works with about 7,500 public libraries in the United States, over 1,000 publishers, and has access to over 100,000 works which it lends to library users. The proprietary system has come under a lot of fire because of its use of DRM, but the company has typically been very successful coming to agreements with even the largest publishers.
The news that Penguin would no longer provide its books via OverDrive is another piece in the long and winding discussion over ebooks and their place within the larger context of lending libraries, which provide their content, of course, free of charge. In fact, Penguin had previously removed its titles from OverDrive, only to return them a few days later, although newly published titles were absent. Publishers, content providing middlemen such as OverDrive, and libraries all understandably have their own interests in mind, and some publishers, such as Simon & Schuster as well as Macmillan, don't lend books in this manner at all, while only Random House gives libraries full access to its entire catalogue.
The technical reason for Penguin's retreat is in the process of how books are lent. While OverDrive allows users to download books over the air directly to their devices, Penguin wanted the process to involve a download first to the patron's computer, then to the device, making the lending experience a bit more cumbersome for pretty much everyone involved. Regardless, this is likely not the last move in this discussion as publishers struggle to come to terms with the digital model.
Note: a much fuller discussion of the state of publishing and ebooks can be found on Digital Book World.