Rather than checking out tapes of audio books, one library in NY (total random aside: it's a library I used to go to quite often growing up) has apparently started offering patrons an iPod Shuffle with the audio books on them already. They had looked at offering books-on-iPods before, but they were too expensive. The cheaper Shuffle is apparently perfect for holding a single book. In fact, the library says it saves them money, since the electronic versions of the audio books are much cheaper than the CD versions. To make it even easier for people to listen to, they provide cassette adapters or FM transmitters, so people can easily listen to the audio books in their cars. Seems like a pretty reasonable use of the technology... assuming people still go to libraries. Of course, it should also make you wonder why it's okay to loan out an iPod with additional content, but it's not okay to sell one.
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