Books by Mail--My Kind of Library Service
I think the main reasons this program is actually cost-effective for the library in question are the sheer size of the library district, the number of library users who live in rural areas, and comparing the cost of mailing books to the alternative cost of rebuilding most of their library branch buildings and building new ones; some of those factors might not offset the costs as much in a smaller, more densely-populated urban area. It also helps that they've been doing this for decades, so the costs are already factored into their budget.
(It may be cheaper to mail books than to build a new building, but for a library to start doing this, the money to pay the outgoing postage still has to come from somewhere--donations to cover a service usually aren't enough to entirely cover all of the service's costs, and most public library budgets are so tight that this would mean either cutting staff, cutting hours open, or cutting back on the number of new books that the library can purchase.)
Feudalism: Serf & Turf