A study was conducted to determine if the centralization of playback machine operations for the national free library program would be feasible, economical, and desirable. An alternative model of playback machine services was constructed and compared with existing network operations considering both cost and service. The alternative model was centralized machine storage, repair, and distribution operations. This report presents the findings of the study in three sections. Section 1 presents a summary of the first phase of operations and the study objective for phase two. Section 2 identifies several criteria that are important to the network's distribution (e.g., minimization of delivery time of machines to patrons, labor costs, and occupancy costs); presents a profile of the network, estimates of delivery time, and calculations of the centroid or "center gravity" of the recorded book readership to be close to St. Louis, Missouri; presents one, two, and more than two central distribution centers scenarios; examines prevailing labor and occupancy costs; and describes the best configuration for central distribution. Section 3 presents macro-level operating procedures, workload requirements, resource requirements, and estimated costs for centralized machine operations. The discussion in this section focuses on workload requirements (readership to be served, repairs to be performed, circulation to be generated, inventory to be stored); operating procedures; labor requirements and estimated costs; estimated occupancy requirements and costs (facility space required for machine storage and other than machine storage, total estimated occupancy requirements and costs); and all other requirements and estimated costs. It was concluded that, although the estimated operating costs indicate that both of two scenarios for centralized machine operations would be more expensive than the current system, the national library service should not discard the concept of machine operation centralization, and four reasons are given for this recommendation. An executive summary is provided, and 25 appended tables, charts, and maps provide statistical profiles related to these issues. (MAB)