THE BIG BUSINESS OF LIBRARY E-BOOKS

For the most part, publishers do not sell their e-books or audiobooks to libraries—they sell digital distribution rights to third-party venders, such as OverDrive, and people like Steve Potash sell lending rights to libraries. These rights often have an expiration date, and they make library e-books a lot more expensive, in general, than print books, Michelle Jeske, who oversees Denver’s public-library system, told me. Digital content gives publishers more power over prices, because it allows them to treat libraries differently than they treat other kinds of buyers. Last year, the Denver Public Library increased its digital checkouts by more than sixty per cent, to 2.3 million, and spent about a third of its collections budget on digital content, up from twenty per cent the year before.

There are a handful of popular e-book venders, including Bibliotheca, Hoopla, Axis 360, and the nonprofit Digital Public Library of America. But OverDrive is the largest. It is the company behind the popular app Libby, which, as the Apple App Store puts it, lets you log in to your local library to access ebooks, audiobooks, and magazines, all for the reasonable price of free. The vast majority of OverDrive’s earnings come from markups on the digital content that it licenses to libraries and schools, which is to say that these earnings come largely from American taxes. As libraries and schools have transitioned to e-books, the company has skyrocketed in value. Rakuten, the maker of the Kobo e-reader, bought OverDrive for more than four hundred million dollars, in 2015.

he company that became OverDrive began, in the mid-eighties, as a document-digitizing firm, in a suburb of Cleveland. Potash and his wife, Loree, an academic librarian, had both gone to law school at night, and their early clients were law firms that needed help digitizing large volumes of paperwork. Eventually, Harcourt Brace Jovanovich (a precursor to Houghton Mifflin Harcourt) hired the young company to digitize reference books, and other publishers followed. It was probably about a ten-year struggle to get the e-book concept to grab hold, Jon Nigbor, an early colleague and investor who left OverDrive around 1990 and sold his stake in 2010, told me. It was the twenty-five-year overnight-success story. (Nigbor describes himself as a co-founder of the company; Potash denies this.)

In the two-thousands, OverDrive helped publishers set up online stores and sold e-books directly to consumers through its own marketplace. The company also persuaded a few presses to license their e-books to libraries. At the time, the six largest publishers tended to sell their goods through online retailers, such as Amazon, which released its e-reader, the Kindle, in 2007. But, gradually, the Big Six began to sell digital rights to libraries under a one copy, one user model. As soon as one reader returned an e-book, a second reader could check it out, and so on, with no expiration date. At the beginning, we were really trying to replicate what happens on the print-book side, a publishing executive told me. Digital books, which could in theory be duplicated for free by any librarian with a computer, would still have waiting lists.

We then saw the first wrinkle in one copy, one user, Potash said. In 2011, HarperCollins introduced a new lending model that was capped at twenty-six checkouts, after which a library would need to purchase the book again. Publishers soon introduced other variations, from two-year licenses to copies that multiple readers could use at one time, which boosted their revenue and allowed libraries to buy different kinds of books in different ways. For a classic work, which readers were likely to check out steadily for years to come, a library might purchase a handful of expensive perpetual licenses. With a flashy best-seller, which could be expected to lose steam over time, the library might buy a large number of cheaper licenses that would expire relatively quickly.

Libraries now pay OverDrive and its peers for a wide range of digital services, from negotiating prices with publishers to managing an increasingly complex system of digital rights. During our video call, Potash showed me OverDrive’s e-book marketplace for librarians, which can sort titles by price, popularity, release date, language, topic, license type, and more. About fifty librarians work for OverDrive, Potash said, and each week they curate the best ways each community can maximize their taxpayers’ dollar. The company offers rotating discounts and generates statistics that public libraries can use to project their future budgets. When I noted that OverDrive’s portal looked a bit like Amazon.com, Potash didn’t respond. Later, he said, with a touch of pride, This is like coming into the front door of Costco.

Alan Inouye, the senior public-policy director at the American Library Association, told me that consolidation could reduce competition and potentially drive the cost of library e-books even higher. OverDrive is already a very large presence in the market, he said. The company’s private-equity owner, K.K.R., also owns a major audiobook producer, RBMedia, which sold its digital library assets to OverDrive last year.

To read the complete article, see:
The Surprisingly Big Business of Library E-books (https://www.newyorker.com/news/annals-of-communications/an-app-called-libby-and-the-surprisingly-big-business-of-library-e-books)

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