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OCLC Completes netLibrary Acquisition, Raises eBook Fees
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Posted On February 11, 2002
After struggling financially last fall and looking for a buyer, netLibrary voluntarily declared bankruptcy in November and gratefully welcomed an operating fund loan and a purchase offer from OCLC (see http://newsbreaks.infotoday.com/nbreader.asp?ArticleID=17459). Now the companies have announced that the sale of netLibrary assets to OCLC was finalized on January 24. The sale includes both the eBook Division, which will become a division of OCLC, and the MetaText eTextbook Division, which will become a for-profit subsidiary. Both operations will remain in Boulder, Colorado.

"netLibrary is an excellent strategic fit for OCLC," said Jay Jordan, OCLC president and CEO. "netLibrary's eBooks will provide synergies in OCLC's core service areas of cataloging, resource sharing, reference, and digital and preservation services, and the MetaText Division will allow OCLC to develop services that will provide new links and synergies involving textbooks, classrooms and library collections." He added: "We at OCLC applaud netLibrary's pioneering efforts in providing digital materials. The netLibrary concept has great potential, and we look forward to working with the staff in Boulder to grow these services."

However, growing these services will involve some changes to the netLibrary business model, based on a reassessment of revenues and customer needs. On February 5, netLibrary president Rob Kaufman sent a letter to all netLibrary customers. In it he outlined the company's goals for the immediate future. "Among these are: reinstating several services that had been temporarily put on hold; working to ensure a smooth integration with the OCLC organization; coordinating efforts with our publisher community to reinstate the flow of new content; and listening to your feedback through our own Advisory Council as well as OCLC's committees."

While he noted the excellent fit of netLibrary's eBooks with the OCLC vision for expanding global access to the world's information, he said that netLibrary had taken a hard look at its business model and its ability to meet customers' needs. To ensure a "strong and stable future," he announced to customers the company's decision was "to raise prices on the portion of eBook fees that covers costs to host, serve, and maintain your collections."

Enclosed with the letter was a document that detailed the revised pricing structure that will take effect on April 1 (available at http://www.netlibrary.com/access_options.asp). Certain conditions for long-term access to eBooks have been changed, and fees will increase for both the long-term and annual access options.

The two payment options available now are Prepaid Ongoing Access and Annual Service Fee. The Prepaid Ongoing Access replaces the former Lifetime Service Fee Prepayment. The change in terminology away from a "perpetual access model" reflects the need to accommodate changing technologies and the potential for additional costs associated with upgrades. netLibrary is wisely covering itself for the future by including some carefully worded clauses in the contract.

Here's the specific wording: "Should market adoption and/or vendor support of the current electronic bookshelf technology change, it may become necessary to adopt a new electronic bookshelf technology. In that instance, it would become necessary to provide libraries with options for either continuing access on a declining platform and/or for migrating some or all of their eBook content to a new platform. Were a technological change of this magnitude to occur, and depending upon the degree of costs incurred to address the change, an additional assessment could be required to ensure forward compatibility of a library's eBook content."

Effective April 1, Prepaid Ongoing Access fees will be 55 percent of the retail cost of the title, payable one time. This is an increase of 5 percent over the fee in the former Lifetime plan. Those libraries choosing the Annual Service Fee payment option will see an increase from 9 percent to 15 percent of the cost of the title, paid annually.

In a telephone interview, Kaufman said the company had come through a difficult time. As a venture-capital-funded company struggling during the downturn in the economy, it faced a "profitability challenge." They are now proud to be part of the OCLC family, a company that is "rock solid and committed to libraries." He said, "OCLC brings us stability." He is also relieved not to be spending his time chasing down venture capital funding.

In addition to the pricing changes, Kaufman also announced the following decisions, based on netLibrary's review of customer needs: "to develop and enhance online collection development and acquisition tools, as well as to provide support in the form of help desks, online training and support, and marketing and promotional support."

While discussions last fall by librarians on the Digital Reference Services listserv (DIG_REF) had indicated fairly low usage of e-books and spotty acceptance by library patrons at that time, at least one major academic user is delighted to have netLibrary operational again.

Dennis Dillon, assistant director for collections and information resources at the University of Texas-Austin, said the library was looking forward to once again making regular netLibrary purchases. "The University of Texas (UT) has been in regular contact with netLibrary and will restart regular e-book purchases within the next 2 weeks. There haven't been any bumps in the road since the OCLC purchase, and, in fact, I can't imagine how any transition could have been smoother."

Dillon said that over the past several years, UT students have used e-books about 40,000 times. In the previous 2-week period, almost 1,800 titles had circulated, with economics and business titles being used the most. He said the library has not done any promotion but that use increases dramatically once the titles are listed in its OPAC.

When asked about the announced pricing changes, he said: "I don't see minor price adjustments as being a significant concern. Of course, I'm speaking from pure self-interest since netLibrary has been well-received on all of the University of Texas campuses, and I certainly don't want to be in the position of having to tell our faculty and students that we won't be able to get them the e-book titles that they've been asking for. If paying a little more for e-books will help ensure netLibrary's long-term survival, then I'm all for it. The practicality of having Web-based e-books from a multitude of publishers delivered through one interface is incredibly valuable to a library like ours."

Kaufman also stressed the importance of getting MARC records for e-books into library OPACs. netLibrary's data indicate that usage explodes once records are included and that e-books sometimes garner two to six times the usage over the hard copy of the same title. He also pointed out that buying an e-book might be more costly upfront than the hard copy, but could prove less costly in the end. He cited a study by Stephen Lawrence (and two co-authors) published in the November 2001 issue of College & Research Libraries that estimated the lifetime ownership costs of a hard-copy monograph to be seven times more than the purchase price.


Paula J. Hane is a freelance writer and editor covering the library and information industries. She was formerly Information Today, Inc.’s news bureau chief and editor of NewsBreaks.


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