OCLC Offers to Purchase netLibrary’s Assets
Paula J. Hane
Posted On November 19, 2001
OCLC (http://www.oclc.org) announced that it has made an offer to purchase "substantially all the assets of netLibrary and assume certain netLibrary liabilities." Concurrent with the OCLC press release, netLibrary announced that it has voluntarily filed a petition with the U.S. Bankruptcy Court for the District of Colorado for relief under Chapter 11 of the U.S. Bankruptcy Code. The transaction includes a loan from OCLC to fund netLibrary's ongoing operations through the transition period. It will be repaid upon consummation of the asset sale. OCLC's purchase of netLibrary's assets and its operating-funds loan are both subject to the bankruptcy court's approval. The offering price and loan amount were not disclosed, but The Wall Street Journal reported that bankruptcy documents stated an offer of $10 million.
netLibrary (http://www.netlibrary.com), based in Boulder, Colorado, works with over 300 publishers of academic, professional, reference, and scholarly books, and currently provides over 40,000 titles in e-book format. It develops, archives, hosts, and maintains e-book collections for academic, corporate, public, and school libraries. netLibrary's MetaText division creates Web-based digital textbooks that include a range of interactive learning tools.
OCLC company representatives said they could not discuss the specific assets and liabilities involved in its purchase offer, noting that the ultimate disposition of assets lies within the purview of the court. They would also not speculate on how long it might take to gain approval for the purchase.
On October 15, netLibrary had announced its financial difficulties and said it was talking with potential buyers. (See the October 22 NewsBreak at http://newsbreaks.infotoday.com/nbreader.asp?ArticleID=17477) Employees who chose to stick with the company after that date have reportedly been paid $360 per week. At that time, a company representative said that an overwhelming majority of its 230 employees returned to work and that the executive team and board remained intact while searching for a buyer. At press time, I was unable to get an update from netLibrary, but Jay Jordan, OCLC's president and CEO, said that a complement of employees had remained who were still passionate about proving the company's business model. Several media reports now say netLibrary has 130 employees.
Industry observers had considered OCLC to be a strong candidate among potential buyers for the struggling e-book company. A few, however, had pessimistically speculated that no buyer would emerge in these difficult economic times. The luster is also off the nascent e-book business, and much of the hype from a year ago about the e-book's market potential has disappeared.
OCLC has been clearly moving into electronic content initiatives and the two companies have a history of cooperative agreements, as well as sharing a core library market. In June, the companies announced an updated agreement under which OCLC maintains a backup storage repository of e-books sold by netLibrary to participating library customers.
"Electronic books and other forms of electronic content are quickly becoming strategic drivers in the sharing and advancement of knowledge in the digital age," said Jordan. "This potential alliance with netLibrary would advance our strategic directive to deliver technologies and services that support, extend, and enhance the OCLC membership cooperative. E-books complement our growing e-journal collection and provide exciting, new synergies for our cataloging, resource sharing, reference, and digital preservation services."
Jordan said that in the due diligence process, OCLC company executives had talked to numerous publishers and subscribing libraries and spent a lot of time in Boulder. He commented that netLibrary had an excellent team of employees and very solid technology and that it would probably operate as a business unit of OCLC, remaining in its Boulder location. While OCLC has envisioned new initiatives following the acquisition, its first efforts will be to stabilize the netLibrary employees, restart the acquisition of new titles in discussion with publishers, and reactivate the library distribution channels.
Many participating OCLC libraries have purchased netLibrary eBooks and have a vested interest in the continuing viability of netLibrary. William J. Crowe, chair of OCLC's board of trustees, said: "Across the OCLC cooperative, there is strong interest in OCLC's pursuing an alliance that would continue to make netLibrary's e-book collection available. Indeed, 14 of OCLC's 16 U.S. regional network affiliates have arrangements for libraries in their regions to purchase netLibrary resources. The OCLC board of trustees has expressed its strong support for pursuing this proposed alliance with netLibrary."
Library users seem pleased by the alliance and feel it to be a natural pairing. Doris Helfer, a librarian at California State University-Northridge and a columnist for Searcher, said: "Since OCLC has clearly stated its intention to enhance and enrich the WorldCat database content, when I first heard about netLibrary's financial difficulties my first thought was that netLibrary would be a perfect fit for OCLC, so they could provide full-text content and not just bibliographic citations. I guess OCLC saw it as a golden opportunity as well, and it is well within their vision for enriched content."
Others wonder just how "golden" it is. Recent discussions by librarians about netLibrary eBooks on the Digital Reference Services listserv (DIG_REF) indicate fairly low usage and spotty acceptance by library patrons. With the general perception that e-books remain difficult and awkward to read, the best use, according to the comments, seems to be for ready reference and technical materials.
The mission of both companies is to develop products and services for libraries; Jordan stressed that this will not change. In just a few short years, netLibrary has built a solid core of electronic assets and has established close ties to publishers and library customers. While it strayed into selling e-books to the consumer and business markets for a time, it is now solidly focused on libraries. If the deal is approved it will unite the leading e-book provider to libraries with the world's largest library consortium. Headquartered in Dublin, Ohio, OCLC is a nonprofit organization that provides computer-based cataloging, reference, resource sharing, and preservation services to 40,000 libraries in 81 countries and territories.