Steve Potash, the bearded, overdrive-wearing chairman and CEO, spent the second week of March 2020 on a business trip to New York City. overdrive distributes electronic books and audiobooks, that is, “digital content”. in new york, potash met with two clients: the new york public library and houghton mifflin harcourt. By this time, Potash had already heard what he recently described to me as “heartbreaking stories” from colleagues in China about neighborhoods being put on lockdown due to the coronavirus. he had a feeling that his business could undergo big changes when, towards the end of the week, on March 13, the n.y.p.l. closed and issued a statement: “The most responsible thing to do, and the best way to serve our customers at this time, is to help minimize the spread of covid-19.” the library added, “we will continue to offer access to e-books.”
The sudden switch to e-books had huge practical and financial implications, not only for Overdrive but also for public libraries across the country. Libraries can buy print books in bulk from any vendor they choose and, thanks to a legal principle called the doctrine of first sale, they have the right to lend those books to any number of readers for free. but the first sale doctrine does not apply to digital content. For the most part, publishers don’t sell their eBooks or audiobooks to libraries; They sell digital distribution rights to third parties like Overdrive, and people like Steve Potash sell lending rights to libraries. These rights often have an expiration date and make e-books in libraries “much more expensive, in general, than print books,” Michelle Jeske, who oversees the Denver Public Library system, told me. digital content gives publishers more pricing power, because it allows them to treat libraries differently than they treat other types of buyers. Last year, the Denver Public Library increased its digital loans by more than 60 percent, to 2.3 million, and spent about a third of its collections budget on digital content, up from 20 percent a year earlier.
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There are a handful of popular eBook vendors, including Bibliotheca, Hoopla, Axis 360, and the Nonprofit Digital Public Library of America. but overdrive is the biggest. is the company behind the popular libby app, which, as the apple app store puts it, “lets you log into your local library to access ebooks, audiobooks, and magazines, all for the reasonable price of being free.” the vast majority of overdrive’s profits come from markups on the digital content it licenses to libraries and schools, meaning these profits come largely from US taxes. As libraries and schools have transitioned to e-books, the value of the business has skyrocketed. Rakuten, the maker of the Kobo e-reader, bought Overdrive for more than $400 million in 2015. Last year, it sold the company to K.K.R., the private equity firm made famous by the 1989 book Barbarians at the Gate. .” details of the sale were not made public, but rakuten reported a profit of “around $365.6 million”.
In the early days of the lockdown, the n.y.p.l. saw an increase in downloads, which lengthened wait times for popular books. in response, it limited readers to three payments and three waitlist requests at a time, and shifted almost its entire multimillion-dollar acquisitions budget to digital content. At the end of March, seventy-four percent of the us. Libraries reported expanding their digital offerings in response to coronavirus-related library closures. During a recent interview about Zoom (another digital service that has proliferated during the pandemic), Potash recalled that Overdrive quickly redeployed about a hundred employees, who would normally have been at trade shows, “to help support and strengthen the increased demand in digital . ” he recalled a fellow executive telling him, “e-books aren’t just ‘one thing’ now, they’re our only thing.”
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Before the pandemic, I had never read an e-book and was not looking forward to it. but, during lockdown, I spent almost every day wandering around my neighborhood with a mask and headphones, listening to audiobooks. I wanted to listen to a human voice and feel the passage of time; libby became a lifesaver. As a dual citizen of the Brooklyn Public Library and the N.Y.P.L., I flipped through library cards, searching for the shortest waiting list. I did the previously unthinkable and spent a hundred and eighty dollars on a kobo. I read more books in 2020 than in years. he wasn’t the only one; Last year, more than 100 library systems borrowed a million or more books from Overdrive’s catalog, with the company reporting a staggering 430 million, a third more than the previous year. (Barnes & Noble, which has more retail stores than any other bookstore in the US, has said it sells about 155 million print books a year.) the explosion of digital lending has helped many readers, but it has also accelerated a disturbing trend. Books, like music, movies, and TV shows, are increasingly something that libraries and readers don’t own, but instead access temporarily, from corporations that do.
The company that became Overdrive began, in the mid-1980s, as a document imaging firm in a cleveland suburb. Potash and his wife, Loree, an academic librarian, had gone to law school at night, and their first clients were law firms that needed help digitizing large volumes of paperwork. Eventually, Harcourt Brace Jovanovich (a forerunner of Houghton Mifflin Harcourt) hired the fledgling company to digitize reference books, and other publishers followed. “It was probably a 10-year struggle to get the eBook concept to take root,” 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 2000s, overdrive helped publishers set up online stores and sold e-books directly to consumers through its own marketplace. the company also persuaded some printers to license their e-books to libraries. At the time, the Big Six publishers tended to sell their products through online retailers, such as Amazon, which launched its e-reader, the Kindle, in 2007. But gradually, the Big Six began selling digital rights to online retailers. libraries under a “one copy, one user” model. as soon as one reader returned an ebook, a second reader could check it out, and so on, with no expiration date. “In the beginning, we were really trying to replicate what happens on the print side of books,” a publishing executive told me. digital books, which in theory could be duplicated for free by any librarian with a computer, would still have waiting lists.
“then we saw the first wrinkle in a copy, a user,” potash said. In 2011, HarperCollins introduced a new loan model that capped twenty-six checkouts, after which the library would have to repurchase the book. publishers soon introduced other variations, from two-year licenses to copies that could be used by multiple readers at the same time, which increased their revenue and allowed libraries to buy different kinds of books in different ways. for a classic work, which readers would likely refer to constantly for years to come, a library might buy a handful of expensive perpetual licenses. with a flashy bestseller, which might run out of steam over time, the library could buy a lot of cheaper licenses that would expire relatively quickly. During the racial justice protests across the country in the summer of 2020, the N.Y.P.L. licensed books on black liberation under a pay-per-use model, which gave all library patrons access to the books without any waiting lists; such licenses are too expensive to use for an entire collection, but can accommodate surges in demand. “At the time of its launch, the twenty-six-circulation model was a lightning rod,” Josh Marwell, president of sales for HarperCollins, told me. “But, over time, the feedback we’ve gotten from librarians is that our model is fair and works well with their mission of providing library patrons with the books they want to read.”
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Over the last decade, publishers and bookstores have consolidated at a rapid pace, leaving a smaller number of companies with a greater degree of influence over what and how we read. In the early days of the Kindle, Amazon undercut many of its competitors, including traditional bookstores, by selling consumer eBooks for just $9.99. in 2012, usa The Justice Department accused Apple of conspiring with publishers to raise the prices of consumer e-books, and Apple later agreed to pay $450 million in the settlement. In 2013, the six largest publishers became five when Penguin merged with Random House. (Now, the Big Five are poised to become the Big Four, if Penguin Random House’s purchase of Simon & Schuster is approved.) Earlier this year, a consumer class action lawsuit accused Amazon of entering into anti-competitive contracts with the five publishers in a “conspiracy to fix the retail price of commercial e-books.” (An Amazon spokesperson declined to comment for this story.)
Libraries now pay overdrive and their peers for a wide range of digital services, from negotiating prices with publishers to managing an increasingly complex digital rights system. During our video call, Potash showed me Overdrive’s eBook Marketplace for Librarians, which can sort titles by price, popularity, release date, language, subject, license type, and more. About 50 librarians are working overtime, Potash said, “each week they select the best ways each community can maximize their taxpayers’ money.” the company offers rotating discounts and generates statistics that public libraries can use to project their future budgets. when i noticed that the overdrive portal looked a bit like amazon.com, potash didn’t respond. later, he said with a hint of pride, “this is like walking through the front door of costco.”
Alan Inouye, senior director of public policy for the American Library Association, told me that consolidation could reduce competition and potentially further increase the cost of library e-books. “Overdrive already has 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 in overdrive last year. But, Inouye added, Overdrive’s influence is an important counterweight to the larger publishers and to Amazon, which dominates the consumer e-book market and operates as a publisher in its own right. (Amazon didn’t make its own eBooks available to libraries until May, when it announced a deal with the Digital Public Library of America.) When I asked Potash about the concern that consolidation could also give too much leverage over the market, he called it “a far-fetched conspiracy theory”. He cited the company’s track record in defending libraries, adding, “I’m a big fan of free-market capitalism.”
To illustrate the economics of e-book lending, the n.y.p.l. he sent me his january 2021 figures from “a promised land”, the memoir of barack obama that had been published a few months earlier by penguin random house. at that time, the library system had purchased three hundred and ten perpetual audiobook licenses at ninety-five dollars each, for a total of $29,450, and had purchased six hundred and thirty-nine one-year and two-year e-book licenses. , for a total of $22,512. Collectively, these digital rights cost about three thousand copies of the consumer e-book, which sells for about eighteen dollars per copy. As of August 2021, the library has spent less than $10,000 on two hundred and twenty-six copies of the hardcover edition, which has a list price of $45 but sells for $23.23 on Amazon. a few thousand people had borrowed digital copies in the book’s first three months, and thousands more were on the waiting list. (Several librarians told me that they monitor hold requests, even for books that haven’t been published yet, to decide how many licenses to purchase.)
High e-book rights prices could become untenable for libraries in the long run, according to several librarians and advocates I spoke with: Libraries, vendors and publishers will likely have to negotiate a new way forward . “It’s not a good system,” Inouye said. “There has to be some kind of change in the law, to restore the public rights that we have for analog materials.” maria bustillos, founding editor of the brick house publishing cooperative, recently argued in the nation that libraries should pay only once for each copy of an electronic book. “The goal of a library is to preserve, and to preserve, a library must possess,” Bustillos wrote. When I asked Potash about libraries and their growing digital budgets, she argued that “digital will always be more profitable,” but acknowledged that if current trends continue, “yes, there is a challenge.”
Future readers may want even more digital content, but it may not look the same as it does now. Audible, which is owned by Amazon, has already made listening to books more like streaming, with subscribers gaining access to an ever-changing catalog of audiobooks they don’t need to purchase separately. “We’ve gone from ownership to access,” Mirela Roncevic, a longtime publishing consultant and librarian, told me. perhaps readers expect books to feel more like websites, and infinite scrolling will replace page turning, as she has in the digital magazine she’s reading now. perhaps readers will want images and videos to blend seamlessly into the text, which will require new formatting. The e-book as we know it “will not last,” Roncevic insisted. lending libraries were once an innovation that helped spread literacy and popularize books. Roncevic wants libraries to continue to innovate, for example by experimenting with new formats and licensing models in partnership with independent or international publishers. “Libraries have more power than they sometimes realize,” she told me.
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