netLibrary's Financial Woes
In mid-October, Rob Kaufman, President and CEO, put netLibrary up for sale. netLibrary's latest round of funding fell through, leaving the company unable even to fully pay its employees. Starting the week of October 15th, the salaries of all of netLibrary's 230 employees were reduced to $360 per week. The failure to attain additional funding has been attributed to the current poor market conditions and the events of September 11th.
netLibrary's current financial woes were not without some foreshadowing. Buried within an April press release about the company's decision to adopt the Open eBook Specification was the announcement of approximately 90 layoffs. In addition, the number of new titles added to the netLibrary collection has dropped off drastically. Between January and April of this year, netLibrary added on average 1,480 new titles each month. Since May, that average has dropped to only 480 new titles per month.
On October 15th, President & CEO, Rob Kaufman, and Executive Vice President, Rich Rosy, sent an email update to all netLibrary customers. The message states that netLibrary is looking for potential buyers "with interest in the library, publishing and eBook marketplace." In my mind, netLibrary is a hard sell. Although it has one of the best collections of academic and scholarly ebooks, each title is locked into the specific terms of the agreement made with the publisher. In other words, Questia could not purchase netLibrary's collection and provide access to the titles using its current model of unlimited, simultaneous users. Questia could not merge the two ebook collections together without first re-negotiating all of netLibrary's publisher agreements-- no small task!
Meanwhile, access to netLibrary ebooks will continue as normal. netLibrary has in place an escrow agreement with OCLC, and I am sure many netLibrary customers have been digging out their netLibrary contracts in order to see what that escrow agreement entails. Here are some highlights from the escrow clause in the University of Rochester's contract, which is probably similar, if not identical, to the contracts of most netLibrary customers:
- On a quarterly basis, netLibrary delivers a compact disc containing copies of all ebooks, for which the customer is or has paid the Access Fee, to OCLC, the escrow agent.
- netLibrary will also deposit in escrow a "description of the software and other equipment needed for a backup system design to display, and to protect the copyrights of, the ebook"
- "Customer further acknowledges agrees [sic] that the rights provided to Customer under the Escrow Agreement may not include the computer software, hardware or other components of the Backup System, and that such system might not have the same or comparable functionality as netLibrary.com."
- Backup copies of the ebooks must continue to be used by only a single user at a time, "and that any violation of this agreement will be a violation of the copyright...for which Customer will be accountable to the publisher."
My layperson interpretation is that if netLibrary ceases to provide access to its collection, each netLibrary customer will receive from OCLC a compact disc containing all of the ebooks to which the customer has purchased access. The ebooks will then have to be hosted on the customer's own in-house servers. The customer may or may not receive a "backup system" with which to display and control access to the ebooks, and, if a backup system is provided, it may not have the same functionality as the current system does. If netLibrary only provides a description of the software and hardware components for a backup system, then it is up to each customer to build that system.
This all becomes much more complicated when a netLibrary collection was acquired through a consortial purchase. If a group of libraries shares a single netLibrary collection, then it is unlikely that each library would receive backup copies of the collection if netLibrary folds. For instance, in New York, Nylink, an OCLC-affiliated network, would receive the backup collection and not the approximately fifty libraries across New York State that currently share the Nylink-sponsored collection.
netLibrary has not released any additional updates and their website currently contains no information about the company's current financial troubles.