eBook Obituaries in Abundance

Over the past few months, there has been a deluge of reports of closures, bankruptcies and layoffs in the ebook industry. No wonder Consumer Reports was prompted to ask "Closing the Cover on e-Books?" (Trends Watch column, January 2002, p. 7) Here is a summary of the woes in the ebook industry.

Questia Layoffs- In mid-November, Questia laid off 72 workers, reducing its workforce to only 68 employees. This follows massive layoffs in May when Questia let go 140 employees. The May layoffs were attributed to a larger than needed conversion staff. Publishers Weekly reports that Questia is attributing the November layoffs to the need to "be conservative with cash" in the current economic recession.* Despite its aggressive marketing campaigns, including ads on MTV and Comedy Central, Questia's customer base simply is not growing at the rate the company expected.

netLibrary Bankruptcy- In mid-October, netLibrary announced that it was actively seeking a buyer due to financial troubles. When netLibrary failed to raise additional venture capital in September, which the company blames on the current instability of the economy, netLibrary was forced to reduce the salary of all 230 of its workers to a mere $360 per week. The situation was made worse when venture capital partner, Parthenon Investors of Boston, filed suit against netLibrary claming that netLibrary overstated its revenues by more than 30%. According to a report in the Rocky Mountain News, Parthenon initially invested $7.5 million in netLibrary, with a contract requiring an additional $7.5 million commitment if netLibrary could generate revenue of at least $3.49 million by the end of March 2000. Parthenon claims that netLibrary improperly counted $300,000 as revenue in order to push the company's revenue to $3.49 million, thus obliging Parthenon to invest the additional $7.5 million. Moreover, reports of bounced publisher royalty checks began to surface.

It appears, however, that netLibrary will be rescued by OCLC (Online Computer Library Center). On November 15th, OCLC offered to purchase netLibrary, and netLibrary has filed for bankruptcy protection. Exactly how the for-profit netLibrary will be merged with the non-profit OCLC has yet to be seen. In the meantime, connectivity to purchased netLibrary collections remains functional and customer service queries are answered, albeit with some delay.

AtRandom Is No Longer- Random House Trade Group announced in early November that it would be phasing out its e-publishing division, AtRandom. Although Random plans to continue publishing ebooks, they will be published under Random's more established imprints, rather than under the separate, e-publishing imprint of AtRandom.

iPublish Closes Its Virtual Doors- Time Warner Books announced that its e-publishing venture, iPublish, will be folding after less than a year. As I previously reported, the idea behind iPublish was to allow a peer-review system to bring to light manuscripts worth considering for publication. Only nine manuscripts were identified through the iPublish process. Although Lawrence Kirshbaum, Warner Books CEO, still believes there is a future for ebooks, the iPublish venture was just too costly. He is quoted by Publishers Weekly saying "We can buy books from agents for $10,000 or $20,000 and it was effectively costing us $50,000 to acquire it this [iPublish] way."

MightyWords Shuts Down- Effective January 12, 2002, MightyWords, an ebook distributor, will cease operations. Surprisingly money, or lack of it, is not the reason for MightyWords departure from the ebook arena. Rather, low demand for digital content was cited.