Should OverDrive sell itself to America’s public libraries? Any foundation angels care to help?

Update: See positive reaction from Thad McIlroy, a prominent publishing consultant.

OverDrive—the leading supplier of popular e-books for America’s public libraries—should sell itself to its library customers or at least think about it if they are willing and able to buy.

In Rockford, Illinois, a much-needed controversy rages about the local library system’s spending almost a quarter of this year’s $1.2 million acquisitions budget on e-content from OverDrive. Will the nonelite suffer in a recession-battered city of 153,000 with high rates of poverty and joblessness? How many low-income people own e-readers, and can 50 or 100 loaner Kindles really do the trick?

But what about a related question—whether a private company should lord it over our nation’s e-libraries in the first place? Why not sell OverDrive to our public libraries, then, if they can find the financing? O maybe to a nonprofit run on their behalf, with librarians and educators setting the direction and with capable, truly involved business people advising them? Such a transaction would allow OverDrive founder and CEO Steve Potash to leave a memorable legacy to the American people while still reaping financial rewards. In one leap we could be truly on our way toward a well-stocked national digital library system for all Americans.

Granted, past LibraryCity essays have urged the Harvard-hosted Digital Public Library of America initiative to give public libraries an OverDrive replacement. The DPLA has many good points, and I support it, but maybe the real solution is for public libraries or a benefactor of them to buy and improve the real OverDrive (with academic libraries right in immediately or later on). And now here are the reasons why this plan might make sense.

Reason #1: Better library services for the U.S. public

OverDrive has its strengths, such as its recent Kindle-fueled growth and the size of its collection and existing relationships with more than 1,000 publishers and “15,000 libraries, schools and retailers.” But it also has major weaknesses, especially in the technical area. OverDrive’s Adobe-powered digital rights management is a nightmare for many library users, with its device limits and other hassles. Given publishers’ attachments to the here and now, I don’t see Draconian DRM vanishing immediately from libraries. But under public or nonprofit ownership with public libraries in mind, libraries and their users would enjoy more clout against DRM—see Reason #3, “More Bargaining Power.” A library-controlled OverDrive could more gracefully modernize and switch to cloud-based systems that still enforced expiration periods for books but did so without existing DRM’s costs and technological complexities for patrons, libraries, and others. You could still read library books offline through a process known as caching (with time limits). For all I know, the existing OverDrive may be planning to embrace better approaches than traditional DRM; it already has laudably arranged for customers to be able to burn audio CDs for private use. But libraries’ ownership of OverDrive could speed up moves away from Adobe DRM.

Other bits-and-bytes-related reasons exist. The e-reading capabilities of OverDrive software, for example, are inferior compared to many commercial and even free rivals. Yesterday I installed the latest version of the OverDrive app for the little eight-inch Android tablet that I’d snapped up on sale for $80. Finally the software had adjustable line spacing via an update. But even now, despite my vehement pleas in the past for all-text boldfacing capabilities, the company still hadn’t obliged in that respect. Most library patrons might not care. But then they might badly want other wrinkles that OverDrive has not supplied. What’s more, it has yet to enable patrons to use third-party reading software like Bluefire to smoothly check out library e-books without messing with, say, a storage card or a Web browser. And even the Kindle checkouts are more complicated than they could be. Despite strengths in many other areas such as marketing and popularity and breadth of offerings—the reason why a purchase would be attractive—OverDrive lacks all the technical savvy to serve public library patrons adequately.

In addition, the reinvented OverDrive could do a better job with social media than the existing company does. OverDrive would not be just a contractor serving the public and school library worlds and other libraries. It would be the library world itself, at least the public parts; and that would make both core content and annotations more trustworthy. Networked books could especially benefit. Books and the components of them could be online forever via stable linking overseen by librarians answerable to the public. Librarians could also use their new clout to promote nonproprietary metadata, a cause understandably dear to top DPLA leaders.

Also—and not just a minor “also”—public libraries’ takeover of OverDrive would give them more control over acquisitions and over integration with books and other content they developed, including the local variety. OverDrive has been more open in recent years than in the past to content from beyond the traditional publishing world. But under librarian control, OverDrive could show considerably more flexibility. Such control would also mean tighter, more confident integration with such efforts as literacy programs—without so much concern over rising fees.

Better library service could also mean integration with a new rental and purchase service retaining patrons’ annotations and bookmarks (just as Amazon does with individuals who start out reading the same titles as library e-books). Let people also rent and buy books via links to commercial alternatives, Amazon included. But here’s a chance for librarians themselves to enjoy part of the action. Why let Amazon scoop it all up?

Reason #2: More transparency and almost surely lower costs

The new OverDrive’s finances would be more transparent and the math would be more library-friendly.  In 2010, Insight Venture Partners “made a major investment in OverDrive” Just how compatible are Insight’s corporate goals with public libraries’ duty to give the taxpayers a good value? A Kansas library consortium has already moved on from OverDrive or will in the near future; but what about the library systems with different arrangements and legal counsels with less backbone to deal with such issues as the true ownership of e-books? And how about the future? Will OverDrive’s business model, or those of competitors, like 3M, be as library-friendly as a genuine library system with books stored on its own servers? Even “owning” the books more than before won’t be enough. What about all the other issues such as inter-book linking and the related copyright and financial angles?

For now, I challenge OverDrive to open up its financial records for public audit. Hardly likely! With a public agency, or at least a nonprofit working on libraries’ behalf, the mysteries could vanish. I totally agree with a Rockford Register Star reporter on the evils of library secrecy at the local level (like local library activists, the Register Star isn’t enchanted with the process that allowed OverDrive’s e-books to claim to much of the local library system’s acquisitions budget). The same is true at the national one. Why should America’s libraries even indirectly entrust so much of their planning to a private company with a fiduciary duty to serve its shareholders above all?

Reason #3: More bargaining power for libraries

If public libraries or a nonprofit working on their behalf owned OverDrive, libraries could enjoy more bargaining power with publishers and with corporations such as Amazon.

OverDrive is now getting its e-book files for the Kindle–the most popular e-reader gadget—from Amazon.  In fact, OverDrive just points Kindle-owning patrons to Jeff Bezo’s outfit. Along the way, they receive pitches to buy from Amazon, and all kinds of other privacy issues may arise. Meanwhile, because public libraries lack bargaining power, some major publishers either won’t make books available for e-lending or insist on, say, a 26-checkout limit. Actually public libraries need to create a genuine ecosystem to give themselves the clout to deal with publishers and Amazon. I’ve already mentioned the need for public libraries to offer commercial rental and retail services rather than let Amazon and the like claim all the revenue.

Control of OverDrive could help realize these goals. Libraries could even develop their own content to use as bargaining chips with Amazon and with publishers. Also keep in mind that OverDrive supplies e-books to retailers, one more reason why a purchase could increase libraries’ prominence in the publishing industry.

Reason #4: The risk that if public library systems don’t control OverDrive, then Amazon might

Could it be that OverDrive’s affiliate-style relationship with Amazon is really just an an audition for Bezos and friends to buy the company—with nice profits for OverDrive’s current executives and Insight Venture Partners but huge future costs for public libraries?

If I were the ALA or the Chief Officers of State Library Administrators, I would explore the purchase option now before Amazon beat me to it. Don’t delay! The longer you do, the more of OverDrive’s problematic contracts will be signed or renewed with public libraries. I’d work the foundation circuit and simultaneously send OverDrive and Insight a strong message that they would fare better if they did not resist. Remember: While libraries need OverDrive right now, OverDrive needs them. The company relies on the kindness of strangers, librarians, whom it has assiduously wooed over the years.

No, it is not all commerce. Loree Potash, wife of CEO Steve Potash, is herself a librarian by background and may well enjoy courting her peers on behalf of the company, which holds librarian workshops. My intent is not to hurt the Potashes. They kept the faith about e-books for libraries when others were giving up. But now, if the Potashes believe in both e-books and libraries, which I think they do, it seems fitting for Steve and Loree to let go. One way or another, they could still be involved as advisors and otherwise in the reborn OverDrive and leave a shining memory for future generations, just as Andrew Carnegie did. Current OverDrive employees could still have roles. A smooth transition could also befit Insight Venture Partners, whose special limited partners include ex-Goldman Sachs Co-chair and ex-Treasury Secretary Robert Rubin; Steve Friedman, former Goldman Sachs chair and ex-chair of the U.S President’s Intelligence Advisory Board; and Insight cofounder Jerry Murdock, a prominent figure in nonprofit and think-tank circles. Like OverDrive, Insight Venture relies on goodwill, not just cash—one more reason for the involvement of public figures like Rubin. I have no idea whether Insight or the Potashes or others are the majority owners these days, but I can see potential positives here for everyone. If nothing else, remember that OverDrive is just one company in Insight Venture Partners’ multibillion-dollar portfolio.

What’s more, just as I believe that an OverDrive purchase should not gouge the public or a foundation, I’d suggest fairness in the other direction (I won’t mention a specific valuation—though it certainly would be within the buying power of super-rich benefactors). The money could come from a foundation associated with a business-savvy philanthropist like Warren Buffett; in fact, perhaps from a consortium of benefactors, just as the Digital Public Library of America has proposed for its own funding.

*   *   *

Speaking of the DPLA, yes, I have very deliberately proposed that America’s public library systems, not the Harvard-hosted library initiative, control OverDrive directly or through a nonprofit. Later this could change somewhat with a joint public-academic technological organization that truly revamped OverDrive. But it is important for libraries to address OverDrive-related issues now rather than wait for the DPLA to wake up. Separate public and academic systems could still remain for content purposes with lots of sharing and some overlapping board members. But the DPLA as an organization still isn’t responding quickly enough to public and school library needs. This was more evident than ever to me earlier this month when the DPLA’s Audience and Participation Workstream held a supposedly open videocast from Dallas. The audio was abysmal at times, meaning that the openness was far from complete; and for technical reasons, the Net version ended prematurely. Would you believe, the presentation came with obnoxious commercials with the sound turned up, perhaps to coax viewers to subscribe to escape the blare of the pitches.

No current K-12 librarians showed up in person despite invitations to three, and the DPLA let only 20 or so people attend. The 17-member DPLA steering committee lacks any current K-12 educators.

In Dallas, the real agenda was, “How can we bring public libraries into this project and sell them on the idea?” as opposed to, “How can the DPLA and public libraries work together help places like Rockford and the rest of the country?” I wanted to hear plenty about pre-school education and the fourth-grade reading slump and ways for the DPLA to partner with librarians and educators to improve and lower the costs of solutions through technology and new business models and guidance and exchange of ideas. And what about alliances to promote connectivity and free and affordable cost-justified hardware and deal with other access issues for the masses—in short, the very issues familiar to LibraryCity readers?

Let me emphasize that this is tough-love, nothing more. I still believe that the DPLA is extremely fixable and includes bright, well-meaning people, and I badly want Harvard, along with America’s other universities, to help enrich the electronic collections of America’s public libraries and participate in a joint technical services organization and in time help run the infrastructure. I strongly encourage school librarians and other K-12 people to get involved with the DPLA and work to educate it, not sabotage it. But the DPLA leaders will need to meet them halfway for K-12 participation to pay off. The good news is that Harvard Law. Prof. John Palfrey, head of the DPLA steering committee, will be the Phillips Academy Andover’s head of school as of July 1, 2012. I like John’s good intent and his dedication to the DPA. But he is no substitute for educators closer to public schools (yes, “public” in the American rather than British sense). Ideally he could serve on the board of a public national digital library system, help to coordinate it with an academic system, and lead or help lead the latter: he is most capable. Eventually the DPLA is to be replaced with a less Harvard-centric board, as I understand it. So the dual-system governance scenario I’ve described might not be that far-fetched.

But even now, just as in the case of the Potashes, Harvard academics and other universities’ people on the DPLA steering committee should be willing to do some letting go. Despite all the rhetoric, the DPLA is a long way from a true “Public” library organization and a decent OverDrive replacement. Hence the need for public libraries not to wait around for the DPLA, however respected and well-meaning its leaders are. Do America’s schools and libraries really want to see middle people siphon away funds that libraries could save or better spend elsewhere on e-books, audio books, digitized music, and other content?

* * *

One remaining questions would be: What to do with OverDrive’s services for the commercial side of publishing beyond libraries and schools? If need be, they could be spun off. But I’d actually prefer that they remain, as part of libraries’ ecosystem to help them be able to bargain on more even ground with publishers. With the eventual elimination or substantial reduction of the use of DRM—really more of benefit to Amazon and others reliant on proprietary technology than to the publishers themselves—the publishing industry would actually come out ahead in the end under the library-friendly arrangements I am proposing.

Among many, this commentary could be heresy. But it just might be very practical heresy—with the results potentially too promising for the library establishment and others to ignore.

Yes, America’s digital public libraries should be open to the services of private contractors for technical and other specialized services and not simply count on help from academic researchers. But contractors should not lead our e-libraries as, in effect, they do now. An OverDrive purchase could help redress this wrong and give cities like Rockford a lot more for their money.

Note, 1 p.m.: This is an evolving document, and I may be modifying it (I’ve already fixed some glitches). Feedback encouraged via the comments section and email (davidrothman@pobox.com)!

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