OverDrive gets loan of up to $1M from Ohio county with budget-challenged libraries: Taxpayers unwittingly encouraging online privatization of U.S. library system?

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Related: More bargaining power via OverDrive bypasses?

In recent years, the cash-strapped public libraries in Cuyahoga County, Ohio, have resorted to such economy measures as staff layoffs, trim-backs of branch hours, vexingly higher fines, longer waits for books, and, of course, reductions in acquired titles. The state of Ohio hasn’t boomed, either. Maybe the economy will brighten now in the Cleveland area and elsewhere in the state, but I doubt that libraries and other government services there are out of the woods yet.

Why, then, has Cuyahoga loaned OverDrive up to $1M to build a $5-million-plus "global headquarters" on a 12-acre campus, with two indoor basketball courts and a pond, and why has the county granted OverDrive a ten-year tax exemption, while the state has also served up other goodies such as $484,000 in tax credits?

imageDocuments from the city of Garfield Heights and Cuyahoga County (here, here, here, here, here, and here), linked from Meredith Schwartz’s Library Journal piece and Gary Price’s Infodocket blog, supply the official answer along other other details. The J word. Jobs. Hoped-for tax revenue. Fear that hundreds of jobs would go to Florida instead when OverDrive relocated from the city of Cleveland.

But isn’t it possible that the people of Cuyahoga County could enjoy a much better investment return simply by spending more money on the local library system there, on which so many county residents rely to upgrade their knowledge and skills? Shouldn’t K-12 education and the quality of the workforce count as much as OverDrive’s basketball courts? The Cuyahoga library system, which serves 47 localities in the Cleveland area, "leads the nation in per capita circulation, visits, program attendance and computer use in the big library category" in listings in Library Journal for the second consecutive year," said Cleveland.com in November 2011. Long-term stimulus possibilities where they’re most useful and needed? Better bets than OverDrive? I think so. While the Cuyahoga library system is “a separate political subdivision” from the main county government, we’re still talking about the same suburban voters. Property owners already feel stretched to the max, and beyond that, keep in mind that all Ohio taxpayers are bearing the costs of OverDrive’s state-provided benefits. Furthermore, the Cleveland Public Library, serving Cleveland, seat of Cuyahoga County, is hardly swimming in surplus cash. Last I knew this library, too, was in the state of Ohio.

I remain gung ho on a foundation or philanthropist paying a fair price for OverDrive to be the start of a well-stocked national digital library system, and I want to see CEO Steve Potash and his people treated with complete respect and kept on as advisors in the interest of a smooth transition. That’s different, though, from pampering by state and local governments, whether or not the big offenders here might be overeager politicians as opposed to OverDrive itself (just doing what comes naturally, given the chance).

Steve and his crew are true pros and have survived while competitors such as NetLibrary have  been bought out or died. But as I know from two decades of writing about digital libraries and related matters, the e-book business is fraught with risks even for established family businesses, given the entry of such formidable adversaries as Amazon—a long-term worry even to giants such as Random House. If OverDrive is so viable as a business investment rather than a true publicly owned library service, why isn’t the company instead getting more money from Insight Venture Partners, a New York venture capital firm, which Robert Rubin, former secretary of the U.S. Treasury, serves as a special limited partner, and which has already invested in OverDrive? Wall Street ahead of recession-battered taxpayers? I’d hope not. Steve can still be a hero if libraries and the philanthropic world will show enough imagination to carry out the purchase plan and approach him with a fair offer.

All Steve and friends have to do is accept. In business terms, given the uncertainties of competing against Amazon, Google and others, he’d be better off. A public digital system would enjoy considerable advantages over the private approach—for example, tighter integration with libraries and their programs, as well as more trustworthy  archiving of materials than Steve and other private companies could offer. And as noted, Steve and his librarian-degreed wife and other key OverDrive people could still participate in advisory roles, help keep publishers in the fold, and share the glory! I’d want them to as a reward for all their years of hard work and belief in e-books.

The DRM angle: A Cuyahoga County document describes OverDrive, Inc., as "a digital security firm for audio books, eBooks, music and videos." No mention of libraries there! I guess the word "security" works out better in the present climate where "homeland security" counts more than education and politicians are suckers for anything with an anti-terrorist sound to it. Of course, that’s another reminder that Digital Rights Management is part of OverDrive’s business model; what’s more, DRM in particular is an area of intense competition.  Even OverDrive’s cloud-computing initiative is hardly a guarantee of survival. So why are local and state taxpayers forced to gamble on OverDrive’s success? A public digital library system could refine OverDrive’s future "protection" technology without having such a vested interest in the current specifics. On the retail side, the possibility exists that the industry will create some attractive nonproprietary alternatives, thereby reducing the value of OverDrive’s DRM-related investment. There’s even some talk of doing away with DRM on retail e-books since the related lock-ins gives companies like OverDrive and Amazon more leverage over their publisher customers.

The transparency issue: Why hasn’t OverDrive been more public about these details, so its DRM-locked-in customers can ascertain the stability of its business for themselves? In that context or another, Gary Price has written about the new headquarters: "Congrats to OverDrive but at a time when libraries (their customers) are having budgetary issues (to say the least) is it a good idea for them to point out (see below) that the new HQ will have two indoor basketball courts, a walking path, and pond, etc.?

"Perhaps a more low key approach would have been a better idea or simply developing a new HQ that shows some unity with their customers? It’s interesting to see OverDrive trying to be transparent on their new HQ while transparency with issues (ones involving customers) can be a challenge to get answered in a timely manner."

Needless to say, if libraries bought OverDrive and it became a public or quasi-public agency, the transparency issue would be much easier to deal with.

Taxpayers in Cuyahoga County and elsewhere would have a better handle on where e-book-related money was going.

For now, just consider the irony. OverDrive is taking over functions traditionally performed in the paper book world by public librarians at public libraries (for example, storage). And yet the public—local and state taxpayers—is paying for this ongoing privatization!

March 21: I’ve tweaked this post to pick up some tax-related nuances.

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One comment to “OverDrive gets loan of up to $1M from Ohio county with budget-challenged libraries: Taxpayers unwittingly encouraging online privatization of U.S. library system?”
One comment to “OverDrive gets loan of up to $1M from Ohio county with budget-challenged libraries: Taxpayers unwittingly encouraging online privatization of U.S. library system?”
  1. Pingback: This week in writing… politics edition | Knitting with Pencils

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