Thursday, October 18, 2001

E-Book Provider netLibrary Puts Itself Up for Sale, Worrying Librarians By JEFFREY R. YOUNG The company that calls itself the "leading provider of electronic books," netLibrary, has put itself up for sale after failing to attract enough investment financing to stay afloat. The announcement has raised concerns among college librarians about the future of the company's service, which is used by thousands of academic libraries. In a statement e-mailed to customers on Monday, the company said that it had failed to win the latest round of investment financing because of "several factors, including overall economic conditions." The company said it was hoping to be acquired by one of "a number of possible candidates with interest in the library, publishing, and eBook marketplace." The company continues to operate, though it warned in the statement that "some related services may be put on hold temporarily." To get by, the statement said, netLibrary has greatly reduced the salaries of all of its employees. Even so, "a majority" of staff members have chosen to stick by netLibrary while the company looks for a buyer, said the statement. Marge Gammon, a company spokeswoman, refused to comment Wednesday. "The statement is what it is, and we're not prepared to add to it," she said. The three-year-old company, based in Boulder, Colo., has a collection of more than 33,000 full-text books online. A library patron can "check out" a book for 48 hours via the Web as long as his or her library, or a consortium including the library, has paid for access to that particular e-book -- and also as long as no other patron under the same subscription is using it at the time. Texts of netLibrary books cannot be saved to a user's own computer. Some librarians whose institutions have sunk time and money into the company's service are now crossing their fingers, hoping that their investment was not wasted. "I do hope they find a way to pull through this," said Mark Sandler, a librarian at the University of Michigan at Ann Arbor. "I think netLibrary had the best grasp of how these new formats would fit in with overall library operations." Since the company's start, librarians -- who are accustomed to buying and storing items for the long term -- have worried about investing in an electronic service from an upstart company. "Librarians weren't born yesterday with this digital stuff," said Dennis J. Dillon, assistant director for collections and information resources at the University of Texas at Austin. "When a new company comes around, you want some guarantees. You don't just give them money and put all that money at risk." For that reason, Mr. Dillon said, his university's contract with netLibrary includes a clause that essentially promises that if the company ceases operations, the university will be given the data files for the electronic books that it bought lifetime electronic access to, as well as software so that the university can continue to make the e-books available on its own. Other libraries apparently made similar arrangements with the company. "What that means in reality I don't want to find out," said Mr. Dillon. Mr. Dillon reported that the service was used heavily at his university. "We've seen steadily growing usage," he said. "This semester we had several faculty members wanting us to buy netLibrary books so they could be put on reserve and that kind of thing." Mr. Sandler said the service was less popular at Michigan, however. "Overall, people haven't rushed to this," he added. "It's not heavily used except in pockets," such as in the areas of computers and business. Even so, Mr. Sandler said he believes in the concept of providing the full text of books electronically, adding: "I do think e-books are certainly on the horizon for us." Following is the text of Monday's electronic-mail message from netLibrary. To all netLibrary Customers, Partners, and Friends: Thank you all for the interest, concern, and support you have shown in response to recent news that netLibrary is talking with interested buyers for the company. As we work through the many difficult and complex issues surrounding this possibility, our desire to communicate must be balanced against the need to first resolve open issues in ways that ensure we communicate with you accurately and completely. Nevertheless, we know you have many questions, which we will begin to address here. Going forward, we will continue to communicate with you regularly to keep you abreast of any changes. Currently, the facts are as follows: 1. While additional investment funding looked extremely positive a few weeks ago, those investors made the decision not to invest based on several factors, including overall economic conditions. 2. netLibrary immediately began to pursue the possibility of being acquired by a number of possible candidates with interest in the library, publishing, and eBook marketplace. Those discussions continue today. 3. It is true that the majority of employees returned to work with the understanding that salaries would be significantly reduced and that future employment would be dependent on identifying an interested buyer and related bridge loan financing. Their passion for eBooks and their deep concern for our customers and business partners is reflected in the number of those who returned to work this morning, ready to continue to service and support our customers as management works through this difficult transition period. 4. Access to your eBooks continues. Should that change, we will contact you via e-mail. 5. Some related services may be put on hold temporarily. For example, you will not be able to order promotional materials until further notice. Additionally, we will be reorganizing and reassigning staff to help wherever needed. Consequently, we ask that you be patient as we work to answer any and all customer support questions. Unquestionably, you will hear much about netLibrary in the coming days from many sources. Certainly, the decisions we must make are very serious and extremely complex, and because it will take time to develop solutions, there will be a tendency by some to couch all discussion in a negative light. We ask for your balanced consideration, your continued support of eBooks and netLibrary, and your understanding that we will do our very best to communicate the facts to you as they become available. The employees and the management team remain highly committed to doing everything we can to bring this to successful resolution -- that commitment derives in large measure from the enthusiasm and passion you have shown us these past three years. We hope we can continue to count on that support to see us through. Sincerely, Rob Kaufman President and CEO Rich Rosy Executive Vice President Background articles from The Chronicle: Companies Find Academic Libraries a Key Target and a Tough Sell (5/18/2001) An Ambitious Plan to Sell Electronic Books (4/16/1999) Easy-to-print version E-mail this article

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