Thursday, March 18, 2010

EBSCO Buys NetLibrary

Announced yesterday and summarized in an article in Library Journal, the deal to sell OCLC's NetLibrary division to EBSCO looks to be a smart move by OCLC. From the LJ article:

In a strategic shift, OCLC today announced the sale of its NetLibrary Division to EBSCO Publishing and the exit of H.W. Wilson databases from the FirstSearch service. In doing so, OCLC moves its business from hosting and reselling vendor content further along the road toward "new Web-scale services for libraries" that include integration and expansion of WorldCat Local ("the one search box that does it all"). Meanwhile EBSCO Publishing, the database aggregator, continues to expand its offerings.

"It’s a strategic repositioning from hosting and reselling content to building WorldCat out as a platform that libraries can use to manage and provide access to their entire collection," including ebooks and articles, said OCLC VP Chip Nilges in an interview with LJ. It's also "part of a broader effort to provide comprehensive coverage" of ebooks in WorldCat, said Nilges. "We have an agreement with Google Book Search to link to books in WorldCat; we have a similar agreement with Hathi Trust. We're in hot pursuit of many different providers." (Also see Nilges's account of his history with OCLC's econtent efforts.)

OCLC rebuilt NetLibrary after they collected the company out of bankruptcy and in the process they updated some key technology, re-established relationships with publishers and re-aligned their management team. However, in an increasingly competitive market for e-Books and e-Platforms, the process of expanding content and market share must have looked daunting for OCLC. There is likely to be some consolidation in this segment over time and this NetLibrary deal looks to be one of the first examples of that trend.

Eric Hellman has a good summary of why this deal was executed (Go To Hellman):
The sale of NetLibrary should be viewed primarily as a capital allocation decision by OCLC. eBooks and eReaders are not the only change happening in the library world, and NetLibrary is not the only major product at OCLC that would suck up significant capital. OCLC is making significant investments in cloud-based library management service based on WorldCat and WorldCat Local, and sensible managed businesses, even non-profit ones, allocate capital according to the potential value created.
The reason that a move into ebooks makes sense for EBSCO is that ebook purchases are really subscriptions. The print book production and distribution chain was built under the assumption that once the book was delivered to the customer, the transaction was done and could be forgotten. Magazine subscriptions, by contrast, are continuing relationships. Electronic magazines and journals require even more continuing support, and this is true for ebooks as well. A corporate infrastructure built to sell and support magazine subscriptions works well for supporting ebooks.

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