Volume 17, Number 6 • June 2000

Q: Let’s talk about your success in the academic and public library markets, the place that netLibrary first started with some key contracts with library consortia. How many actual library clients do you have now?

A: Today we have signed contracts with libraries and consortia making our e-books accessible to more than 700 libraries. I think the patron base would be over 4 million end-users. We have seen not just significant business in e-book collections purchased, but also significant usage. A number of customers have told us that e-book use is exceeding the use of the corresponding book in hard copy. Librarians are seeing a trend with their patron base—the younger Web-savvy consumers are coming to a library looking for digital content first. When I say come into a library, in a lot of cases that is often now through a Web site. There’s a generation of kids who assume if it’s not online, it’s not there. The e-book product and service we provide to libraries rings very true and is compelling as libraries try to provide content that is relevant to their audiences. This has resulted not only in increased sales for us, but in repeat sales.

Q: I believe you are also providing consumer content for some hand-held devices through your purchase of peanutpress.com.

A: One of the issues with providing content for hand-held devices is that we need to go back to our existing publisher partners and negotiate to make their content available on those platforms for libraries. Librarians have actually asked us when we could provide content for their patrons to download to these Palm-type devices. It’s now a matter of integration among peanutpress.com, our publisher partners, and us.

Our business was built with the notion that our mission was to help publishers propagate content in the same way as hard-copy books, and to provide to libraries and consumers the content they want on the exact platform they want. We just announced an agreement with Glassbook, so users can access our content via a Glassbook Reader. We’re now working to secure arrangements with the owners of other reading devices and software platforms to ensure that we provide any e-book solution a user wants. The notion of being platform-agnostic is fundamental to what we do. We provide a level of copyright protection for publishers that is one step removed from the actual device. It’s what we call “high-level digital rights management,” which lets us structure agreements with Glassbook, Microsoft, and others.

Over the last year, companies like Glassbook have seen their business models change. Things have gone from trying to convince publishers to adopt the Glassbook protocol, to where Glassbook is trying to propagate their device among end-users and rely on partners like netLibrary to worry about the content. The marketplace has embraced our role as a kind of high-level rights-management provider and content solution provider for publishers.

Q: Are you actively working with the Open eBook Specification format?

A: Yes, we have one of the seven board seats of the OEB. The netLibrary e-book files that we create for publishers are OEB-compliant. We’re very excited about what OEB is pursuing.

Q: Microsoft was one of the companies behind establishing the OEB specification. They’ve just now come out with their own e-book software, called Microsoft Reader. It’s going to be added into Windows, and it’s going to be on all the Pocket PCs that are just now launching. How does this affect netLibrary? [For more on the Microsoft Reader, see page 57 of the Internet Publishing section.]

A: We think it affects us in a positive way. Microsoft is a technology solutions provider for netLibrary, and we hope to establish a relationship with the Microsoft Reader group. Microsoft, particularly in their agreement with Xerox last week [Editor’s Note: See the ContentGuard story on page 55], has let the marketplace know that they are firmly committed to electronic books and will work to propagate the e-book experience, both on the desktop and on Pocket PC devices. We’ve seen the Microsoft ClearType and Microsoft Reader—it’s a very compelling experience. We’re very excited about it.

Q: So, all of these developments are serving to move the market to a general acceptance of e-books. Everyone benefits.

A: Yes, and it’s giving consumers a choice, among a Glassbook version, peanutpress.com for PalmPilot or Windows CE, Rocket eBook, SoftBook, etc.

Q: How many different formats are you making available for publishers?

A: Good question. The answer is we do as many formats as the market requires and our publishers ask us to. We maintain netLibrary’s proprietary file format as a very richly tagged XML, OEB-compliant format that we can easily filter to other XML-based platforms, such as peanutpress.com or Microsoft. The PDF format is easily transitioned to Glassbook. The question is, who incurs the cost to create those file formats and do we have the agreements in place to migrate that content down to the device. In the case of Glassbook, we have reached terms on the agreement.

Q: Your success in the library marketplace was because you worked so closely with librarians during the design and launch of the product. When you talk about launching into the consumer marketplace, you might be happy about Microsoft’s maneuvers, but they are going to be positioning there with their partner barnesandnoble.com and there will be other major competitors operating in that same area. Playing devil’s advocate a bit, wouldn’t it be better to stick to the library and education markets and leave the consumer space to the others?

A: We don’t feel it’s inconsistent to provide a solution for both markets. netLibrary’s business is to provide an e-book solution for publishers. We help them create, and host, and archive, and serve their digital content up to e-book users. We have had a focus on the institutional, or library marketplace—academic, public, K-12, and most recently, corporate libraries. They have been proven and early adopters of digital content and were therefore our obvious choice for a first area of focus. For the publishers that sell to these markets and to the consumer market, or those that sell only to consumers, that is, the large trade houses, the netLibrary solution is no different, except that we can help sell through to consumers as well as institutions. But, despite selling to consumers, we are still firmly committed to our library partners in supporting e-books in that space. I think that will always be our strength and our focus.

There’s still a lot of work to be done for publishers to deliver solutions for every possible platform through to every book
reseller—not just to barnesandnoble.com, but to Amazon.com and Borders.com, and others. It also includes print on demand. The netLibrary file format is also consistent with delivering a print-on-demand solution that is very important to publishers. It all springs from the design of our technology and our view of the book publishing market.

We started with reference and professional texts. We have recently purchased a textbook technology company called MetaText, Inc. The textbook market is estimated to be a $7 or $8 billion marketplace. We feel we have to participate there because our technology supports it and, working with our channel partners, we feel we bring the most compelling solution in the market today.

Q: What is the MetaText Digital Textbook Solution you have announced?

A: MetaText is an approach to a digital textbook that differs in approach from an e-book. A MetaText textbook provides significant value and incremental functionality to an e-book, in the form of multimedia content. We work with publishers to determine what images, charts, pictures, and graphs should come to life, which can be full-motion video and sound. We can have embedded spreadsheets in a text that can be interactive with the user. We can provide links from a textbook out onto the Internet to approved sites, where a publisher or an educator can make links real-time to provide for an interactive experience using the Web. We can provide links from that textbook out to another collection of e-books, such as to a reference book in a collection purchased by the university from netLibrary.

There’s also functionality in the digital textbook to provide for dialogue between the professor and the student. A professor can make notes in the margins to communicate with students. Students can create private annotations for their future use. The textbook also has other features of e-books—it is fully searchable, you can add notes in the margins, highlights, sticky notes—all of which are fully searchable as well.

Q: Was this part of the technology that MetaText brought to you? How much did you merge your two technologies?

A: Their platform was not dissimilar to netLibrary’s. The value was additive. They did some things we had not yet done and we chose to merge the companies because they were highly complementary to the base functionality we were providing. We had some publishers that pointed us to MetaText as the leader in the textbook space.

Q: The e-textbook and educational publishing area is certainly a hot one right now. There seems to be a lot of competition. We’ve seen bigchalk.com launch, the Gale Group is doing a lot in this area, and there are many Internet learning companies. You obviously feel you have something better to offer.

A: We do, because I think we’re different from some of these companies. The big distinction that I try to make is that netLibrary is working with long-standing content owners and channel partners that will help sell this content. Let me give you an example. I know a number of e-learning companies that are trying to go directly to students or trying to structure new e-learning products, without any success. netLibrary is working with publishers like McGraw-Hill to take hundreds of their textbooks and create digital textbooks, and working also with the academic customers we already have who are an integral part of the academic adoption process. Our products won’t succeed unless we have the support of the very same parties that make textbooks succeed today. We’re working with the same channel partners that are selling paper-based textbooks today.

We have a partner that competes in the same space, and that’s EBSCO. They are a major player, alongside Gale and Bell & Howell, in the journal and periodical market and in content propagation in the learning business. We are partnered very closely with EBSCO, not just in selling e-book content, but in furthering the digital education solution. Again, an established partner, very successful, driving revenues today—so we feel very comfortable about our ability to make inroads there.

Q: Talk a little more about your partnership with EBSCO. I know it involves some joint marketing, and I think I have heard that it includes linking their EBSCOhost search system with yours?

A: EBSCO is an extremely important partner for netLibrary because of their understanding of the institutional marketplace. They understand the issues related to the marketing and sales of digital content. We have extended the product base that they have available for sale. Now we have EBSCO representatives out in the field selling netLibrary e-books. The next step in our relationship may be the linking of our databases so that from a netLibrary e-book you can jump into the EBSCO collection of periodicals and journals. I don’t think, and I suspect our library customers don’t think, that data need to be format-specific. If you’re looking for answers, you shouldn’t have to launch separate searches for books and journals.

There are some significant integration issues and some significant business issues. We’d love for a netLibrary patron to be able to launch into the complete EBSCO collection—but with EBSCO we’re talking about thousands of periodicals. For libraries that might not have access to all those periodicals, we want to make sure that a link through to something means you can actually get there. So, actual integration is a little further out on the calendar. If I had to pick a date, I’d say sometime in the middle of the next school year.

Our number-one priority right now is dealing with some integration issues with library automation companies. This leads me into discussing this area of our business, which I feel is a major strength that netLibrary has to offer libraries. We expect that you will see, beginning this fall, that netLibrary has worked with Innovative Interfaces, and Follett, and epixtech—the providers of software for library catalogs—to integrate netLibrary e-books into the online catalogs of our customers. So, netLibrary e-books will be listed alongside the physical books in their collections. Librarians won’t have to explain e-books or steer students to a Web site. You will be able to check out a netLibrary book right from that system.

Q: Certainly, getting the automation vendors on board was a smart thing, as was getting OCLC participating with the provision of MARC records for netLibrary e-books.

I’d like to move on now to discuss your entry into the corporate market. You’ve announced a Corporate Digital Library Initiative. What is this?

A: This was for us a logical next step. It was important for us to have a collection with the breadth and depth that would be appealing to corporations. What’s appealing to us about corporations is that they have the budget and need for content that our academic and public customers have but without the infrastructure requirements for approval and authorization. We believe we will see rapid adoption by some corporate customers. I think netLibrary is attractive to corporations because they are voracious users of information and data, and have been large consumers for database vendors. netLibrary represents not just a category-specific collection of content but rather a broad collection of useful corporate content.

For example, it’s easy to understand why a technology company would want access to a great collection of IT books. Other companies, like Books24x7 and iBooks, provide this today. Here’s the issue: The books they have, for the most part, we have. So, if you’re a corporate customer making a decision about a provider, where do you go? I think you’ll go to a provider that doesn’t just have one vertical offering, like technology. You’ll want a provider that has human resources books, books on management, books on finance and accounting, books with a breadth of collection that speak to your whole corporate user base, not just to a group of engineers.

We map our collection of books against any other e-book provider, and we’ve got more and better e-books. We have over 20,000 e-books, and it’s growing by up to 100 a day. We’re working to propagate collections that we know are of interest to corporate users. McGraw-Hill, for example, has a significant customer base in corporations, and we’re working closely with them to help them sell more books. And, our architecture supports this just as well to corporate users as to a traditional library.

Q: From the publishers’ point of view, it seems that the best thing they could do is to have as many distribution arrangements as possible.

A: Yes, and netLibrary has never secured an exclusive publisher agreement. All we ask is the ability to compete head on, on the basis of the quality of our products and services. We know we’re going to succeed.

Q: After completing all these recently announced initiatives, where do you see netLibrary moving next?

A: What’s next is execution. You won’t see fewer press releases from netLibrary, what you’ll see is more depth. You may see more announcements about other reader devices, about other library automation companies, about more high-profile publishers. You may see announcements about netLibrary providing a complete, end-to-end solution for publishers that involves the creation, hosting, and serving of content to both the institutional and consumer markets.

A year ago, I sat in my office with Tim Schiewe, our founder, and talked about three categories of content in the publishing world: reference, textbook, and trade. We tried to understand what the relevant adoption rates would be in each of those segments. We targeted not just content but distribution, and what you have seen is a rollout of our strategy in every one of those categories. There isn’t a fourth one. And, we have enough on our plate right now.

For more information on netLibrary, visit the Web site at http://www.netlibrary.com or call 303/415-2548.
 
 

Paula J. Hane is contributing editor of Information Today, co-editor with Barbara Quint for NewsBreaks, a former reference librarian, and a longtime online searcher. Her e-mail address is phane@infotoday.com.

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