"We have to let boys read like boys. My son loves to read, but he doesn't always read what you'd call classics. My wife groans sometimes over his choices, and I think he may even like that. " - Columnist Jerry Large in the Seattle Times.

The TeleRead take: Perhaps Jerry Large and his son could check out a recent TeleRead post and benefit from a visit to Blackmask Online. Also of interest: the site Twice Told Tales, to which Large points his readers.

One scary aspect of e-books for many teachers--male or female: The more books online, especially the free variety, the less control they'll have over students' reading. Some teachers will hate that. But a little balance, please. Is it really so evil to let boys read Jules Verne before they go on to Jane Austen? Schools understandably will make her required reading, but they shouldn't cheat the boys of the books they may naturally enjoy, including, yes, some classics in the Verne vein.

Kind of related: One cool aspect of Blackmask Online, named after a detective magazine: "The royalties for any title sold on Blackmask are 70% of retail. There are no additional costs associated with publishing (i.e. no upfront fees)." While owner David Moynihan lacks the promo budget of, say, Random House, his percentages look fair. One reason is that David does not spend a fortune on DRM and related complexities. Try to patronize sites that reward writers, not greedy software conglomerates.

(Large column found via LISNews.)
posted by David Rothman at 2:35 PM | permanent link

"A new digital library launched recently by San Jose Public Library is giving Silicon Valley residents access to popular eBooks directly from their home or office. OverDrive, a leading vendor of eBook solutions for libraries, supplied the technology for the new service." - Managing Information.

The TeleRead take: The above is a great example of a useful service from OverDrive--the troubled e-book distributor that is behind on payments to some publishers and saw fit to slap yearly storage fees of up to $300 per book. I just hope that OverDrive's terms for SJLibrary.org--a collaboration of the San Jose Public Library System and the San Jose State University Library--are fair and will stay that way. As I've noted, OverDrive loves sizzly things like flashy PR and expensive parties, and that can jack up costs.

But at the same time, if OverDrive efficiently automates its Web services, it can offer libraries some good value and help popularize e-books.

Under TeleRead, a proposal for a well-stocked national digital library system, OverDrive could do quite well if president-CEO Steve Potash, also president of the Open eBook Forum, showed sufficient imagination and resourcefulness.

While library patrons could access TeleRead e-books directly, they could also retrieve them through the sites of local schools and libraries that blended in e-books with other resources and presented everything well. Bottom line? Millions in potential new business for OverDrive--from state and local libraries.

Format Department: Adobe, a horror to read on PDAs, is apparently the only format available in San Jose. Let's hope that a slightly less dreadful version of Adobe comes out soon. The other hope is that the Mobipocket format, far better than Adobe and appropriately now a darling at OverDrive, will soon be be available as well, which I suspect it will be. Of course, the best solution remains a common e-book format, around which vendors could compete with many different reader programs.

Branding Department: Hmmm. I need to keep an eye on other OverDrive-powered sites to see if that nifty picture of the PDA and laptop shows up all over the place. In San Jose case, I notice that the file name of the graphic reads, "ebooks_overdrive.jpg." Is this a clever little trick which OverDrive intends to use to brand public library sites in ways other than the words "Powered by OverDrive Digital Library Reserve" at the bottom?

Why yet another mention of OverDrive: Hey, some 700 publishers are using it, and the company made itself newsworthy, wittingly or not, when it slapped that ugly $300-per-book charge on the little mom-and-pop publishers that could least afford it.

About the reason for the charge: Some people are now speculating that OverDrive used the charge as a form of quality control. But I'm not sure if I'll buy that explanation, as opposed to cashflow problems. A large distributor should carry everything, while a store can and should be more selective. Under a TeleRead-style national digital library system, readers could easily do filtered searches reflecting the tastes of a default collection of librarians--or public, academic or commercial librarians whom the readers each picked. They could also filter the searches to reflect the tastes of other people with similar reading preferences.
posted by David Rothman at 9:21 AM | permanent link

"The Library of Congress will in the fall launch the first centralized database portal for motion pictures and video images. The portal will be 'a gateway to the world’s moving-image collections,' said Gregory Lukow, assistant chief of the Library’s Motion Picture, Broadcasting and Recorded Sound Division." - Government Computer News.

The TeleRead take: This is Good News. The real solution would be a system of redundant, well-backed-up servers that could store everything (independent servers could still remain). But at least LOC has gotten it right with the idea of letting people search across a number of now-isolated databases at once. Plus, I love the idea of the project having different interfaces for film buffs, historians and the public. A good library system should present many different faces for many users. Beyond that, I'd like to see a way for private companies to be able to build hooks into the portal for interfaces of their own. Fittingly the project uses Linux and open-source apps.

The inevitable thought: How much extra effort would it take for the same project to include e-books, which, compared to films and video, would be a snap to store? Perhaps eventually they could migrate over to LOC servers for true durability--especially if in an open-standards format, first at the production level and then perhaps eventually at the consumer one as well. The LOC folks like to talk about born-digital content. Here's a way to apply the concept across all media, especially in a search context. For all I know, this could already be in LOC's plans. Eventually, one hopes, there would be a distributed network of librarians in many cities, as well as integration with local schools and libraries and appropriate changes in training for teachers and librarians. And how about a mix of public and private funding sources and other precautions to assure maximum freedom of expression? Lo and behold--TeleRead for real!

(Via LISNews.)
posted by David Rothman at 10:29 AM | permanent link

Steve Potash, founder of OverDrive, has been getting it between the eyes on the eBook Community List and in the TeleRead Web Log. But how could we not fight the gouge that his Content Reserve distribution arm wants to impose on publishers--up to $300 a year for storage of just one e-book? Nor will I forget the thousands he's owed book people such as Mary Z. Wolf, who, in turn, must pay her authors. This is Steve's bed, made not so crisply in cahoots with his partners Microsoft and Adobe. He splurged on expensive servers before he should have, and he rented out space in an art museum for a Gatsby-fancy party. Steve wants his PR and flash to move e-books into the consumer mainstream. Meanwhile the oppressive DRM and format wars of his partners are among the biggest reasons why the industry today brings in less revenue than Tom Clancy does by himself.

And yet, far from hating Steve, I am simply pushing for him and the rest of e-book business to acquire a true sense of purpose, so that more people read, period, and not just in a new format. I've done what I could to praise him for endeavors such as OverDrive's laudable collaboration with the Cleveland Public Library and other systems to get best-sellers online, as well as for his people's work for the blind. His library sites have shown a real flair often missing from the genre. But the looks of OverDrive sites should be just a start. Let me tell you how I feel about the book industry of today and what kind of a role e-books could play if Steve and the rest of the old guard would allow.

We begin with issues that transcend e-books; just how much excitement is there today about books of every kind? Very little for the most part, compared to the past, despite the hordes of authors peddling their wares on cable channels. Book Magazine has folded. I go to the drugstores today, and what do I see? Oodles of genre novels and not that much else. The nonfiction consists of diet books and the like. What a contrast to the paperback rack I used to enjoy in my youth at the local People's Drugstore. You could read Norman Mailer, Saul Bellow, Gore Vidal, not to mention such provocative, popular-level nonfiction such as Black Like Me. The books weren't free, but they sold for a fraction of the costs of today's paperbacks, a bargain even by yesteryear's prices; and chances were that I could also find a good selection at the local library. I read genre fiction then and do now, and I'd worry about a rack purged of it; but can't we also have just a little more Roth and Oates and younger equivalents?

Steve, I want that newsstand revived online--as a library full of both literary and popular novels and far more, such as up-to-date technical books, educational software, videos, audios, with as many as possible of them free, paid for by way of a national digital library fund and private philanthropy and local libraries; in short, a variety of funding sources, so that neither bureaucrats nor corpocrats can control our reading. We've got millions of new Americans who need to be brought into the culture, we've got the unemployed in need of new skills; and yet many libraries are going begging, especially school libraries as a recent news clip from California shows: Poverty plagues school libraries: Districts struggling to obtain new books. At one school, some books on the space program are several deades old.

E-books could be a way of spreading less-whiskered books around cheaply through libraries and bookstores alike. Imagine making them part of the schools. Think of whole classes sharing and discussing the same novels and dissecting them in blogs, the best entries to which the teachers could point all the students. Imagine friends file-sharing their own favorites, while publishers and writers collected due compensation. Imagine tired working couples being able to guide their kids' reading from home rather than hauling sons and daughters off to the local library, which, in rural areas, may be 50 or 100 miles or more away. Imagine ghetto children not have to worrying about getting shot or stabbed. Imagine my sick, hurting wife being able to enjoy a truly well-stocked online library, full of authoritative titles on her ailments, as opposed to her having to wander from Web site in search of nondreck. Alas, many boomers will be in her situation. We need to show compassion and prepare, adjusting libraries to them rather than squandering hundreds and hundreds of millions on downtown library palaces forever.

But a TeleRead-style national digital library system won't happen without winning the confidence of politicians, an unattainable goal if the e-book industry turns out to be nothing more than welfare for the wasteful middlemen and hangers-on it was supposed to chase away. I love good distributors and other behind-the-scenes players who can add value, such as by matching a trout book up with a fishing site; but, please, let's keep the parasites away or encourage them to evolve into genuine contributors to the industry. We need to channel the money for online libraries into royalties and effectual promotion, not expensive proprietary formats and problematic DRM schemes that deny readers a sense of ownership. Steve may argue that some technophobic publishers and his partners insisted on full-strength DRMing of digital books even though the paper ones are piratable. Regardless, however, he consented, and thanks to his Faustian nonbargain, DRM-related expenses are no small burden for him and his customers today.

Decades later I still have some of the old books from People's Drugstore--yellowing, but still accessible. I also have the books my late father left me. How many of today's e-books will still be around 30 years now? Perhaps not that many if Gemstar is a clue. My rejection of DRMed commercial books--at least the ones I can't find as freebies--goes on with new enthusiasm. Why should I buy "protected" e-books when, because of the uncertainties of DRM, I may only be renting them? Suppose Palm Digital Media goes out of business? Or Microsoft tires of e-books? Must we remain in bondage to the DRM dons who don't give a squat about the permanence of our private collections? Do we really want to continue letting them cheapen the medium? And what about all the lost opportunities in areas such as precise interbook linking if proprietary formats and copyright zealotry so ruthlessly interfere? A Universal Consumer Format, combined with more reasonable DRM Lite, could help allay publishers' piracy fears and allow for all kinds of new technical capabilities.

So far, however, at the misnamed Open eBook Forum under Steve's leadership as president, the story has been, "Same old, same old, same old." Besides, this man should focus on saving his company, not rescuing the OeBF from progress in formats and other areas.

A healthier OverDrive, the kind I've love to see, could offer the industry a genuine service by, for example, continuing its activities in library Web site creation. But Steve imperils those opportunities when he deprives publishers of money owned, in violation of contractual commitments--thereby almost surely raising questions in the minds of some librarians he is courting. I wish Steve well. I also wish him the courage to resign from the OeBF presidency for the good of the industry, his employees and their families. Ideally he can come clean about his company's financial situation. As some have suggested, I'd even be willing to stop the campaign against those $300-a-year gouges of one-book publishers if only Steve would say: "Give us a little more time, this is only temporary, help me stay in business so I can help you. The storage fees will stop after a year." Could the lawyer in Steve be preventing him from telling the full truth? Is he worried about providing publishers with lawsuit ammo? Well, the truth might be nothing compared to the financial damage from the ill feelings. Steve cut hundreds of publishers out of the loop--despite the thousands of dollars in revenue from already-made sales that these small business people had entrusted to him. Leveling with publishers just might reduce legal risks.

The causes of Steve Potash, OverDrive and e-books at large will not be helped by the rant that Dorothea Salo wrote yesterday after the TeleBlog picked up her "I was right" item on OverDrive. Among the targets of her latest tantrum was the Universal Consumer Format, the very creature that Steve has resisted for so long because of his ties to the software industry. Given the library world's interest in open standards as a way to create new options for readers--and reduce expenditures of tax money--I'm baffled why Dorothea would knock the UCF, which would be fortified by MathML for mathematical expressions and SVG for more elaborate graphics. None other than Jon Noring, an invited expert to the Open eBook Forum and acting vice chair of the Publication Structure Working Group has championed the idea. I've linked to the UCF concept exactly as he, an XML expert, has expressed it. The UCF is just as described, a consumer format for Jane and Joe Reader whose format needs will be far less than, say, those of a researcher at a nuclear lab--although, yes, Jon himself has worked among nuclear scientists. Just about all of the time for the typical reader, a good UCF will suffice, as Jon sees it, especially if plug-ins are available. It would be a shame to let the Tower of eBabel remain in place because of the nitpicking of people like Dorothea who should know better. A properly designed UCF would be far more powerful and versatile than the crappy and rather proprietary alternatives with which Steve's friends have stuck us. Is Jon's idea perfect? Of course not. But it's a good start, courageously posted with the goal of eliciting further feedback in a constructive vein. Yo, Dorothea?

Along the way, I'm disappointed to see Dorothea snapping at me even though I picked up her comments in a manner she should have viewed positively. No good quote goes unpunished, eh? I do respect her wisdom on XML and the like, for the most part, even if she is a tad jihad-prone. Her latest gem assures us that "I do my own damn dirty work," complete with an immediate denial that she is muddying up Steve. Reminds me of something I wrote December 21. Back then I noted that "Dorothea has been kicking around Potash, her ex-employer, for years," and I apologized for "encroaching on her territory. Sorry, Dorothea. It will happen again." And again and again and again if Steve deserves criticism of his actions. Sorry, sister. You're writing a blog, not a private diary, and, alas, I agree with much of what you say about him. The general rule is, "If you don't want people to link to it, don't write it." Increasingly we're an Open Source Society these days, as you, working toward your MLIS, ought to know. Links happen. In fact, this much-facilitated exchange of ideas is all the more reason to promote standardization in e-book formats and other areas. A UCF, anyone? Look, Dorothea, worry less about Steve's image online and more about schoolchildren, other library users including boomers with mobility problems, and the toy-sized industry that he and his pals have unwittingly helped stunt.
posted by David Rothman at 8:49 AM | permanent link

Tony Soprano would love the DRM blood oath for OverDrive retailers selling e-books in the Microsoft Reader format.

Prospective retail partners of OverDrive's Content Reserve distribution arm must sign a Non-Disclosure Agreement before they can even find out information such as the percentage of revenue they must cough up for Microsoft DRM.

So what is it? Three percent? Five percent? Seven percent? Whatever it is, the dons of Redmond are secretive about the size of the tribute they demand. Keep in mind, too, that the OverDrive NDA apparently covers other fees and restrictions. But almost surely it is influenced by OverDrive's DRM vendors to one extent or another. DRMed Adobe format may also be costly via OverDrive--perhaps thousands in recurring charges before a new retailer can sell just one book.

Needed: Openness about the retailers' costs

In the past, many people just wouldn't have cared about the NDA slapped on retailers. But that needs to change. OverDrive now wants one-book publishers to pay annual storage fees as high as $300 per year--and the largest companies to cough up thousands in new storage charges. Since OverDrive is asking publishers of all sizes to pay their share of the operating expenses, shouldn't those houses get to know the details of the retailers' side of the transaction? A little openness, please.

OverDrive President-CEO Steve Potash claims that publishers aren't bearing their share of the burden, and it would help if he revealed more about retailers' costs to make his point. Content Reserve's Pamela Turner wouldn't disclose the DRM fees when I asked some months ago. Are the percentage-based DRM charges really so onerous that they must stay a secret, and how about the up-front costs, which may run uncomfortably into the thousands, a big burden on mom-and-pop-sized operations? Some aggressive questioning by small publishers, of OverDrive, Microsoft and Adobe, could go a long way if the publishers truly want to look ahead.

Nice work if you can get it

Let's say that global e-book sales eventually and miraculously grow from a pathetic $20 million a year to a whopping $20 billion despite all the DRM and Tower of eBabel hassles. Say Microsoft has finally gotten serious about the medium again and improved Reader and blown away the competition, so that, just as with the Word word-processor, its e-book format reigns. Well, then, a hypothetical five percent of a hypothetical $20 billion would leave the Richmond dons with a cool billion per year. Ka-ching, ka-ching! Not bad work if you can get it. But please, let's hear more about the details, especially since so many of the small publishers say they don't even want DRM capabilities in the first place.

Remember, too, that DRM percentages are just the tip of the iceberg of the cost of the technology. Imagine all the lost sales from customers frustrated by the inconveniences of DRM. Or the tech support demanded by braver end-users willing to jump through Redmond's hoops? Or the higher spending on DRM-capable systems that OverDrive-style distributors need to include this oft-hated "feature"?

Public libraries and the DRM dons

Beyond that, bear in mind that while OverDrive doesn't offer Microsoft-formatted books for public libraries, at least not the Cleveland system, the dons of Redmond surely want to be a major part of the library scene via other routes. Taxpayers should be entitled to know how much of their money is going for DRM. Just how big of a DRM tax will Microsoft and perhaps Adobe, directly or indirectly, seek to impose on cash-strapped local libraries and schools?

Also, are there anti-trust ramifications for Microsoft or OverDrive if the fee on retailers' gross is five percent or some other outrageous level when e-book retailers don't have the highest of margins? What does it say when Microsoft can enjoy such pricing power even when Microsoft Reader is so out of date?

To Adobe's credit, as far as I know, it does not go by percent of revenue these days.

Instead it licenses out its tools and charges sites fees, which, though some might dispute them, at least aren't geared to a percentage of revenues.

A burden just the same

Still, if you deal with OverDrive, Adobe's own fees can add up. Tiny retailers apparently must pay thousands before they can sell one Adobe-DRMd e-book, and that's onerous for small operations, especially since the charges may repeat after time.

Together, the retailers in the OverDrive operation may be paying hundreds of thousands of dollars for DRMed Adobe and Microsoft formats.

Is it really fair to pass even part of those expenses on to publishers that hate DRM?

The TeleRead take: While we're not the biggest fans of DRM, we realize it can have its place--for example, as part of a system to help track use of file-shared books and fairly compensate writers and publishers. And some publishers will always insist on DRM. The solution might be a compromise, DRM Lite as I'll call it--just a strong enough dose to keep honest users honest. Helpful, too, would be a business model such as TeleRead, which, by making many thousands of books free on the Net, especially popular ones of the kind most likely to be pirated, would reduce the incentives for rip-offs. Publishers and writers would be paid via a national digital library fund, with participation, too, by private philanthropies and the commercial side to assure maximum freedom of expression. In addition, local libraries could acquire books not included in the national system.
posted by David Rothman at 5:35 AM | permanent link

The eBook Community list just keeps buzzin' and buzzin' with complaints against OverDrive, the troubled e-book distributor (yes, that might as well be one word). Small publishers believe more and more that OverDrive boss Steve Potash is keen on gouging 'em to make up for his own mistakes. Jon Noring, list moderator, has just posted Why I reject Steve Potash's explanation and arithmetic for the Publisher "storage" fees.

More of my own thoughts:

--The small guys are right: Steve Potash has made some king-sized blunders. Did he really have to expand so fast, hiring and buying and in general spending like mad? Was it necessary to throw at least one promo bash--and probably more--costing tens of thousands of dollars? Far more importantly, did he buy extra servers and hire too many people before the market was ready? His pitch to publishers was, "Hey, let me incur those big expenses instead of you." They said yes and, alas for Steve, he may have justified those words prematurely. What's more, I still wonder if he's using the e-book publishers, especially the small guys, as bankers to finance expansion in areas such as librarians--which themselves may feel a Potash-style squeeze in the future. Too, as I've repeatedly pointed out, he rejected Dorothea's Salo wisdom on the most efficient XML practices.

--Suppose Steve had avoided flash and built his business more systematically and kept costs down. Then how low would his share of the publishers' sale be today? My speculation is that with the best techie advice, Steve might have reduced discounts to less than 25 percent in cases where publishers drove traffic to his site and perhaps 30-25 percent in other cases. Instead it's clear he's typically grabbing 50 percent discounts, at least from smaller publishers. Even if he's sending money back to e-stores, that's still a hefty share.

--By how much has DRM added to his infrastructure cost? Did he have to buy more machines? How many more people did he have to hire to handle the additional support that DRMed e-books require when they won't work on more than X numer of machines or never work right in the first place? Did relations with Adobe and Microsoft force him into DRM big time, inflicting the costs even on publishers that hated the technology? I supect that in Microsoft's case the DRM costs would be far greater than for Adobe, which sells DRM tools to publishers. By contrast Microsoft doesn't seem quite as ready to spread the tech around. In fact, Steve may have used his close relationship to Microsoft to push publishers toward him--even though other companies may have served the publishers far, far better.

--What's Steve's salary? Those of other key people at OverDrive?

--Are investors now pressing Steve to justify his investments now, even at the expense of small publishers?

--Who are Steve's investors? He was once pretty chummy with Microsoft, for which he developed some software apps related to Microsoft Reader. Did Microsoft also invest? And how about Adobe? Its Adobe Digital Media Store is "powered by OverDrive Media Vending." Could OverDrive actually be no more than an annex of software companies? I don't know. But in his role as president of the Open eBook Forum, his foot-dragging on a Universal Consumer Format doesn't exactly build confidence.

--Might there be a conflict of interest between Steve's library push at the OeBF and his company's own library activities? Is he using the forthcoming OeBF-sponsored library conference to woo library clients in a big way? And will he jack up library fees in the future, just as he's gouging one-book publishers with $300-a-year storage charges?

--Isn't it time for Steve to resign as chair of the OeBF to attend to his business, just as I've said before? Actually the OeBF has a lot in common with OverDrive--a very bad cost-to-value ratio. The one exception has been the work of standards-setters, who, however, have bogged down under Steve. Yo, Steve. Care to release a time table for a UCF? Or even for the next version of the Open eBook Publication Structure? And how about the fight against those European tariffs on e-books? No word from you on this even though you said you would let me know. That's what happens when you've got OverDrive's problems to distract you. Be good to OeBF, be good to your employees and investors, and focus on your business. That's the easiest way to turn enemies into friends. People aren't out to get you. They just want to be able to make money from e-books, and right now you're a big barrier.
posted by David Rothman at 12:46 AM | permanent link

From Tom Peters of Tap Information Services:

Please join us for the next lively, informal gathering of Meeting of the Minds, an online book discussion group designed specifically for print-impaired readers. On Thursday, March 18 from 7:00 to 8:00 Central Standard Time (8:00 to 9:00 Eastern) we will be discussing the comic novel, Handling Sin, by Michael Malone. The novel recounts with breakneck speed the travels and adventures of an insurance salesman from a small town in North Carolina and his friend and sidekick as they search for the salesman's ailing father, who mysteriously left the local hospital, bought a Cadillac, left a treasure hunt for his son, and was last seen leaving town with a young woman. Malone has been called the Dickens of America because of his high-spirited writing style, menagerie of comic characters, and appeals to our sensibilities and better instincts.

Note: See item below for details on how to log on for the show--sponsored by the Mid-Illinois Talking Books Center.

Correction: That's March 18, not this week.
posted by David Rothman at 12:14 AM | permanent link

From Lori Bell, via LISNews:

The next eBookWorm online interview and discussion will be held on Thursday, March 18 from 4:00 to 5:00 EST. eBookWorm is sponsored by the Mid-Illinois Talking Book Center. The featured guest will be Andre Dubois, a technical advisor from Visuaide.

Visuaide is a Canadian company devoted to facilitating active and independent living by persons with print-impairments. Visuaide sells a variety of hardware and software products, including the Victor Reader Vibe, a portable CD player capable of playing DAISY ebooks, MP3 files, and commercial audio CDs. Please join us for what promises to be an interesting look at global developments in ebooks and assistive technologies for the print-impaired.

To access the online meeting room: 1. Go to http://talkingcommunities.com/entrance.pl?284280012382. 2. A small software applet will download to your computer. 3. Type your name (no password is necessary) and click enter. If you have questions about the eBookWorm program, please contact either Tom Peters or Lori Bell.
posted by David Rothman at 11:44 PM | permanent link

Any anti-trust fodder here for the FTC or congressional investigators? Why will OverDrive feel free to charge small publishers as much as $300 per year per book in storage fees? Too much pricing power within the little e-book industry?

Could OverDrive--which services 700 publishers and has had close ties to Microsoft, Adobe and other powers in software, such as Palm Digital Media--be one reason why e-books have not taken off? Because specific commercial interests have mattered more than the e-book industry as a whole? And why is it that OverDrive inflicts Digital Rights Management schemes on all publishers, even the ones that would rather not pay for them?

Note: My bet is that OverDrive is either stupid or is acting on its own to drive off small publishers. In my opinion, big publishers are also among the victims of the company's new storage fees. Is it possible that OverDrive, rather than immediately buying new equipment and hiring new people to expand, wants to reduce the load on its system for the moment and squeeze some extra money out of publishers along the way?

Related question: How much is Steve paying in DRM costs to Microsoft, Adobe and the like? Content Reserve some months ago refused to tell me. Publishers deserve to know DRM costs if they're asked to foot the bill, right? While little e-book publishers are struggling, could big software companies be making some nice money off DRM? Any NDAs involved? Why won't Content Reserve get specific about full DRM costs even though they are big enough for him to list them among his expenses in justifying his services?
posted by David Rothman at 1:59 PM | permanent link

Late last week, Salvo Press contacted us to complain that OverDrive, a major distributor in the e-book business, wanted to slap storage fees on e-books. What's more, the new charges discriminate horrendously against tiny publishers that deal with the company's Content Reserve branch. The smallest will end up paying 50 times more per book than the largest publishers.

Not only that, it turns out that OverDrive hasn't exactly been exemplary in paying some publishers on time. Is OverDrive in trouble or just being tight with cash in violation of contracts? "In April 2003," reports Mary Z. Wolf at Hard Shell Word Factory, "I received payment for 1-1/4 years of sales. However, I haven't received a cent since then. I've sent emails, snail mail, voice mail messages, actual voice calls, and even emailed" Steve Potash, the president-CEO of OverDrive.

So far OverDrive hasn't released any financial figures. In terms of specific numbers, we still don't know if OverDrive is making a profit, close to a profit or instead is rapidly burning through its capital. Steve has told me that his revenue is growing and his business is "fine"--and it could well be.

Just the same, revenue isn't earnings, and it's curious why he feels compelled to slap storage charges of $300 per year on one-book publishers, impose storage fees on large publishers as well, and still benefit from distributor's discounts of "customarily 50 percent or greater." B&N doesn't charge for storage in brick warehouses, which are much more expensive than hard drives. While there are expenses for e-distributors such as bandwidth, OverDrive's rivals don't charge for storage and, according to at least some e-bookers, can be far more effective than OverDrive at moving merchandise. It would be unfortunate if OverDrive's distribution efforts collapsed with its more than 700 publishers failing to collect on already-made sales.

Meanwhile here is a list of links to items about the OverDrive gouge, starting with the first public report:

--OverDrive socks tiny e-publishers with steep storage fees--even though e-books are just bits and pixels.

--Bits-and-pixels gouge draws fire--and a proposal for an e-book-distribution cooperative.

--Seattle publisher criticizes storage gouge by OverDrive's Content Reserve.

--Uproar grows over Content Reserve's bits-and-pixels fees--while distribution nonprofit gains support.

--Novelist finds Content Reserve lags as sales builder.

--Hard Shell Word Factory knocks bits-and-pixels gouge.

--An e-book distribution cooperative: How to set it up.

--Hard Shell Word Factory: OverDrive behind on payments.

--OverDrive CEO: Expenses justify storage fees charged publishers.

--DRM, Tower of eBabel, bureaucracy may be taking toll at OverDrive: Time for Steve Potash to resign as OeBF prez to focus on his business.

--The PR factor: Why Random House, S&S, other giants should support a nonprofit e-book distribution cooperative.

--Math at OverDrive supports conspiracy theory, reader says.

--Dragon Tree Press: Consider leaving Content Reserve out of the loop.

--Wanna avoid OverDrive's publisher gouge? Tips from Blackmask--and TeleRead request for more info from publishing community.

Needed: An industrywide site to promote e-books

Perhaps a nonprofit distributor could pick up the pieces from Content Reserve, with participation from publishers of all sizes, groups such as American Association of Publishers, retailers and related organizations, and librarians, the latter of whom could help this reborn effort evolve into a well-organized, e-book-focused Amazon to the mutual benefit of the entire industry. Jon Noring, moderator of the eBook Community list, has already proposed a distribution cooperative, a great idea that, however, could actually go further.

This e-book Amazon could include a powerful search engine, with options for publishers to participate in varying degrees, depending on their wishes. Independent e-stores, promoters and distributors could still exist and offer their own special services to help individual titles stand out from the crowd and push them elsewhere on the Net--in addition to creating and customizing related back-office applications. The e-book Amazon would treat all publishers neutrally while at the same time letting readers know which titles were moving the most briskly. To address an inevitable question, the existing Amazon has actually gotten rid of some e-book-specific menus, and B&N is out of the e-book business, so, yes, the e-book Amazon would help considerably.

The library angle: E-libraries and e-publishers should work in harmony even if their interests don't always overlap. Libraries, for example, can benefit from publishers' aggressive promotion of e-books and specific titles. Publishers could benefit from library sales and popularization of e-books in schools and libraries in the States and overseas. Furthermore, as already noted, librarians could help make the right e-books easier to find (search words are just a start, given the vast amounts of material to wade through). Too, via durable sites with books ready for hyperlinking, librarians could help writers and publishers take full advantage of the power of the medium.
posted by David Rothman at 8:37 AM | permanent link

From Mary Ezzell at Dragon Tree Press:

If Content Reserve needs to charge us a percent on actual sales, we could live with that. But any recurring flat fee would probablly drive us out. Even a one-time account fee would be something we'd look at closely.

Thanks for the warning on this. We just put up half a dozen ebooks at Lightning Source (free uploads this month). We were getting ready to upload them to Content Reserve too, which is lot of work (unless they've improved their interface), so now we  won't bother doing it till we find out if we're going to have to withdraw from CR.

[Ed Howdershelt at Abintra Press] had a good point [on the eBook Community list] about retailers having contracted with Content Reserve for a wider range of products than will be available if the smaller publishers withdraw. Maybe we should get together and approach those retailers and offer to supply them direct (or through some co-op), and leave Content Reserve out of the loop.

* * *

Update, 4:11 p.m.: Mary's done a post to the eBook Community List saying: "For small retailers, what do we really need a big centralized middleman for, anyway? If maintaining a central storage place is the big expense, how much
of the loop could be managed without ongoing central storage?" Actually, as I see it, ongoing central storage could be pretty useful in terms of the permanence of e-books and reliability of access.
posted by David Rothman at 10:09 AM | permanent link

From Devoss--to support his fear that big publishers are using OverDrive President-CEO Steve Potash as a cat's paw against the small guys:

I was just reading Steve's response to the publishers concerns on your site, and I'm left with even more questions.

$40k/month seems like an absurd amount of money to support 100k ebooks, but I'll let that go. I realize if he hopes for more books, he'd have to plan for far more than 100k.

100,000 ebooks, times a $5/year fee per book = $500,000
$40,000 x 12 months = $480,000

Give the above numbers, why create a priceing structure that deliberately forces small publishers away and encourages quantity submissions only from large publishers? Why not create a pricing structure that encourages hundreds, if not thousands, of individual authors to finally have their work published and made available for all?

The pricing structure he selected sounds more and more like suicide to me. Once he drives off the small pubers, the large houses will be his sole souce of income. Large companies are notorious for dropping out of programs like this on whim, or taking the whole thing in-house rather than outsourcing it.

My conspiracy theory still remains viable.

I think it's way past time this went the "open source" route.

* * *

The TeleRead take: Now that I'd agree with. Whether through a TeleRead-style library or a distribution cooperative or a combination of the two, the e-book industry and the rest of publishing need more financial transparency. Open source would be one way to make this happen. The issues are human, not technological. If the humans at big publishers get in the way, then Devoss could well be on to something with his conspiracy theory. I won't buy it so far--but my mind's open.
posted by David Rothman at 9:54 AM | permanent link

Heavy-handed DRM and the Tower of eBabel may be sapping even more growth from e-books--a stunted industry at just $10-$20 million in global revenue--than I feared.

In reply to criticism of the storage fees charged publishers, OverDrive President and CEO Steve Potash noted his costs in people and otherwise. He himself cited DRM--which we know involves not just licensing fees but related technical complications--as among his major expenses. Then there's the ever-present issue of the e-book format wars. I went to the Team OverDrive page and in fact saw a bunch of format conversion specialists even though OverDrive is scaling back its conversion business. Too, I found too many people in marketing and administrative jobs. OverDrive and its Content Reserve distribution arm are hardly the only important companies in e-bookdom, but in studying them, we can better understand why e-books have fallen so short of their promise and still cost too much.

Unwanted services

The issue is, "Do e-book publishers really want all of Steve's services, especially the smaller houses?" One solution would be to impose DRM-related costs only on publishers that insisted on the technology. In the long run, the best answer would be a Universal Consumer Format with standardized DRM Lite, as well as a strengthened effort by the Open eBook Forum or another organization to help publishers get formats right in the first place.

Needless to say, an efficient distribution cooperative, far closer to reflecting the wishes of retailers and publishers than OverDrive does, could also help. Steve Potash could turn himself from a publisher-perceived villain into a hero by following Jon Noring's suggestion and spinning off Content Reserve to let it become a group-run nonprofit. Once I thought Steve could have made it as a distributor. But he seems far too eager to give customers more than they want.

Qustions abound, too, in other areas, including one that is far too important for "other" to apply. We still don't know if OverDrive/Content Reserve is turning a profit or, if not, how close it is to profitability. As the dotcom era showed, revenue by itself means squat. Cashflow, earnings, all that other grubby stuff, should count as well.

Friction-filled commerce

Other mysteries remain. One publisher has said Content Reserve claimed to be kicking back a hefty percentage of its discount to retailers. And if that's true, why should Steve feel they were getting shafted to the advantage of the e-publishers and that hefty storage fees were needed? Other distributors don't have such charges. In fact, come to think of it, p-book distributors don't sock publishers for storage. So much for frictionless capitalism, OverDrive style.

All in all, OverDrive so far strikes me as a rather troubled company without the most efficient of business and technological practices--in part, the result of ignoring Dorothea Salo's wise advice on the production front. Ideally Steve will step down as president of the Open eBook Forum to focus on reinventing his company. He has already been winding down his conversion business, a commendable first step.

OverDrive's strengths

Steve's big strengths seem to be in coming up with jazzy-looking sites and in wining and dining key industry players. Maybe he should put OverDrive on a diet and slim down to what he does best--without inflicting his services on the unwilling. If publishers want Steve to promote them, then he could do so independently of the distribution effort that he should spin off to be a group-run nonprofit. What's more, Steve could continue in the library area, where, in partnershp with the Cleveland Public Library, many other local systems and the Mid-Illinois Talking Books Center, OverDrive is making its share of praiseworthy contributions.

Steve may also want to apply his talent for sizzle to OverDrive's retail side and maybe even consider developing some original content--yes, join the ranks of publishers. I notice that some key OverDrive employees are ex-English majors. Mightn't life be more fun for them and Steve if he turned them loose to focus on their love of books and perhaps the related promo, both online and offline? Come to think of it, if the money is there, perhaps Steve might not have to slim down so much if he can bring out the best in truly book-minded employees--just make better use of their true talents. But, look, Steve, the operative word about the money is "if." Don't expect rival publishers and retailers to subsidize you. If you've burned out your capital, that should be OverDrive's problem, not Salvo Press's.

A big frustration: As suggested by the above, the mess at OverDrive could well be among the reason why the Steve so far has not given me a tentative timeline for development of a UCF despite my repeated requests for one. How frustrating. If a UCF had existed--so Steve could focus on the nontechnical areas where he's best--OverDrive itself might be in far better shape. More than ever I can understand why Steve pleads time pressures.

If only OverDrive had reached out: Perhaps OverDrive should have spent more time helping publishers get their production processes right in the first place to reduce the need for conversion. Instead was Steve thinking, "Why, that would eat into our conversion business"? See the problem? And how Steve's paying for it now, either in his own conversion costs or the costs of hiring other companies? Imagine the potential of a better model, such as a cooperative distribution arrangement, where the development of a UCF and related production tools and training for publishers would be in everyone's interest.

The eBookExpress site: As noted, OverDrive can do some nifty sites. But for credibility's sake, let me note eBookExpress as an exception. Why doesn't this e-bookstore have a comprehensive category listing or pull-down at the very top of the home page? Surely BookExpress is offering more than books in the areas of computers, finance, self-improvement and travel, the categories he does mentioon there. In fact, the store does have a complete category listing lower down, but at least on my system, the links are hard to see against a yellowish background. Now compare Steve's retail site with, say, the home page of Fictionwise, where the cateogies leap out at you.
posted by David Rothman at 7:15 AM | permanent link

Steve Potash, president and CEO of OverDrive, whose Content Reserve distribution branch is now under attack for new storage fees charged to e-publishers, offered a classy response. I disagree just as vehemently with him as ever and will later provide further opinions and analysis. Meanwhile, however, I believe he's entitled to his say. Steve, I hope much more information will be coming very quickly. Pamela Turner, mentioned below, is Steve's Director of Content. - David Rothman

Pamela and I have been travelling. I will share with you [that] besides our significant investment in technology and infrastructure, we incur almost $40,000 monthly costs for hosting, bandwidth, support personnel and hardware upgrades to support the nearly 100,000 eBook products in multiple formats we have today in Content Reserve. We have been subsidizing publishers as they have been provided direct access to manage digital content accounts yet have had no costs. We have ongoing investments related to these services that we maintain 24/7. We talked to several key large, medium and smaller publishers prior to developing our new Publisher Account Service Terms.  Publishers we spoke with confirmed that we provided valuable services with associated overhead as part of our distribution role in the marketplace. Our original proposed fees were much higher, and after discussions with these suppliers, we settled for the reduced fees that are reflected in the notices that went out.

Our suppliers receive the benefits of applying DRM to their products and yet they have paid zero for these services. We provide staff to maintain the integrity of the publishers catalog and insure proper feeds to all major eBook retailers. These costs are incurred before and regardless of any sales. Our database transaction tables grow exponentially each quarter as we processes millions of transactions to support the catalog feeds of tens of thousands of titles being refreshed weekly at dozens of online catalogs. This requires us to constantly add servers, and archive capacity to support the publishers and permit them to refresh, add new titles, upload reviews, jacket covers, etc.

We didn't feel it was fair to just keep pushing these costs onto the retailers and OverDrive cannot continue to subsidize publishers for DRM services and catalog support. We also provide public access to locate publisher's titles at eBooklocator.com. We are proud of our work in this space driving new outlets for eBook publishers through retail and library channels. The small contributions we seek from participating publishers will not come close to covering the cost of our services. These fees will contribute to some of our ongoing costs for staff, software upgrades, hardware, and continue to support our developing of a growing channels for digital book products.

Steve


> Hi, Steve. Just to alert you that I've put up various publishers'
> reactions to the storage fees. Feel free to comment on anything related
> that you see in the TeleRead Web Log, and I'll give you your say.  
> Also, I'm curious what you think of the just-proposed idea of spinning
> off Content Reserve into a separate nonprofit cooperative and letting
> publishers and retailers as a group run it--as opposed to just one
> company calling the shots? Perhaps libraries could participate too.  
> Thanks,
> David
posted by David Rothman at 5:13 AM | permanent link