Steve Potash

Steve Potash is President and CEO of OverDrive, which provides books for libraries via its Libby app and video content via Kanopy and...

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Episode Transcript

Speaker 1 (00:08):
Welcome back to Bob WEFs podcast. My guest today is
Steve Hotel, President CEO of Overdrive. Steve, what exactly is Overdrive?

Speaker 2 (00:23):
Bob?

Speaker 3 (00:24):
Overdrive is a mission based company that has, over the
last forty years been one of the pioneers in the
new format of reading books on the screen, which we
all know today as an ebook, as well as digital
audio books that you could listen to anytime, anywhere while
you're walking or in the car commuting. And as a result,

(00:46):
the Overdrive business has become the single largest supplier of
digital books to schools, libraries, universities, and other institutions globally.

Speaker 2 (00:58):
As a result of this work.

Speaker 3 (00:59):
Over the list twenty five to twenty five plus years.

Speaker 1 (01:03):
Okay, just to sort of define what's going on here,
are clear things up. If I am getting a book
from Amazon, I'm buying the book. Are you involved in
that transaction at all?

Speaker 2 (01:17):
No.

Speaker 3 (01:17):
When you are buying an ebook from Amazon, you're purchasing
an ebook in their Kindle format, either to read on
an ein Kindle device or to read on a tablet
or your phone on the Kindle app. So Amazon has
built their own ecosystem and a proprietary file format, the

(01:38):
Kindle format. They built their business on some of the
earlier work that Overdrive did. Because Kindle was introduced by
Amazon in two thousand and seven. Oversdrive started digitizing books
on floppy diskets in the nineteen eighties. So I am
the proud recipient of an honor in this industry. I've

(02:01):
been part of more digital book failures than any person
alive because I started too early putting books on floppy diskets,
and then a decade on CD RAM and by the
late nineties mid nineties, when this Internet thing showed it
had some promise, Overdrive was the pioneers that helped create

(02:23):
the environment for the ebook and the audiobook markets today.
So we've been into this business much longer than most
and we participate in many aspects of it. But Amazon
is a direct to consumer closed system.

Speaker 1 (02:39):
Okay, so what format do you distribute books in?

Speaker 3 (02:45):
We distribute books in most of the popular open industry standards,
and there is an industry standard that has evolved as
a result of overdrives participation twenty five years ago, when
this nascent book end was trying to see about how
they might grow a digital electronic book future. Today it's

(03:06):
known as epop EPUB, and that is a global acronym,
just like your listeners would be familiar with the MP
three file format. It's an open industry standard that allows
any content creator to package their written work in a

(03:29):
digital container and make it broadly available for retail booksellers
for their own website, and it could be used by
thousands of devices and reading apps. That is kind of
the ubiquitous ebook standard today, and that's for books and
texts and images you read on a screen in the

(03:52):
audio space. Overdrive has its own proprietary apps, but it
is all really based upon the original audio files we
get from the audio publishers and their suppliers, and we
are leveraging some of the open industry standards and then
applying as required by the rights holders the controls that

(04:15):
manage access copyright digital rights management. So we are based
on open industry standards and then to meet the requirements
of the rights holders, we utilize copyright protection tools.

Speaker 1 (04:31):
Okay, if I'm a user and I own a computer,
can I write something and turn it into EPUB format?

Speaker 2 (04:41):
Absolutely.

Speaker 3 (04:42):
EPUB has been an adopted industry wide standard for mobile
online reading for now, going back twenty plus years. Many
of the tools like Microsoft Office and Word will allow
you to take a word document and save it as
an EPUB. Now EPUB actually in the technical stance is

(05:07):
a variety of what's called XHTML. So the web standards
of XML, HTML and many of the open metadata standards
of the Internet are also utilized in the in the
ebook world in the epook standard. So there's free tools
to take your web content. There are many tools to

(05:29):
convert a PDF into epub, and there are lots of
service based industries working inside publishing houses or as a
service bureau to help content creators and publishers transition their
files into an ebook marketplace.

Speaker 1 (05:49):
Okay, needless to say, publishers own the rights. What is
the relationship between overdrive and publishers.

Speaker 3 (05:58):
Well, I'm going to just comment on your statement. Publishers
own the rights to distribute and merchandise and build you know,
the market, and promote and.

Speaker 2 (06:10):
Sell the books.

Speaker 3 (06:12):
But the ownership of the rights is a little bit
more diverse. We see that today's world authors sometimes still
control all of the rights. So our relationship, as you
appropriately stated, is with publishers, aggregators, or in some limited cases,

(06:33):
we work directly with the publisher to get permission for
the digital book file to have overdrives right to sell it,
market it, and fulfill it worldwide based on the permissions granted.
And I know your audience is very familiar with the

(06:54):
complexity of the music space and copyright and mechanical and
license fee and royalties. There is a similar hierarchy and
rights structure in publishing, less complicated than music. I'll thankfully say,
but for every title, Overdrive seeks permission from the rights holder.

(07:16):
And let's just say it's a publisher like Penguin, Random
House or Simon and Schuster, that they are giving us
the rights to the Stephen King novel that we could
sell in the territories where they have the permissions. So
for let's say Simon and Schuster us they may give
us a new Stephen King novel, and those permissions may

(07:38):
be granted for North America. Because Stephen King and his
agent may have done a deal for ebook distribution in London,
or in Germany or in Australia with a different publisher,
we have to go in every territory to those that
have the rights to distribute the work in the territory.

(08:01):
And then similarly, we work with the publisher to get
the permission on how they want to enable access for
the institutional buyer and what rights they have with that
digital file. I know that sounds like it's complex, and
unfortunately it is.

Speaker 2 (08:21):
But we are best known, BOB.

Speaker 3 (08:24):
For the dramatic adoption of ebook and audiobook usage from
our nation's public libraries. So I'm going to use that
as a use case to kind of bring down to
you more day to day how this impacts your listeners.
Let's say you hear about a new bestseller that you're

(08:45):
excited to listen to on your commute to work, and
you're in love with audiobooks, And yes, we do educate
millions of listeners that instead of paying for a subscription
and a credit card and ads, your public library is
an unbelievable, untapped off in resource for access to lifelong books.

(09:12):
For free ebooks you can read on your kindle, Audiobooks
you can listen to on your commute or on your walk,
or on your tablet. And so if you are a
patron of a public library, as public library patrons have
been doing for one hundred and almost two hundred years
in this country, you walk into a public library if
there's a popular book, they may have enough units and

(09:35):
it's available for you to borrow now. And in the
physical print world, if there's if it's in demand and
they're all checked out, you would add yourself to a
wait list or place a hold, and when the book
becomes available, the library would notify you your books available,
pick it up. We have created a replication of that

(10:00):
experience going to your digital virtual branch online searching and
browsing for a book of interest, and with one click
you can immediately borrow the book. But for let's say
this Stephen King new novel, Simon and Schuster as others,
have created permissions that if a user if an institution

(10:25):
and bob you're in the Los Angeles area and we
have a dramatic, fabulous partnership with the Los Angeles Public Library.
So if a listener is going to Los Angeles Public
Library excited about the new Stephen King, Simon and Schuster book,
they may see that the library has of the e
book or the audiobook, one hundred copies of the e

(10:45):
book one hundred copies of the audiobook, depending.

Speaker 2 (10:48):
On when they check it in.

Speaker 3 (10:51):
They may see that they're all checked out, and in
our app called Libby, and the app is free and
the books are free from.

Speaker 2 (10:57):
Your library Libb Libby.

Speaker 3 (11:01):
They may see they're all checked out and you are
number fifty two on the wait list. Libby will also
say you have approximately like a one week wait. So
we have replicated the experience that in the sense where
the publisher and the permissions are to only sell the
library a number of units, they mandate that for every

(11:24):
unit the library buys, just like physical one person can
borrow at a time. If that is the model that
the library acquires the book under the ebook or the audiobook, well,
then the experience is very similar to the print or
the physical CD. For the audio, one user at a time.

(11:45):
If they're all checked out, the patron clicks put me
on the wait list, Libby will automatically notify them the
book is available.

Speaker 2 (11:56):
Click here to.

Speaker 3 (11:56):
Start enjoying your read or enjoying your listen. That is
the model that built the ebook and audiobook lending in
public library. So that is kind of the baseline of
the permissions we as publishers. For they set the price.
We respect the territorial permission of the author and the publisher,

(12:20):
and for every title we seek to get multiple permissions
so that our libraries, our schools, our universities, our corporate
learning centers can actually acquire the digital book with multiple
ways to make it available. I shared with you the
most common way, one user at a time. They buy

(12:43):
ten copies, ten users can read it, then the rest
have to wait till it's the return.

Speaker 1 (12:48):
Okay. Overdrive only works with institutions, and it only is
on the public library side, or is there any conventional
retail at all.

Speaker 3 (13:04):
Overdrive has a thirty year history of being behind the
scenes with ebook and audiobook fulfillment for a number of
direct to consumer retail experiences. But we have that side
of the Overdrive business is much smaller today, and today
we are focused and ninety x percent of our revenue

(13:29):
that we are the single largest supplier of digital books,
books you can read and those are for all ages
in all categories. Digital magazines and periodicals, manga, graphic novels
and comics, audiobooks and streaming video and we service every

(13:49):
type of institution. We're best known for the success Libby
and Canopy. Canopy is our streaming It's like Netflix for
Library Canopy with the ka NPY similar to you can
cut your subscription to Audible or other paid services with

(14:10):
Libby for ian audio or audiobooks. Similarly for the streaming
video platform. Canopy has the largest collection of feature films,
documentary and children and world cinema, more than Netflix. And
again with the library card, the app is free and

(14:31):
the content is free. We service public libraries and in
the US where in every zip code in North America,
US and Canada. We serve about sixty percent of the
schools in the United States, so that's pre K through
high school. Overdrive is globally supplying ebooks, audiobooks, streaming video, magazines,

(14:55):
and content to universities, colleges. We are in thousands of
corporate knowledge centers. We supply the US military, professional associations
and the like. So we supply almost every form of library, public, academic, school,

(15:15):
corporate knowledge center, government, military, prison libraries. That is where
we are best known worldwide, and today we are available
in over ninety thousand institutions. So pretty much anywhere humans exist,

(15:36):
they are using our Libby oursa, our Canopy apps or
platforms on set tops or browsers to benefit from content
lifelong free content courtesy of their local library, university, or school.

Speaker 1 (15:54):
Okay, just to do some backfill here. Independent retailers are
now selling digital books. Who is doing the fulfillment on that?

Speaker 3 (16:05):
That is today being dramatically supported by bookshop dot org,
our good friends out of Brooklyn. In that past, Overdrive
had a role in it. And like I said, if
this was if we were doing this interview twenty years ago,
I would be listing a big litany of publishers that
we are powering direct to consumer ebook, audiobook or retail bookstores.

(16:31):
When I said, I've been part of more ebook failures.
Bob is an entrepreneur born and raised in Cleveland, Ohio.
I came home to my family said this is it.
We are now going to be the ebook supplier for borders.
I just came back from ann Arbor. Well that wasn't it.
You know, years before I said this is it, we
are going to be the number one e book supplier

(16:52):
and one billion cell phones, the biggest mobile cell phone worldwide.
We just did no Kia. Well that was a few
months before the iPhone was launched, you know, So you
know we work today. Retail independent bookstores are very well
supported by my buddy Andy Hunter at bookshop dot org.

(17:14):
And Andy is doing a great job letting all the
independents add a full catalog of Ian audiobooks so they
can compete with the Amazons and the and some of
the other big boxes.

Speaker 1 (17:33):
Okay, do you have any competitors in this sphere? Is
there somebody else who's licensing written words audio books and
providing them to institutions.

Speaker 3 (17:46):
Yes, we do, and in the in the markets we
serve because we are global. Business started here from Cleveland, Ohio.
I'm delighted to say that we created the category and
we were the ones that pioneered early ebooks. And then
about twenty five years ago launched the first public library

(18:11):
popular digital book service. And that was years before Kindle
or iPads and you know the current ebook environment. And
we've over the years, we've had the traditional booksellers, the
schools and libraries tried to develop a digital business because

(18:33):
they had all of the embedded relationships with the authors
in the supply chain. They knew all the publishers, they
had the relationships with the rights holders. They service the
library and university, and you know the big school district communities,
so these would be the Baker and Taylors and the
Ingram book groups or in the k twelve defilettes. So

(18:56):
all of those traditional booksellers to schools, libraries, institutions, every
one of them then developed a digital extension to their
physical or their print businesses, and many of those are
still in the market today. So we have competitors with
Baker and Taylor has a platform called Boundless. There's a

(19:19):
legacy CD RAM and DVD distributor to libraries, Midwest Tape
out of Holland, Ohio. They created a competitive platform called Hoopla.
All of them followed us, but collectively overdrives Libby and Canopy.
In the North American public library, we are the dominant

(19:41):
leader in many cases, we are the sole supplier to
many of these biggest systems in the markets, but we
do have competition, and in international markets we have competitors
in Germany and here and there, all over the space.
And if I look at Universe, it's a different group
of competitors. If I look at students in the classroom

(20:05):
from kindergarten through high school, we have educational competitors. But
for the mainstay of you know, public library, consumer ebook
and audiobook, it would be the traditional book suppliers to
the market and the few I mentioned.

Speaker 1 (20:21):
Okay, Let's say I'm a library system you talk about
the County of Los Angeles, and I have an arrangement
with Overdrive to provide titles. Would they buy titles from
anybody else or rent whatever it may be, or is
it an exclusive relationship?

Speaker 3 (20:40):
In most cases with public libraries, there's no contractual exclusivity,
but as a de facto business practice, they're only buying
from us. And that is the majority of the In
the United States, public library data is very available. So
we know that out of our nation systems of public

(21:03):
libraries roun you know, thirteen fourteen thousand public library systems
in the United States. Out of those systems, Overdrive is
supplying about eighty five percent of all of the digital
book inventories that public libraries used last year. So collectively,

(21:26):
all of our competitors might you know, be sharing about
fifteen percent of the spend, and we capture the majority
of it. And it's not by contract or exclusivity. It's
by delivering the best experience for the patron and the listener.
It's by having services and features within the experience that

(21:48):
want people to use our libby app or canopy. And
we're constantly and we do have some competitive advantages that
frustrate others. So, for example, in the US, the dominant
way many of the adult fiction community enjoy books and
reading are on their kindle. Overdrives the only supplier where

(22:12):
you can borrow a new bestseller New York Times Bestseller
from the Los Angeles Public Library in Libby and through
an arrangement an agreement with Amazon, you can borrow it
from the library and within a moment open up your
kindle paperwhite and start reading the book you borrowed for
free in Libby from the library in kindle, and at

(22:37):
the end of the fourteen or twenty one days on
your kindle, the book expires and gets checked back into
the system, all managed by Overdrive. So Overdrive in twenty
eleven added a read with Kindle option, and because we're
the only ones, Amazon entered into that arrangement with This
is another reason why most libraries who are buying popular

(23:01):
books will look at Overdrive and Libby as the supplier,
because if you bought the book from one of the
other suppliers, you would not have the kindle option. So
that is just one of many competitive reasons why we've
been successful in winning the business. Because we deliver value.

(23:23):
We're accountable as well as public libraries and our schools
and our universities, and our government agencies, military and prisons
are mostly nonprofits, and Overdrive has developed into a mission
based company. We know that if we're going to capture federal, state,
regional taxpayer money and budgets, we have to earn and

(23:47):
be held accountable for how those taxpayer federal funds are
being utilized. And we develop, we deliver proven value, and
we hold ourselves up to higher standards. And for those reasons,
we have continued to grow our footprint in those markets
and frustrate our competitors.

Speaker 1 (24:09):
Okay, very occasionally on the libby app in Los Angeles,
I will borrow a book that is not readable on
the kindle. Is that because the publisher made a restriction
or they got that book from a third party?

Speaker 3 (24:27):
Well, typically it is when we ingust and our size
of our catalog and businesses constantly.

Speaker 2 (24:38):
Expanding.

Speaker 3 (24:40):
But in a typical month we will add about one
hundred thousand new digital books that are mostly brand new books,
and with one hundred thousand books coming in in all
languages for all audiences. I'm talking about Japanese manga Arabic
audio books read alongs where the children and the babies

(25:04):
can see the words and follow the engagement and the
hear the words. We add categories of content that are
not supported by a Kindle device, So often if you
are picking up a select title, if it doesn't have

(25:28):
Kindle compatibility, or there is some other inability for the
Amazon Catalog to do the enablement. But for most of
the English language popular trade books. Trade books are the
popular books you see at Amazon, Barts and Noble. We

(25:49):
have a very high percent Kindle availability in the US,
so yes, you will see some books and sometimes it
might only be a gap. We just added it it's
a hot new book, and you know we're getting in
sync with the Amazon catalog because we're not actually sending
the file to the Kindle. We've engineered with Amazon a

(26:15):
process that allows Kindle to fulfill the title under the
terms and conditions of the library permissions we have. So
you will find some occasional books that you can open.
And this would be for example, I believe our magazines.
Libby does fantastic on magazines, but I don't believe Kindle

(26:35):
is supporting our magazines so that you will see pockets
of inventory you can borrow in Libby in the US
where there's not an immediate Kindle availability.

Speaker 1 (26:46):
Okay, point blank, let's just use Los Angeles as an example.
They have the right to buy from your competitors. Those
books would be at a disadvantage, do they or most
people that you work with, they're getting all their content
from you.

Speaker 3 (27:08):
The vast majority are buying the vast majority of their
digital collection from Overdrive. For the value we deliver, we
have to earn the right.

Speaker 1 (27:19):
Place, Okay, but the lines are exceptions.

Speaker 3 (27:22):
There's exceptions. So if I don't have a book, you
need the book, God bless you. You have to get
the book. Because content is king. Content is and will
always remain king. And this is why I'll renew a
subscription I canceled two years ago because I have a
book or a series or streaming and that I'll go

(27:46):
through a bad experience or competitors platform. So we do
have The reality is in dozens of major metro markets,
or Overdrive maybe supplying ninety five percent of all the
digital books, they still could have several other competitors. Usually

(28:06):
when they have multiple competitors, it's because they're buying it
for a selection of either titles that we don't offer
for one or various reasons, or some other legacy reasons.
So yes, but it's very rare that they're going to
buy the same title, the new Sarah Jay Moss or

(28:29):
you know Dan Brown, or you know John Grisham. They
will occasionally buy the John Grisham in my platform and
one of my competitors, because they do have an audience
of users and it could be seniors that learn this system,
and they don't want to learn a new system. You know,

(28:50):
it's America, and we do not have we do not
you know, handcuff our buyers with you know, restrictions, and
you can't buy for my competitor. I want to win
the business because I offer the best value, the best service,
and the best selection.

Speaker 2 (29:07):
But in reality that does exist.

Speaker 3 (29:09):
I could show you the homepage of many California libraries.
You'll see what's the most prominent app and the experience
they promote in library online. It would be Libby for books,
Canopy for video. But in many cases I'll go in
the library and I'll see our competitors banner stands and
you know, bookmarks and you know merchandising. We're not exclusive

(29:33):
and many of our customers have multiple suppliers, but they're
buying usually smaller select and they may have a variety
of reasons why they did that.

Speaker 1 (29:43):
Okay, let's talk about overdrives. Relationship with publishers. As you stated,
you've been in this business along time. It has been a
long evolution. Yes, let's just say, with the major publishers today,
do you have an annual or multi year deal that
covers all their books or are they charging different prices

(30:07):
for different titles? How does it work?

Speaker 3 (30:11):
Yeah, our business is not too different from what you
would think of a traditional distributor. Let's take Ingram Content Group,
and Ingram would be known across many industries. Micro Ingram
and Ingram Books or Baker and Taylor is very specific
to public library. So we have relations direct distribution, terms

(30:37):
of sale with When we talk about the Big five
right now, in most countries, the best sellers are dominated
by anywhere from two to three. In the US is
now we call the Big five. It used to be
the Big six, but then Penguin and Random House merge,
so we have the Big five. So in the US,

(30:57):
the Big five dominate maybe sixty of all of the
popular trade book sales. And that's you know most of
the New York Times bestseller list and the marquee authors
you're familiar with. Our relationship with each of them is
a direct distribution agreement. In most cases we provide them

(31:22):
access to our marketplace. Overdrive has developed and has been
operating for twenty five years, the single largest B to
B digital book supply chain for retail and institutional buyers.
So with a Penguin Random House, a Simon and Schuster,

(31:43):
a McMillan, a hartper Collins, for example, we have negotiated
or operating under published terms of sale. Most cases it's
a distributor discount off of a digitalist price. So we
have the ability to sell a unit of a Penguin

(32:06):
Random House bestseller, this new John Grisham.

Speaker 2 (32:10):
We know what.

Speaker 3 (32:13):
Their digital list prices is like recommended price to the market.
We pay for every unit that is acquired by a
buyer based on the gross margin or the distributor discount.
So just to make life easy and our and our
distributor discounts vary and there's a healthy negotiation going on.

(32:36):
Frequently they're trying to claw back a few points gross margin.
We're trying to get them back, so we take a
percentage of the sale of the goods and pay back
the publisher. I will say this, Overdrive has a very
large digital book institutional business to library schools and universities.

(33:01):
We send to the big five publishers hundreds of millions
of dollars annually, and the majority of the money that
library schools and government agencies pay for the rights for
you to borrow as a student, as a taxpayer, as
a library patron, the majority goes to the publisher, and

(33:25):
then the publisher has their deals with the agents and authors,
so every time someone buys a book and is being
used at a public library, the majority of the revenue
paid by the library goes to the publisher.

Speaker 2 (33:43):
And authors earn on every.

Speaker 3 (33:46):
Book we sell, and sometimes authors aren't familiar. All they
see is oh, I can get a book for free
from the library, and the authors sometimes is not informed,
and this is because publisher on their royalty reports to
their authors are not delineating occasionally how many units and

(34:08):
how much revenue that author earned from the public library channel,
from the schools or from the university markets that.

Speaker 2 (34:16):
We sell to.

Speaker 3 (34:17):
So there's a lot of misinformation on the creator community.
When they just see, Oh you mean someone's getting my
book for free? Well, how do I get paid? I
can tell you every author earns significant share of the revenue.
Librari's pay and the majority of the revenue goes to
the supplier, my aggregator, my publisher, or my audio partner.

Speaker 1 (34:50):
Okay, so you have a deal. Let's say with Penguin
Random House on their books to traditional retail and physical
every book might have a different retail price and wholesale price.
A is it the same with you b as a

(35:12):
result of an anti trust lawsuit? When Apple and Amazon
sell their books, it's an agency thing such a it's
a percentage in your particular case, is you're buying the
book akin to that or is it a kin to
a retailer? This is the price minus whatever discounts you

(35:35):
might have. That as a price you're paid.

Speaker 3 (35:39):
As you're familiar with as a result of the antitrust
action the Big five or six at the time, it
was found that they created this agency model to facilitate
go you know, I want to discuss legal justification for that.

(36:04):
But to answer your question, it's more like a straight
distribution business and we actually have the ability to set
the price we charge the market for the vast majority
of the inventory coming into the Overdrive marketplace. We operate marketplace.

(36:25):
It's only a B to B shopping. So your listeners,
unless say are a buyer at a nonprofit institution, library, university,
government agency, they can't go in and look at my catalog.
But for the ninety thousand institutional buyers that have access
to go into my warehouse to see what books are available,

(36:47):
they see majority of it are the digitalist price that
was established by our supplier. We just benefit from them
setting the price putting it in, and we operate off
of our gross margin discount from what you know, the
difference from what I sell the book to what I
have to pay the publisher for the unit. So for

(37:10):
if I have to pay the publisher fifteen dollars and
I sell the book for twenty five, you know, then
I'm earning the ten dollars gross margin. So I earn
forty points and the publisher got sixty. I mean, if
my math is right, So that's that is the model.
We get a digital list price, we sell it at

(37:32):
the digital list price. We pay the supplier minus our
distributor discount. Now, in some cases Overdrive might discount the
price and I might get, you know, eat into my
gross margin. In some cases, we might have the publisher say,
we want to up unit sales, we want to sell
it to more doors. Let's let's create a sale like

(37:55):
back to school. Like back to school is a very
big campaign we're in the middle of now, Bob. And
it's not just for schools. It's for public libraries, for universities.
It's even for corporations that are helping professional development or
remote or continuing education or professional development. So we may

(38:16):
have publishers say, hey, for the month of August September,
we're going to reduce the price of all of our books.

Speaker 2 (38:21):
Our gross margin stays the.

Speaker 3 (38:23):
Same, but then we increase unit sales, maybe capture a
little higher bump year over year for back to school period,
but we're still operating off the same gross margin. So
the gross margin that we negotiate with our suppliers is
basically how Overdrive earns its.

Speaker 2 (38:43):
You know.

Speaker 1 (38:44):
Okay, as a practical matter, I realize nothing is identical,
But if a library is buying a book, or when
you're buying the book, is it essentially the same price
as an end user might see on Apple or Amazon.

Speaker 2 (39:01):
It may be.

Speaker 3 (39:02):
Unfortunately for the most popular in demand bestsellers, the supply
chain and the publishers and the authors and the agents
have increased the price to library lending to often make
it a multiple of the price sets the prevailing retail

(39:23):
price at Amazon, Barnes and Noble or Apple or Audible.
And they've justified that because they are correct in saying
that when we sell a license for a library to
lend this book out, we know that it will be

(39:47):
used by multiple users over the course of a calendar year.
And they also know that during the period of the
digital access for that book, they're unlikely going to be
buying a replacement copy. So when a library bought a
physical book or a stack of audiobooks, and audiobooks really

(40:11):
is the reason why overdrive success in the early two
thousands rolled across the country. We were solving a big
paint point for libraries. If your listeners are still going
into public libraries, maybe for themselves or parents or grandparents
and getting mom or dad an audiobook and they get

(40:33):
a hearts clamshell plastic case like you used to get
a Blockbusters and it's filled with a sleeve of twelve CDs.
That's how people were using audiobooks before we invented download
audiobook at the library. But guess what, after about three
or six months, the library had to buy replacement units.

(40:55):
When we were first selling our digital book value proposition
to libraries, and you bought an ebook or an audiobook,
I said, you know what, you buy this unit never lost,
never late, never damaged, lever scratched. So publishers said, an
author said, at least when the library or the school

(41:15):
bought my book every year or every few months, I
might be selling additional replacement units. At least when they
were buying my digital books. The book couldn't be anywhere
in an instant so there were limitations on the number
of actual readers that could benefit from that print copy

(41:35):
or that box of CDs. So the publishers of the
big best sellers and their agents and authors started to
demand that they would only sell into schools and institutions
that had permissions to possibly let fifty people use it
in a year or more. They wanted a higher price

(41:58):
per unit. So today the reality is that for many
of the best sellers that when the first book comes out,
and the book industry also kind of like the video industry.
You know, it first used to be theatrical first, and
then it went into pay per view, and then it
got into you know, the streaming, and then eventually it

(42:21):
went into the home channels and CD and DVD markets.
So the publishing industry still still has a premium on
when the new book comes out and it's called a
frontless title. When the frontless New York Times bestseller drops,
they really want to maximize the impact at retail first

(42:42):
format hardcover sales. They're trying to keep the velocity and
the buzz up. And then as a book after twelve
months or twenty four months, starts to become a book
that they would call it's now moving into the publisher's
mid list and eventually backlist for the author and publisher,
we'll often see the prices to the library decline. So

(43:04):
we have a complex because we've been doing digital library
and we've created the dynamics of now I think we
have over thirty thousand individual suppliers to our digital distribution
platform globally. We've allowed the suppliers, the aggregators, the JK.

(43:25):
Rowlings and Potter Mores when they say here's how we're
willing to make Harry Potter available in forty languages worldwide.
We want this price, we want this model. We have
to listen to them and see how we can accommodate.
So Overdrive another reason why we are the dominant supplier

(43:46):
because we've invented and developed most of the platforms that
all our competitors have emulated or copied over the years worldwide.
Our capability of meeting the rights holders requirements is unparalleled.

Speaker 2 (44:02):
We support more one off.

Speaker 3 (44:05):
Unfortunate because content is king, and for the first five
years when I launched popular ebook lending, all I heard
was Harry Potter, Harry Potter, Harry Potter, and still today
Harry Potter went through seven as we call it, starting
with Sorcerer's Stone, is still today one of the most
used digital books worldwide in all languages and all channels.

Speaker 2 (44:29):
So, being content as king, we.

Speaker 3 (44:32):
Have developed and we support to the suppliers, and we
are evangelizing for authors and publishers. If you follow Overdrives guidance,
we can tell you how you can grow market share,
increase brand awareness, and when libraries are interested in then

(44:54):
ian audiobook and put it in their catalog for discovery.
Overdrive will help you, your author and your publisher. We
will discover your book and sell more print. We'll sell
more print to the library, will create more demand for
your book at Apple and Kindall and Barnes and Noble
and elsewhere. We have been proven to be such a

(45:17):
valuable discovery and sales partner to the author in the
publisher community that I'm proud to say almost all of
the Big five now have also given overdrive permissions for
other models besides the one user at a time.

Speaker 2 (45:32):
And that's something I want to share with you and
your listeners.

Speaker 1 (45:36):
OK, a couple of things. Just do some cleanup work.
What about the concept of expiration you have. I'm buying
the book, but after it's read two hundred times or
it's read for twelve months, it expires. What's going on there?

Speaker 2 (45:52):
In a good swath of our catalog.

Speaker 3 (45:56):
We have enabled the publishers that require a overdrive, invented
this term metered access. What happened was when we were
negotiating twenty five years ago and ongoing even today overseas
and globally, when I get a reluctant author or publisher says, well,

(46:17):
I'll only go in the library, but I don't want
them to buy the book and have one a digital
file and then that's it forever. So they invented the
way that they said, I'm willing to sell to the institution,
but I want them to every two years have to
renew their license. So we created a system of metered

(46:42):
access levers. The first metered access level was introduced about
fifteen years ago by HarperCollins. They said, especially think about nonfiction.
Think about reference. If you are a library and you're
buying a reference book, an evergreen title, a dictionary, a

(47:08):
reference book that people use to look up. It's not
for pleasure reading, it's not a beach read, it's for
looking up in research. Do they want to sell that
book and maybe it doesn't get updated but once every
ten years? Do they want to sell that book once
and then that's it. The library buy five copies, will

(47:29):
never sell another copy of that dictionary until there's a
massive update. So publishers fifteen years ago said, we want
to find a way that if we do sell it,
it's not perpetual. So HarperCollins fifteen years ago introduced the
first of these levers. They introduce, when the library buys
my new popular HarperCollins ebook. We want the library to

(47:54):
lend it out twenty six times. After twenty six times,
they want them to buy a replenish unit. So that
was introduced. Within a year or two, we had one
of the other Big five who said, we are willing
to give you books popular bestsellers, and they introduce a

(48:15):
meter of We're willing to sell you the ebook for
library lending. One user at a time. They buy five copies,
five people in the wait list. You wait your turn.
But for each unit, we want each unit from the
data goes live, we want the library title of that
unit to expire in two years. So that's meter to

(48:38):
Access twenty four months. During COVID, we then had libraries
at urgencies and wanted to fill holds. Penguin Random House said,
to be even more flexible. How about we now let
libraries buy the same unit that PRH made Meter to
Access twenty four months. Now you can buy the same

(48:59):
best seller metered access twelve months at fifty percent the price.
So overdrive has supported and today in our catalog, unfortunately,
we support and when we go internationally, we saw that
in Germany the publishers were licensing books to libraries for

(49:20):
forty eight months or fifty serfs, whichever came first. So
Overdrive had to develop the capability so we could support
the Berlin Public Library, Hamburg or you know, Munich. So unfortunately,
when I said, the business has got it complex based
on the marketplace and they restrictions or the permissions that

(49:43):
were set by the rights holders. This is why it's
becoming more complicated and challenging in the for the buyer,
and Overdrive has been evangelizing, simplifying and providing the tools.

Speaker 1 (50:05):
Okay says there's a tension always in commerce between the
seller and the buyer. So you're talking about the seller
having multiples of traditional list price, you're talking about controls.
Now when you deal with an Amazon, which of course
is extremely powerful, they will push back into that. They'll say, well,

(50:30):
you know, our business model doesn't work, our customers don't
want it, our libraries pushing You read in the Wall
Street Journal about this all the time, Okay, especially expiration whatever.
Is this just something that people have to accept or
is there a pushback? And to what degree is Overdrive
itself saying hey, you know you're killing the business by

(50:53):
doing this.

Speaker 2 (50:55):
You know, Bob, thank you.

Speaker 3 (50:56):
I've been an evangelist for enlightening the rights, whul on
the un realized, the underrealized value and appreciation for what
our nation's librarians do. And I'll just talk about the US.
It's it's kind of a global phenomenon in many markets.
And when we introduce this, and I've had to give

(51:18):
testimony in Parliament, I've given testimony and many I've been
in Congress. I've been in the US and globally. There
is an anti library e lending bias that has permeated
this market, and there are bias and stereotypes against e lending,

(51:39):
and as a result, the libraries have been forced to
evaluate if they want to be relevant with the migration
to an online, mobile, digital world with a mobile and
everyone's smartphone and listening in your car and you know,
Bluetooth and every device in your house. The libraries have

(52:02):
had to swallow hard. The prices in many cases are onerous,
the restrictions are challenging. It puts tremendous stress on the institutions.
And the real trauma now is not even what this environment. Yeah,
this is the overhead for a market that's been going

(52:25):
through the pains of transitioning from analog to digital as
many industries have growing pains and accommodations and so many
of the things that are being done now, and there's
all you know. So the pressures that the libraries are
put under has been daunting. But I could say this

(52:47):
overdrive has been consistently delivering over twenty five years incremental
progress because we have a north start. We are a
mission based company. In twenty seventeen we became a certified
B corporation. If we are going to capture significant tens
of millions of dollars in every state from their public

(53:10):
funds to educate, entertain, comfort and support the communities from
cradle to grave, we have to be advocates for those
institutional buyers. And I can tell you we have pushed
and we have been successful in getting fair, flexible and

(53:30):
more reasonable accommodation and movement from the Big five than
any other force in the market. And we are constantly
getting wins for the buyers. But there's still a lot
more work to do. I don't want to name names,
but we have some very big, prominent publishers that if
you just looked at their terms, you would think that

(53:52):
they really do not want any libraries to buy their
books because they've made it so onerous and so difficult,
and as a result, librarians have say I'll only buy
the book if I have to so that author and
that publisher unless they have a must have book it's
now you know, made it to a motion picture, the
author's coming to town. They will buy that author's book

(54:16):
as few as they have to, only because they want
to be relevant and they don't want patrons saying, what's
the matter with you?

Speaker 2 (54:23):
This is the biggest book. How come you don't have
it in libby?

Speaker 3 (54:26):
Because everybody expects the public library to have every book
available for them, all books at all time, because it's digital,
and unfortunately the libraries are dealt this dynamic situation. But
I can tell you Overdrive has stood on the side
of librarians and we are delivering every month wins. For example,

(54:49):
the last two years we have evangelized big collections value
propositions to libraries. One is called all access. When we
saw during COVID the dynamic spike in demand when all
the physical libraries close and every student in America became
a remote and distant learner, and the cries came out

(55:13):
from the librarians and the cities and the superintendents of
the big school districts, including LAUSD and New York Public schools.
They said, we're not going to be here for two
years and our kids don't have a book. So we
had to go to the publishers and say we need
to create instant availability.

Speaker 2 (55:32):
Now.

Speaker 3 (55:34):
We started to negotiate and got permissions for what we
call all access collections. Libraries now through Overdrive can select
from dozens of bundles where they buy an annual plan
and in some cases two thousand books always available, no weightless,

(55:55):
simultaneous access. If you need to make a reading list
for your kids for summer reading, use these books. They
will never be a wait list. You promote them on
your homepage, you make reading challenges and bringing the authors.
You want to have fifty thousand people read the same
book at the same time.

Speaker 2 (56:14):
Done.

Speaker 3 (56:15):
So, we have evangelized that we have launched all access collections.
We launch a very popular all access romance and let's
face it, romance, adult picture, erotic, romanticy, pretty hot, and
I'm talking about great books.

Speaker 2 (56:30):
Now.

Speaker 3 (56:30):
It may not be the current New York bestseller, that
this publisher is giving me unlimited access for the entire
state of California for one flat fee. But that is
live today all across the country. We have evangelized. I'm
a costco shopper. My wife loves BJ wholesale Club. What
do we do when you know that as a library

(56:51):
you need inventory. You know this is a quality book,
it's never going to go out of style. We negotiated
with the publishers for a model we call Overdrive Max.

Speaker 2 (57:02):
And it's like costco.

Speaker 3 (57:04):
If you are going to buy something that has long
shelf life, you're buying paper, toal and bottled water. Why
do you buy in bulk because it never expires and
you want to get the lowest cost per unit. Overdrive
has rolled out globally a growing catalog of Overdrive Max
availability and you can buy this book in bundles of

(57:27):
one hundred cirques and it never expires. So I have
Monday morning in Long Island, New York and Queens. The
buyers for New York Public and Brooklyn Public, they come
in at morning. It's called book ops or operation buying
for the NYPL and Brooklyn Library. They come in, they
say what was added over the weekend in that model.

(57:48):
I buy that model first because I can use that
available inventory anytime anywhere. If all of a sudden there's
a big demand on the best seller, I could buy
one hundred units and knock out one hundred holds at
once because I got a low.

Speaker 2 (58:04):
Cost of unit.

Speaker 3 (58:05):
I went to Costco, I loaded up, I reduced the
waytime and the Holts list. I know that we have
this author coming in for an author event. The author's
coming for an author event, three hundred people are coming in.
Everybody's going to want the book in advance of the
author event. So they might say, let's buy five hundred
units in Overdrive Max and I have the lowest cost

(58:27):
per lend. So Overdrive has provided tools to the library
so they could go into our massive catalog of millions
of in copyright digital books and in many cases of
valuate because schools, libraries, institutions use books for different purposes.

(58:50):
So I argue to the author and the publisher, if
you give the market multiple ways to buy your product,
you'll sell more.

Speaker 2 (59:00):
I have some.

Speaker 3 (59:01):
Buyers in some communities who will only buy by one model,
and that's it. If you don't offer your books in
that model, you don't exist. They come in, they search
what's available. If you're not in that model. You don't
get that top of the wall.

Speaker 2 (59:17):
It's spent.

Speaker 3 (59:18):
So I am evangelizing that if you give the market
multiple ways, because you buy books for reference, you buy
books for a beach read. You buy books when you're
going off the grid. Then you want that five hundred
page novel. But you're going to the beach for the weekend,

(59:38):
you want that weekend read. We want books in because libraries, schools, universities, corporations,
knowledge centers. Books are used in so many different ways,
and we have engineered multiple solutions and it's evolved over
the last you know, three decades.

Speaker 1 (59:58):
Okay, let's talk the history of ebooks from a consumer standpoint.
You've been in the business for forty years, but the
average person is not. Kindall launches from Amazon. Their business
model is we will pay you traditional wholesale on the book,
just like a physical book. We will set the price,

(01:00:19):
we will make up the loss. So let's say wholesale
was seventeen dollars at the time, everything was nine to
ninety nine.

Speaker 2 (01:00:25):
Right.

Speaker 1 (01:00:26):
Of course, as we say, it was the antitrust element.
But what I'm focusing on here is publishers and what
degree are they hip to what is going on in
the online digital world. When they did that, ebook sales
went down. They saw that as a triumph. Okay, Jeff

(01:00:50):
Bezos was still at the Amazon at the time, said
my goal with the low prices is to grow a business.
Steve Jobs at Apple didn't give a shit, he said,
you know, books weren't that important to him. But subsequent
to that antitrust, you know, all you saw were articles about, well,

(01:01:12):
the independent bookstores coming back. Look how well physical is
doing now. Libby is an unbelievable success. But I want
to carve out something and I want to leave that
aside for a second. Do the publishers still understand that
the future is digital or are they still hanging on

(01:01:33):
to the physical model and using digital reluctantly? And to
what degree are they sophisticated on this subject.

Speaker 3 (01:01:41):
Well, it's a great question, Bob, and unfortunately it varies
from house to house. And as I think you know,
many of the larger trade houses are actually a federation
of individual imprints that they've acquired through acquis positions. So

(01:02:02):
the largest is Penguin Random House in the trade book space.
I was just over with our publishing partners in Munich
at PRH Germany even trying to evangelize the German fifty
Penguin Random House German imprints that you've never heard of.

Speaker 2 (01:02:20):
Maybe you've heard of one or two.

Speaker 3 (01:02:23):
Every single one of them is run by an individual publisher,
and PRH runs a more decentralized.

Speaker 2 (01:02:32):
Business.

Speaker 3 (01:02:33):
So you may have parts of the catalog that are
progressive and they want to get discovered everywhere worldwide, and
they're a little bit more flexible on models and pricing,
And then you may have a more traditional, legacy conservative
mindset who you know, just has it is holding on

(01:02:57):
to the past. In the international markets, it's dramatically a
challenge when I go, let's say, into Japan or into
some of the Asian markets, they have such a reluctance
to change their business process. And quite frankly, it's happening
in the last year or two. There's been a real

(01:03:18):
awakening that the traditional print model is not only declining
and at risk, but there was like a major shock
wave just recently when the industry decided that they're going
to just quit mass paperback publishing. I mean, the biggest

(01:03:39):
impact would be for the thousands of drug stores and
small independent retail that when the magazine jobber came in
to freshen up the newsstand and the magazines next to
the American greeting guy who was freshing up because it's
a real estate business. At least they also dropped in
the top twenty best selling paperbacks and maybe was an

(01:04:01):
impulse item at the bookstand or at the train station.
Mass paperback going away as a format. That's huge, I
mean everything they've been trying to protect. They also have
had this legacy value proposition that the most important thing
that the Big Five now have been, you know, obsessed
over for the last decade is the New York Times

(01:04:24):
bestseller list. Let's face it, you know, the Big Five.
This book business, the trade book business is so based
on the mega, the mega breakout book. You know, a
publisher or a retail bookstore chain has a good year
or back. A bad year could be based on one author,

(01:04:45):
could be based on one.

Speaker 2 (01:04:46):
Book, what Sarah J.

Speaker 3 (01:04:48):
Moss did for Bloomsbury the last year or two, or
you know this, you know some of these romanticy breakout stars,
the TikTok the book talk things. It's so that has
so much has changed in the last even just twenty
four months that the appreciation for those that have reached

(01:05:13):
to the audiences. And even over the last just year,
I've seen a dramatic investment of publishers and authors where
the author is now holding back more approval on the tours,
on the branding, and almost every author now is investing.

(01:05:34):
An author is a brand. So for any New York
Times bestseller, they're not necessarily sending you to the publisher's
website to learn about my tour. They want the direct
relationship with the reader. We are working and so many
authors are now coming to us directly and the author.

(01:05:56):
The rise of the author is a brand. The rise
of the author is even creating new dynamics for how
the publisher is catering to keep that best selling author.
It used to be just on the size of the
advance check and they go to auction and who got
the best You know, who negotiated the biggest upfront. Many

(01:06:17):
of these new author deals and agency deals are not
only author, show me your reach, show me your platform,
Show me what you're going to do to grow the
audience for my brand. How are you going to build
a sale for my backlist? You know, we've done such
The good thing about Libby's success in scale Bob is

(01:06:39):
unlike Amazon and Apple and Google, who have billions of
data points, Libby has billions of data points on how
a reader was looking for what to read next, where
they discovered it, how they came to the library, how
they came to a digital edition, where they borrowed the book,

(01:07:02):
how they open. All of this is anonymized and privacy
is sacred. But we have the aggregated data endpoint of
how a book was borrowed, where was used?

Speaker 2 (01:07:15):
How? Just imagine this.

Speaker 3 (01:07:17):
I presented a at a publisher conference in New York
earlier this year called the u S Book Show, to
an audience of eight hundred New York and US and
international publishers, and I asked this question, could you ever
imagine a day where your acquisition editor, your author, your
publisher knew where in the story you lost the reader?

Speaker 2 (01:07:41):
Just imagine? Would you?

Speaker 3 (01:07:43):
Would you In the music space, would you would your
would your creator like to know where in the track
that they say? No?

Speaker 2 (01:07:50):
Not for me? Imagine? We showed I did a study.

Speaker 3 (01:07:54):
I took one author, a very successful author, Janet Ivanovitch.
She has this series of Stephanie Plum who's a protagonist
in these murder mysteries, and Stephanie started. Janovitz started with
One for the Road, and every one of these murder
mysteries with Stephanie plum has. I think the most recent

(01:08:16):
one was The Dirty thirty. You know, they all had
the number. And she started her career, did the first
three books, one of the big five, and her ebooks
and audio came up.

Speaker 2 (01:08:25):
And I actually know on average.

Speaker 3 (01:08:28):
The completion rate where people when those who fell in
love with the Stephanie Plump stories, where seventy five percent
read seventy five percent or more. Where did you lose
the reader? I know where they lost the reader? What
chapter page? I mean the aggregate of hundreds of millions
of sessions. She then went to the second publisher, and
we noticed over this thirty year history that when this

(01:08:50):
second publisher brought out a dozen books, they didn't read
as far into the e they didn't listen as far
in the audio that represented her voice. She lost hundreds
of millions of minutes of people listening to her story.
And the only thing different I could tell was she
changed publishers. And you would say no, actually, when they

(01:09:11):
went to number two, it went up. Oh, and so
the first publisher said, oh, well, she had a following.
By the time they got to book four, people had
heard of her. That wasn't it, Because after twelve books
she went to publisher three and it dropped down again.

Speaker 2 (01:09:26):
And then she went to original publisher and it stayed
low again.

Speaker 3 (01:09:30):
What happened at publisher too while she was there with
these dozen books Janet Ivanovitch's books, people completed on average
almost more than seven eight nine percent of the entire story.
I have to say the editor who worked with Janet
Ivanovitch during those years knew how to get that story

(01:09:50):
to the listener in a way that engaged the reader
and kept them in trance with the story longer. I
just have I can't say why the readers left or
stuck around, but I just have the d they did.
These are the kind of untold insights we now have
with publishers and authors, and we are willing protecting privacy,

(01:10:10):
anonymize aggregated data and with the permission of libraries and
our suppliers. Are these are the data points that are
going to change how we build audience for our suppliers
and their authors.

Speaker 1 (01:10:33):
Okay, I have to ask because of the incredible volume
of books read on Libby. Why is there not a
Libby chart which would ultimately even eclipse the New York
Times chart.

Speaker 3 (01:10:48):
Well, we do share, and I think People Magazine in
the Spring usually has an exclusive with Overdrive. We have
given USA Today, and we do have a feed on
the most read books, and we do give every institution,
and we do operate dashboards reporting this out, so the

(01:11:10):
most popular books open, read and consumed. We published this,
and we publish it on format for audience. So I
can tell you for adult fiction, for adult nonfiction, for
ya young adult, I can tell you by subject, by genre,
by sub subgenre, so you know, when you know Amish

(01:11:33):
romance was a hot thing and everyone got into Amish romance,
we could tell you in Amish romance whether it was
Kensington or Harlequin.

Speaker 1 (01:11:42):
Who is there, Thomas, Well, let me give you an
example from the music business. Traditionally it's been the Billboard chart.
Different people provided that data. That is manipulated data. What
I mean, it is not pure numbers. They adjust and
they wait. So despite my publicity, everybody in the music
business now relies on the Spotify Top fifty. All the

(01:12:07):
numbers are available to everybody. Wouldn't this be a benefit
to everybody to essentially have a Libby chart.

Speaker 3 (01:12:15):
Yes, and we do provide this information. It's just that
we're trying to find a partner that wants to platform
it for more ubiquitous discovery. So first of the year,
we publish, at the end of the year our stats
this year, and by the way, on a typical week

(01:12:36):
we have through We also the ways people come to
discover a book and benefit from a piece of content
in Libby could start in ten thousand starting points. You
could be at your local library, in the library searching
on the public catalog where you could see a QR

(01:13:00):
code at the end of a shelf, saying did you
know this book's available in Libby?

Speaker 2 (01:13:05):
And you know?

Speaker 3 (01:13:07):
So people come into Libby. We have about five hundred
third parties who take overdrive catalog feeds in a dynamic APIs,
So you could start anywhere in the planet, find a book,
wind up at the library, get to Libby, borrow the book,
open a.

Speaker 1 (01:13:25):
Little bit slower, you say, just like the Amazon partner
program that you're saying, certain enterprises, if people access there
and go to Libby, you pay them.

Speaker 2 (01:13:39):
We don't pay them.

Speaker 3 (01:13:40):
But I'm just saying the way we report on top
circulating books, we have more data and we slice it
and dice it for the benefit of First of all,
informing our partners are supply chain stakeholders, publishers, as we

(01:14:00):
let them know how they're performing, how they're trending. So
if you let's say you're a publisher or travel books,
let's say ebooks, and you want to get market share,
you're a lonely planning You're competing against Rick Steves and
you know five other travel book you know voters, and
you know all the others. You want to know how

(01:14:22):
am I performing in my category? How's my market share?
Am I trending up or down? Are they buying my
Europe or they only just buying my Disney Disney World
twenty twenty six. So you are trying to improve sell
through and market analytics, we can provide you down to
almost the zip code, just like the Bouchers or the

(01:14:46):
Neils sins would tell you how you're performing at retail
or some of the other data services overdrive. First of all,
we provide the publishers so the supply chain sees real
time which institutions bought their book, and they have a
clue on how many units, what was paid, and how
they're performing. With so much of this data, we do

(01:15:08):
have the ability to put out the Libby fifty or
the Libby hundred.

Speaker 2 (01:15:12):
But we could do it, and we do it for schools.

Speaker 3 (01:15:14):
We do it in the classroom, We do it for
every grade, we do it for every community. I can
tell you in the Pacific Northwest what's trending and how
it's doing down in Louisiana and the parishes. We have
more data than most.

Speaker 1 (01:15:28):
You talked about writers becoming brands analogizing to Spotify. Once again,
Spotify has Spotify for artists, so not only the company,
which in this case could be a record company in
your situation, a publisher that the artist himself can see
where his music is being played and therefore direct marketing

(01:15:51):
activities to that location, assuming they want to. Is there
anything equivalent in the Overdrive atmosphere.

Speaker 2 (01:15:58):
Absolutely sure, well obviously we have.

Speaker 3 (01:16:03):
You know, it was kind of funny in the early
days when we were introducing public Library. I had an
author who reached out to me and just was praising
me in Overdrive, and I couldn't figure out why this
discreet author was praising me and how we sold thousands
of units of this really small, unknown nonfiction book. And

(01:16:26):
then this was early in our library lending experience. The
title of his book was something like A thousand and
one and I forget what the rest of the book was.
And so, you know, in the early days when libraries
were buying books and they put up a list of
books you could borrow, they just alpha sorted it. And

(01:16:47):
so people came into a library and they say, well,
I want to try this, and the first thing that
came up was one thousand and one you know whatever.
It was one thousand and one Ways to Tie your
Shoe and I, you're on, how are we selling all this?
And I said, everybody's just trying the new system. So
he was Alpha blessed. They all bought it. People said

(01:17:08):
I want to try it. Let me try this thing
I heard about, and so they downloaded this book. And
so so the bottom line is it has evolved and
merchandised every single library today. When you go into an
LA County Library or LA Public Library to two separate systems.
And here's a little Libby hack for your listeners. Libby
supports your ability to get multiple library cards. So if

(01:17:31):
you have a card from the County of Los Angeles
and you have a library card from lapl the City
Library downtown, when you're in Libby searching or looking for
something to read, you will get the benefit of both collections.
And they both have different collections. They may have many
of the same but one may have a shorter wait
list for that new bestseller. So with Libby, you can

(01:17:53):
have multiple library cards and work Beverly Hills or in
Huntington Longbridge, Orange County. We're in every library in California,
so when your listeners have at least two or three
library cards, this also and so for us to say
what's the best circuing book in Southern cal we could
look at every library in southern cal and we can
say for this region, this is trending. These are the

(01:18:16):
best by audience, by category, by genre. So it's we
have board data and we are offering it up. As
I said, just protecting privacy and permissions.

Speaker 1 (01:18:28):
Okay, I want to pull the lens all the way back.
Such an overdrive is not dominant. Just in the landscape.
I want to talk about digital books and digital reading.
There are many people, especially older people, who have fetishized

(01:18:49):
the physical book. They will go.

Speaker 2 (01:18:51):
On and on.

Speaker 1 (01:18:52):
I like having something in my hands, I get a
headache when I read digitally, etcetera, etcetera, etcetera. And they
will trumpet, you know, any success in the independent world,
the new guy who runs Barnes and Noble, who has
you know, different inventory and different stories. Having said that too,
elements people of that age remember going to school, you

(01:19:16):
went to high school, you went to college. There were
a million physical books and to transport them around that
was a big schlip. So putting out some of the issues.
You and me both know that going to educational institutions
in the future it will all be digital for numerous reasons,

(01:19:39):
portability and the issue of being able to replace for
changes instantaneously. My question is to what degree is that happening?
And I'll use this is not a perfect example, but
I'll use the classic example of Kodak Digital's coming, I mean,

(01:20:00):
Digital's coming never came. Then in one year digital wiped
out Kodak. So what is the future of digital reading?
Vis a vi physical?

Speaker 3 (01:20:14):
The print book will never go away. And for good reason,
and just to be clear, we are a mission company
with a vision of a world enlightened by reading and
access to information, education and opportunity, and print books are
still essential and print books have created so many advances

(01:20:35):
that we are benefiting from. I'll give you one example.
We are working with a company in the UK called
Ulpuscroft and the gentleman who is the founder of the
foundation there, he invented what's now a beloved product by seniors.
It's called large print. Before this, gentleman said, why don't

(01:20:59):
we make a book where the type size is accessible
to those that are aging or have failing vision or
macula degeneration or high corrective lenses, so the print book
will always be around. The print book is one of
the most beloved gifts. Giving a digital book.

Speaker 1 (01:21:21):
Wait wait, wait, wait wait, I gotta blow the whistle
on this because I see you being very political, so
I gotta play devil's advocate, which is really the truth.
Everyone who uses a digital reading device knows that you
can adjust the type size, which is extremely advantageous for
elder readers. B CDs music physical music was an incredible

(01:21:46):
gift that is not a gift anymore. Yes, there are
stores selling vinyl. It's a deminimous business. Okay, it gets
a lot of press. If you look at it, I
don't want to want to throw the it's really a
z it on the ass of consumption. So yes, a
coffee table book, etc. Those will exist, just like people

(01:22:11):
have vinyl collections. Okay, but in reality, isn't it going
to be the extreme outlier and everybody's really going to
be reading digitally?

Speaker 2 (01:22:23):
Well?

Speaker 3 (01:22:23):
As you astutey said, education, it's a foregone future. We
saw it start in higher ed. It actually started in
the professional space when I got started, when I got
started thinking about a future where one day, when this
blinking box showed up on my kitchen table forty years ago,

(01:22:46):
said one day on the screen, I should have access
to every print book in the world. And I was
a little too early, and we finally got there.

Speaker 2 (01:22:55):
But at.

Speaker 3 (01:22:57):
To be I am being politically diplomatic because we love
the print book and we're not competing against it. But
you are correct, depending on how far you set your future,
crystal Ball, in a thousand years, will print book be

(01:23:19):
in museums and archives. That's going to be probably where
some of these relics live, like we relish, you know,
the Gutenberg Bibles and the relics of prior decades and civilizations.
I do believe in the digital future, and every book
being printed today does have a digital simultaneous except for

(01:23:41):
some you know international and you know small foreign markets.
The future is purely digital. But we have a bigger problem,
and that is long form reading and book consumption is
on the decline. And this is also coming into headlines

(01:24:02):
more mainstream recently, and it hasn't been new. The decline
of reading by adult reading of long form print books
has been on the decline since the invention of television.
If you look at the pie chart of all of
our disposable time for entertainment or consumer activities, that slice

(01:24:23):
that used to be long form adult book reading by
every demographic age, gender, race has been shrinking.

Speaker 2 (01:24:33):
When the Internet came up. It shrunk again when online
social media, when online gambling, every time gaming gaming set tops,
every time something new comes on you can do on
a device with a screen or with a speaker. Long
form digital books podcasts now, but podcasts actually helped create

(01:24:57):
set the stage for growing the audiobook business. But the
book print industry has many factors that are causing stress.
The decline of their product is a consumer product in
the market and it's not just domestic. The decline of
book reading in the UK. In Germany is actually a

(01:25:19):
little faster than we're experiencing in the US well, because
we came from two communities that had more literate baseline,
so you know, they live longer. In Germany, every community
has multiple independent retail bookstores in every neighborhood. It's a
book culture.

Speaker 3 (01:25:36):
But the decline of book consumption, the number of buyers
globally for print books is on the decline. So digital
is an answer. Audiobooks is a dramatic bright spot for
this industry, and we are constantly innovating how do we
grow the market for this consumer product called a book

(01:25:57):
or long form reading. And I'm excited to say we're
having great success working with our educational and library institutions
and finally for the most astute publishers being better and
more appreciated for how we are trying to reverse this
decline in demand for the product. Now, music, the market
grows every day. Everybody wants music, and music is not

(01:26:21):
going away. But long form reading of books that's under
attack and that has been on the decline, and there's
no answer for it right now.

Speaker 1 (01:26:31):
Okay, point of information in colleges universities. What percentage of
books are digital as opposed to physical today.

Speaker 3 (01:26:42):
Well, the college textbook curriculum market has gone nearly one
hundred percent digital as a result of the publishers themselves
creating the digital learning platform, so they could not only
sell the tech book, but then sell these Many of

(01:27:04):
your listeners may remember, like in the nineties and two thousands,
when they were in college and they got their textbook,
there was a CD rom in the back and that
contained the supplemental materials. So if you're Pierson or Gale
Ahote Mifflin or McGraw hill Wiley trying to sell your
textbook for the state of Texas or Illinois for history

(01:27:25):
one oh one, and you get a big adoption, that's
a big deal. Your textbook gets adopted for a three
or five year cycle. That could be seven figures for
that book and that imprint. So to do that, publishers
had to compete and add special value add Before the Internet,

(01:27:45):
they used to offer teachers editions and quizes and supplements.
Then it went to the CD in the back of
the textbook. Now, for the last fifteen twenty years, publishers
have gone direct and created ancillary supplemental value add So
right now every piece of coursewear or curriculum may be

(01:28:08):
offered directly from the publisher, is part of a learning
system or also you've seen the rise Amazon, Barnes and
Noble Education follow it, check vital Source. Many other platforms
have aggregated all the digital college textbooks and either offer

(01:28:30):
pay as you go or a subscription. So that market
is pretty far along on the digital transformation. If I
go to K twelve, now we're at the infancy last
year twenty twenty four. If I look at the spend,
and it's a big number. For the one hundred and
fifteen thousand K twelve schools in the US alone, the

(01:28:54):
spend on coursewear, textbook, curriculum, school library, special ad, summer reading, intervention,
English language learning is a second language for immigrants. It's
in the billions. And yet if we look at where
are they in the transformation from analog, physical to digital

(01:29:16):
ebooks has not really entered the elementary school, the middle school,
or the high school at any scale yet, except that
Overdrive has been evangelizing and growing that market.

Speaker 2 (01:29:29):
Today.

Speaker 3 (01:29:29):
I'm proud to say we are in sixty thousand schools,
but still the use of an ebook or a digital
audiobook in the classroom in K twelve is still a.

Speaker 2 (01:29:40):
Single digit low.

Speaker 3 (01:29:42):
And this is one of the biggest growth opportunities of
the next five years for every author and creator. If
you have a book, fiction or nonfiction that is appropriate
for a school for education, school library, some are reading entertainment,
learning English to whatever. The next five years, you should

(01:30:03):
be thinking purely, how do I get in on this.
It's about to happen and our team at overdrive and
Libby is even driving parents to discover that they're kids.
For all those that have children in the schools, we
have a Libby for students app called Sora.

Speaker 2 (01:30:22):
It's called Sra. The app is.

Speaker 3 (01:30:24):
Free, but for your student to benefit from it, you
have you know, just like you can't walk into a
school and go into the library. They're pretty locked down,
not like the public library. Everyone's welcome. Sora is available
to sixty thousand schools in the US and we have
millions of students. Our biggest success we just hit a

(01:30:45):
milestone with New York City Public Schools.

Speaker 2 (01:30:48):
New York City Public Schools and.

Speaker 3 (01:30:50):
The leadership of Fabulous Library and Melissa Jacobs, who runs
the New York City Public School libraries. She has delivered
just in the last two places. Students in those classrooms
have opened and benefited from ten million ebooks through the
New York City Public School SORA collection is called Citywide

(01:31:13):
Digital Library. You could be in any of the five boroughs,
you have a student in any of their charter schools, STEM, academies, whatever, ps, whatever,
one oh one, you have SORA and you have the
ability for your student to benefit twenty four to seven
just like Libby, except SORA is built in student learning, gamification, reading,

(01:31:36):
daily reading challenges and the like. So our engagement for
growing the audience and the transition to digital is accelerating.
We're seeing in corporate America a broad adoption for employees
to have benefit for professional development wellness. HR departments are

(01:31:58):
adding digital lie libraries. Our first digital library was Microsoft
Corporation twenty years ago.

Speaker 2 (01:32:05):
Back in the day.

Speaker 3 (01:32:06):
Mike Bushman was a corporate librarian and building one hundred
in the campus in Redmond.

Speaker 2 (01:32:12):
And this was while Bomber was running it.

Speaker 3 (01:32:14):
And I've had relations and we dealt with Bill and
Melinda in the day, and he said, I am buying
millions of dollars of programming and coding books every year,
and I have to buy hundreds of units and drop
them into hundreds of locations around Redmond and Seattle and
San Francisco. I don't want to do that. So they

(01:32:36):
created the first corporate digital library with Overdrive and all
of the books on cybersecurity or programming in JavaScript or AI,
this or that or whatever. They then started making a
digital library for their workforce globally. Anytime anywhere you need
a book and how to program this thing, you got it.

(01:32:57):
Corporate Knowledge centers. During COVID, they provided all of this
comfort and wellness and you know, am I okay and
all of that you know, access during these you know,
troubling and uncertain times. So the momentum we're seeing in
corporate libraries. You know, our largest corporate partner is a

(01:33:20):
US Department of Defense. About fifteen twenty years ago, every
branch of the military said we want to serve our
community worldwide. So Navy Knowledge Online Services one point seven
million readers. It's not only the active military and the officers,
and it's a it's a students at the War College.

(01:33:41):
You could be on assignment in a nuclear submarine and
you your commandant says, we want you to read Jefferson's War.
Listen to the audiobook in your bunk. They are getting
this from the US Department of Defense through a platform,
and they're opening it with Libby. So we are building
and growing an evangelize seeing books and reading and education

(01:34:03):
and comfort and entertainment globally and overdrives. Footprint is fortunately
expanding and helping publishers and authors offset some of these
other challenges they're seeing in retail.

Speaker 2 (01:34:18):
Or some of the legacy print businesses.

Speaker 1 (01:34:28):
Let's talk about the elephant in the room, which is funding.
These are public institutions, these libraries who presently have an
administration who says they don't want to give as much
money to the libraries. Tell us about that.

Speaker 3 (01:34:42):
Yeah, it's a very unfortunate and tragic condition that I
don't want to open this stack. But at tax coming
to our public education and schools and libraries was a
political playbook executed in the last election cycle, and it

(01:35:03):
created false narratives that these institutions are being utilized for
political or cultural agendas. That was nonsense, and we've been
dealing with for about four years now. Libraries and librarians

(01:35:25):
and educators and public schools and school librarians being villainized
and coming under attack for a false narrative for a
political gain. Unfortunately, this has created a toxic environment in
many communities and has created local pushback and has challenged

(01:35:47):
so many of the underlying principles that have made every
community better because a public librarian educated their children, helped
those seeking a job from divided, a public internet terminal
for those that had no broadband in their home, and
that continued when the recent election cycle put a party

(01:36:10):
into the White House, and they came after this April
and took the funding from the Institute, from Museum and
Library services, and that playbook now is being replicated in
several state capitals.

Speaker 2 (01:36:25):
It's tragic. Instead of investing in.

Speaker 3 (01:36:29):
Bringing America back and educating our next generation workforce on
the skills and making them competitive, instead of making sure
every person, regardless of their background, could compete with proficiency
and talent in language in English speaking, they are defunding

(01:36:50):
the safety net community organizations that are essential and overdrive.
And I've been on the record what has happened is
unfortunate and tragic, and in many communities, the most impacted
will be the small and rural librarians who because a

(01:37:15):
few dollars that trickled down from Washington to their state library,
it got distributed like here in Ohio to our eighty
eight counties. That is essential service money. That money in
some rural and farm communities allowed the librarian to go
in and open the door or pay for the broadband

(01:37:36):
that the community needed to come in and sit in
the parking lot so they could check their email or
see if their job and they could find a job.
Just like it's just a tragic situation unfolding. I'm proud
to say that in many of the larger metro areas,
because they've built multiple sources of funding, that some of

(01:38:01):
these cuts may not impact the material budgets, the money
that they use to buy content, books and subscriptions. But
it's a real concern, and the greater concerns are in
the small and rural communities that will be impacted even
more so. You know, we have stories every day where

(01:38:21):
the impact of the presidential executive orders or some of
the state capitals who have taken and said in the
protection of minors, this false narrative that we need to
protect our children and implemented some of these playbooks. Most

(01:38:43):
of the voters who put those elected officials and offers
are going to be the ones that suffer the most.
That's a reality, and it's happening every day. It's not
something that's coming. It happens every day. Now the money's
been cut, they're fighting, flying back bits and pieces or
trying to find alternate sources of funding, and Overdrive as

(01:39:05):
a partner in that effort.

Speaker 1 (01:39:07):
Okay, let's switch gears completely to Canopy. Explain how Canopy works.
Public is very familiar with streaming and they're very familiar
with their rights involved and a lot of money. So
how does Canopy work.

Speaker 3 (01:39:25):
Canopy is an amazing value add for everyone who has
an interest in film, and the value add of Canopy
is I think based on threefold and the reason Overdrive
acquired the business it was the best we to've ever seen.

(01:39:48):
Overdrive built a digital video streaming platform for schools and
libraries and we launched it and about a decade plus ago,
a startup in West in Australia by an amazing entrepreneur
by the name of Olivia Humphrey from Perth. She saw
a problem in some of the universities in Western Australia,

(01:40:10):
the universities who were teaching film and or were signing
documentaries and film in the classroom could not supply the
teachers the classroom or the students with access to the
videos or the films. And so she negotiated, like with
the film studios, could I get permission to create a

(01:40:35):
platform for academic libraries to license a digital video and
stream it for these educational purposes. So Canopy was born
in Australia, it launched, and today still Canopy is worldwide
in more university libraries and public libraries. After several years

(01:40:58):
of success in the university library, Olivia with her young
family moved to San Francisco and said, let's get into
the big markets the US North America. And then she
started to sell the universities in North America. But she said, well,
since I'm in libraries, and since we do have films
of interest for public libraries, documentary, foreign films, some you know,

(01:41:21):
film noir and boutique, and lots of unbelievable art films.
The curation of the Canopy collection is so eclectic that
people love Canopy because of the curation. What is in
those catalogs and what have been selected from these out

(01:41:45):
of the way book festivals, and we have a team
is just outstanding. Now today, Canopy has evolved because when
she introduced it to public library she did not have
the appreciation for how public libraries worked and how they
could their sources of funding, and how it might use

(01:42:05):
in a consumer space. So when she came to the
US and I saw the excellence of their product, of
their user experience, I approached Olivia and I said, look,
you have done what I've dreamed of doing. You have
an unbelievable catalog, you have a great platform and user experience.

(01:42:26):
And they also integrated with all the set top players,
so you can get Canopy on Roku, Apple TV, or
Samsung or any of your smart TVs. In addition, Canopy
ka n o, py dot com. You can run at
anything with the browser. And of course I natively run
the Canopy app on iOS or on my Android smartphone.

(01:42:49):
So they had they had the best platform, they had
the best catalog, they had the best user experience. I said, Olivia,
I either want to partner with you, buy you, or
I'm going to be competing with you. And it took
a twist in turn, she went to a private equity
and eventually we acquired it about four or five years ago.

(01:43:11):
And so today Canopy is the most valuable streaming product.
We just got from Yahoo and many other media the
five streaming best platforms. Regardless of price. Canopy. You'll never
get asked for a credit card, you'll never see an
ad and it is purely delight So Canopy has one

(01:43:34):
of the largest film libraries and over the last several
years now that Overdrive with our reach, we've scaled it
up into public libraries. We've changed the user experience to
make it simple for public libraries and patrons. So today
the public library can add Canopy. Like I'll be in
San Francisco seeing our partners as San Francisco Public Library.

(01:43:57):
It's available at Los Angeles Public Lives Library and they
subscribe to Canopy. And Canopy has a core collection that
is adding thousands of films every year. Because some of
the rights come in and out, we negotiate with major suppliers.

(01:44:19):
Like one of the biggest deals I ever signed it
Overdrive was when we did a five year exclusives with
BBC Studios in London. Because we have so many Anglo
file you know, they just love everything British and the
downtown Abbey crowd and all that. We signed a multi
year exclusive for library and institution with BBC and it's

(01:44:43):
been extraordinarily popular. We now are negotiating next to Amazon, Prime, Hulu, Disney,
Netflix and the others at all the big studios. So
we when we acquired Canopy, they we had a film
team and the head of our business units Southern cal

(01:45:04):
We have a team in California because we are working
with all the major studios. So whether it's lions Gate
or Warner Brothers, we are in the rooms negotiating alongside.
When they're carving up the out the geos and they're
coming up the territories, and when they're carving up the platforms,
we're in there saying we want institution. We want to

(01:45:28):
have day and day or whenever it's available for those markets.
We want public library, academic library, and some of the
other governmental special institutional markets. And just like we do
with the Amazons and the Netflix, we may get it
for a particular term when we're dealing with the mgs

(01:45:50):
and you know the restrictions, and of course the whole
video community has their own kind of rights management, you know,
technical qualifications and we of course abide by all that
and for the patron, it's just a win. If you
are subscribing to the half a dozen to dozen monthly

(01:46:12):
subscriptions that you use on and off, or maybe less
or more. In the peacocks and this plus and that plus,
you may discover that about a high percentage of the
movies the documentaries.

Speaker 2 (01:46:26):
We have an amazing kids collection.

Speaker 3 (01:46:28):
It's called Canopy Kids, and it's unlimited and you could
put Canopy Kids, set it on your tablet, give it
to your young child and they can just go unlimited use.
And then of course we have feature films award winners,
and now Canopy is giving us a platform to do
originals and exclusives. The very exciting time that we're in

(01:46:49):
the streaming video business and we are negotiating alongside the
other big platforms. We're just saying we want it for
this market. I have complaints. Now in Singapore, we have
such a fantastic success. The entire country of Singapore just
is almost standard on Libby and Sora.

Speaker 2 (01:47:09):
And they added Canopy.

Speaker 3 (01:47:11):
But when Singapore National Library wants to buy for every
citizen and the five million plus citizens Canopy, they go
how come, I don't have these blockbusters. They go, well,
I didn't want to write a check for the whole
Southeast Asia. I didn't want to put up money. When
we negotiate, I said, how much do you want for
the US? How much if I throw in Canada? You
know it, it is negotiating for territories and rights. So

(01:47:34):
I didn't actually, at the time we were signing up
for that big deal, say how much for Singapore. But
now I got to go back to all those studios
and say, you know, let's face it, Crazy rich As.
That's you know, when Crazy rich As came out as
a Warder Brother film or you know, and we've been
selling the books like crazy you know heaven Chan. Of
course they wanted that. But so it's a really exciting time.

Speaker 1 (01:47:57):
Oh okay, but explain the money to me. I don't
quite understand you're bidding on these rights. Where does the
money come from? Because it's free to the end users.

Speaker 3 (01:48:07):
Correct, just like I do to the libraries or the
universities or their corporations. I show you my catalog. You
want to add canopy, We have multiple ways you can
add it. And since we've added, we created these we
call plus packs so let's say you're a smaller community,
we don't have the budget. But the reality is, you know,

(01:48:29):
just as we talk about the evolution of streaming video
and library in this ecosystem, if you asked me five
years ago, pre COVID, what was the number one circulating
reason a product or the reason people went to their
local public life or in the US, it was to
borrow a DVD or Blu Ray. I could tell you

(01:48:53):
in many metro markets, just pre COVID, let's say twenty eighteen,
twenty nineteen, if you looked at what was the foot
traffic to the libraries throughout the United States, one of
the top reasons people went was to pick up that
DVD or Blu ray they reserved and they got from
the library for free to take home for their family.

Speaker 2 (01:49:16):
Well, let's face.

Speaker 3 (01:49:17):
It, just like DVD and streaming video, and you know,
vinyl is no longer available in big box and major retail,
they've just gotten out of it libraries. Since COVID, the
size of the retail foot space and public libraries for
circulating DVDs and Bluberries has been shrinking and shrinking. For

(01:49:40):
the same reason one foot traffic is down COVID killed it,
and now they're fighting to bring back foot traffic, which
has been building back. But unfortunately in many markets here,
like in Cleveland, Ohio, we're overdrives headquartered, our biggest public
libraries still are not at the twenty nineteen levels of

(01:50:00):
visitors in their branches or foot traffic in their central library.
So as a result, everything has been moving towards streaming.
When the library wants they had canopy, they can either
buy the whole collection and set a monthly budget and
we can monitor in the usage and kind of throttle
it because they're giving you as a user, Bob, if

(01:50:21):
you go to Los Angeles Public Library, LAPL will give
you each month maybe thirty tickets, and every time you
want to watch a feature film, a documentary or children's childrens.

Speaker 2 (01:50:34):
Don't cost a ticket.

Speaker 3 (01:50:35):
You may see a blockbuster feature film and for you
to borrow it for the window of seven days watching
it might cost you two tickets. Doesn't cost you anything
because the library's giving you tickets. But after let's say
by the twentieth of the month, you've used up all
your tickets, well then you got to wait till the
first of the month, and then you could start over

(01:50:58):
unless you had multiple library cards and go somewhere else.
But the bottom line is the library will budget so
much per year, so much per month. But with small
libraries with no experience in the demand for streaming, Overdrive
introduced what we call like we did for ebooks. We
created all access, a bundle, flat fee unlimited. Overdrive introduced

(01:51:21):
Canopy plus packs. So if you don't know the demand,
you don't know what we have plus packs, staff favorites,
all time classics. You want books for your kids, you
could buy a Canopy plus fix for children, and we
have tiered pricing. If you're in a little parish in
Louisiana and your total population of five thousand, maybe for

(01:51:45):
under five hundred bucks a year, every kid can stream.

Speaker 2 (01:51:48):
This all year long, unlimited.

Speaker 3 (01:51:51):
That same plus pack for Los Angeles Public Library might
be twenty five hundred a year, and then it's an
annual subscription, unlimited viewing. So then we have plus packs
for World Seminar, all time classics, film noir. These are
constantly building and we are giving actually institutions. So if
you're in academic institutions and every year you're teaching multice

(01:52:15):
Falcon and I have it. We might even give you
the option to buy that title, have it for ten years,
and only pay a small service fee annually. So, just
like we did with our market evolving, if you give
the institutional buyers multiple ways to buy, you will sell more,

(01:52:36):
you will open new doors, and you will also evolve
to see where the market and the demand and the
budget will drive your growth. So libraries budget, we give
them multiple options to suffice. We have a lot of
budget for video. And if you're transitioning. Let's say you're
lapl and you budget a million dollars. I'm making this

(01:52:58):
up every year for new Blu rays or DVDs. You've
been transitioning, so you're saying, well, we're going to start
because the usage of the physical good is declining. As
it declines, we're moving that budget and we're transitioning into canopy.
So that's been going on for the last few years
and it's accelerating.

Speaker 1 (01:53:27):
Okay, let's pitch back to a Libby. Libby is a menia. Okay,
I should have been going to library from the time
I can remember, big Reader, but Libby is a thing
unto itself. Do you know what percentage of reading is
done on Libby as opposed to physical Can you tell

(01:53:49):
me what percentage Overdrive sales are compared to the overall
market for books.

Speaker 2 (01:53:58):
I can give you some some general.

Speaker 3 (01:54:02):
Sense of scale and proportion because we obviously utilize industry reports.
So there are several sources of the global book business
in the United State, well, i'll say the United States
book business, and one of them is from the AAP,
which is the Association of American Publishers. And then there

(01:54:25):
are some data services companies, the book scans that aggregate
for the retailers, and they aggregate from the big box.
But there's a lot of gaps when publishers sell direct
that's under reported. We don't have the you know, all
of the detail. Let's face religious Christian Bible sales, not

(01:54:46):
all of that is always reported up. There's so much
activity on direct to consumer.

Speaker 2 (01:54:52):
Do we know?

Speaker 3 (01:54:53):
Is Amazon sharing KDP numbers and Kindled direct and exclusives?
So I could just give a sense. So in last year,
Overdrive circulated around six hundred million digital books. This year
will be probably around three quarters of a billion, seven

(01:55:15):
hundred and fifty million. Now that's actual delivery and fulfillment
of a full book. Now in addition to that, we
had billions and billions of reader sessions opening a book,
sampling a book. If you've been in the Libby, you know,
before you borrow or get in line, you could open
and go through ten percent for free.

Speaker 2 (01:55:37):
Say it's not for me.

Speaker 3 (01:55:39):
You're looking up a fiction book and you want an audiobook.
You may want to say, let me listen. Do I
like the narrator's voice. So our impact on how many
books are open and listen to is in the hundreds
of billions a year. But at the end of the day,
I've delivered last year over six hundred million entire books

(01:56:00):
to an end user who was authenticated, had a library
card and got a book that I had permission, and
we paid the publisher, the author got paid. Everyone wins.
And in many cases I have authors and publishers thanking
me because I discovered on a Libby I bought my

(01:56:21):
print sales went up. I was just last week I
was meeting with my partner in Fort Myers Lee County
Library System, Southwest Florida by Naples and the and the
librarian said, we used the demanded Libby to buy print.

Speaker 2 (01:56:36):
I go, I don't get I don't get any.

Speaker 3 (01:56:39):
Reward for that when the when the publishers are arguing
and taking margin away. My discovery of your book in
sampling is selling you books at retail, selling your print
to other institutions. And we are fortunate that every day
I'm getting the data showing that our impact on the
growth of the audience for your product. Publisher, you should

(01:57:03):
be paying us just for the placement in that Libby position,
because we are getting hundreds of millions of impressions that
lead to retail sales. But can I connect all those
dots now?

Speaker 2 (01:57:15):
Wait?

Speaker 1 (01:57:15):
Wait, wait, when you say six hundred million, does that
mean Overdrive bought six hundred million books or does that
mean six hundred million people read Overdrive books?

Speaker 3 (01:57:27):
It means during calendar year twenty twenty four, I delivered
to an authenticated end user, six six hundred million books
were delivered. Maybe it's to three hundred million readers. Maybe
it's you know, three hundred million people. Over the year.
They averaged two each, one at one, one at fifty.
I don't know, So it's all anonymoused because we respect

(01:57:48):
privacy in that case, Let's take Los Angeles Public Library.
Los Angeles Public Library last year was our top public
library circing Libby books and they circulate on average over
one million books a month now. Also, Los Angeles Public

(01:58:10):
Library spends with overdrive to acquire multiple copies, licenses, new materials,
bumps up the ability to service. Under these other models.
They spend annually approximately almost ten million a year to
keep their Libby catalog fresh, complete and current. So the

(01:58:36):
library is spending one library in California and it's number
one in circulation under the leadership of John Zabo and
amazing library leaders at LA Public Libraries plus to have
they are a rock star globally. I have people all
over the world that look at how New York Public

(01:58:56):
or LA Public or Toronto Public, or I'll be up
in Seattle with our partners at King County. These are
libraries are innovators. Libraries have been evangelizing books and creating
the market for reading and pushing people into lifelong reading
since there was a library in Alexandria three thousand years ago.

(01:59:20):
We know that this is a growth market and I'm
proud to say that when I'm in New York or
London talking to the Big five or whoever. Overdrive as
far as a source of revenue for the trade publishers
is always in the top five. Who's number one, who
generates revenue for them? It's Amazon, Amazon's number one worldwide

(01:59:43):
pretty much number two and three. Depending on what segment,
what audience, what geo, it might fluctuate between an Apple
of Barnes and Noble or audiobooks, maybe Spotify and you know,
Nordic Countries is your rock star. Now couple of courses
in the mix and b you know the others. But
overdrive as unit and revenue sales to the publishers. In

(02:00:09):
some cases we may be number three. We are delivering
hundreds of millions of dollars annually to the creed or community,
and the publishers and the authors are getting, on average,
possibly even more for the privilege of someone benefiting from

(02:00:30):
a book from that school or library than they're getting
from buying it at retail. And let's face it, when
you we have no secondary market. When they sell to
the library, they're not competing against used book sales or
eBay or you know other other forms where you know,

(02:00:50):
libraries are not benefiting and some of them are arguing
they should from the first sale doctrine. You know, you
bob or I Bob I buy a book and I
want to gift it to my daughter, I want to
give it to the library.

Speaker 2 (02:01:01):
I'm free to do that.

Speaker 3 (02:01:02):
Library school buys a digital edition for lending under the
permissions that are granted to me as their distributor and
vendor and partner. The library can't say, you know, this
book is not so popular, we now want to give
it away.

Speaker 2 (02:01:17):
I mean I can't. They can't.

Speaker 3 (02:01:19):
So the value proposition to the author and the publisher
is extraordinary. By the way, when the library spends a
million dollars and the publisher gets us, the publisher has
so much more net earnings off the sale of the
digital book through me. They never get. They don't have
to put a reserve on their balance sheet for returns.

(02:01:40):
They don't have to worry about print costs, print overruns, returns,
shipping costs, warehouse They don't have.

Speaker 2 (02:01:48):
Any of that.

Speaker 3 (02:01:48):
Yet they want to negotiate with me and get the
benefit and beat me up on gross margin and clawback
and put it make it harder for me to sell.
They should be paying me to promote their books in
the library. Because of the value of Libby and the
discovery and soar in the classroom, we are growing the
market for their products. And I'll keep evangelizing because schools

(02:02:12):
and libraries are the best thing for the future of
books and reading. And if they don't wake up and
get that memo, shame on them. Someone's going to take
their business. And it's happening every day.

Speaker 1 (02:02:23):
Okay, two quick questions. One, if la spend on Libby
is a million, what's their spend on Canopy.

Speaker 3 (02:02:33):
It's a smaller number. And by the way I generalize,
those are those exact numbers. I use that as a
general number. So they probably spend six figures a year
with Canopy. And they may be adding and adjusting because
as we keep adding collections or providing different models, because

(02:02:56):
we're also learning film and video or use for different perpose.
So if they are using it for complementary to event
or programming, they may need to be very concerned about
public performance rights. So Canopy in the public library is
not quite at the level of revenue that we've what

(02:03:18):
you enjoyed from the book business. Because I've been giving
many of the biggest public libraries in North America have
been on Overdrive platform and now with Libby for twenty
plus years. So we started with Cleveland Public twenty three
years ago, so LA Public Library we've probably launched around
four h five so twenty years we've only been in
the supplying of the Canopy video business. Now, you know,

(02:03:41):
just under five years. And since we acquired Canopy, the
models and the collection wasn't as well aligned for the
public library space, and we've made some real milestones. This
simplifying the tickets was a major way of streamlining because before,
when people borrowed movie from Canopy for the tickets, the

(02:04:03):
librarian didn't know how much it was costing them. But
now when they see films in the Canopy catalogs and
they see that this is two tickets, this is one ticket,
this is no ticket. If they want to highlight for
a subber reading program a film that is low ticket use,

(02:04:23):
they know that it's going to be lower costs for
them because they're paying for the platform and the collection,
and users can get more views. And every end user
now has a simpler I give you, I give you
thirty tickets. You know where you are. Every time you
launch Canopy, it shows you how many you have available.

(02:04:46):
In the upper right hand corner, you're you're using down
your tickets for the month and then it resets.

Speaker 1 (02:04:51):
Okay, finally, what turns you on and how did this start?
Is it about books or is it about a digital enterprise?
I mean retrospect. Jeff Bezos didn't care about books. He's
kind of honest about this. Saw a niche filled it.
So is this about reading or is this about tapping

(02:05:14):
an untapped market?

Speaker 3 (02:05:16):
Well, if you would have asked me those questions at
once every decade over the past forty years, I would
have had a different answer. But I can tell you
over the last decade what has got me to jump
out of bed every morning and be so eager to

(02:05:37):
lean forward into every opportunity that technology and access to
content and even with some of the new influences of
AI tools, which is another podcast at a future date.
I believe that in the next five to ten years,
as a confluence of the technology and our positioning with

(02:06:00):
these it's the secret weapon overdrive has is a network
of dedicated community servants informational professional known as librarians, and
they have been dedicated for a world enlightened by reading.
When someone walks into that public library anywhere in the country,

(02:06:23):
they don't look at how your dress or what your
zip code is they are there to welcome you and
provide you whatever it is which will help you in
your time of crisis, in your time of celebration, at
every point of the journey. And what excites me is
I honestly believe we are going to change the literacy

(02:06:45):
pandemic in this nation. Childhood illiteracy is just a fact
of life. And you know, unfortunately where you are, you
know this is where zip code matters. If you are
in a in a neighborhood where you have access to
less funded public libraries or less funded public schools and

(02:07:06):
they don't have access to all the material and resources
and interventions, it's likely that your students will not have
the same progression how they learn to speak and read
books and progress in their academic journey. This is why
so many states are now leaning forward in the science
of reading, or there's been a decade mandate to read

(02:07:29):
by three. We know that if a student isn't by
the third grade reading at the appropriate grade level, you
could almost chart out the rest of his life on
his earnings, his academic and his even his health and wellness.
That's all impacted by the foundation of reading and literacy.
Now in the urban markets, that we are dedicated to

(02:07:50):
support every public library in America. Yes, we're so blessed
that if you are a Libby fan commuting and you
have multiple tableists and streaming platforms, we are better than
slice bread. And I love the love letters and the
you know, we have fan bases worldwide, but that doesn't
motivate me. I want to improve the life of those

(02:08:14):
who need a book to take care of their parent,
or to make a reversal of their decline of their health,
or to help them get that job so they can
apply for that manufacturing opportunity, workforce development, adult literacy, health literacy.

(02:08:35):
We are going to I go to every week, you know,
the first of the year, I'm at CES, marching around.
I spend about a third of my time at the
Senior Tech sponsored by AARP. Because we're all aging, We're
all going to need assiste of technology everything. Yes, I
could make the font larger, and I need to make

(02:08:55):
the audiobook louder, and I want to speed it up
or slow it down. But the invention of you know,
I'm going to be everything you read and hear is
going to be instantly available in every language. We are
going to be able to adapt the book and the
modality of presenting the content and the concept to every

(02:09:17):
reader in untold ways that are going to make a difference.
So this is this is what excites me. We are
going to make We are going to turn around a
nation that has been over decades becoming.

Speaker 2 (02:09:31):
Less literate, less skilled.

Speaker 3 (02:09:34):
You know, in the UK, they just died a twenty
study that in the UK classroom students are reading four
percent below the grade level over two years ago, and
the kids that are getting to the middle schools are
reading at the lower grade levels. And it's not just there,
this is happening worldwide. We are going to make such
a dent and literacy English Language Cultural Education workforce element.

(02:10:00):
I volunteer in our local major healthcare system here at
University Hospital, and I'm all about health literacy. Yes, we
have the best doctors and the best apps, and the
best science and the best clinical data. But at the
end of the day, it's you, the patient who has
to make the change. If I don't stop eating this
and do that, if I don't get off my butt
and do this, I am going to suffer that outcome.

Speaker 2 (02:10:24):
I got a bad lab result.

Speaker 3 (02:10:25):
But when I come in and they tell me something
and I don't understand, and they give me a file
folder of papers and I don't know what placeemic is
and I can't read it. I can't even understand how
to take the pills because it's three x five x,
and I have a numeracy issue. Literacy enlightening the world
through books and access to information.

Speaker 2 (02:10:45):
That's what gets me out of bed. And we have
a lot of work to do.

Speaker 1 (02:10:49):
Well, Steve, you've really gone through it lists. I'm glad
to have you on the podcast. I'm a huge fan
ofly B use it literally every day for those people
you know, listen, I get physical books all the time.
I happened to read it. Be reading a physical book
right now. Had to go for a doctor's appointment yesterday.
I'm celebt to go. Well, that's a big book and

(02:11:12):
I got to carry it around, whereas I can read
digital books on my phone. Secondly, I'm always reading a
physical book and I find a word I don't understand,
I start to touch. Because I'm used to digital books,
I can give the definition. Well, you've certainly amplified what's
going on in the ebook digital revolution libraries, and I

(02:11:32):
want to thank you so much for taking this time
with my audience.

Speaker 3 (02:11:36):
Thank you, Bob, and I really appreciate your perspective from
the industry standpoint, because usually I'm talking about just the
frustrations of the end user. And I really like talking
about the industry because there's so many commonalities of negotiating
with the artists and the music publishers and the labels

(02:11:58):
that we are deal with on the on the book
and the on the film side. I stayed out of
music because it was too hard. That's how we met our.

Speaker 2 (02:12:08):
Well.

Speaker 1 (02:12:09):
On that note, till next time, Thanks again, Steve. Till
next time. This is Bob left six