Speaker 1: Welcome back to Bob WEFs podcast. My guest today is
Speaker 1: Steve Hotel, President CEO of Overdrive. Steve, what exactly is Overdrive?
Speaker 2: Bob?
Speaker 3: Overdrive is a mission based company that has, over the
Speaker 3: last forty years been one of the pioneers in the
Speaker 3: new format of reading books on the screen, which we
Speaker 3: all know today as an ebook, as well as digital
Speaker 3: audio books that you could listen to anytime, anywhere while
Speaker 3: you're walking or in the car commuting. And as a result,
Speaker 3: the Overdrive business has become the single largest supplier of
Speaker 3: digital books to schools, libraries, universities, and other institutions globally.
Speaker 2: As a result of this work.
Speaker 3: Over the list twenty five to twenty five plus years.
Speaker 1: Okay, just to sort of define what's going on here,
Speaker 1: are clear things up. If I am getting a book
Speaker 1: from Amazon, I'm buying the book. Are you involved in
Speaker 1: that transaction at all?
Speaker 2: No.
Speaker 3: When you are buying an ebook from Amazon, you're purchasing
Speaker 3: an ebook in their Kindle format, either to read on
Speaker 3: an ein Kindle device or to read on a tablet
Speaker 3: or your phone on the Kindle app. So Amazon has
Speaker 3: built their own ecosystem and a proprietary file format, the
Speaker 3: Kindle format. They built their business on some of the
Speaker 3: earlier work that Overdrive did. Because Kindle was introduced by
Speaker 3: Amazon in two thousand and seven. Oversdrive started digitizing books
Speaker 3: on floppy diskets in the nineteen eighties. So I am
Speaker 3: the proud recipient of an honor in this industry. I've
Speaker 3: been part of more digital book failures than any person
Speaker 3: alive because I started too early putting books on floppy diskets,
Speaker 3: and then a decade on CD RAM and by the
Speaker 3: late nineties mid nineties, when this Internet thing showed it
Speaker 3: had some promise, Overdrive was the pioneers that helped create
Speaker 3: the environment for the ebook and the audiobook markets today.
Speaker 3: So we've been into this business much longer than most
Speaker 3: and we participate in many aspects of it. But Amazon
Speaker 3: is a direct to consumer closed system.
Speaker 1: Okay, so what format do you distribute books in?
Speaker 3: We distribute books in most of the popular open industry standards,
Speaker 3: and there is an industry standard that has evolved as
Speaker 3: a result of overdrives participation twenty five years ago, when
Speaker 3: this nascent book end was trying to see about how
Speaker 3: they might grow a digital electronic book future. Today it's
Speaker 3: known as epop EPUB, and that is a global acronym,
Speaker 3: just like your listeners would be familiar with the MP
Speaker 3: three file format. It's an open industry standard that allows
Speaker 3: any content creator to package their written work in a
Speaker 3: digital container and make it broadly available for retail booksellers
Speaker 3: for their own website, and it could be used by
Speaker 3: thousands of devices and reading apps. That is kind of
Speaker 3: the ubiquitous ebook standard today, and that's for books and
Speaker 3: texts and images you read on a screen in the
Speaker 3: audio space. Overdrive has its own proprietary apps, but it
Speaker 3: is all really based upon the original audio files we
Speaker 3: get from the audio publishers and their suppliers, and we
Speaker 3: are leveraging some of the open industry standards and then
Speaker 3: applying as required by the rights holders the controls that
Speaker 3: manage access copyright digital rights management. So we are based
Speaker 3: on open industry standards and then to meet the requirements
Speaker 3: of the rights holders, we utilize copyright protection tools.
Speaker 1: Okay, if I'm a user and I own a computer,
Speaker 1: can I write something and turn it into EPUB format?
Speaker 2: Absolutely.
Speaker 3: EPUB has been an adopted industry wide standard for mobile
Speaker 3: online reading for now, going back twenty plus years. Many
Speaker 3: of the tools like Microsoft Office and Word will allow
Speaker 3: you to take a word document and save it as
Speaker 3: an EPUB. Now EPUB actually in the technical stance is
Speaker 3: a variety of what's called XHTML. So the web standards
Speaker 3: of XML, HTML and many of the open metadata standards
Speaker 3: of the Internet are also utilized in the in the
Speaker 3: ebook world in the epook standard. So there's free tools
Speaker 3: to take your web content. There are many tools to
Speaker 3: convert a PDF into epub, and there are lots of
Speaker 3: service based industries working inside publishing houses or as a
Speaker 3: service bureau to help content creators and publishers transition their
Speaker 3: files into an ebook marketplace.
Speaker 1: Okay, needless to say, publishers own the rights. What is
Speaker 1: the relationship between overdrive and publishers.
Speaker 3: Well, I'm going to just comment on your statement. Publishers
Speaker 3: own the rights to distribute and merchandise and build you know,
Speaker 3: the market, and promote and.
Speaker 2: Sell the books.
Speaker 3: But the ownership of the rights is a little bit
Speaker 3: more diverse. We see that today's world authors sometimes still
Speaker 3: control all of the rights. So our relationship, as you
Speaker 3: appropriately stated, is with publishers, aggregators, or in some limited cases,
Speaker 3: we work directly with the publisher to get permission for
Speaker 3: the digital book file to have overdrives right to sell it,
Speaker 3: market it, and fulfill it worldwide based on the permissions granted.
Speaker 3: And I know your audience is very familiar with the
Speaker 3: complexity of the music space and copyright and mechanical and
Speaker 3: license fee and royalties. There is a similar hierarchy and
Speaker 3: rights structure in publishing, less complicated than music. I'll thankfully say,
Speaker 3: but for every title, Overdrive seeks permission from the rights holder.
Speaker 3: And let's just say it's a publisher like Penguin, Random
Speaker 3: House or Simon and Schuster, that they are giving us
Speaker 3: the rights to the Stephen King novel that we could
Speaker 3: sell in the territories where they have the permissions. So
Speaker 3: for let's say Simon and Schuster us they may give
Speaker 3: us a new Stephen King novel, and those permissions may
Speaker 3: be granted for North America. Because Stephen King and his
Speaker 3: agent may have done a deal for ebook distribution in London,
Speaker 3: or in Germany or in Australia with a different publisher,
Speaker 3: we have to go in every territory to those that
Speaker 3: have the rights to distribute the work in the territory.
Speaker 3: And then similarly, we work with the publisher to get
Speaker 3: the permission on how they want to enable access for
Speaker 3: the institutional buyer and what rights they have with that
Speaker 3: digital file. I know that sounds like it's complex, and
Speaker 3: unfortunately it is.
Speaker 2: But we are best known, BOB.
Speaker 3: For the dramatic adoption of ebook and audiobook usage from
Speaker 3: our nation's public libraries. So I'm going to use that
Speaker 3: as a use case to kind of bring down to
Speaker 3: you more day to day how this impacts your listeners.
Speaker 3: Let's say you hear about a new bestseller that you're
Speaker 3: excited to listen to on your commute to work, and
Speaker 3: you're in love with audiobooks, And yes, we do educate
Speaker 3: millions of listeners that instead of paying for a subscription
Speaker 3: and a credit card and ads, your public library is
Speaker 3: an unbelievable, untapped off in resource for access to lifelong books.
Speaker 3: For free ebooks you can read on your kindle, Audiobooks
Speaker 3: you can listen to on your commute or on your walk,
Speaker 3: or on your tablet. And so if you are a
Speaker 3: patron of a public library, as public library patrons have
Speaker 3: been doing for one hundred and almost two hundred years
Speaker 3: in this country, you walk into a public library if
Speaker 3: there's a popular book, they may have enough units and
Speaker 3: it's available for you to borrow now. And in the
Speaker 3: physical print world, if there's if it's in demand and
Speaker 3: they're all checked out, you would add yourself to a
Speaker 3: wait list or place a hold, and when the book
Speaker 3: becomes available, the library would notify you your books available,
Speaker 3: pick it up. We have created a replication of that
Speaker 3: experience going to your digital virtual branch online searching and
Speaker 3: browsing for a book of interest, and with one click
Speaker 3: you can immediately borrow the book. But for let's say
Speaker 3: this Stephen King new novel, Simon and Schuster as others,
Speaker 3: have created permissions that if a user if an institution
Speaker 3: and bob you're in the Los Angeles area and we
Speaker 3: have a dramatic, fabulous partnership with the Los Angeles Public Library.
Speaker 3: So if a listener is going to Los Angeles Public
Speaker 3: Library excited about the new Stephen King, Simon and Schuster book,
Speaker 3: they may see that the library has of the e
Speaker 3: book or the audiobook, one hundred copies of the e
Speaker 3: book one hundred copies of the audiobook, depending.
Speaker 2: On when they check it in.
Speaker 3: They may see that they're all checked out, and in
Speaker 3: our app called Libby, and the app is free and
Speaker 3: the books are free from.
Speaker 2: Your library Libb Libby.
Speaker 3: They may see they're all checked out and you are
Speaker 3: number fifty two on the wait list. Libby will also
Speaker 3: say you have approximately like a one week wait. So
Speaker 3: we have replicated the experience that in the sense where
Speaker 3: the publisher and the permissions are to only sell the
Speaker 3: library a number of units, they mandate that for every
Speaker 3: unit the library buys, just like physical one person can
Speaker 3: borrow at a time. If that is the model that
Speaker 3: the library acquires the book under the ebook or the audiobook, well,
Speaker 3: then the experience is very similar to the print or
Speaker 3: the physical CD. For the audio, one user at a time.
Speaker 3: If they're all checked out, the patron clicks put me
Speaker 3: on the wait list, Libby will automatically notify them the
Speaker 3: book is available.
Speaker 2: Click here to.
Speaker 3: Start enjoying your read or enjoying your listen. That is
Speaker 3: the model that built the ebook and audiobook lending in
Speaker 3: public library. So that is kind of the baseline of
Speaker 3: the permissions we as publishers. For they set the price.
Speaker 3: We respect the territorial permission of the author and the publisher,
Speaker 3: and for every title we seek to get multiple permissions
Speaker 3: so that our libraries, our schools, our universities, our corporate
Speaker 3: learning centers can actually acquire the digital book with multiple
Speaker 3: ways to make it available. I shared with you the
Speaker 3: most common way, one user at a time. They buy
Speaker 3: ten copies, ten users can read it, then the rest
Speaker 3: have to wait till it's the return.
Speaker 1: Okay. Overdrive only works with institutions, and it only is
Speaker 1: on the public library side, or is there any conventional
Speaker 1: retail at all.
Speaker 3: Overdrive has a thirty year history of being behind the
Speaker 3: scenes with ebook and audiobook fulfillment for a number of
Speaker 3: direct to consumer retail experiences. But we have that side
Speaker 3: of the Overdrive business is much smaller today, and today
Speaker 3: we are focused and ninety x percent of our revenue
Speaker 3: that we are the single largest supplier of digital books,
Speaker 3: books you can read and those are for all ages
Speaker 3: in all categories. Digital magazines and periodicals, manga, graphic novels
Speaker 3: and comics, audiobooks and streaming video and we service every
Speaker 3: type of institution. We're best known for the success Libby
Speaker 3: and Canopy. Canopy is our streaming It's like Netflix for
Speaker 3: Library Canopy with the ka NPY similar to you can
Speaker 3: cut your subscription to Audible or other paid services with
Speaker 3: Libby for ian audio or audiobooks. Similarly for the streaming
Speaker 3: video platform. Canopy has the largest collection of feature films,
Speaker 3: documentary and children and world cinema, more than Netflix. And
Speaker 3: again with the library card, the app is free and
Speaker 3: the content is free. We service public libraries and in
Speaker 3: the US where in every zip code in North America,
Speaker 3: US and Canada. We serve about sixty percent of the
Speaker 3: schools in the United States, so that's pre K through
Speaker 3: high school. Overdrive is globally supplying ebooks, audiobooks, streaming video, magazines,
Speaker 3: and content to universities, colleges. We are in thousands of
Speaker 3: corporate knowledge centers. We supply the US military, professional associations
Speaker 3: and the like. So we supply almost every form of library, public, academic, school,
Speaker 3: corporate knowledge center, government, military, prison libraries. That is where
Speaker 3: we are best known worldwide, and today we are available
Speaker 3: in over ninety thousand institutions. So pretty much anywhere humans exist,
Speaker 3: they are using our Libby oursa, our Canopy apps or
Speaker 3: platforms on set tops or browsers to benefit from content
Speaker 3: lifelong free content courtesy of their local library, university, or school.
Speaker 1: Okay, just to do some backfill here. Independent retailers are
Speaker 1: now selling digital books. Who is doing the fulfillment on that?
Speaker 3: That is today being dramatically supported by bookshop dot org,
Speaker 3: our good friends out of Brooklyn. In that past, Overdrive
Speaker 3: had a role in it. And like I said, if
Speaker 3: this was if we were doing this interview twenty years ago,
Speaker 3: I would be listing a big litany of publishers that
Speaker 3: we are powering direct to consumer ebook, audiobook or retail bookstores.
Speaker 3: When I said, I've been part of more ebook failures.
Speaker 3: Bob is an entrepreneur born and raised in Cleveland, Ohio.
Speaker 3: I came home to my family said this is it.
Speaker 3: We are now going to be the ebook supplier for borders.
Speaker 3: I just came back from ann Arbor. Well that wasn't it.
Speaker 3: You know, years before I said this is it, we
Speaker 3: are going to be the number one e book supplier
Speaker 3: and one billion cell phones, the biggest mobile cell phone worldwide.
Speaker 3: We just did no Kia. Well that was a few
Speaker 3: months before the iPhone was launched, you know, So you
Speaker 3: know we work today. Retail independent bookstores are very well
Speaker 3: supported by my buddy Andy Hunter at bookshop dot org.
Speaker 3: And Andy is doing a great job letting all the
Speaker 3: independents add a full catalog of Ian audiobooks so they
Speaker 3: can compete with the Amazons and the and some of
Speaker 3: the other big boxes.
Speaker 1: Okay, do you have any competitors in this sphere? Is
Speaker 1: there somebody else who's licensing written words audio books and
Speaker 1: providing them to institutions.
Speaker 3: Yes, we do, and in the in the markets we
Speaker 3: serve because we are global. Business started here from Cleveland, Ohio.
Speaker 3: I'm delighted to say that we created the category and
Speaker 3: we were the ones that pioneered early ebooks. And then
Speaker 3: about twenty five years ago launched the first public library
Speaker 3: popular digital book service. And that was years before Kindle
Speaker 3: or iPads and you know the current ebook environment. And
Speaker 3: we've over the years, we've had the traditional booksellers, the
Speaker 3: schools and libraries tried to develop a digital business because
Speaker 3: they had all of the embedded relationships with the authors
Speaker 3: in the supply chain. They knew all the publishers, they
Speaker 3: had the relationships with the rights holders. They service the
Speaker 3: library and university, and you know the big school district communities,
Speaker 3: so these would be the Baker and Taylors and the
Speaker 3: Ingram book groups or in the k twelve defilettes. So
Speaker 3: all of those traditional booksellers to schools, libraries, institutions, every
Speaker 3: one of them then developed a digital extension to their
Speaker 3: physical or their print businesses, and many of those are
Speaker 3: still in the market today. So we have competitors with
Speaker 3: Baker and Taylor has a platform called Boundless. There's a
Speaker 3: legacy CD RAM and DVD distributor to libraries, Midwest Tape
Speaker 3: out of Holland, Ohio. They created a competitive platform called Hoopla.
Speaker 3: All of them followed us, but collectively overdrives Libby and Canopy.
Speaker 3: In the North American public library, we are the dominant
Speaker 3: leader in many cases, we are the sole supplier to
Speaker 3: many of these biggest systems in the markets, but we
Speaker 3: do have competition, and in international markets we have competitors
Speaker 3: in Germany and here and there, all over the space.
Speaker 3: And if I look at Universe, it's a different group
Speaker 3: of competitors. If I look at students in the classroom
Speaker 3: from kindergarten through high school, we have educational competitors. But
Speaker 3: for the mainstay of you know, public library, consumer ebook
Speaker 3: and audiobook, it would be the traditional book suppliers to
Speaker 3: the market and the few I mentioned.
Speaker 1: Okay, Let's say I'm a library system you talk about
Speaker 1: the County of Los Angeles, and I have an arrangement
Speaker 1: with Overdrive to provide titles. Would they buy titles from
Speaker 1: anybody else or rent whatever it may be, or is
Speaker 1: it an exclusive relationship?
Speaker 3: In most cases with public libraries, there's no contractual exclusivity,
Speaker 3: but as a de facto business practice, they're only buying
Speaker 3: from us. And that is the majority of the In
Speaker 3: the United States, public library data is very available. So
Speaker 3: we know that out of our nation systems of public
Speaker 3: libraries roun you know, thirteen fourteen thousand public library systems
Speaker 3: in the United States. Out of those systems, Overdrive is
Speaker 3: supplying about eighty five percent of all of the digital
Speaker 3: book inventories that public libraries used last year. So collectively,
Speaker 3: all of our competitors might you know, be sharing about
Speaker 3: fifteen percent of the spend, and we capture the majority
Speaker 3: of it. And it's not by contract or exclusivity. It's
Speaker 3: by delivering the best experience for the patron and the listener.
Speaker 3: It's by having services and features within the experience that
Speaker 3: want people to use our libby app or canopy. And
Speaker 3: we're constantly and we do have some competitive advantages that
Speaker 3: frustrate others. So, for example, in the US, the dominant
Speaker 3: way many of the adult fiction community enjoy books and
Speaker 3: reading are on their kindle. Overdrives the only supplier where
Speaker 3: you can borrow a new bestseller New York Times Bestseller
Speaker 3: from the Los Angeles Public Library in Libby and through
Speaker 3: an arrangement an agreement with Amazon, you can borrow it
Speaker 3: from the library and within a moment open up your
Speaker 3: kindle paperwhite and start reading the book you borrowed for
Speaker 3: free in Libby from the library in kindle, and at
Speaker 3: the end of the fourteen or twenty one days on
Speaker 3: your kindle, the book expires and gets checked back into
Speaker 3: the system, all managed by Overdrive. So Overdrive in twenty
Speaker 3: eleven added a read with Kindle option, and because we're
Speaker 3: the only ones, Amazon entered into that arrangement with This
Speaker 3: is another reason why most libraries who are buying popular
Speaker 3: books will look at Overdrive and Libby as the supplier,
Speaker 3: because if you bought the book from one of the
Speaker 3: other suppliers, you would not have the kindle option. So
Speaker 3: that is just one of many competitive reasons why we've
Speaker 3: been successful in winning the business. Because we deliver value.
Speaker 3: We're accountable as well as public libraries and our schools
Speaker 3: and our universities, and our government agencies, military and prisons
Speaker 3: are mostly nonprofits, and Overdrive has developed into a mission
Speaker 3: based company. We know that if we're going to capture federal, state,
Speaker 3: regional taxpayer money and budgets, we have to earn and
Speaker 3: be held accountable for how those taxpayer federal funds are
Speaker 3: being utilized. And we develop, we deliver proven value, and
Speaker 3: we hold ourselves up to higher standards. And for those reasons,
Speaker 3: we have continued to grow our footprint in those markets
Speaker 3: and frustrate our competitors.
Speaker 1: Okay, very occasionally on the libby app in Los Angeles,
Speaker 1: I will borrow a book that is not readable on
Speaker 1: the kindle. Is that because the publisher made a restriction
Speaker 1: or they got that book from a third party?
Speaker 3: Well, typically it is when we ingust and our size
Speaker 3: of our catalog and businesses constantly.
Speaker 2: Expanding.
Speaker 3: But in a typical month we will add about one
Speaker 3: hundred thousand new digital books that are mostly brand new books,
Speaker 3: and with one hundred thousand books coming in in all
Speaker 3: languages for all audiences. I'm talking about Japanese manga Arabic
Speaker 3: audio books read alongs where the children and the babies
Speaker 3: can see the words and follow the engagement and the
Speaker 3: hear the words. We add categories of content that are
Speaker 3: not supported by a Kindle device, So often if you
Speaker 3: are picking up a select title, if it doesn't have
Speaker 3: Kindle compatibility, or there is some other inability for the
Speaker 3: Amazon Catalog to do the enablement. But for most of
Speaker 3: the English language popular trade books. Trade books are the
Speaker 3: popular books you see at Amazon, Barts and Noble. We
Speaker 3: have a very high percent Kindle availability in the US,
Speaker 3: so yes, you will see some books and sometimes it
Speaker 3: might only be a gap. We just added it it's
Speaker 3: a hot new book, and you know we're getting in
Speaker 3: sync with the Amazon catalog because we're not actually sending
Speaker 3: the file to the Kindle. We've engineered with Amazon a
Speaker 3: process that allows Kindle to fulfill the title under the
Speaker 3: terms and conditions of the library permissions we have. So
Speaker 3: you will find some occasional books that you can open.
Speaker 3: And this would be for example, I believe our magazines.
Speaker 3: Libby does fantastic on magazines, but I don't believe Kindle
Speaker 3: is supporting our magazines so that you will see pockets
Speaker 3: of inventory you can borrow in Libby in the US
Speaker 3: where there's not an immediate Kindle availability.
Speaker 1: Okay, point blank, let's just use Los Angeles as an example.
Speaker 1: They have the right to buy from your competitors. Those
Speaker 1: books would be at a disadvantage, do they or most
Speaker 1: people that you work with, they're getting all their content
Speaker 1: from you.
Speaker 3: The vast majority are buying the vast majority of their
Speaker 3: digital collection from Overdrive. For the value we deliver, we
Speaker 3: have to earn the right.
Speaker 1: Place, Okay, but the lines are exceptions.
Speaker 3: There's exceptions. So if I don't have a book, you
Speaker 3: need the book, God bless you. You have to get
Speaker 3: the book. Because content is king. Content is and will
Speaker 3: always remain king. And this is why I'll renew a
Speaker 3: subscription I canceled two years ago because I have a
Speaker 3: book or a series or streaming and that I'll go
Speaker 3: through a bad experience or competitors platform. So we do
Speaker 3: have The reality is in dozens of major metro markets,
Speaker 3: or Overdrive maybe supplying ninety five percent of all the
Speaker 3: digital books, they still could have several other competitors. Usually
Speaker 3: when they have multiple competitors, it's because they're buying it
Speaker 3: for a selection of either titles that we don't offer
Speaker 3: for one or various reasons, or some other legacy reasons.
Speaker 3: So yes, but it's very rare that they're going to
Speaker 3: buy the same title, the new Sarah Jay Moss or
Speaker 3: you know Dan Brown, or you know John Grisham. They
Speaker 3: will occasionally buy the John Grisham in my platform and
Speaker 3: one of my competitors, because they do have an audience
Speaker 3: of users and it could be seniors that learn this system,
Speaker 3: and they don't want to learn a new system. You know,
Speaker 3: it's America, and we do not have we do not
Speaker 3: you know, handcuff our buyers with you know, restrictions, and
Speaker 3: you can't buy for my competitor. I want to win
Speaker 3: the business because I offer the best value, the best service,
Speaker 3: and the best selection.
Speaker 2: But in reality that does exist.
Speaker 3: I could show you the homepage of many California libraries.
Speaker 3: You'll see what's the most prominent app and the experience
Speaker 3: they promote in library online. It would be Libby for books,
Speaker 3: Canopy for video. But in many cases I'll go in
Speaker 3: the library and I'll see our competitors banner stands and
Speaker 3: you know, bookmarks and you know merchandising. We're not exclusive
Speaker 3: and many of our customers have multiple suppliers, but they're
Speaker 3: buying usually smaller select and they may have a variety
Speaker 3: of reasons why they did that.
Speaker 1: Okay, let's talk about overdrives. Relationship with publishers. As you stated,
Speaker 1: you've been in this business along time. It has been a
Speaker 1: long evolution. Yes, let's just say, with the major publishers today,
Speaker 1: do you have an annual or multi year deal that
Speaker 1: covers all their books or are they charging different prices
Speaker 1: for different titles? How does it work?
Speaker 3: Yeah, our business is not too different from what you
Speaker 3: would think of a traditional distributor. Let's take Ingram Content Group,
Speaker 3: and Ingram would be known across many industries. Micro Ingram
Speaker 3: and Ingram Books or Baker and Taylor is very specific
Speaker 3: to public library. So we have relations direct distribution, terms
Speaker 3: of sale with When we talk about the Big five
Speaker 3: right now, in most countries, the best sellers are dominated
Speaker 3: by anywhere from two to three. In the US is
Speaker 3: now we call the Big five. It used to be
Speaker 3: the Big six, but then Penguin and Random House merge,
Speaker 3: so we have the Big five. So in the US,
Speaker 3: the Big five dominate maybe sixty of all of the
Speaker 3: popular trade book sales. And that's you know most of
Speaker 3: the New York Times bestseller list and the marquee authors
Speaker 3: you're familiar with. Our relationship with each of them is
Speaker 3: a direct distribution agreement. In most cases we provide them
Speaker 3: access to our marketplace. Overdrive has developed and has been
Speaker 3: operating for twenty five years, the single largest B to
Speaker 3: B digital book supply chain for retail and institutional buyers.
Speaker 3: So with a Penguin Random House, a Simon and Schuster,
Speaker 3: a McMillan, a hartper Collins, for example, we have negotiated
Speaker 3: or operating under published terms of sale. Most cases it's
Speaker 3: a distributor discount off of a digitalist price. So we
Speaker 3: have the ability to sell a unit of a Penguin
Speaker 3: Random House bestseller, this new John Grisham.
Speaker 2: We know what.
Speaker 3: Their digital list prices is like recommended price to the market.
Speaker 3: We pay for every unit that is acquired by a
Speaker 3: buyer based on the gross margin or the distributor discount.
Speaker 3: So just to make life easy and our and our
Speaker 3: distributor discounts vary and there's a healthy negotiation going on.
Speaker 3: Frequently they're trying to claw back a few points gross margin.
Speaker 3: We're trying to get them back, so we take a
Speaker 3: percentage of the sale of the goods and pay back
Speaker 3: the publisher. I will say this, Overdrive has a very
Speaker 3: large digital book institutional business to library schools and universities.
Speaker 3: We send to the big five publishers hundreds of millions
Speaker 3: of dollars annually, and the majority of the money that
Speaker 3: library schools and government agencies pay for the rights for
Speaker 3: you to borrow as a student, as a taxpayer, as
Speaker 3: a library patron, the majority goes to the publisher, and
Speaker 3: then the publisher has their deals with the agents and authors,
Speaker 3: so every time someone buys a book and is being
Speaker 3: used at a public library, the majority of the revenue
Speaker 3: paid by the library goes to the publisher.
Speaker 2: And authors earn on every.
Speaker 3: Book we sell, and sometimes authors aren't familiar. All they
Speaker 3: see is oh, I can get a book for free
Speaker 3: from the library, and the authors sometimes is not informed,
Speaker 3: and this is because publisher on their royalty reports to
Speaker 3: their authors are not delineating occasionally how many units and
Speaker 3: how much revenue that author earned from the public library channel,
Speaker 3: from the schools or from the university markets that.
Speaker 2: We sell to.
Speaker 3: So there's a lot of misinformation on the creator community.
Speaker 3: When they just see, Oh you mean someone's getting my
Speaker 3: book for free? Well, how do I get paid? I
Speaker 3: can tell you every author earns significant share of the revenue.
Speaker 3: Librari's pay and the majority of the revenue goes to
Speaker 3: the supplier, my aggregator, my publisher, or my audio partner.
Speaker 1: Okay, so you have a deal. Let's say with Penguin
Speaker 1: Random House on their books to traditional retail and physical
Speaker 1: every book might have a different retail price and wholesale price.
Speaker 1: A is it the same with you b as a
Speaker 1: result of an anti trust lawsuit? When Apple and Amazon
Speaker 1: sell their books, it's an agency thing such a it's
Speaker 1: a percentage in your particular case, is you're buying the
Speaker 1: book akin to that or is it a kin to
Speaker 1: a retailer? This is the price minus whatever discounts you
Speaker 1: might have. That as a price you're paid.
Speaker 3: As you're familiar with as a result of the antitrust
Speaker 3: action the Big five or six at the time, it
Speaker 3: was found that they created this agency model to facilitate
Speaker 3: go you know, I want to discuss legal justification for that.
Speaker 3: But to answer your question, it's more like a straight
Speaker 3: distribution business and we actually have the ability to set
Speaker 3: the price we charge the market for the vast majority
Speaker 3: of the inventory coming into the Overdrive marketplace. We operate marketplace.
Speaker 3: It's only a B to B shopping. So your listeners,
Speaker 3: unless say are a buyer at a nonprofit institution, library, university,
Speaker 3: government agency, they can't go in and look at my catalog.
Speaker 3: But for the ninety thousand institutional buyers that have access
Speaker 3: to go into my warehouse to see what books are available,
Speaker 3: they see majority of it are the digitalist price that
Speaker 3: was established by our supplier. We just benefit from them
Speaker 3: setting the price putting it in, and we operate off
Speaker 3: of our gross margin discount from what you know, the
Speaker 3: difference from what I sell the book to what I
Speaker 3: have to pay the publisher for the unit. So for
Speaker 3: if I have to pay the publisher fifteen dollars and
Speaker 3: I sell the book for twenty five, you know, then
Speaker 3: I'm earning the ten dollars gross margin. So I earn
Speaker 3: forty points and the publisher got sixty. I mean, if
Speaker 3: my math is right, So that's that is the model.
Speaker 3: We get a digital list price, we sell it at
Speaker 3: the digital list price. We pay the supplier minus our
Speaker 3: distributor discount. Now, in some cases Overdrive might discount the
Speaker 3: price and I might get, you know, eat into my
Speaker 3: gross margin. In some cases, we might have the publisher say,
Speaker 3: we want to up unit sales, we want to sell
Speaker 3: it to more doors. Let's let's create a sale like
Speaker 3: back to school. Like back to school is a very
Speaker 3: big campaign we're in the middle of now, Bob. And
Speaker 3: it's not just for schools. It's for public libraries, for universities.
Speaker 3: It's even for corporations that are helping professional development or
Speaker 3: remote or continuing education or professional development. So we may
Speaker 3: have publishers say, hey, for the month of August September,
Speaker 3: we're going to reduce the price of all of our books.
Speaker 2: Our gross margin stays the.
Speaker 3: Same, but then we increase unit sales, maybe capture a
Speaker 3: little higher bump year over year for back to school period,
Speaker 3: but we're still operating off the same gross margin. So
Speaker 3: the gross margin that we negotiate with our suppliers is
Speaker 3: basically how Overdrive earns its.
Speaker 2: You know.
Speaker 1: Okay, as a practical matter, I realize nothing is identical,
Speaker 1: But if a library is buying a book, or when
Speaker 1: you're buying the book, is it essentially the same price
Speaker 1: as an end user might see on Apple or Amazon.
Speaker 2: It may be.
Speaker 3: Unfortunately for the most popular in demand bestsellers, the supply
Speaker 3: chain and the publishers and the authors and the agents
Speaker 3: have increased the price to library lending to often make
Speaker 3: it a multiple of the price sets the prevailing retail
Speaker 3: price at Amazon, Barnes and Noble or Apple or Audible.
Speaker 3: And they've justified that because they are correct in saying
Speaker 3: that when we sell a license for a library to
Speaker 3: lend this book out, we know that it will be
Speaker 3: used by multiple users over the course of a calendar year.
Speaker 3: And they also know that during the period of the
Speaker 3: digital access for that book, they're unlikely going to be
Speaker 3: buying a replacement copy. So when a library bought a
Speaker 3: physical book or a stack of audiobooks, and audiobooks really
Speaker 3: is the reason why overdrive success in the early two
Speaker 3: thousands rolled across the country. We were solving a big
Speaker 3: paint point for libraries. If your listeners are still going
Speaker 3: into public libraries, maybe for themselves or parents or grandparents
Speaker 3: and getting mom or dad an audiobook and they get
Speaker 3: a hearts clamshell plastic case like you used to get
Speaker 3: a Blockbusters and it's filled with a sleeve of twelve CDs.
Speaker 3: That's how people were using audiobooks before we invented download
Speaker 3: audiobook at the library. But guess what, after about three
Speaker 3: or six months, the library had to buy replacement units.
Speaker 3: When we were first selling our digital book value proposition
Speaker 3: to libraries, and you bought an ebook or an audiobook,
Speaker 3: I said, you know what, you buy this unit never lost,
Speaker 3: never late, never damaged, lever scratched. So publishers said, an
Speaker 3: author said, at least when the library or the school
Speaker 3: bought my book every year or every few months, I
Speaker 3: might be selling additional replacement units. At least when they
Speaker 3: were buying my digital books. The book couldn't be anywhere
Speaker 3: in an instant so there were limitations on the number
Speaker 3: of actual readers that could benefit from that print copy
Speaker 3: or that box of CDs. So the publishers of the
Speaker 3: big best sellers and their agents and authors started to
Speaker 3: demand that they would only sell into schools and institutions
Speaker 3: that had permissions to possibly let fifty people use it
Speaker 3: in a year or more. They wanted a higher price
Speaker 3: per unit. So today the reality is that for many
Speaker 3: of the best sellers that when the first book comes out,
Speaker 3: and the book industry also kind of like the video industry.
Speaker 3: You know, it first used to be theatrical first, and
Speaker 3: then it went into pay per view, and then it
Speaker 3: got into you know, the streaming, and then eventually it
Speaker 3: went into the home channels and CD and DVD markets.
Speaker 3: So the publishing industry still still has a premium on
Speaker 3: when the new book comes out and it's called a
Speaker 3: frontless title. When the frontless New York Times bestseller drops,
Speaker 3: they really want to maximize the impact at retail first
Speaker 3: format hardcover sales. They're trying to keep the velocity and
Speaker 3: the buzz up. And then as a book after twelve
Speaker 3: months or twenty four months, starts to become a book
Speaker 3: that they would call it's now moving into the publisher's
Speaker 3: mid list and eventually backlist for the author and publisher,
Speaker 3: we'll often see the prices to the library decline. So
Speaker 3: we have a complex because we've been doing digital library
Speaker 3: and we've created the dynamics of now I think we
Speaker 3: have over thirty thousand individual suppliers to our digital distribution
Speaker 3: platform globally. We've allowed the suppliers, the aggregators, the JK.
Speaker 3: Rowlings and Potter Mores when they say here's how we're
Speaker 3: willing to make Harry Potter available in forty languages worldwide.
Speaker 3: We want this price, we want this model. We have
Speaker 3: to listen to them and see how we can accommodate.
Speaker 3: So Overdrive another reason why we are the dominant supplier
Speaker 3: because we've invented and developed most of the platforms that
Speaker 3: all our competitors have emulated or copied over the years worldwide.
Speaker 3: Our capability of meeting the rights holders requirements is unparalleled.
Speaker 2: We support more one off.
Speaker 3: Unfortunate because content is king, and for the first five
Speaker 3: years when I launched popular ebook lending, all I heard
Speaker 3: was Harry Potter, Harry Potter, Harry Potter, and still today
Speaker 3: Harry Potter went through seven as we call it, starting
Speaker 3: with Sorcerer's Stone, is still today one of the most
Speaker 3: used digital books worldwide in all languages and all channels.
Speaker 2: So, being content as king, we.
Speaker 3: Have developed and we support to the suppliers, and we
Speaker 3: are evangelizing for authors and publishers. If you follow Overdrives guidance,
Speaker 3: we can tell you how you can grow market share,
Speaker 3: increase brand awareness, and when libraries are interested in then
Speaker 3: ian audiobook and put it in their catalog for discovery.
Speaker 3: Overdrive will help you, your author and your publisher. We
Speaker 3: will discover your book and sell more print. We'll sell
Speaker 3: more print to the library, will create more demand for
Speaker 3: your book at Apple and Kindall and Barnes and Noble
Speaker 3: and elsewhere. We have been proven to be such a
Speaker 3: valuable discovery and sales partner to the author in the
Speaker 3: publisher community that I'm proud to say almost all of
Speaker 3: the Big five now have also given overdrive permissions for
Speaker 3: other models besides the one user at a time.
Speaker 2: And that's something I want to share with you and
Speaker 2: your listeners.
Speaker 1: OK, a couple of things. Just do some cleanup work.
Speaker 1: What about the concept of expiration you have. I'm buying
Speaker 1: the book, but after it's read two hundred times or
Speaker 1: it's read for twelve months, it expires. What's going on there?
Speaker 2: In a good swath of our catalog.
Speaker 3: We have enabled the publishers that require a overdrive, invented
Speaker 3: this term metered access. What happened was when we were
Speaker 3: negotiating twenty five years ago and ongoing even today overseas
Speaker 3: and globally, when I get a reluctant author or publisher says, well,
Speaker 3: I'll only go in the library, but I don't want
Speaker 3: them to buy the book and have one a digital
Speaker 3: file and then that's it forever. So they invented the
Speaker 3: way that they said, I'm willing to sell to the institution,
Speaker 3: but I want them to every two years have to
Speaker 3: renew their license. So we created a system of metered
Speaker 3: access levers. The first metered access level was introduced about
Speaker 3: fifteen years ago by HarperCollins. They said, especially think about nonfiction.
Speaker 3: Think about reference. If you are a library and you're
Speaker 3: buying a reference book, an evergreen title, a dictionary, a
Speaker 3: reference book that people use to look up. It's not
Speaker 3: for pleasure reading, it's not a beach read, it's for
Speaker 3: looking up in research. Do they want to sell that
Speaker 3: book and maybe it doesn't get updated but once every
Speaker 3: ten years? Do they want to sell that book once
Speaker 3: and then that's it. The library buy five copies, will
Speaker 3: never sell another copy of that dictionary until there's a
Speaker 3: massive update. So publishers fifteen years ago said, we want
Speaker 3: to find a way that if we do sell it,
Speaker 3: it's not perpetual. So HarperCollins fifteen years ago introduced the
Speaker 3: first of these levers. They introduce, when the library buys
Speaker 3: my new popular HarperCollins ebook. We want the library to
Speaker 3: lend it out twenty six times. After twenty six times,
Speaker 3: they want them to buy a replenish unit. So that
Speaker 3: was introduced. Within a year or two, we had one
Speaker 3: of the other Big five who said, we are willing
Speaker 3: to give you books popular bestsellers, and they introduce a
Speaker 3: meter of We're willing to sell you the ebook for
Speaker 3: library lending. One user at a time. They buy five copies,
Speaker 3: five people in the wait list. You wait your turn.
Speaker 3: But for each unit, we want each unit from the
Speaker 3: data goes live, we want the library title of that
Speaker 3: unit to expire in two years. So that's meter to
Speaker 3: Access twenty four months. During COVID, we then had libraries
Speaker 3: at urgencies and wanted to fill holds. Penguin Random House said,
Speaker 3: to be even more flexible. How about we now let
Speaker 3: libraries buy the same unit that PRH made Meter to
Speaker 3: Access twenty four months. Now you can buy the same
Speaker 3: best seller metered access twelve months at fifty percent the price.
Speaker 3: So overdrive has supported and today in our catalog, unfortunately,
Speaker 3: we support and when we go internationally, we saw that
Speaker 3: in Germany the publishers were licensing books to libraries for
Speaker 3: forty eight months or fifty serfs, whichever came first. So
Speaker 3: Overdrive had to develop the capability so we could support
Speaker 3: the Berlin Public Library, Hamburg or you know, Munich. So unfortunately,
Speaker 3: when I said, the business has got it complex based
Speaker 3: on the marketplace and they restrictions or the permissions that
Speaker 3: were set by the rights holders. This is why it's
Speaker 3: becoming more complicated and challenging in the for the buyer,
Speaker 3: and Overdrive has been evangelizing, simplifying and providing the tools.
Speaker 1: Okay says there's a tension always in commerce between the
Speaker 1: seller and the buyer. So you're talking about the seller
Speaker 1: having multiples of traditional list price, you're talking about controls.
Speaker 1: Now when you deal with an Amazon, which of course
Speaker 1: is extremely powerful, they will push back into that. They'll say, well,
Speaker 1: you know, our business model doesn't work, our customers don't
Speaker 1: want it, our libraries pushing You read in the Wall
Speaker 1: Street Journal about this all the time, Okay, especially expiration whatever.
Speaker 1: Is this just something that people have to accept or
Speaker 1: is there a pushback? And to what degree is Overdrive
Speaker 1: itself saying hey, you know you're killing the business by
Speaker 1: doing this.
Speaker 2: You know, Bob, thank you.
Speaker 3: I've been an evangelist for enlightening the rights, whul on
Speaker 3: the un realized, the underrealized value and appreciation for what
Speaker 3: our nation's librarians do. And I'll just talk about the US.
Speaker 3: It's it's kind of a global phenomenon in many markets.
Speaker 3: And when we introduce this, and I've had to give
Speaker 3: testimony in Parliament, I've given testimony and many I've been
Speaker 3: in Congress. I've been in the US and globally. There
Speaker 3: is an anti library e lending bias that has permeated
Speaker 3: this market, and there are bias and stereotypes against e lending,
Speaker 3: and as a result, the libraries have been forced to
Speaker 3: evaluate if they want to be relevant with the migration
Speaker 3: to an online, mobile, digital world with a mobile and
Speaker 3: everyone's smartphone and listening in your car and you know,
Speaker 3: Bluetooth and every device in your house. The libraries have
Speaker 3: had to swallow hard. The prices in many cases are onerous,
Speaker 3: the restrictions are challenging. It puts tremendous stress on the institutions.
Speaker 3: And the real trauma now is not even what this environment. Yeah,
Speaker 3: this is the overhead for a market that's been going
Speaker 3: through the pains of transitioning from analog to digital as
Speaker 3: many industries have growing pains and accommodations and so many
Speaker 3: of the things that are being done now, and there's
Speaker 3: all you know. So the pressures that the libraries are
Speaker 3: put under has been daunting. But I could say this
Speaker 3: overdrive has been consistently delivering over twenty five years incremental
Speaker 3: progress because we have a north start. We are a
Speaker 3: mission based company. In twenty seventeen we became a certified
Speaker 3: B corporation. If we are going to capture significant tens
Speaker 3: of millions of dollars in every state from their public
Speaker 3: funds to educate, entertain, comfort and support the communities from
Speaker 3: cradle to grave, we have to be advocates for those
Speaker 3: institutional buyers. And I can tell you we have pushed
Speaker 3: and we have been successful in getting fair, flexible and
Speaker 3: more reasonable accommodation and movement from the Big five than
Speaker 3: any other force in the market. And we are constantly
Speaker 3: getting wins for the buyers. But there's still a lot
Speaker 3: more work to do. I don't want to name names,
Speaker 3: but we have some very big, prominent publishers that if
Speaker 3: you just looked at their terms, you would think that
Speaker 3: they really do not want any libraries to buy their
Speaker 3: books because they've made it so onerous and so difficult,
Speaker 3: and as a result, librarians have say I'll only buy
Speaker 3: the book if I have to so that author and
Speaker 3: that publisher unless they have a must have book it's
Speaker 3: now you know, made it to a motion picture, the
Speaker 3: author's coming to town. They will buy that author's book
Speaker 3: as few as they have to, only because they want
Speaker 3: to be relevant and they don't want patrons saying, what's
Speaker 3: the matter with you?
Speaker 2: This is the biggest book. How come you don't have
Speaker 2: it in libby?
Speaker 3: Because everybody expects the public library to have every book
Speaker 3: available for them, all books at all time, because it's digital,
Speaker 3: and unfortunately the libraries are dealt this dynamic situation. But
Speaker 3: I can tell you Overdrive has stood on the side
Speaker 3: of librarians and we are delivering every month wins. For example,
Speaker 3: the last two years we have evangelized big collections value
Speaker 3: propositions to libraries. One is called all access. When we
Speaker 3: saw during COVID the dynamic spike in demand when all
Speaker 3: the physical libraries close and every student in America became
Speaker 3: a remote and distant learner, and the cries came out
Speaker 3: from the librarians and the cities and the superintendents of
Speaker 3: the big school districts, including LAUSD and New York Public schools.
Speaker 3: They said, we're not going to be here for two
Speaker 3: years and our kids don't have a book. So we
Speaker 3: had to go to the publishers and say we need
Speaker 3: to create instant availability.
Speaker 2: Now.
Speaker 3: We started to negotiate and got permissions for what we
Speaker 3: call all access collections. Libraries now through Overdrive can select
Speaker 3: from dozens of bundles where they buy an annual plan
Speaker 3: and in some cases two thousand books always available, no weightless,
Speaker 3: simultaneous access. If you need to make a reading list
Speaker 3: for your kids for summer reading, use these books. They
Speaker 3: will never be a wait list. You promote them on
Speaker 3: your homepage, you make reading challenges and bringing the authors.
Speaker 3: You want to have fifty thousand people read the same
Speaker 3: book at the same time.
Speaker 2: Done.
Speaker 3: So, we have evangelized that we have launched all access collections.
Speaker 3: We launch a very popular all access romance and let's
Speaker 3: face it, romance, adult picture, erotic, romanticy, pretty hot, and
Speaker 3: I'm talking about great books.
Speaker 2: Now.
Speaker 3: It may not be the current New York bestseller, that
Speaker 3: this publisher is giving me unlimited access for the entire
Speaker 3: state of California for one flat fee. But that is
Speaker 3: live today all across the country. We have evangelized. I'm
Speaker 3: a costco shopper. My wife loves BJ wholesale Club. What
Speaker 3: do we do when you know that as a library
Speaker 3: you need inventory. You know this is a quality book,
Speaker 3: it's never going to go out of style. We negotiated
Speaker 3: with the publishers for a model we call Overdrive Max.
Speaker 2: And it's like costco.
Speaker 3: If you are going to buy something that has long
Speaker 3: shelf life, you're buying paper, toal and bottled water. Why
Speaker 3: do you buy in bulk because it never expires and
Speaker 3: you want to get the lowest cost per unit. Overdrive
Speaker 3: has rolled out globally a growing catalog of Overdrive Max
Speaker 3: availability and you can buy this book in bundles of
Speaker 3: one hundred cirques and it never expires. So I have
Speaker 3: Monday morning in Long Island, New York and Queens. The
Speaker 3: buyers for New York Public and Brooklyn Public, they come
Speaker 3: in at morning. It's called book ops or operation buying
Speaker 3: for the NYPL and Brooklyn Library. They come in, they
Speaker 3: say what was added over the weekend in that model.
Speaker 3: I buy that model first because I can use that
Speaker 3: available inventory anytime anywhere. If all of a sudden there's
Speaker 3: a big demand on the best seller, I could buy
Speaker 3: one hundred units and knock out one hundred holds at
Speaker 3: once because I got a low.
Speaker 2: Cost of unit.
Speaker 3: I went to Costco, I loaded up, I reduced the
Speaker 3: waytime and the Holts list. I know that we have
Speaker 3: this author coming in for an author event. The author's
Speaker 3: coming for an author event, three hundred people are coming in.
Speaker 3: Everybody's going to want the book in advance of the
Speaker 3: author event. So they might say, let's buy five hundred
Speaker 3: units in Overdrive Max and I have the lowest cost
Speaker 3: per lend. So Overdrive has provided tools to the library
Speaker 3: so they could go into our massive catalog of millions
Speaker 3: of in copyright digital books and in many cases of
Speaker 3: valuate because schools, libraries, institutions use books for different purposes.
Speaker 3: So I argue to the author and the publisher, if
Speaker 3: you give the market multiple ways to buy your product,
Speaker 3: you'll sell more.
Speaker 2: I have some.
Speaker 3: Buyers in some communities who will only buy by one model,
Speaker 3: and that's it. If you don't offer your books in
Speaker 3: that model, you don't exist. They come in, they search
Speaker 3: what's available. If you're not in that model. You don't
Speaker 3: get that top of the wall.
Speaker 2: It's spent.
Speaker 3: So I am evangelizing that if you give the market
Speaker 3: multiple ways, because you buy books for reference, you buy
Speaker 3: books for a beach read. You buy books when you're
Speaker 3: going off the grid. Then you want that five hundred
Speaker 3: page novel. But you're going to the beach for the weekend,
Speaker 3: you want that weekend read. We want books in because libraries, schools, universities, corporations,
Speaker 3: knowledge centers. Books are used in so many different ways,
Speaker 3: and we have engineered multiple solutions and it's evolved over
Speaker 3: the last you know, three decades.
Speaker 1: Okay, let's talk the history of ebooks from a consumer standpoint.
Speaker 1: You've been in the business for forty years, but the
Speaker 1: average person is not. Kindall launches from Amazon. Their business
Speaker 1: model is we will pay you traditional wholesale on the book,
Speaker 1: just like a physical book. We will set the price,
Speaker 1: we will make up the loss. So let's say wholesale
Speaker 1: was seventeen dollars at the time, everything was nine to
Speaker 1: ninety nine.
Speaker 2: Right.
Speaker 1: Of course, as we say, it was the antitrust element.
Speaker 1: But what I'm focusing on here is publishers and what
Speaker 1: degree are they hip to what is going on in
Speaker 1: the online digital world. When they did that, ebook sales
Speaker 1: went down. They saw that as a triumph. Okay, Jeff
Speaker 1: Bezos was still at the Amazon at the time, said
Speaker 1: my goal with the low prices is to grow a business.
Speaker 1: Steve Jobs at Apple didn't give a shit, he said,
Speaker 1: you know, books weren't that important to him. But subsequent
Speaker 1: to that antitrust, you know, all you saw were articles about, well,
Speaker 1: the independent bookstores coming back. Look how well physical is
Speaker 1: doing now. Libby is an unbelievable success. But I want
Speaker 1: to carve out something and I want to leave that
Speaker 1: aside for a second. Do the publishers still understand that
Speaker 1: the future is digital or are they still hanging on
Speaker 1: to the physical model and using digital reluctantly? And to
Speaker 1: what degree are they sophisticated on this subject.
Speaker 3: Well, it's a great question, Bob, and unfortunately it varies
Speaker 3: from house to house. And as I think you know,
Speaker 3: many of the larger trade houses are actually a federation
Speaker 3: of individual imprints that they've acquired through acquis positions. So
Speaker 3: the largest is Penguin Random House in the trade book space.
Speaker 3: I was just over with our publishing partners in Munich
Speaker 3: at PRH Germany even trying to evangelize the German fifty
Speaker 3: Penguin Random House German imprints that you've never heard of.
Speaker 2: Maybe you've heard of one or two.
Speaker 3: Every single one of them is run by an individual publisher,
Speaker 3: and PRH runs a more decentralized.
Speaker 2: Business.
Speaker 3: So you may have parts of the catalog that are
Speaker 3: progressive and they want to get discovered everywhere worldwide, and
Speaker 3: they're a little bit more flexible on models and pricing,
Speaker 3: And then you may have a more traditional, legacy conservative
Speaker 3: mindset who you know, just has it is holding on
Speaker 3: to the past. In the international markets, it's dramatically a
Speaker 3: challenge when I go, let's say, into Japan or into
Speaker 3: some of the Asian markets, they have such a reluctance
Speaker 3: to change their business process. And quite frankly, it's happening
Speaker 3: in the last year or two. There's been a real
Speaker 3: awakening that the traditional print model is not only declining
Speaker 3: and at risk, but there was like a major shock
Speaker 3: wave just recently when the industry decided that they're going
Speaker 3: to just quit mass paperback publishing. I mean, the biggest
Speaker 3: impact would be for the thousands of drug stores and
Speaker 3: small independent retail that when the magazine jobber came in
Speaker 3: to freshen up the newsstand and the magazines next to
Speaker 3: the American greeting guy who was freshing up because it's
Speaker 3: a real estate business. At least they also dropped in
Speaker 3: the top twenty best selling paperbacks and maybe was an
Speaker 3: impulse item at the bookstand or at the train station.
Speaker 3: Mass paperback going away as a format. That's huge, I
Speaker 3: mean everything they've been trying to protect. They also have
Speaker 3: had this legacy value proposition that the most important thing
Speaker 3: that the Big Five now have been, you know, obsessed
Speaker 3: over for the last decade is the New York Times
Speaker 3: bestseller list. Let's face it, you know, the Big Five.
Speaker 3: This book business, the trade book business is so based
Speaker 3: on the mega, the mega breakout book. You know, a
Speaker 3: publisher or a retail bookstore chain has a good year
Speaker 3: or back. A bad year could be based on one author,
Speaker 3: could be based on one.
Speaker 2: Book, what Sarah J.
Speaker 3: Moss did for Bloomsbury the last year or two, or
Speaker 3: you know this, you know some of these romanticy breakout stars,
Speaker 3: the TikTok the book talk things. It's so that has
Speaker 3: so much has changed in the last even just twenty
Speaker 3: four months that the appreciation for those that have reached
Speaker 3: to the audiences. And even over the last just year,
Speaker 3: I've seen a dramatic investment of publishers and authors where
Speaker 3: the author is now holding back more approval on the tours,
Speaker 3: on the branding, and almost every author now is investing.
Speaker 3: An author is a brand. So for any New York
Speaker 3: Times bestseller, they're not necessarily sending you to the publisher's
Speaker 3: website to learn about my tour. They want the direct
Speaker 3: relationship with the reader. We are working and so many
Speaker 3: authors are now coming to us directly and the author.
Speaker 3: The rise of the author is a brand. The rise
Speaker 3: of the author is even creating new dynamics for how
Speaker 3: the publisher is catering to keep that best selling author.
Speaker 3: It used to be just on the size of the
Speaker 3: advance check and they go to auction and who got
Speaker 3: the best You know, who negotiated the biggest upfront. Many
Speaker 3: of these new author deals and agency deals are not
Speaker 3: only author, show me your reach, show me your platform,
Speaker 3: Show me what you're going to do to grow the
Speaker 3: audience for my brand. How are you going to build
Speaker 3: a sale for my backlist? You know, we've done such
Speaker 3: The good thing about Libby's success in scale Bob is
Speaker 3: unlike Amazon and Apple and Google, who have billions of
Speaker 3: data points, Libby has billions of data points on how
Speaker 3: a reader was looking for what to read next, where
Speaker 3: they discovered it, how they came to the library, how
Speaker 3: they came to a digital edition, where they borrowed the book,
Speaker 3: how they open. All of this is anonymized and privacy
Speaker 3: is sacred. But we have the aggregated data endpoint of
Speaker 3: how a book was borrowed, where was used?
Speaker 2: How? Just imagine this.
Speaker 3: I presented a at a publisher conference in New York
Speaker 3: earlier this year called the u S Book Show, to
Speaker 3: an audience of eight hundred New York and US and
Speaker 3: international publishers, and I asked this question, could you ever
Speaker 3: imagine a day where your acquisition editor, your author, your
Speaker 3: publisher knew where in the story you lost the reader?
Speaker 2: Just imagine? Would you?
Speaker 3: Would you In the music space, would you would your
Speaker 3: would your creator like to know where in the track
Speaker 3: that they say? No?
Speaker 2: Not for me? Imagine? We showed I did a study.
Speaker 3: I took one author, a very successful author, Janet Ivanovitch.
Speaker 3: She has this series of Stephanie Plum who's a protagonist
Speaker 3: in these murder mysteries, and Stephanie started. Janovitz started with
Speaker 3: One for the Road, and every one of these murder
Speaker 3: mysteries with Stephanie plum has. I think the most recent
Speaker 3: one was The Dirty thirty. You know, they all had
Speaker 3: the number. And she started her career, did the first
Speaker 3: three books, one of the big five, and her ebooks
Speaker 3: and audio came up.
Speaker 2: And I actually know on average.
Speaker 3: The completion rate where people when those who fell in
Speaker 3: love with the Stephanie Plump stories, where seventy five percent
Speaker 3: read seventy five percent or more. Where did you lose
Speaker 3: the reader? I know where they lost the reader? What
Speaker 3: chapter page? I mean the aggregate of hundreds of millions
Speaker 3: of sessions. She then went to the second publisher, and
Speaker 3: we noticed over this thirty year history that when this
Speaker 3: second publisher brought out a dozen books, they didn't read
Speaker 3: as far into the e they didn't listen as far
Speaker 3: in the audio that represented her voice. She lost hundreds
Speaker 3: of millions of minutes of people listening to her story.
Speaker 3: And the only thing different I could tell was she
Speaker 3: changed publishers. And you would say no, actually, when they
Speaker 3: went to number two, it went up. Oh, and so
Speaker 3: the first publisher said, oh, well, she had a following.
Speaker 3: By the time they got to book four, people had
Speaker 3: heard of her. That wasn't it, Because after twelve books
Speaker 3: she went to publisher three and it dropped down again.
Speaker 2: And then she went to original publisher and it stayed
Speaker 2: low again.
Speaker 3: What happened at publisher too while she was there with
Speaker 3: these dozen books Janet Ivanovitch's books, people completed on average
Speaker 3: almost more than seven eight nine percent of the entire story.
Speaker 3: I have to say the editor who worked with Janet
Speaker 3: Ivanovitch during those years knew how to get that story
Speaker 3: to the listener in a way that engaged the reader
Speaker 3: and kept them in trance with the story longer. I
Speaker 3: just have I can't say why the readers left or
Speaker 3: stuck around, but I just have the d they did.
Speaker 3: These are the kind of untold insights we now have
Speaker 3: with publishers and authors, and we are willing protecting privacy,
Speaker 3: anonymize aggregated data and with the permission of libraries and
Speaker 3: our suppliers. Are these are the data points that are
Speaker 3: going to change how we build audience for our suppliers
Speaker 3: and their authors.
Speaker 1: Okay, I have to ask because of the incredible volume
Speaker 1: of books read on Libby. Why is there not a
Speaker 1: Libby chart which would ultimately even eclipse the New York
Speaker 1: Times chart.
Speaker 3: Well, we do share, and I think People Magazine in
Speaker 3: the Spring usually has an exclusive with Overdrive. We have
Speaker 3: given USA Today, and we do have a feed on
Speaker 3: the most read books, and we do give every institution,
Speaker 3: and we do operate dashboards reporting this out, so the
Speaker 3: most popular books open, read and consumed. We published this,
Speaker 3: and we publish it on format for audience. So I
Speaker 3: can tell you for adult fiction, for adult nonfiction, for
Speaker 3: ya young adult, I can tell you by subject, by genre,
Speaker 3: by sub subgenre, so you know, when you know Amish
Speaker 3: romance was a hot thing and everyone got into Amish romance,
Speaker 3: we could tell you in Amish romance whether it was
Speaker 3: Kensington or Harlequin.
Speaker 1: Who is there, Thomas, Well, let me give you an
Speaker 1: example from the music business. Traditionally it's been the Billboard chart.
Speaker 1: Different people provided that data. That is manipulated data. What
Speaker 1: I mean, it is not pure numbers. They adjust and
Speaker 1: they wait. So despite my publicity, everybody in the music
Speaker 1: business now relies on the Spotify Top fifty. All the
Speaker 1: numbers are available to everybody. Wouldn't this be a benefit
Speaker 1: to everybody to essentially have a Libby chart.
Speaker 3: Yes, and we do provide this information. It's just that
Speaker 3: we're trying to find a partner that wants to platform
Speaker 3: it for more ubiquitous discovery. So first of the year,
Speaker 3: we publish, at the end of the year our stats
Speaker 3: this year, and by the way, on a typical week
Speaker 3: we have through We also the ways people come to
Speaker 3: discover a book and benefit from a piece of content
Speaker 3: in Libby could start in ten thousand starting points. You
Speaker 3: could be at your local library, in the library searching
Speaker 3: on the public catalog where you could see a QR
Speaker 3: code at the end of a shelf, saying did you
Speaker 3: know this book's available in Libby?
Speaker 2: And you know?
Speaker 3: So people come into Libby. We have about five hundred
Speaker 3: third parties who take overdrive catalog feeds in a dynamic APIs,
Speaker 3: So you could start anywhere in the planet, find a book,
Speaker 3: wind up at the library, get to Libby, borrow the book,
Speaker 3: open a.
Speaker 1: Little bit slower, you say, just like the Amazon partner
Speaker 1: program that you're saying, certain enterprises, if people access there
Speaker 1: and go to Libby, you pay them.
Speaker 2: We don't pay them.
Speaker 3: But I'm just saying the way we report on top
Speaker 3: circulating books, we have more data and we slice it
Speaker 3: and dice it for the benefit of First of all,
Speaker 3: informing our partners are supply chain stakeholders, publishers, as we
Speaker 3: let them know how they're performing, how they're trending. So
Speaker 3: if you let's say you're a publisher or travel books,
Speaker 3: let's say ebooks, and you want to get market share,
Speaker 3: you're a lonely planning You're competing against Rick Steves and
Speaker 3: you know five other travel book you know voters, and
Speaker 3: you know all the others. You want to know how
Speaker 3: am I performing in my category? How's my market share?
Speaker 3: Am I trending up or down? Are they buying my
Speaker 3: Europe or they only just buying my Disney Disney World
Speaker 3: twenty twenty six. So you are trying to improve sell
Speaker 3: through and market analytics, we can provide you down to
Speaker 3: almost the zip code, just like the Bouchers or the
Speaker 3: Neils sins would tell you how you're performing at retail
Speaker 3: or some of the other data services overdrive. First of all,
Speaker 3: we provide the publishers so the supply chain sees real
Speaker 3: time which institutions bought their book, and they have a
Speaker 3: clue on how many units, what was paid, and how
Speaker 3: they're performing. With so much of this data, we do
Speaker 3: have the ability to put out the Libby fifty or
Speaker 3: the Libby hundred.
Speaker 2: But we could do it, and we do it for schools.
Speaker 3: We do it in the classroom, We do it for
Speaker 3: every grade, we do it for every community. I can
Speaker 3: tell you in the Pacific Northwest what's trending and how
Speaker 3: it's doing down in Louisiana and the parishes. We have
Speaker 3: more data than most.
Speaker 1: You talked about writers becoming brands analogizing to Spotify. Once again,
Speaker 1: Spotify has Spotify for artists, so not only the company,
Speaker 1: which in this case could be a record company in
Speaker 1: your situation, a publisher that the artist himself can see
Speaker 1: where his music is being played and therefore direct marketing
Speaker 1: activities to that location, assuming they want to. Is there
Speaker 1: anything equivalent in the Overdrive atmosphere.
Speaker 2: Absolutely sure, well obviously we have.
Speaker 3: You know, it was kind of funny in the early
Speaker 3: days when we were introducing public Library. I had an
Speaker 3: author who reached out to me and just was praising
Speaker 3: me in Overdrive, and I couldn't figure out why this
Speaker 3: discreet author was praising me and how we sold thousands
Speaker 3: of units of this really small, unknown nonfiction book. And
Speaker 3: then this was early in our library lending experience. The
Speaker 3: title of his book was something like A thousand and
Speaker 3: one and I forget what the rest of the book was.
Speaker 3: And so, you know, in the early days when libraries
Speaker 3: were buying books and they put up a list of
Speaker 3: books you could borrow, they just alpha sorted it. And
Speaker 3: so people came into a library and they say, well,
Speaker 3: I want to try this, and the first thing that
Speaker 3: came up was one thousand and one you know whatever.
Speaker 3: It was one thousand and one Ways to Tie your
Speaker 3: Shoe and I, you're on, how are we selling all this?
Speaker 3: And I said, everybody's just trying the new system. So
Speaker 3: he was Alpha blessed. They all bought it. People said
Speaker 3: I want to try it. Let me try this thing
Speaker 3: I heard about, and so they downloaded this book. And
Speaker 3: so so the bottom line is it has evolved and
Speaker 3: merchandised every single library today. When you go into an
Speaker 3: LA County Library or LA Public Library to two separate systems.
Speaker 3: And here's a little Libby hack for your listeners. Libby
Speaker 3: supports your ability to get multiple library cards. So if
Speaker 3: you have a card from the County of Los Angeles
Speaker 3: and you have a library card from lapl the City
Speaker 3: Library downtown, when you're in Libby searching or looking for
Speaker 3: something to read, you will get the benefit of both collections.
Speaker 3: And they both have different collections. They may have many
Speaker 3: of the same but one may have a shorter wait
Speaker 3: list for that new bestseller. So with Libby, you can
Speaker 3: have multiple library cards and work Beverly Hills or in
Speaker 3: Huntington Longbridge, Orange County. We're in every library in California,
Speaker 3: so when your listeners have at least two or three
Speaker 3: library cards, this also and so for us to say
Speaker 3: what's the best circuing book in Southern cal we could
Speaker 3: look at every library in southern cal and we can
Speaker 3: say for this region, this is trending. These are the
Speaker 3: best by audience, by category, by genre. So it's we
Speaker 3: have board data and we are offering it up. As
Speaker 3: I said, just protecting privacy and permissions.
Speaker 1: Okay, I want to pull the lens all the way back.
Speaker 1: Such an overdrive is not dominant. Just in the landscape.
Speaker 1: I want to talk about digital books and digital reading.
Speaker 1: There are many people, especially older people, who have fetishized
Speaker 1: the physical book. They will go.
Speaker 2: On and on.
Speaker 1: I like having something in my hands, I get a
Speaker 1: headache when I read digitally, etcetera, etcetera, etcetera. And they
Speaker 1: will trumpet, you know, any success in the independent world,
Speaker 1: the new guy who runs Barnes and Noble, who has
Speaker 1: you know, different inventory and different stories. Having said that too,
Speaker 1: elements people of that age remember going to school, you
Speaker 1: went to high school, you went to college. There were
Speaker 1: a million physical books and to transport them around that
Speaker 1: was a big schlip. So putting out some of the issues.
Speaker 1: You and me both know that going to educational institutions
Speaker 1: in the future it will all be digital for numerous reasons,
Speaker 1: portability and the issue of being able to replace for
Speaker 1: changes instantaneously. My question is to what degree is that happening?
Speaker 1: And I'll use this is not a perfect example, but
Speaker 1: I'll use the classic example of Kodak Digital's coming, I mean,
Speaker 1: Digital's coming never came. Then in one year digital wiped
Speaker 1: out Kodak. So what is the future of digital reading?
Speaker 1: Vis a vi physical?
Speaker 3: The print book will never go away. And for good reason,
Speaker 3: and just to be clear, we are a mission company
Speaker 3: with a vision of a world enlightened by reading and
Speaker 3: access to information, education and opportunity, and print books are
Speaker 3: still essential and print books have created so many advances
Speaker 3: that we are benefiting from. I'll give you one example.
Speaker 3: We are working with a company in the UK called
Speaker 3: Ulpuscroft and the gentleman who is the founder of the
Speaker 3: foundation there, he invented what's now a beloved product by seniors.
Speaker 3: It's called large print. Before this, gentleman said, why don't
Speaker 3: we make a book where the type size is accessible
Speaker 3: to those that are aging or have failing vision or
Speaker 3: macula degeneration or high corrective lenses, so the print book
Speaker 3: will always be around. The print book is one of
Speaker 3: the most beloved gifts. Giving a digital book.
Speaker 1: Wait wait, wait, wait wait, I gotta blow the whistle
Speaker 1: on this because I see you being very political, so
Speaker 1: I gotta play devil's advocate, which is really the truth.
Speaker 1: Everyone who uses a digital reading device knows that you
Speaker 1: can adjust the type size, which is extremely advantageous for
Speaker 1: elder readers. B CDs music physical music was an incredible
Speaker 1: gift that is not a gift anymore. Yes, there are
Speaker 1: stores selling vinyl. It's a deminimous business. Okay, it gets
Speaker 1: a lot of press. If you look at it, I
Speaker 1: don't want to want to throw the it's really a
Speaker 1: z it on the ass of consumption. So yes, a
Speaker 1: coffee table book, etc. Those will exist, just like people
Speaker 1: have vinyl collections. Okay, but in reality, isn't it going
Speaker 1: to be the extreme outlier and everybody's really going to
Speaker 1: be reading digitally?
Speaker 2: Well?
Speaker 3: As you astutey said, education, it's a foregone future. We
Speaker 3: saw it start in higher ed. It actually started in
Speaker 3: the professional space when I got started, when I got
Speaker 3: started thinking about a future where one day, when this
Speaker 3: blinking box showed up on my kitchen table forty years ago,
Speaker 3: said one day on the screen, I should have access
Speaker 3: to every print book in the world. And I was
Speaker 3: a little too early, and we finally got there.
Speaker 2: But at.
Speaker 3: To be I am being politically diplomatic because we love
Speaker 3: the print book and we're not competing against it. But
Speaker 3: you are correct, depending on how far you set your future,
Speaker 3: crystal Ball, in a thousand years, will print book be
Speaker 3: in museums and archives. That's going to be probably where
Speaker 3: some of these relics live, like we relish, you know,
Speaker 3: the Gutenberg Bibles and the relics of prior decades and civilizations.
Speaker 3: I do believe in the digital future, and every book
Speaker 3: being printed today does have a digital simultaneous except for
Speaker 3: some you know international and you know small foreign markets.
Speaker 3: The future is purely digital. But we have a bigger problem,
Speaker 3: and that is long form reading and book consumption is
Speaker 3: on the decline. And this is also coming into headlines
Speaker 3: more mainstream recently, and it hasn't been new. The decline
Speaker 3: of reading by adult reading of long form print books
Speaker 3: has been on the decline since the invention of television.
Speaker 3: If you look at the pie chart of all of
Speaker 3: our disposable time for entertainment or consumer activities, that slice
Speaker 3: that used to be long form adult book reading by
Speaker 3: every demographic age, gender, race has been shrinking.
Speaker 2: When the Internet came up. It shrunk again when online
Speaker 2: social media, when online gambling, every time gaming gaming set tops,
Speaker 2: every time something new comes on you can do on
Speaker 2: a device with a screen or with a speaker. Long
Speaker 2: form digital books podcasts now, but podcasts actually helped create
Speaker 2: set the stage for growing the audiobook business. But the
Speaker 2: book print industry has many factors that are causing stress.
Speaker 2: The decline of their product is a consumer product in
Speaker 2: the market and it's not just domestic. The decline of
Speaker 2: book reading in the UK. In Germany is actually a
Speaker 2: little faster than we're experiencing in the US well, because
Speaker 2: we came from two communities that had more literate baseline,
Speaker 2: so you know, they live longer. In Germany, every community
Speaker 2: has multiple independent retail bookstores in every neighborhood. It's a
Speaker 2: book culture.
Speaker 3: But the decline of book consumption, the number of buyers
Speaker 3: globally for print books is on the decline. So digital
Speaker 3: is an answer. Audiobooks is a dramatic bright spot for
Speaker 3: this industry, and we are constantly innovating how do we
Speaker 3: grow the market for this consumer product called a book
Speaker 3: or long form reading. And I'm excited to say we're
Speaker 3: having great success working with our educational and library institutions
Speaker 3: and finally for the most astute publishers being better and
Speaker 3: more appreciated for how we are trying to reverse this
Speaker 3: decline in demand for the product. Now, music, the market
Speaker 3: grows every day. Everybody wants music, and music is not
Speaker 3: going away. But long form reading of books that's under
Speaker 3: attack and that has been on the decline, and there's
Speaker 3: no answer for it right now.
Speaker 1: Okay, point of information in colleges universities. What percentage of
Speaker 1: books are digital as opposed to physical today.
Speaker 3: Well, the college textbook curriculum market has gone nearly one
Speaker 3: hundred percent digital as a result of the publishers themselves
Speaker 3: creating the digital learning platform, so they could not only
Speaker 3: sell the tech book, but then sell these Many of
Speaker 3: your listeners may remember, like in the nineties and two thousands,
Speaker 3: when they were in college and they got their textbook,
Speaker 3: there was a CD rom in the back and that
Speaker 3: contained the supplemental materials. So if you're Pierson or Gale
Speaker 3: Ahote Mifflin or McGraw hill Wiley trying to sell your
Speaker 3: textbook for the state of Texas or Illinois for history
Speaker 3: one oh one, and you get a big adoption, that's
Speaker 3: a big deal. Your textbook gets adopted for a three
Speaker 3: or five year cycle. That could be seven figures for
Speaker 3: that book and that imprint. So to do that, publishers
Speaker 3: had to compete and add special value add Before the Internet,
Speaker 3: they used to offer teachers editions and quizes and supplements.
Speaker 3: Then it went to the CD in the back of
Speaker 3: the textbook. Now, for the last fifteen twenty years, publishers
Speaker 3: have gone direct and created ancillary supplemental value add So
Speaker 3: right now every piece of coursewear or curriculum may be
Speaker 3: offered directly from the publisher, is part of a learning
Speaker 3: system or also you've seen the rise Amazon, Barnes and
Speaker 3: Noble Education follow it, check vital Source. Many other platforms
Speaker 3: have aggregated all the digital college textbooks and either offer
Speaker 3: pay as you go or a subscription. So that market
Speaker 3: is pretty far along on the digital transformation. If I
Speaker 3: go to K twelve, now we're at the infancy last
Speaker 3: year twenty twenty four. If I look at the spend,
Speaker 3: and it's a big number. For the one hundred and
Speaker 3: fifteen thousand K twelve schools in the US alone, the
Speaker 3: spend on coursewear, textbook, curriculum, school library, special ad, summer reading, intervention,
Speaker 3: English language learning is a second language for immigrants. It's
Speaker 3: in the billions. And yet if we look at where
Speaker 3: are they in the transformation from analog, physical to digital
Speaker 3: ebooks has not really entered the elementary school, the middle school,
Speaker 3: or the high school at any scale yet, except that
Speaker 3: Overdrive has been evangelizing and growing that market.
Speaker 2: Today.
Speaker 3: I'm proud to say we are in sixty thousand schools,
Speaker 3: but still the use of an ebook or a digital
Speaker 3: audiobook in the classroom in K twelve is still a.
Speaker 2: Single digit low.
Speaker 3: And this is one of the biggest growth opportunities of
Speaker 3: the next five years for every author and creator. If
Speaker 3: you have a book, fiction or nonfiction that is appropriate
Speaker 3: for a school for education, school library, some are reading entertainment,
Speaker 3: learning English to whatever. The next five years, you should
Speaker 3: be thinking purely, how do I get in on this.
Speaker 3: It's about to happen and our team at overdrive and
Speaker 3: Libby is even driving parents to discover that they're kids.
Speaker 3: For all those that have children in the schools, we
Speaker 3: have a Libby for students app called Sora.
Speaker 2: It's called Sra. The app is.
Speaker 3: Free, but for your student to benefit from it, you
Speaker 3: have you know, just like you can't walk into a
Speaker 3: school and go into the library. They're pretty locked down,
Speaker 3: not like the public library. Everyone's welcome. Sora is available
Speaker 3: to sixty thousand schools in the US and we have
Speaker 3: millions of students. Our biggest success we just hit a
Speaker 3: milestone with New York City Public Schools.
Speaker 2: New York City Public Schools and.
Speaker 3: The leadership of Fabulous Library and Melissa Jacobs, who runs
Speaker 3: the New York City Public School libraries. She has delivered
Speaker 3: just in the last two places. Students in those classrooms
Speaker 3: have opened and benefited from ten million ebooks through the
Speaker 3: New York City Public School SORA collection is called Citywide
Speaker 3: Digital Library. You could be in any of the five boroughs,
Speaker 3: you have a student in any of their charter schools, STEM, academies, whatever, ps, whatever,
Speaker 3: one oh one, you have SORA and you have the
Speaker 3: ability for your student to benefit twenty four to seven
Speaker 3: just like Libby, except SORA is built in student learning, gamification, reading,
Speaker 3: daily reading challenges and the like. So our engagement for
Speaker 3: growing the audience and the transition to digital is accelerating.
Speaker 3: We're seeing in corporate America a broad adoption for employees
Speaker 3: to have benefit for professional development wellness. HR departments are
Speaker 3: adding digital lie libraries. Our first digital library was Microsoft
Speaker 3: Corporation twenty years ago.
Speaker 2: Back in the day.
Speaker 3: Mike Bushman was a corporate librarian and building one hundred
Speaker 3: in the campus in Redmond.
Speaker 2: And this was while Bomber was running it.
Speaker 3: And I've had relations and we dealt with Bill and
Speaker 3: Melinda in the day, and he said, I am buying
Speaker 3: millions of dollars of programming and coding books every year,
Speaker 3: and I have to buy hundreds of units and drop
Speaker 3: them into hundreds of locations around Redmond and Seattle and
Speaker 3: San Francisco. I don't want to do that. So they
Speaker 3: created the first corporate digital library with Overdrive and all
Speaker 3: of the books on cybersecurity or programming in JavaScript or AI,
Speaker 3: this or that or whatever. They then started making a
Speaker 3: digital library for their workforce globally. Anytime anywhere you need
Speaker 3: a book and how to program this thing, you got it.
Speaker 3: Corporate Knowledge centers. During COVID, they provided all of this
Speaker 3: comfort and wellness and you know, am I okay and
Speaker 3: all of that you know, access during these you know,
Speaker 3: troubling and uncertain times. So the momentum we're seeing in
Speaker 3: corporate libraries. You know, our largest corporate partner is a
Speaker 3: US Department of Defense. About fifteen twenty years ago, every
Speaker 3: branch of the military said we want to serve our
Speaker 3: community worldwide. So Navy Knowledge Online Services one point seven
Speaker 3: million readers. It's not only the active military and the officers,
Speaker 3: and it's a it's a students at the War College.
Speaker 3: You could be on assignment in a nuclear submarine and
Speaker 3: you your commandant says, we want you to read Jefferson's War.
Speaker 3: Listen to the audiobook in your bunk. They are getting
Speaker 3: this from the US Department of Defense through a platform,
Speaker 3: and they're opening it with Libby. So we are building
Speaker 3: and growing an evangelize seeing books and reading and education
Speaker 3: and comfort and entertainment globally and overdrives. Footprint is fortunately
Speaker 3: expanding and helping publishers and authors offset some of these
Speaker 3: other challenges they're seeing in retail.
Speaker 2: Or some of the legacy print businesses.
Speaker 1: Let's talk about the elephant in the room, which is funding.
Speaker 1: These are public institutions, these libraries who presently have an
Speaker 1: administration who says they don't want to give as much
Speaker 1: money to the libraries. Tell us about that.
Speaker 3: Yeah, it's a very unfortunate and tragic condition that I
Speaker 3: don't want to open this stack. But at tax coming
Speaker 3: to our public education and schools and libraries was a
Speaker 3: political playbook executed in the last election cycle, and it
Speaker 3: created false narratives that these institutions are being utilized for
Speaker 3: political or cultural agendas. That was nonsense, and we've been
Speaker 3: dealing with for about four years now. Libraries and librarians
Speaker 3: and educators and public schools and school librarians being villainized
Speaker 3: and coming under attack for a false narrative for a
Speaker 3: political gain. Unfortunately, this has created a toxic environment in
Speaker 3: many communities and has created local pushback and has challenged
Speaker 3: so many of the underlying principles that have made every
Speaker 3: community better because a public librarian educated their children, helped
Speaker 3: those seeking a job from divided, a public internet terminal
Speaker 3: for those that had no broadband in their home, and
Speaker 3: that continued when the recent election cycle put a party
Speaker 3: into the White House, and they came after this April
Speaker 3: and took the funding from the Institute, from Museum and
Speaker 3: Library services, and that playbook now is being replicated in
Speaker 3: several state capitals.
Speaker 2: It's tragic. Instead of investing in.
Speaker 3: Bringing America back and educating our next generation workforce on
Speaker 3: the skills and making them competitive, instead of making sure
Speaker 3: every person, regardless of their background, could compete with proficiency
Speaker 3: and talent in language in English speaking, they are defunding
Speaker 3: the safety net community organizations that are essential and overdrive.
Speaker 3: And I've been on the record what has happened is
Speaker 3: unfortunate and tragic, and in many communities, the most impacted
Speaker 3: will be the small and rural librarians who because a
Speaker 3: few dollars that trickled down from Washington to their state library,
Speaker 3: it got distributed like here in Ohio to our eighty
Speaker 3: eight counties. That is essential service money. That money in
Speaker 3: some rural and farm communities allowed the librarian to go
Speaker 3: in and open the door or pay for the broadband
Speaker 3: that the community needed to come in and sit in
Speaker 3: the parking lot so they could check their email or
Speaker 3: see if their job and they could find a job.
Speaker 3: Just like it's just a tragic situation unfolding. I'm proud
Speaker 3: to say that in many of the larger metro areas,
Speaker 3: because they've built multiple sources of funding, that some of
Speaker 3: these cuts may not impact the material budgets, the money
Speaker 3: that they use to buy content, books and subscriptions. But
Speaker 3: it's a real concern, and the greater concerns are in
Speaker 3: the small and rural communities that will be impacted even
Speaker 3: more so. You know, we have stories every day where
Speaker 3: the impact of the presidential executive orders or some of
Speaker 3: the state capitals who have taken and said in the
Speaker 3: protection of minors, this false narrative that we need to
Speaker 3: protect our children and implemented some of these playbooks. Most
Speaker 3: of the voters who put those elected officials and offers
Speaker 3: are going to be the ones that suffer the most.
Speaker 3: That's a reality, and it's happening every day. It's not
Speaker 3: something that's coming. It happens every day. Now the money's
Speaker 3: been cut, they're fighting, flying back bits and pieces or
Speaker 3: trying to find alternate sources of funding, and Overdrive as
Speaker 3: a partner in that effort.
Speaker 1: Okay, let's switch gears completely to Canopy. Explain how Canopy works.
Speaker 1: Public is very familiar with streaming and they're very familiar
Speaker 1: with their rights involved and a lot of money. So
Speaker 1: how does Canopy work.
Speaker 3: Canopy is an amazing value add for everyone who has
Speaker 3: an interest in film, and the value add of Canopy
Speaker 3: is I think based on threefold and the reason Overdrive
Speaker 3: acquired the business it was the best we to've ever seen.
Speaker 3: Overdrive built a digital video streaming platform for schools and
Speaker 3: libraries and we launched it and about a decade plus ago,
Speaker 3: a startup in West in Australia by an amazing entrepreneur
Speaker 3: by the name of Olivia Humphrey from Perth. She saw
Speaker 3: a problem in some of the universities in Western Australia,
Speaker 3: the universities who were teaching film and or were signing
Speaker 3: documentaries and film in the classroom could not supply the
Speaker 3: teachers the classroom or the students with access to the
Speaker 3: videos or the films. And so she negotiated, like with
Speaker 3: the film studios, could I get permission to create a
Speaker 3: platform for academic libraries to license a digital video and
Speaker 3: stream it for these educational purposes. So Canopy was born
Speaker 3: in Australia, it launched, and today still Canopy is worldwide
Speaker 3: in more university libraries and public libraries. After several years
Speaker 3: of success in the university library, Olivia with her young
Speaker 3: family moved to San Francisco and said, let's get into
Speaker 3: the big markets the US North America. And then she
Speaker 3: started to sell the universities in North America. But she said, well,
Speaker 3: since I'm in libraries, and since we do have films
Speaker 3: of interest for public libraries, documentary, foreign films, some you know,
Speaker 3: film noir and boutique, and lots of unbelievable art films.
Speaker 3: The curation of the Canopy collection is so eclectic that
Speaker 3: people love Canopy because of the curation. What is in
Speaker 3: those catalogs and what have been selected from these out
Speaker 3: of the way book festivals, and we have a team
Speaker 3: is just outstanding. Now today, Canopy has evolved because when
Speaker 3: she introduced it to public library she did not have
Speaker 3: the appreciation for how public libraries worked and how they
Speaker 3: could their sources of funding, and how it might use
Speaker 3: in a consumer space. So when she came to the
Speaker 3: US and I saw the excellence of their product, of
Speaker 3: their user experience, I approached Olivia and I said, look,
Speaker 3: you have done what I've dreamed of doing. You have
Speaker 3: an unbelievable catalog, you have a great platform and user experience.
Speaker 3: And they also integrated with all the set top players,
Speaker 3: so you can get Canopy on Roku, Apple TV, or
Speaker 3: Samsung or any of your smart TVs. In addition, Canopy
Speaker 3: ka n o, py dot com. You can run at
Speaker 3: anything with the browser. And of course I natively run
Speaker 3: the Canopy app on iOS or on my Android smartphone.
Speaker 3: So they had they had the best platform, they had
Speaker 3: the best catalog, they had the best user experience. I said, Olivia,
Speaker 3: I either want to partner with you, buy you, or
Speaker 3: I'm going to be competing with you. And it took
Speaker 3: a twist in turn, she went to a private equity
Speaker 3: and eventually we acquired it about four or five years ago.
Speaker 3: And so today Canopy is the most valuable streaming product.
Speaker 3: We just got from Yahoo and many other media the
Speaker 3: five streaming best platforms. Regardless of price. Canopy. You'll never
Speaker 3: get asked for a credit card, you'll never see an
Speaker 3: ad and it is purely delight So Canopy has one
Speaker 3: of the largest film libraries and over the last several
Speaker 3: years now that Overdrive with our reach, we've scaled it
Speaker 3: up into public libraries. We've changed the user experience to
Speaker 3: make it simple for public libraries and patrons. So today
Speaker 3: the public library can add Canopy. Like I'll be in
Speaker 3: San Francisco seeing our partners as San Francisco Public Library.
Speaker 3: It's available at Los Angeles Public Lives Library and they
Speaker 3: subscribe to Canopy. And Canopy has a core collection that
Speaker 3: is adding thousands of films every year. Because some of
Speaker 3: the rights come in and out, we negotiate with major suppliers.
Speaker 3: Like one of the biggest deals I ever signed it
Speaker 3: Overdrive was when we did a five year exclusives with
Speaker 3: BBC Studios in London. Because we have so many Anglo
Speaker 3: file you know, they just love everything British and the
Speaker 3: downtown Abbey crowd and all that. We signed a multi
Speaker 3: year exclusive for library and institution with BBC and it's
Speaker 3: been extraordinarily popular. We now are negotiating next to Amazon, Prime, Hulu, Disney,
Speaker 3: Netflix and the others at all the big studios. So
Speaker 3: we when we acquired Canopy, they we had a film
Speaker 3: team and the head of our business units Southern cal
Speaker 3: We have a team in California because we are working
Speaker 3: with all the major studios. So whether it's lions Gate
Speaker 3: or Warner Brothers, we are in the rooms negotiating alongside.
Speaker 3: When they're carving up the out the geos and they're
Speaker 3: coming up the territories, and when they're carving up the platforms,
Speaker 3: we're in there saying we want institution. We want to
Speaker 3: have day and day or whenever it's available for those markets.
Speaker 3: We want public library, academic library, and some of the
Speaker 3: other governmental special institutional markets. And just like we do
Speaker 3: with the Amazons and the Netflix, we may get it
Speaker 3: for a particular term when we're dealing with the mgs
Speaker 3: and you know the restrictions, and of course the whole
Speaker 3: video community has their own kind of rights management, you know,
Speaker 3: technical qualifications and we of course abide by all that
Speaker 3: and for the patron, it's just a win. If you
Speaker 3: are subscribing to the half a dozen to dozen monthly
Speaker 3: subscriptions that you use on and off, or maybe less
Speaker 3: or more. In the peacocks and this plus and that plus,
Speaker 3: you may discover that about a high percentage of the
Speaker 3: movies the documentaries.
Speaker 2: We have an amazing kids collection.
Speaker 3: It's called Canopy Kids, and it's unlimited and you could
Speaker 3: put Canopy Kids, set it on your tablet, give it
Speaker 3: to your young child and they can just go unlimited use.
Speaker 3: And then of course we have feature films award winners,
Speaker 3: and now Canopy is giving us a platform to do
Speaker 3: originals and exclusives. The very exciting time that we're in
Speaker 3: the streaming video business and we are negotiating alongside the
Speaker 3: other big platforms. We're just saying we want it for
Speaker 3: this market. I have complaints. Now in Singapore, we have
Speaker 3: such a fantastic success. The entire country of Singapore just
Speaker 3: is almost standard on Libby and Sora.
Speaker 2: And they added Canopy.
Speaker 3: But when Singapore National Library wants to buy for every
Speaker 3: citizen and the five million plus citizens Canopy, they go
Speaker 3: how come, I don't have these blockbusters. They go, well,
Speaker 3: I didn't want to write a check for the whole
Speaker 3: Southeast Asia. I didn't want to put up money. When
Speaker 3: we negotiate, I said, how much do you want for
Speaker 3: the US? How much if I throw in Canada? You
Speaker 3: know it, it is negotiating for territories and rights. So
Speaker 3: I didn't actually, at the time we were signing up
Speaker 3: for that big deal, say how much for Singapore. But
Speaker 3: now I got to go back to all those studios
Speaker 3: and say, you know, let's face it, Crazy rich As.
Speaker 3: That's you know, when Crazy rich As came out as
Speaker 3: a Warder Brother film or you know, and we've been
Speaker 3: selling the books like crazy you know heaven Chan. Of
Speaker 3: course they wanted that. But so it's a really exciting time.
Speaker 1: Oh okay, but explain the money to me. I don't
Speaker 1: quite understand you're bidding on these rights. Where does the
Speaker 1: money come from? Because it's free to the end users.
Speaker 3: Correct, just like I do to the libraries or the
Speaker 3: universities or their corporations. I show you my catalog. You
Speaker 3: want to add canopy, We have multiple ways you can
Speaker 3: add it. And since we've added, we created these we
Speaker 3: call plus packs so let's say you're a smaller community,
Speaker 3: we don't have the budget. But the reality is, you know,
Speaker 3: just as we talk about the evolution of streaming video
Speaker 3: and library in this ecosystem, if you asked me five
Speaker 3: years ago, pre COVID, what was the number one circulating
Speaker 3: reason a product or the reason people went to their
Speaker 3: local public life or in the US, it was to
Speaker 3: borrow a DVD or Blu Ray. I could tell you
Speaker 3: in many metro markets, just pre COVID, let's say twenty eighteen,
Speaker 3: twenty nineteen, if you looked at what was the foot
Speaker 3: traffic to the libraries throughout the United States, one of
Speaker 3: the top reasons people went was to pick up that
Speaker 3: DVD or Blu ray they reserved and they got from
Speaker 3: the library for free to take home for their family.
Speaker 2: Well, let's face.
Speaker 3: It, just like DVD and streaming video, and you know,
Speaker 3: vinyl is no longer available in big box and major retail,
Speaker 3: they've just gotten out of it libraries. Since COVID, the
Speaker 3: size of the retail foot space and public libraries for
Speaker 3: circulating DVDs and Bluberries has been shrinking and shrinking. For
Speaker 3: the same reason one foot traffic is down COVID killed it,
Speaker 3: and now they're fighting to bring back foot traffic, which
Speaker 3: has been building back. But unfortunately in many markets here,
Speaker 3: like in Cleveland, Ohio, we're overdrives headquartered, our biggest public
Speaker 3: libraries still are not at the twenty nineteen levels of
Speaker 3: visitors in their branches or foot traffic in their central library.
Speaker 3: So as a result, everything has been moving towards streaming.
Speaker 3: When the library wants they had canopy, they can either
Speaker 3: buy the whole collection and set a monthly budget and
Speaker 3: we can monitor in the usage and kind of throttle
Speaker 3: it because they're giving you as a user, Bob, if
Speaker 3: you go to Los Angeles Public Library, LAPL will give
Speaker 3: you each month maybe thirty tickets, and every time you
Speaker 3: want to watch a feature film, a documentary or children's childrens.
Speaker 2: Don't cost a ticket.
Speaker 3: You may see a blockbuster feature film and for you
Speaker 3: to borrow it for the window of seven days watching
Speaker 3: it might cost you two tickets. Doesn't cost you anything
Speaker 3: because the library's giving you tickets. But after let's say
Speaker 3: by the twentieth of the month, you've used up all
Speaker 3: your tickets, well then you got to wait till the
Speaker 3: first of the month, and then you could start over
Speaker 3: unless you had multiple library cards and go somewhere else.
Speaker 3: But the bottom line is the library will budget so
Speaker 3: much per year, so much per month. But with small
Speaker 3: libraries with no experience in the demand for streaming, Overdrive
Speaker 3: introduced what we call like we did for ebooks. We
Speaker 3: created all access, a bundle, flat fee unlimited. Overdrive introduced
Speaker 3: Canopy plus packs. So if you don't know the demand,
Speaker 3: you don't know what we have plus packs, staff favorites,
Speaker 3: all time classics. You want books for your kids, you
Speaker 3: could buy a Canopy plus fix for children, and we
Speaker 3: have tiered pricing. If you're in a little parish in
Speaker 3: Louisiana and your total population of five thousand, maybe for
Speaker 3: under five hundred bucks a year, every kid can stream.
Speaker 2: This all year long, unlimited.
Speaker 3: That same plus pack for Los Angeles Public Library might
Speaker 3: be twenty five hundred a year, and then it's an
Speaker 3: annual subscription, unlimited viewing. So then we have plus packs
Speaker 3: for World Seminar, all time classics, film noir. These are
Speaker 3: constantly building and we are giving actually institutions. So if
Speaker 3: you're in academic institutions and every year you're teaching multice
Speaker 3: Falcon and I have it. We might even give you
Speaker 3: the option to buy that title, have it for ten years,
Speaker 3: and only pay a small service fee annually. So, just
Speaker 3: like we did with our market evolving, if you give
Speaker 3: the institutional buyers multiple ways to buy, you will sell more,
Speaker 3: you will open new doors, and you will also evolve
Speaker 3: to see where the market and the demand and the
Speaker 3: budget will drive your growth. So libraries budget, we give
Speaker 3: them multiple options to suffice. We have a lot of
Speaker 3: budget for video. And if you're transitioning. Let's say you're
Speaker 3: lapl and you budget a million dollars. I'm making this
Speaker 3: up every year for new Blu rays or DVDs. You've
Speaker 3: been transitioning, so you're saying, well, we're going to start
Speaker 3: because the usage of the physical good is declining. As
Speaker 3: it declines, we're moving that budget and we're transitioning into canopy.
Speaker 3: So that's been going on for the last few years
Speaker 3: and it's accelerating.
Speaker 1: Okay, let's pitch back to a Libby. Libby is a menia. Okay,
Speaker 1: I should have been going to library from the time
Speaker 1: I can remember, big Reader, but Libby is a thing
Speaker 1: unto itself. Do you know what percentage of reading is
Speaker 1: done on Libby as opposed to physical Can you tell
Speaker 1: me what percentage Overdrive sales are compared to the overall
Speaker 1: market for books.
Speaker 2: I can give you some some general.
Speaker 3: Sense of scale and proportion because we obviously utilize industry reports.
Speaker 3: So there are several sources of the global book business
Speaker 3: in the United State, well, i'll say the United States
Speaker 3: book business, and one of them is from the AAP,
Speaker 3: which is the Association of American Publishers. And then there
Speaker 3: are some data services companies, the book scans that aggregate
Speaker 3: for the retailers, and they aggregate from the big box.
Speaker 3: But there's a lot of gaps when publishers sell direct
Speaker 3: that's under reported. We don't have the you know, all
Speaker 3: of the detail. Let's face religious Christian Bible sales, not
Speaker 3: all of that is always reported up. There's so much
Speaker 3: activity on direct to consumer.
Speaker 2: Do we know?
Speaker 3: Is Amazon sharing KDP numbers and Kindled direct and exclusives?
Speaker 3: So I could just give a sense. So in last year,
Speaker 3: Overdrive circulated around six hundred million digital books. This year
Speaker 3: will be probably around three quarters of a billion, seven
Speaker 3: hundred and fifty million. Now that's actual delivery and fulfillment
Speaker 3: of a full book. Now in addition to that, we
Speaker 3: had billions and billions of reader sessions opening a book,
Speaker 3: sampling a book. If you've been in the Libby, you know,
Speaker 3: before you borrow or get in line, you could open
Speaker 3: and go through ten percent for free.
Speaker 2: Say it's not for me.
Speaker 3: You're looking up a fiction book and you want an audiobook.
Speaker 3: You may want to say, let me listen. Do I
Speaker 3: like the narrator's voice. So our impact on how many
Speaker 3: books are open and listen to is in the hundreds
Speaker 3: of billions a year. But at the end of the day,
Speaker 3: I've delivered last year over six hundred million entire books
Speaker 3: to an end user who was authenticated, had a library
Speaker 3: card and got a book that I had permission, and
Speaker 3: we paid the publisher, the author got paid. Everyone wins.
Speaker 3: And in many cases I have authors and publishers thanking
Speaker 3: me because I discovered on a Libby I bought my
Speaker 3: print sales went up. I was just last week I
Speaker 3: was meeting with my partner in Fort Myers Lee County
Speaker 3: Library System, Southwest Florida by Naples and the and the
Speaker 3: librarian said, we used the demanded Libby to buy print.
Speaker 2: I go, I don't get I don't get any.
Speaker 3: Reward for that when the when the publishers are arguing
Speaker 3: and taking margin away. My discovery of your book in
Speaker 3: sampling is selling you books at retail, selling your print
Speaker 3: to other institutions. And we are fortunate that every day
Speaker 3: I'm getting the data showing that our impact on the
Speaker 3: growth of the audience for your product. Publisher, you should
Speaker 3: be paying us just for the placement in that Libby position,
Speaker 3: because we are getting hundreds of millions of impressions that
Speaker 3: lead to retail sales. But can I connect all those
Speaker 3: dots now?
Speaker 2: Wait?
Speaker 1: Wait, wait, when you say six hundred million, does that
Speaker 1: mean Overdrive bought six hundred million books or does that
Speaker 1: mean six hundred million people read Overdrive books?
Speaker 3: It means during calendar year twenty twenty four, I delivered
Speaker 3: to an authenticated end user, six six hundred million books
Speaker 3: were delivered. Maybe it's to three hundred million readers. Maybe
Speaker 3: it's you know, three hundred million people. Over the year.
Speaker 3: They averaged two each, one at one, one at fifty.
Speaker 3: I don't know, So it's all anonymoused because we respect
Speaker 3: privacy in that case, Let's take Los Angeles Public Library.
Speaker 3: Los Angeles Public Library last year was our top public
Speaker 3: library circing Libby books and they circulate on average over
Speaker 3: one million books a month now. Also, Los Angeles Public
Speaker 3: Library spends with overdrive to acquire multiple copies, licenses, new materials,
Speaker 3: bumps up the ability to service. Under these other models.
Speaker 3: They spend annually approximately almost ten million a year to
Speaker 3: keep their Libby catalog fresh, complete and current. So the
Speaker 3: library is spending one library in California and it's number
Speaker 3: one in circulation under the leadership of John Zabo and
Speaker 3: amazing library leaders at LA Public Libraries plus to have
Speaker 3: they are a rock star globally. I have people all
Speaker 3: over the world that look at how New York Public
Speaker 3: or LA Public or Toronto Public, or I'll be up
Speaker 3: in Seattle with our partners at King County. These are
Speaker 3: libraries are innovators. Libraries have been evangelizing books and creating
Speaker 3: the market for reading and pushing people into lifelong reading
Speaker 3: since there was a library in Alexandria three thousand years ago.
Speaker 3: We know that this is a growth market and I'm
Speaker 3: proud to say that when I'm in New York or
Speaker 3: London talking to the Big five or whoever. Overdrive as
Speaker 3: far as a source of revenue for the trade publishers
Speaker 3: is always in the top five. Who's number one, who
Speaker 3: generates revenue for them? It's Amazon, Amazon's number one worldwide
Speaker 3: pretty much number two and three. Depending on what segment,
Speaker 3: what audience, what geo, it might fluctuate between an Apple
Speaker 3: of Barnes and Noble or audiobooks, maybe Spotify and you know,
Speaker 3: Nordic Countries is your rock star. Now couple of courses
Speaker 3: in the mix and b you know the others. But
Speaker 3: overdrive as unit and revenue sales to the publishers. In
Speaker 3: some cases we may be number three. We are delivering
Speaker 3: hundreds of millions of dollars annually to the creed or community,
Speaker 3: and the publishers and the authors are getting, on average,
Speaker 3: possibly even more for the privilege of someone benefiting from
Speaker 3: a book from that school or library than they're getting
Speaker 3: from buying it at retail. And let's face it, when
Speaker 3: you we have no secondary market. When they sell to
Speaker 3: the library, they're not competing against used book sales or
Speaker 3: eBay or you know other other forms where you know,
Speaker 3: libraries are not benefiting and some of them are arguing
Speaker 3: they should from the first sale doctrine. You know, you
Speaker 3: bob or I Bob I buy a book and I
Speaker 3: want to gift it to my daughter, I want to
Speaker 3: give it to the library.
Speaker 2: I'm free to do that.
Speaker 3: Library school buys a digital edition for lending under the
Speaker 3: permissions that are granted to me as their distributor and
Speaker 3: vendor and partner. The library can't say, you know, this
Speaker 3: book is not so popular, we now want to give
Speaker 3: it away.
Speaker 2: I mean I can't. They can't.
Speaker 3: So the value proposition to the author and the publisher
Speaker 3: is extraordinary. By the way, when the library spends a
Speaker 3: million dollars and the publisher gets us, the publisher has
Speaker 3: so much more net earnings off the sale of the
Speaker 3: digital book through me. They never get. They don't have
Speaker 3: to put a reserve on their balance sheet for returns.
Speaker 3: They don't have to worry about print costs, print overruns, returns,
Speaker 3: shipping costs, warehouse They don't have.
Speaker 2: Any of that.
Speaker 3: Yet they want to negotiate with me and get the
Speaker 3: benefit and beat me up on gross margin and clawback
Speaker 3: and put it make it harder for me to sell.
Speaker 3: They should be paying me to promote their books in
Speaker 3: the library. Because of the value of Libby and the
Speaker 3: discovery and soar in the classroom, we are growing the
Speaker 3: market for their products. And I'll keep evangelizing because schools
Speaker 3: and libraries are the best thing for the future of
Speaker 3: books and reading. And if they don't wake up and
Speaker 3: get that memo, shame on them. Someone's going to take
Speaker 3: their business. And it's happening every day.
Speaker 1: Okay, two quick questions. One, if la spend on Libby
Speaker 1: is a million, what's their spend on Canopy.
Speaker 3: It's a smaller number. And by the way I generalize,
Speaker 3: those are those exact numbers. I use that as a
Speaker 3: general number. So they probably spend six figures a year
Speaker 3: with Canopy. And they may be adding and adjusting because
Speaker 3: as we keep adding collections or providing different models, because
Speaker 3: we're also learning film and video or use for different perpose.
Speaker 3: So if they are using it for complementary to event
Speaker 3: or programming, they may need to be very concerned about
Speaker 3: public performance rights. So Canopy in the public library is
Speaker 3: not quite at the level of revenue that we've what
Speaker 3: you enjoyed from the book business. Because I've been giving
Speaker 3: many of the biggest public libraries in North America have
Speaker 3: been on Overdrive platform and now with Libby for twenty
Speaker 3: plus years. So we started with Cleveland Public twenty three
Speaker 3: years ago, so LA Public Library we've probably launched around
Speaker 3: four h five so twenty years we've only been in
Speaker 3: the supplying of the Canopy video business. Now, you know,
Speaker 3: just under five years. And since we acquired Canopy, the
Speaker 3: models and the collection wasn't as well aligned for the
Speaker 3: public library space, and we've made some real milestones. This
Speaker 3: simplifying the tickets was a major way of streamlining because before,
Speaker 3: when people borrowed movie from Canopy for the tickets, the
Speaker 3: librarian didn't know how much it was costing them. But
Speaker 3: now when they see films in the Canopy catalogs and
Speaker 3: they see that this is two tickets, this is one ticket,
Speaker 3: this is no ticket. If they want to highlight for
Speaker 3: a subber reading program a film that is low ticket use,
Speaker 3: they know that it's going to be lower costs for
Speaker 3: them because they're paying for the platform and the collection,
Speaker 3: and users can get more views. And every end user
Speaker 3: now has a simpler I give you, I give you
Speaker 3: thirty tickets. You know where you are. Every time you
Speaker 3: launch Canopy, it shows you how many you have available.
Speaker 3: In the upper right hand corner, you're you're using down
Speaker 3: your tickets for the month and then it resets.
Speaker 1: Okay, finally, what turns you on and how did this start?
Speaker 1: Is it about books or is it about a digital enterprise?
Speaker 1: I mean retrospect. Jeff Bezos didn't care about books. He's
Speaker 1: kind of honest about this. Saw a niche filled it.
Speaker 1: So is this about reading or is this about tapping
Speaker 1: an untapped market?
Speaker 3: Well, if you would have asked me those questions at
Speaker 3: once every decade over the past forty years, I would
Speaker 3: have had a different answer. But I can tell you
Speaker 3: over the last decade what has got me to jump
Speaker 3: out of bed every morning and be so eager to
Speaker 3: lean forward into every opportunity that technology and access to
Speaker 3: content and even with some of the new influences of
Speaker 3: AI tools, which is another podcast at a future date.
Speaker 3: I believe that in the next five to ten years,
Speaker 3: as a confluence of the technology and our positioning with
Speaker 3: these it's the secret weapon overdrive has is a network
Speaker 3: of dedicated community servants informational professional known as librarians, and
Speaker 3: they have been dedicated for a world enlightened by reading.
Speaker 3: When someone walks into that public library anywhere in the country,
Speaker 3: they don't look at how your dress or what your
Speaker 3: zip code is they are there to welcome you and
Speaker 3: provide you whatever it is which will help you in
Speaker 3: your time of crisis, in your time of celebration, at
Speaker 3: every point of the journey. And what excites me is
Speaker 3: I honestly believe we are going to change the literacy
Speaker 3: pandemic in this nation. Childhood illiteracy is just a fact
Speaker 3: of life. And you know, unfortunately where you are, you
Speaker 3: know this is where zip code matters. If you are
Speaker 3: in a in a neighborhood where you have access to
Speaker 3: less funded public libraries or less funded public schools and
Speaker 3: they don't have access to all the material and resources
Speaker 3: and interventions, it's likely that your students will not have
Speaker 3: the same progression how they learn to speak and read
Speaker 3: books and progress in their academic journey. This is why
Speaker 3: so many states are now leaning forward in the science
Speaker 3: of reading, or there's been a decade mandate to read
Speaker 3: by three. We know that if a student isn't by
Speaker 3: the third grade reading at the appropriate grade level, you
Speaker 3: could almost chart out the rest of his life on
Speaker 3: his earnings, his academic and his even his health and wellness.
Speaker 3: That's all impacted by the foundation of reading and literacy.
Speaker 3: Now in the urban markets, that we are dedicated to
Speaker 3: support every public library in America. Yes, we're so blessed
Speaker 3: that if you are a Libby fan commuting and you
Speaker 3: have multiple tableists and streaming platforms, we are better than
Speaker 3: slice bread. And I love the love letters and the
Speaker 3: you know, we have fan bases worldwide, but that doesn't
Speaker 3: motivate me. I want to improve the life of those
Speaker 3: who need a book to take care of their parent,
Speaker 3: or to make a reversal of their decline of their health,
Speaker 3: or to help them get that job so they can
Speaker 3: apply for that manufacturing opportunity, workforce development, adult literacy, health literacy.
Speaker 3: We are going to I go to every week, you know,
Speaker 3: the first of the year, I'm at CES, marching around.
Speaker 3: I spend about a third of my time at the
Speaker 3: Senior Tech sponsored by AARP. Because we're all aging, We're
Speaker 3: all going to need assiste of technology everything. Yes, I
Speaker 3: could make the font larger, and I need to make
Speaker 3: the audiobook louder, and I want to speed it up
Speaker 3: or slow it down. But the invention of you know,
Speaker 3: I'm going to be everything you read and hear is
Speaker 3: going to be instantly available in every language. We are
Speaker 3: going to be able to adapt the book and the
Speaker 3: modality of presenting the content and the concept to every
Speaker 3: reader in untold ways that are going to make a difference.
Speaker 3: So this is this is what excites me. We are
Speaker 3: going to make We are going to turn around a
Speaker 3: nation that has been over decades becoming.
Speaker 2: Less literate, less skilled.
Speaker 3: You know, in the UK, they just died a twenty
Speaker 3: study that in the UK classroom students are reading four
Speaker 3: percent below the grade level over two years ago, and
Speaker 3: the kids that are getting to the middle schools are
Speaker 3: reading at the lower grade levels. And it's not just there,
Speaker 3: this is happening worldwide. We are going to make such
Speaker 3: a dent and literacy English Language Cultural Education workforce element.
Speaker 3: I volunteer in our local major healthcare system here at
Speaker 3: University Hospital, and I'm all about health literacy. Yes, we
Speaker 3: have the best doctors and the best apps, and the
Speaker 3: best science and the best clinical data. But at the
Speaker 3: end of the day, it's you, the patient who has
Speaker 3: to make the change. If I don't stop eating this
Speaker 3: and do that, if I don't get off my butt
Speaker 3: and do this, I am going to suffer that outcome.
Speaker 2: I got a bad lab result.
Speaker 3: But when I come in and they tell me something
Speaker 3: and I don't understand, and they give me a file
Speaker 3: folder of papers and I don't know what placeemic is
Speaker 3: and I can't read it. I can't even understand how
Speaker 3: to take the pills because it's three x five x,
Speaker 3: and I have a numeracy issue. Literacy enlightening the world
Speaker 3: through books and access to information.
Speaker 2: That's what gets me out of bed. And we have
Speaker 2: a lot of work to do.
Speaker 1: Well, Steve, you've really gone through it lists. I'm glad
Speaker 1: to have you on the podcast. I'm a huge fan
Speaker 1: ofly B use it literally every day for those people
Speaker 1: you know, listen, I get physical books all the time.
Speaker 1: I happened to read it. Be reading a physical book
Speaker 1: right now. Had to go for a doctor's appointment yesterday.
Speaker 1: I'm celebt to go. Well, that's a big book and
Speaker 1: I got to carry it around, whereas I can read
Speaker 1: digital books on my phone. Secondly, I'm always reading a
Speaker 1: physical book and I find a word I don't understand,
Speaker 1: I start to touch. Because I'm used to digital books,
Speaker 1: I can give the definition. Well, you've certainly amplified what's
Speaker 1: going on in the ebook digital revolution libraries, and I
Speaker 1: want to thank you so much for taking this time
Speaker 1: with my audience.
Speaker 3: Thank you, Bob, and I really appreciate your perspective from
Speaker 3: the industry standpoint, because usually I'm talking about just the
Speaker 3: frustrations of the end user. And I really like talking
Speaker 3: about the industry because there's so many commonalities of negotiating
Speaker 3: with the artists and the music publishers and the labels
Speaker 3: that we are deal with on the on the book
Speaker 3: and the on the film side. I stayed out of
Speaker 3: music because it was too hard. That's how we met our.
Speaker 2: Well.
Speaker 1: On that note, till next time, Thanks again, Steve. Till
Speaker 1: next time. This is Bob left six