Penguin Withdraws From Overdrive; Looks For New Library Partners

Penguin announced late Thursday that as of February 10 (today) it "will no longer offer additional copies of ebooks and audiobooks for purchase via Overdrive" and is severing their ongoing relationship with the vendor. Libraries will continue to have access to titles they have already purchased, and Penguin is negotiating a "continuance agreement" with Overdrive to service the products that have already been sold. The move is an outgrowth of the publisher's suspension of sales of new titles to libraries in late November. At the time they said that "due to new concerns about the security of our digital editions, we find it necessary to delay the availability of our new titles in the digital format while we resolve these concerns with our business partners."

One aspect of those security concerns is ever-clearer: As Overdrive told their library customers in an e-mail, "Penguin ebooks loaned for reading on Kindle devices will need to be downloaded to a computer then transferred to the device over USB. For library patrons, this means Penguin ebooks will no longer be available for over-the-air delivery to Kindle devices or to Kindle apps." (In November, Overdrive briefly suspended Kindle lending for Penguin titles, then restored it on a temporary basis, "until the end of the year.")

As we have reported multiple times, but does not seem to have seeped out into general reports or public consciousness, multiple publishers have told us that Overdrive's implementation of their Kindle library lending--in which library patrons are sent to a commercial, third-party retailer, in this case Amazon--is in their view a direct violation of Overdrive's contracts. Remember that in November, Penguin said clearly it "informed suppliers to libraries that it expected them to abide by existing agreements to offer older digital titles to libraries only if those files were held behind the firewalls of the suppliers." Not the firewalls of retailers. Also in November, Penguin said it had "subsequently been informed by Amazon that it had not been consulted by Overdrive about the terms of Penguin’s agreement with Overdrive," which, you can reasonably infer, does not allow Kindle lending the way Overdrive was executing it.

As another publisher told us when the Kindle library lending was launched in September--and surprised publishers by sending patrons to Amazon.com: "Our agreement with Amazon allows them to download our books only to people they sell to from their sites. Our OverDrive contract allows for fulfillment of files to end users (libraries or retail) only if the file is on their server (ContentReserve)." Similarly, a publisher reiterated to us today that they "have been in discussions with OverDrive but we have not had a satisfactory resolution to the issue (despite their stated willingness to amend the contract). We continue to allow them to work with Kindle but we are getting more and more anxious to have a solution."

Many of today's accounts focus on Penguin's withdrawal, without covering the rest of Penguin's statement. The publisher says "it is vital that we forge relationships with libraries and build a future together.... Our ongoing partnership with the ALA is more important than ever, and our recent talks with ALA leadership helped bring everything into focus." The company expects to establish an agreement with one or more new vendors to resume digital library lending, under a different set of business conditions. They say in their statement, "we are continuing to talk about our future plans for ebook and digital audiobook availability for library lending with a number of partners providing these services.

Following productive discussions between the ALA leadership and executives from Penguin, Macmillan, Random House, Simon & Schuster, and Perseus, there is some talk about at least one pathway to what some believe is an appropriate model for now: lending ebooks to patrons from within library branches, the same way physical media is lent, rather than lending ebooks online. Mimicking the current process of how other library materials are lent would be one way of restoring the "friction" that differentiates libraries from online shopping, and reinforces libraries themselves as a destination and resource for patrons. Among vendors competing for portions of the library lending business, 3M offers in-library kiosks and library-loaded ereading devices.

As one publisher noted, the entire library digital supply chain and security procedures emerged without publishers having an active role in how it is constructed, managed and governed. Starting over--as quickly as can be implemented--is one way of rebuilding a better process that supports libraries' important role in serving the public while protecting the interests of creators and publishers. Meanwhile, OverDrive says that they "are continuing to talk to Penguin about their future plans for ebook and digital audiobook availability for library lending."