Why the Penguin Merger with Random House Will Kill OverdriveBy
Most libraries in North American tend to do business with Overdrive to facilitate their content distribution system for ebooks, audiobooks, and video. The 3M Cloud Library system is the new kid on the block and has been around for only three years, though it tends to exclusively focus on the US market. Pearson owned Penguin used to do business with Overdrive and then severed ties with the program last February. It seems Penguin had to reevaluate its business model for libraries and got back into the game, but this time with 3M. Why did Penguin go with a minor player and not with Overdrive? The answer is Amazon.
Amazon is the largest ebook seller in the world and is thought to control over 45% of the global market. Overdrive makes all of its digital library books available in the Kindle format, something 3M does not.
Penguin started a pilot program last October at the Queens and New York library. After the success it has garnered, the company expanded its relationship with 3M and did a broad American roll out. You can find hundreds of Penguin titles at most libraries participating in the 3M Cloud Library System, but what about Overdrive?
Penguin really doesn’t like Amazon and doesn’t want to give the company any more business than it absolutely has to. Recently, “Penguin accused Amazon of being ‘predatory’ and a ‘monopolist,’ saying the online retailer’s anti-competitive behavior was poised to damage the bookselling industry. Penguin added the company was ‘concerned that Amazon’s below-cost pricing strategy for certain new release titles would be detrimental to the long term health of the book industry.’”
Obviously this is very telling on how the entire company views Amazon and by proxy Overdrive. One of the big proponents to Overdrive’s continued growth in Canada, the US, the UK, Ireland, and Australia is because they do support the Kindle. I don’t know if Penguin titles are essential to the current business model, but I can see something big happening soon.
Penguin and Random House are going to merge companies sometime in 2013 and I can see the Penguin influence resulting in pulling even more titles from Overdrive. This will account for 1/4 of all books published in the world, and would be a massive blow to the continued growth of Overdrive that may give 3M an advantage.