OverDrive is a provider of technology for managing and distributing digital content to public libraries, schools and retail stores. Founded in 1986, OverDrive’s initial business model involved converting analog media to digital forms, such as interactive diskettes and CD-ROMs. In 2003, with the rise of e-books, OverDrive launched a digital download service for libraries . Today, OverDrive distributes digital content from more than 5,000 publishers through its online platform to more than 34,000 libraries and schools .
OverDrive’s Business Model
OverDrive serves as a digital content aggregator and provides the infrastructure for distributing e-books, audiobooks, streaming videos, and periodicals to public and school libraries. OverDrive first negotiates distribution agreements with publishers to obtain the licensing rights to the publisher’s digital titles. The company currently offers over 3.3 million titles on its platform . On the customer side, OverDrive negotiates contracts with libraries to build a customized online library which provides access to a specific collection of digital content, depending on the library’s needs. Libraries pay a subscription fee to access OverDrive’s platform, and then have the option to browse OverDrive’s entire collection and purchase titles based on their collection development goals.
Depending on its distribution agreement with the publishers, OverDrive can offer different lending options to the libraries :
- Simultaneous Use – Titles can be borrowed simultaneously by an unlimited number of users. Titles will typically never expire.
- One Copy / One User – A digital library can only have one copy of a title, and only one user can borrow it at a specific time. Titles will never expire.
- Metered Access – Similar to one One Copy / One User, but titles will expire after a determined period of time (typically 12 months).
- Cost Per Circ (CPC) – Add a publisher’s entire catalog to library’s collection and pay when users borrow titles from that catalog.
E-Books: a Blessing and a Curse
There is no doubt that the success of e-books has been instrumental to OverDrive’s growth. Digital books now account for 20% of the market , and public libraries must provide e-books to stay relevant to patrons. However, there is an inherent tension between publishers and libraries over the right to circulate e-books. Libraries argue that e-books are the same as physical books: they are checked out for a standard loan period and cannot be checked out by more than one user at a time . Publishers, on the other hand, argue that e-books are different because a user doesn’t need to go to the library to pick up a book, and this lack of friction removes a differentiating factor between buying and borrowing books . In addition, print books deteriorate over time, and users value the difference between borrowing a used book from the library and buying a brand new print book . With e-books this differentiation also doesn’t exist.
Figure 1: North America e-book revenue from 2009 to 2016*, (in million U.S. dollars) 
The tension between publishers and libraries has been both a blessing and a curse for OverDrive. Because each of the “Big Five” publishers has different lending terms and pricing policies for libraries, both libraries and publishers are dependent on OverDrive’s digital platform to aggregate content and set pricing and circulation restrictions. On the other hand though, OverDrive runs the risk that the tension between publishers and libraries could become so significant that either party could withdraw from the platform. For example, in 2012, Penguin, one of the “Big Five” publishers, severed ties with OverDrive and decided to stop offering any of its e-books to libraries . While Penguin returned to OverDrive in 2013, there is still the constant threat that publishers and libraries will stop using OverDrive’s platform.
Figure 2: Big Five Publishers and Library Lending 
OverDrive’s Long Term Value Proposition?
To be successful in the long run, I think that OverDrive needs to resolve the fundamental tension between libraries and publishers. At the moment, OverDrive is playing referee between two very unhappy parties. At an ALA meeting in Boston in January 2016, the overall sentiment was “as it is currently set up, the library e-book market is too burdensome to manage, complex for users to navigate, and library e-book prices are too expensive to sustain .” One thing that OverDrive should do is run tests for publishers on select titles to gather data on whether libraries really affect retail sales. At the core of the issue is that libraries and publishers don’t know if libraries increase book sales or cannibalize them, and as a result, cannot price e-books to libraries efficiently. If OverDrive can use their digital platform to obtain library-specific data to show the true impact library e-books have on retail sales, then they may be one step closer to bridging the divide between publishers and libraries.
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 Andrew Richard Albanese, “The Next Big Step for E-Books in Libraries,” Publishers Weekly, January 15, 2016, http://www.publishersweekly.com/pw/by-topic/industry-news/libraries/article/69153-the-next-big-step-for-e-books-in-libraries.html, accessed November 2016.