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OverDrive Acquires Kanopy

Smart Libraries Newsletter [September 2021]

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OverDrive further solidified its position as the largest global provider of digital content to libraries through the acquisition of Kanopy, a company known for its streaming video services for public and academic libraries. Although OverDrive has been offering video content for over a decade in addition to ebook and audiobooks, the acquisition of Kanopy brings one of the most popular library-oriented streaming video services into the company's portfolio.

Premium Video Streaming for Libraries

Kanopy has assembled a catalog of over 30,000 films, including a broad range of high-quality films, documentaries, and educational videos. So far in 2021 Kanopy has announced significant new content acquisitions including selected titles from Participant, the Criterion Collection, ARRAY Releasing, Schweitzer Fachinformationen, as well as collections supporting diversity, equity, and inclusion and Asian Pacific heritage. Kanopy offers specialized film collections and is not intended to compete directly with commercial streaming services.

Olivia Humphrey founded Kanopy in Perth, Australia in 2008, initially as a distributor of DVDs for academic libraries. In 2010 the company launched its streaming video service for libraries in Australia. Kanopy successfully expanded into New Zealand and then into Hong Kong and Singapore. By 2012, the company launched its service in the United States. In 2013, Kanopy shifted its headquarters to San Francisco.

Kanopy has been led by Kevin Sayer as its chief executive officer since December 2019. Sayer had previously held executive roles at ProQuest, including as a senior vice president with responsibility for ProQuest Books. Sayer was a cofounder of ebrary, along with Christopher Warnock, an early ebook distributor that ProQuest acquired in January 2011. Humphrey continued with Kanopy following the company's acquisition by L Squared, serving as non-executive director of its board of directors through September 2020.

Kanopy serves customers in public and academic libraries, offering different business models for each. The service is meant to be free to patrons, supported by the subscription fees paid by the libraries. The main business model for public libraries involves variations of pay per view. Kanopy offers academic libraries a demand-driven acquisition model whereby patron viewing of a title triggers its selection into the library's collection. Such on-demand video services can press the limits of library budgets. More recently, Kanopy is working within the bounds of libraries' annual budgets using a combination of what they call Smart PDA and perpetual access models for select titles. Unlimited on-demand access to the complete Kanopy catalog would not likely be an affordable option for most libraries. Library patrons, acclimated to consumer services, have a big appetite for streaming video services. As with other types of digital content, libraries must balance their subscription profile with their budget allocations. One of Kanopy's challenges has been to adapt its business model to deliver high-impact collection packages with affordable pricing.

Under OverDrive, Kanopy may see opportunities beyond its capabilities as a standalone company. It potentially benefits from a broader international presence, with opportunities to expand into other countries and regions. Kanopy gains access to OverDrive's extensive experience with the business and technology of providing digital content to libraries. For OverDrive, the addition of Kanopy strengthens its offerings for streaming video at a time when libraries are expanding their digital offerings. As the viability of DVD lending winds down, we can anticipate increased interest in streaming video services developed for libraries.

Prior to the acquisition, which closed in July 2021, Kanopy was owned by L Squared Capital Partners, a private equity firm that purchased the company in July 2018.

The acquisition of Kanopy by OverDrive brings additional consolidation in the library digital media sector. OverDrive gained its position as the largest library ebook supplier primarily through organic growth over its 30-year history. Prior to Kanopy, it acquired the Australian ebook company Book.ish in 2013. Overdrive has made small investments in K-12, and most recently acquired the library portion of RBmedia. The purchase of RBDigital greatly expanded OverDrive's audiobook and digital magazine offerings.

Kanopy shifts from private equity ownership under L Squared to OverDrive, along with RBmedia. Overdrive's owner, KKR, is a major private equity firm managing over $367 billion in assets spanning a diverse range of business sectors. OverDrive was part of Tokyo-based Rakuten from March 2015 through May 2020.

OverDrive history of Mergers and Acquisitions
OverDrive history of Mergers and Acquisitions

OverDrive Background and Update

Steve Potash founded OverDrive in 1986 and has been involved in the development of technologies supporting digital technologies for publishers and other organizations. OverDrive has been a major player in the development of ebook and other digital content delivery technologies and in collaborating with publishers and libraries to create a large-scale ebook and audiobook lending service. Today OverDrive employs over 500 personnel, with its headquarters in Cleveland, OH. OverDrive is a certified B Corporation (https://com pany.overdrive.com/company-profile/overdrive-b-corpora tion/), reflecting its performance for social benefit and the environment.

OverDrive launched its ebook lending service for libraries in May 2003, with Cleveland Public Library and King County Library System as early adopters. In 2021, over 75,000 institutional outlets, mostly schools and libraries, subscribe to some form of OverDrive's digital lending service. Overdrive's Marketplace holds more than 6 million copyrighted titles, including the addition of more than 75,000 new ebooks each month from publisher frontlists.

OverDrive offers multiple content licensing options for libraries, depending on the terms offered by publishers. Most titles are licensed with the number of simultaneous loans limited to the quantity of copies held in the library's OverDrive digital collection. Some license packages (Metered Access) may expire after a specific interval or after a specified number of loans. OverDrive also offers a Cost-per-Circ and pre-packaged bundles of Circs to its growing catalog. Once a copy has passed these thresholds, the library would need to repurchase the license to continue offering access. Although OverDrive enforces these policies on its platforms, the terms are established by the publishers.

In June 2021 the Delaware Department of Education announced it selected OverDrive to provide access to online books for all 144,000 K-12 students in the state. Multiple times each year OverDrive facilitates an international book club, called the Big Library Read (https://biglibraryread.com/), which features a title selected for the program with online discussions and other participatory activities. The current selection, The Quiet Girl, by S.F. Kosa, is made available through over 20,000 participating libraries using OverDrive's platform, including over 90 percent of the public libraries in the United States.

In June 2021, OverDrive stated that for its customers, the costs per checkout were considerably lower from March 2020 through February 2021, a period when libraries were dramatically affected by the COVID-19 pandemic. The lower per-circ costs were due to substantially increased loan volume, focused attention of libraries to manage their ebook collections in response to extraordinary demand, as well as programs such as the Public Library CONNECT service that enables students within a public library's service area to access its collections via the Sora app for K-12 students.

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Publication Year:2021
Type of Material:Article
Language English
Published in: Smart Libraries Newsletter
Publication Info:Volume 41 Number 09
Issue:September 2021
Page(s):2-4
Publisher:ALA TechSource
Place of Publication:Chicago, IL
Company: OverDrive
Subject: Mergers and Acquisitions
ISSN:1541-8820
Record Number:26693
Last Update:2022-07-03 15:13:12
Date Created:2021-09-17 03:55:35
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