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netLibrary: Without Distribution Centers

In April 2000, the best-selling author, Stephen King, made online publishing history. He distributed his novella, Riding the Bullet, over the Net. Approximately 500,000 copies were sold.

True, the Web and book publishing seems like a natural fit. After all, the Internet is a great medium for written content. However, there is a problem: Publishers and authors want to make sure they get paid for their hard work. On the wild-wild Internet, it is easy to freely distribute such content. Look at the music industry's response to Napster, that is, lawsuits.

A company called netLibrary wants to change things. Basically, the company is creating an online marketplace for written content that guards against piracy. And, yes, this company is also going public - although, the offering will not be for a two months or so. The lead underwriter is CS First Boston and the proposed ticker symbol is EBKS. No pricing has been set on the IPO.

The netLibary technology is basically a digital rights management system. That is, it allows for the copying of limited portions of electronic books. But if the copying or printing is excessive, then a notice is sent to the end user. There are also watermark features, so as to detect if other sites are wrongfully displaying copyrighted information.

Of course, netLibrary products are very cost-effective. What's more, netLibrary makes it easy for publishers and authors to digitize their content.

The benefits to the end user are many. There is sophisticated searching capabilities, as well the ability to take notes, highlight text and bookmark pages. Moreover, netLibrary's technology is device agnostic. In other words, the content can be read from a variety of readers.

So far, netLibrary has digitized over 28,000 titles. Currently, the company is focusing on the academic, corporate, K-12 and public library markets. As of the end of June 2000, netLibrary sold over 162,000 copies of electronic books. This has translated into $3.7 million in revenues for the first six months of 2000.

But with its strong technology and growing database of books, the company should be able to ramp-up the revenues quickly. All in all, expect this IPO to do well when it debuts.