netLibrary: Amazon.com 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.

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