The Full Story: How We Got Here

Introduction: The Stakes

In February 2026, OverDrive controls 95% of library ebook distribution globally. Libraries pay $60-80 for a two-year license to lend a book that readers can buy for $15. Baker & Taylor, a 140-year-old distributor, has closed. SimplyE, the NYPL\'s open-source alternative, is retired. School libraries report their ebook spending collapsed from 26% (pandemic peak) to 7% of collections. This isn\'t accidental inefficiency. It's the logical outcome of a legal and economic system that shifted power from readers and libraries to publishers and vendors.

This narrative traces how that happened. It examines the strategic decisions each stakeholder made, the legal framework that enabled them, and the consolidation that locked libraries into a single platform. Most importantly, it shows that this outcome wasn't inevitable. Different policy choices could have preserved library rights, maintained competitive platforms, and balanced author incentives with public access.

The story matters because the decisions Congress and regulators make in 2026-2027 will determine whether libraries remain public institutions or become rental customers of private platforms. Understanding how we got here is the first step toward building something better.

Foundation: First Sale to Digital Licensing

The First Sale Doctrine, established in 1908, says that once a copyright holder sells a copy of their work, they lose control over that copy. The buyer can resell it, lend it, donate it, or destroy it. Libraries depended entirely on this doctrine. They purchased books from publishers and lent them freely, generating millions of circulations from single purchases.

When ebooks emerged in the 2000s, publishers panicked. Digital copies didn\'t wear out. One digital copy could theoretically serve unlimited readers. Piracy became possible at scale. Publishers argued that the First Sale Doctrine shouldn\'t apply to digital files, and Congress agreed implicitly through the Digital Millennium Copyright Act (1998) and the courts agreed explicitly through cases like Vernor v. Autodesk (2010).

This created a legal divide: publishers could sell physical books (limited control) or license digital books (absolute control). Libraries adapted to licensing because they had to. But licensing fundamentally changes economics. A purchased book generates one payment. A licensed book generates recurring payments when the license expires. Publishers discovered that licensing to libraries was more profitable than selling to them.

By 2010, OverDrive had positioned itself as the bridge between this old and new world. They managed digital rights, enforced licensing terms, and collected fees from libraries. Librarians believed the platform was neutral infrastructure. They didn\'t realize the legal shift had already happened. They\'d moved from ownership to rental, and the landlord could change terms at any time.

Consolidation: The Vendor Story

In the 2010s, libraries had choices. OverDrive dominated with 50%+ market share, but alternatives existed: 3M Cloud Library, Hoopla, Axis 360, Baker & Taylor, and smaller regional platforms. This fragmentation meant libraries could negotiate, threaten to switch, and maintain some leverage.

Between 2015-2026, consolidation accelerated. Rakuten acquired OverDrive (2015), bringing it under e-commerce management focused on platform dominance. Kanopy, a video-focused platform, was acquired by OverDrive. 3M gradually withdrew from library services. Boundless, built by an educational startup, was absorbed. Baker & Taylor, the last major print distributor with ebook capability, closed in December 2025. NYPL's SimplyE, the only significant open-source alternative, was retired in August 2025.

By 2026, libraries faced a single vendor: OverDrive. Switching costs are astronomical (recataloging, user retraining, system integration, loss of reading history). Network effects are powerful (publishers optimize recommendations for OverDrive, which incentivizes libraries to stay). And with alternatives eliminated, OverDrive had no reason to negotiate better terms. Libraries were trapped.

What made consolidation possible? Copyright law. In the print world, antitrust regulators would likely challenge a single distributor controlling 95%+ of a market. But copyright holders (publishers) can unilaterally choose how to distribute their work. They can choose to license exclusively through OverDrive. Without the First Sale Doctrine, they have no obligation to maintain competitive channels. Consolidation became inevitable because copyright law enabled it.

Impact Analysis: Three Perspectives

For Librarians: The consolidation created an impossible situation. Librarians want to provide access, but ebook licensing costs have become unsustainable. A school library with a $30,000 annual budget that allocates $5,000 to ebooks can purchase 50-80 physical books or 30-40 ebook licenses. The licenses expire. The physical books don't. Over five years, the ROI on physical purchases is objectively superior. Yet patrons expect digital access. Librarians are caught between unsustainable costs and user expectations, forced to choose between abandoning digital or shrinking print collections.

For Publishers: The consolidation was a strategic win. They shifted from a one-time sale model (high volume, low margins) to a recurring license model (lower volume, higher margins per title). The Big Five publishers now set licensing terms that maximize revenue from libraries while minimizing cannibalization of their retail sales. KKR's ownership of Simon & Schuster aligns publisher incentives with financial engineering: maximize margins now, worry about sustainability later.

For Readers: Consolidation meant reduced access. Smaller library systems that couldn\'t afford OverDrive\'s minimum commitments withdrew from digital lending entirely. School libraries cut ebook budgets by 70%. Rural libraries in low-income areas couldn't negotiate group purchases. The readers who could afford to buy books saw selection shrink. The readers who depended on libraries lost access. Consolidation solved a publisher problem by creating a reader problem.

The Structural Failure: None of these actors behaved irrationally given their incentives. Publishers maximized profits. OverDrive maximized market share. Librarians maximized access within budget constraints. The system itself (a copyright framework that eliminated the First Sale Doctrine for digital) created misaligned incentives. Every actor optimized locally, and the system optimized globally toward less access, higher costs, and fewer alternatives.

Path Forward: Solutions and Opportunities

Copyright Reform (High Impact, High Difficulty): Congress could amend the Copyright Act to restore library rights to digital ebooks equivalent to their rights for physical books. This would require explicitly stating that libraries have the right to lend ebooks on reasonable terms without time limits or checkout restrictions. It would face intense publisher opposition but would fundamentally resolve the access problem by rebalancing copyright toward libraries and readers.

Antitrust Enforcement (Medium Impact, Medium Difficulty): The DOJ could challenge OverDrive\'s platform dominance, either through merger review or Sherman Act Section 2 enforcement. This wouldn\'t fix copyright policy but would prevent further consolidation and create room for competitive platforms. The legal theory is novel (access-based monopoly rather than price-based) so success is uncertain, but recent FTC leadership shows willingness to try.

Consumer Protection (Medium Impact, Low Difficulty): The FTC could challenge OverDrive's deletion of purchased MP3 content, opaque terms, and unilateral changes through Section 5 enforcement. This is a lower bar than copyright reform and would create immediate pressure for better practices. Libraries already have consumer protection advocates, but what they lack is an agency asserting authority to protect them.

Library Technology Commons (Lower Impact, Medium Difficulty): Federal funding for an open-source ebook platform would break vendor lock-in and create a competitive alternative. This wouldn't require copyright reform and would immediately improve librarian bargaining power. OverDrive would have to compete on service and cost rather than convenience.

Indie Author Expansion (Moderate Impact, Already Happening): Indie authors are already adopting library-friendly licensing practices. As readers discover that indie ebooks have better terms and lower prices, market share will shift. This won't solve the Big Five problem but will create a visible alternative that pressures traditional publishers to improve terms.

The Opportunity: The 2026 congressional session presents a window for action. Steve Potash\'s testimony on OverDrive\'s monopoly power will create political attention. Bipartisan support for limiting big tech platforms creates an opening for library-specific legislation. The moment won't last, because Congress moves on. The question for librarians, readers, and technologists is whether they can build the political coalition to push policy change before the attention fades.