From Gutenberg to Gouging: 55 Years of Digital Content in Libraries

Introduction: 55 Years of Promises and Extraction

The history of digital content in libraries is a story of idealism systematically captured by corporate interests. What began in 1971 as a volunteer effort to make the world's literature freely accessible has, by February 2026, devolved into a landscape where a single private equity-backed platform controls roughly 90% of the library ebook market, the only meaningful competitor just collapsed, and legislators are finally asking why libraries pay $60 for an ebook that consumers buy for $14.99.

This document traces that arc, from Michael Hart\'s first digital text to Steve Potash\'s testimony before the DC Council, and names what happened at every inflection point: who made what decision, who benefited, and who paid.

Era 1: The Open Promise (1971–1999)

Project Gutenberg: The Original Vision

In 1971, Michael Hart, a student at the University of Illinois, typed the Declaration of Independence into a mainframe computer connected to the nascent ARPANET. He called it Project Gutenberg, and its premise was radical in its simplicity: digitize public domain texts and give them to anyone who wants them, for free, forever. No DRM. No licensing. No expiration. Just text.

Hart's vision was profoundly aligned with the library mission: universal access to knowledge. By the late 1990s, Project Gutenberg had digitized thousands of works and proven that digital distribution of books was not only possible but practically free at the margin. The question was never whether digital books would happen. The question was who would control them.

The Early Digital Landscape

Through the 1990s, digital reading was largely confined to academic and technical contexts. Adobe introduced PDF in 1993, and various ebook formats emerged. The commercial ebook market barely existed. But the infrastructure decisions being made during this period, particularly around Digital Rights Management (DRM) and the Digital Millennium Copyright Act (DMCA) of 1998, would shape everything that followed.

The DMCA made it illegal to circumvent digital copy protection, even for legitimate uses. This single piece of legislation effectively nullified the First Sale Doctrine for digital content and gave publishers a legal framework to treat ebooks as something fundamentally different from print books. Libraries could buy a physical book from any vendor, lend it as many times as they wanted, and resell or donate it when they were done. None of those rights would transfer to digital.

Era 2: The Platform Play (2000–2010)

OverDrive Enters the Library Market

OverDrive was founded in 1986 by Steve Potash, an attorney, originally as a company that converted analog media to digital formats. In 2000, the company launched Content Reserve, an online repository for ebooks and downloadable audiobooks.

The pivotal moment came in 2002–2003. Cleveland Public Library (Potash's hometown library) approached OverDrive about building a digital lending platform. Librarians Patricia Lowrey, Cindy Orr, Sari Feldman, and Tracy Strobel collaborated with OverDrive to create what would become the first popular ebook and audiobook lending service from a public library, launching in 2003.

This is the part of the story OverDrive loves to tell: local librarians and local tech company, working together, pioneering digital lending. And it\'s true. But what\'s also true is that from day one, the model was built on a fundamental asymmetry. Libraries didn\'t own the content. They didn\'t own the platform. They didn\'t own the patron data. They licensed everything through OverDrive, which licensed from publishers, creating a two-layer intermediary structure that gave libraries less control over their digital collections than they\'d ever had over their physical ones.

Baker & Taylor's Digital Ambitions

Baker & Taylor, founded in 1828, was one of the oldest companies in American publishing and the backbone of library acquisitions for nearly two centuries. Roughly half of U.S. public libraries relied on Baker & Taylor for physical book distribution.

Seeing the digital shift, Baker & Taylor developed Axis 360, its own digital content platform for libraries, positioning it as a competitor to OverDrive. Axis 360 never achieved anything close to OverDrive's market share, but it mattered as the only real alternative. Having two vendors gave libraries at least minimal leverage in negotiations.

The Kindle Arrives (2007)

Amazon launched the Kindle in November 2007, and the consumer ebook market exploded. By 2010, ebook sales were growing by triple-digit percentages year over year. This was simultaneously the best and worst thing that could have happened to library digital lending. Demand surged. But publishers, suddenly seeing ebooks as a meaningful revenue stream rather than a novelty, began treating library lending as a direct threat to retail sales.

The irony is that libraries were driving ebook adoption. Multiple studies confirmed that patrons who discovered ebooks through library lending became ebook buyers. But publishers, operating from a scarcity mindset forged in decades of physical distribution, couldn't see lending as marketing. They could only see it as cannibalization.

Insight Venture Partners: The First PE Play

In October 2010, private equity firm Insight Venture Partners made a significant investment in OverDrive, placing two representatives on the company's board. This was the first time private equity capital entered the library digital lending space. From 2010 onward, OverDrive had financial investors expecting returns.

Era 3: The Publisher Wars (2011–2015)

HarperCollins and the 26-Checkout Bomb

In February 2011, HarperCollins dropped a bomb on the library world: all new ebook licenses distributed through OverDrive would expire after 26 checkouts. The rationale, per HarperCollins President of Sales Josh Marwell, was that 26 checkouts approximated "the average lifespan of a print book."

This was, to put it plainly, bullshit. Any librarian who has handled physical books knows that a decently bound hardcover can circulate 100+ times. The number 26 appears to have been calculated by assuming a two-week checkout period across one year (26 two-week periods). It was engineered to create an annual relicensing fee masquerading as a wear-and-tear analog.

The library community erupted. Boycotts were launched. Petitions circulated. But the boycotts largely failed, because libraries buy what their patrons want to read, and patrons wanted HarperCollins titles. The 26-checkout model wasn't just accepted; it became the template. Other publishers adopted similar or worse terms.

The Big Six Lockout

The 2011–2013 period was the nadir for library ebook access. Here's what the "Big Six" publishers were doing:

• Macmillan and Simon & Schuster: Refused to make ebooks available to libraries at all.
• Hachette: Stopped offering frontlist ebook titles to libraries in July 2011. Later raised prices by an average of 220%.
• HarperCollins: Implemented the 26-checkout limit.
• Penguin: Terminated its contract with OverDrive entirely in 2012, citing "security concerns."
• Random House: Continued working with libraries but tripled its ebook prices in March 2012.

By May 2013, the Urban Libraries Council documented that not a single one of the six largest publishers was selling ebooks to libraries on the same terms as print. The pattern was clear: publishers treated digital as an opportunity to extract more money from libraries while providing less value.

OverDrive's Repositioning: "Library Company" as Marketing

During this period, OverDrive executed a critical brand repositioning. It had started as a DRM infrastructure company. But as it became the dominant platform, Potash began framing OverDrive as a "library company" aligned with the library mission. In 2017, OverDrive would even become a Certified B Corporation.

The reality was more complex. OverDrive's business model depended on publishers being willing to license content through its platform. It could not and would not antagonize publishers on behalf of libraries, because publishers were the supply side of its marketplace. When publishers raised prices, OverDrive passed those prices through and took its margin. When publishers imposed restrictive licensing terms, OverDrive implemented them technically. The "library company" framing was marketing, not operational reality.

Rakuten Acquisition (2015)

In April 2015, Japanese e-commerce giant Rakuten acquired OverDrive for $410 million. Rakuten also owned Kobo, an ebook reader and retail platform. The acquisition gave OverDrive access to international markets and Rakuten's technology resources. Potash remained CEO. The library community largely shrugged, feeling a strategic corporate owner seemed preferable to a private equity one.

Era 4: Consolidation and the PE Playbook (2017–2023)

Libby Launches (2017)

In 2017, OverDrive launched Libby, a consumer-facing app that would become the primary way library patrons accessed digital content. Libby was well-designed, intuitive, and wildly popular. It earned thousands of five-star reviews and was named one of Popular Mechanics' Best Apps of the Decade.

A 2023 ALA report found that younger users of Libby largely didn\'t realize their local libraries were paying for the service. They thought it was just an app. OverDrive built a consumer brand that obscured the library\'s role. Patrons experienced Libby, not their library's digital collection. The relationship between patron and library was mediated, and to some degree replaced, by the relationship between patron and app. This is a textbook platform play: insert yourself between supply and demand, become indispensable to both sides, then extract value from the position.

KKR Acquires OverDrive (2020)

On Christmas Eve 2019, Rakuten announced it would sell OverDrive to KKR, one of the world's largest private equity firms. The inferred transaction value was approximately $775 million, nearly double what Rakuten had paid four years earlier. The acquisition closed in June 2020.

KKR is not a neutral name in American business history. The firm is famous for the RJR Nabisco leveraged buyout and was involved in the Toys R Us acquisition that ended in the company\'s destruction. KKR\'s standard playbook involves leveraged buyouts where the acquired company takes on significant debt, increasing profitability through price increases and cost cuts, and then selling the company at a higher valuation within five to seven years.

Here's what happened immediately after the acquisition closed:

• RBMedia rollup: KKR had acquired RBMedia, the largest audiobook publisher, in 2018. Two weeks after closing the OverDrive acquisition, KKR rolled RBMedia's digital library business (RBdigital) onto the OverDrive platform. One more competitor eliminated.
• Kanopy acquisition (2021): OverDrive acquired Kanopy, the leading streaming video platform for libraries. More consolidation under one roof.
• Price increases: Library ebook costs began climbing faster than inflation. DCPL's ebook spending went from $655,000 (11% of collections budget) in 2019 to $1.6 million (34% of budget) by 2024, and wait times barely improved.

KKR Acquires Simon & Schuster (2023)

In August 2023, KKR acquired Simon & Schuster, one of the Big Five publishers, for $1.62 billion. This meant KKR now controlled both a major publisher (the supply of books) and the dominant library distribution platform (the channel through which libraries accessed digital books). Vertical integration at its most brazen.

KKR insisted the businesses would remain "separate and independently managed." But the structural incentive was obvious: KKR profits when publisher prices go up AND when OverDrive takes its margin on those higher prices.

The math: KKR now owns the platform with ~90% market share in library ebook lending; a Big Five publisher with 12% of the U.S. book market; and previously owned the largest audiobook publisher. This is what monopoly position looks like when you're polite about it.

Era 5: The Collapse and the Reckoning (2024–2026)

Baker & Taylor Dies

Baker & Taylor had been showing stress fractures for years. In 2022, its book ordering platform went down in a server outage that rattled libraries. The company had been financially strained since at least 2024.

In 2025, things deteriorated rapidly. Baker & Taylor's lender, CIT, declared a default and moved to liquidate assets. On October 6, 2025, Baker & Taylor announced it would cease operations, effective January 2026. Over 500 employees were laid off immediately.

The digital platform, Axis 360 (which had been rebranded to Boundless), went offline on December 8, 2025. Libraries that had used Boundless as their ebook platform scrambled to migrate content. Some moved to Hoopla. Some moved to the Palace Project, a newer open-source alternative backed by Lyrasis. But many libraries lost access to digital content with minimal warning.

As of February 2026, Connecticut libraries are still waiting for refund responses from Baker & Taylor, and aren't sure anyone is even monitoring the email.

Bradley Bullis, Connecticut State Library\'s digital content coordinator, summarized it: "This is probably one of the biggest shocks, to have a whole vendor that everybody trusted just go away. It wasn\'t like they faded. They just went away."

The DC Council Takes On OverDrive

With Baker & Taylor gone and OverDrive's market dominance now essentially unchallenged, the pricing problem became impossible to ignore. In Washington, D.C., Ward 3 Councilmember Matthew Frumin introduced B26-0490: The Library E-book Pricing Fairness Amendment Act of 2025.

The bill would prohibit libraries from paying more to license an ebook than a consumer would pay at retail, and prevent publishers from limiting the number of licenses and loans a library can engage in. To avoid D.C. acting alone, the bill includes a trigger clause: it only takes effect if 10 other jurisdictions with a combined population of 50 million people pass similar measures. Connecticut has already passed such a bill. New Jersey and Massachusetts have introduced variants.

DCPL Executive Director Richard Reyes-Gavilan testified plainly: the current model is unsustainable. For a bestseller like David Szalay\'s "Flesh," DCPL pays $28.99 for a physical copy it owns forever. The ebook costs $59.99 and expires after two years. The audiobook is $69.99. For perennially popular titles like Michelle Obama\'s memoir, DCPL has had to relicense the same book over and over, spending hundreds of dollars for what is, at the end of the day, a file on a server.

Potash's Testimony: The Mask Slips

Steve Potash submitted extensive testimony against the DC bill. The key passage:

"To argue that libraries are entitled to "Magical Library Books" at the same price of a Kindle ebook from Amazon, ignores the fact that print and digital library books are not the same product. Yet the bill's proponents want to strongarm their CDL contracts on every public librarian."

ReadersFirst, a library ebook advocacy group, called the testimony "vituperative" and "a poor argumentative showing that seems not to understand this bill at all."

Potash\'s core argument, that digital library books deliver "500% more value" because they\'re never lost, never late, and never wear out, is technically true and strategically disingenuous. It\'s the argument of a middleman protecting his margin, not a "library company" advocating for its customers. ReadersFirst noted the irony of Potash\'s testimony directly contradicting that of DCPL\'s own executive director. As they put it: "It\'s a business. It makes money, and lots of it, from us. It's not our friend."

Analysis: The Extraction Pattern

The Playbook, Decoded

The 55-year history of digital content in libraries follows a predictable pattern:

• Phase 1 — Value Creation: Build something genuinely useful (OverDrive's 2003 lending platform). Align with institutional mission. Get libraries dependent on the platform.
• Phase 2 — Lock-in: Become the infrastructure layer. Control the patron experience (Libby). Make switching costs prohibitive. Eliminate competitors (RBdigital rollup, Baker & Taylor's collapse).
• Phase 3 — Extraction: Raise prices. Accept increasingly restrictive publisher terms without pushback. Use the monopoly position to capture an ever-larger share of library budgets.
• Phase 4 — Exit Preparation: KKR\'s typical hold period is 5–7 years. They acquired OverDrive in 2020. We\'re in the window. Every price increase, every competitor eliminated, every patron locked into the Libby ecosystem increases the eventual sale price.

The First Sale Doctrine Gap

The fundamental structural problem remains the one identified at the very beginning: the First Sale Doctrine doesn't apply to digital content. When a library buys a physical book, it owns that book. It can lend it, display it, donate it, or destroy it. No permission needed from the publisher. This right, established by the Supreme Court in 1908, is the legal foundation of the public library as we know it.

Digital content exists in a legal framework where libraries own nothing. They license access through intermediaries, under terms set by publishers, on platforms controlled by vendors. Every link in that chain has a profit motive. No link in that chain has a legal obligation to serve the public interest. The result is entirely predictable: costs go up, access goes down, and libraries (funded by taxpayers) absorb the squeeze.

The Monopoly Math

As of February 2026, here is the competitive landscape for library ebook lending in North America:

This is not a competitive market. This is a monopoly with decorative alternatives.

What Comes Next

The Legislative Path

The DC bill represents the most promising avenue for structural change. If enough states pass similar legislation and the 50-million-population trigger is met, publishers will have to negotiate. Connecticut is already there. New Jersey and Massachusetts are in motion. The question is whether the library community can sustain the political momentum while publishers and OverDrive lobby against it.

The Data Sovereignty Question

Beyond pricing, the fundamental issue is ownership. Libraries need to own their data, their patron relationships, and their digital infrastructure. The current model, where a PE-backed vendor controls the platform, the app, and the patron experience, is architecturally incompatible with the library mission. Open-source alternatives like the Palace Project point toward a different model, but they need investment, adoption, and publisher cooperation to scale.

The Exit Clock

KKR acquired OverDrive in June 2020. The typical PE hold period is 5–7 years. We are now in year 5.5. Every strategic decision OverDrive makes should be evaluated through this lens: does it increase the company's valuation for a potential sale? Price increases do. Competitor elimination does. Market consolidation does. Testifying against library-friendly legislation does. The pattern is consistent and the clock is ticking.

Conclusion

Michael Hart typed the Declaration of Independence into a computer in 1971 because he believed knowledge should be free. Fifty-five years later, a private equity firm charges libraries $60 for a two-year rental of a file, controls 90% of the lending market, owns one of the publishers it distributes, and testifies before a city council that libraries wanting fair prices are asking for "Magical Library Books."

The question is not whether this system is broken. The question is whether it was ever designed to serve libraries at all, or whether libraries were always the customer being extracted from. The history suggests the latter. The response should be proportionate.