Over my years in this profession, I’ve often found myself bothered and sometimes outright disturbed by OCLC®’s behavior in the marketplace. Particularly when I lead companies that competed with them in the marketplace. Now, as a librarian in an OCLC member library, I’m not finding the behavior any more acceptable. Frequently their actions lead me to wonder if they weren’t openly flouting anti-competition laws -- at least here in the U.S.
Now we have another example of that behavior with their recent decision to substitute WorldCat® Discovery Services for FirstSearch® or WorldCat Local in order to make the library’s cataloging accessible and visible in WorldCat.org.
For the uninitiated, a little background. Per OCLC’s website:
OCLC’s response to this is that those libraries that buy just their cataloging or Inter-Library Loan service from OCLC (in other words, only the catalogers and ILL staff people at those libraries) will be able to add their holdings to WorldCat. WorldCat Discovery is NOT required for those holdings to be exposed to other cataloging libraries (again, just the catalogers and ILL staff). The cataloging service consists of the record supply, record quality, KB and holdings registration piece. FirstSearch and WorldCat Local were the components that supplied the exposure and discoverability pieces, which also includes the mobile interfaces, API’s and further syndication of the metadata.
Now, comes the most recent announcement, where we’re being told FirstSearch and WorldCat Local are being replaced with WorldCat Discovery Services and that’s what we’ll have to buy to make our records globally accessible. Here is the wording from the OCLC website:
With regard to the costs, OCLC reps have publicly stated (emphasis is mine throughout the paragraph):
Now sure, most of us buy cable TV services, so we’re quite familiar with this type of abusive behavior. But we hate it and complain about it constantly and loudly and recently, even that bundling appears to be under attack per this recent NY Times article. However, OCLC is owned by us and is supposed to be serving us! So someone please explain to me why we are doing this to ourselves?!?!
Again, let me step back for a moment and clarify why bundling is not only wrong, but raises other concerns. Bundling products and services must be done in such a way so as not to violate anti-competition laws. Wikipedia indicates anti-competitive practices:
Now, I’m reasonably certain that if someone asks one of the competing firms offering Discovery products (Ebsco®, Proquest®, Ex Libris®) if they think requiring WorldCat Discovery Services to be used by every library, in order to have their records accessible by all WorldCat users globally, constitutes a restriction on competition, I’d be surprised if they gave any answer other than: “Of course”. I think it’s very likely this behavior might result in some libraries feeling they need to cancel their preferred discovery solution and adopt WorldCat Discovery Services, rather than trying to explain to their boards and/or administrators why they’re maintaining/supporting two separate discovery services and bearing all the associated costs. Certainly, if that happens, it would seem competition in the marketplace has been restricted.
OCLC’s position is that FirstSearch has been expanded and improved with this offering and thus they’ve offered greater value to the membership by replacing the FirstSearch product, which solely searched reference databases, with WorldCat Discovery Services, which searches all of WorldCat and therefore serves as an important reference tool.
However, we have to view this in a larger context, which is that OCLC is an organization that dominates a market, i.e. bibliographic services and on a national, if not global scale. Their behavior in this case is clearly that of “tying” or bundling products/services together in such a way as to make WorldCat Discovery Services a mandatory purchase in order to obtain the maximum value of your OCLC cataloging service investment.
Now I’ll be the first to admit I’m no lawyer and this requires professional legal review to be certain, but the behavior certainly seems questionable and raises major concerns. Given this kind of convoluted business logic, there are librarians saying: “this seems like a road that could easily lead to OCLC requiring a library to purchase WorldShare Management System in order to make "accessible" the cataloging they contributed [and paid for].” If you need two discovery services for your metadata, well then why not require you to have two library management systems? I mean, what the heck, it’s only more money, time and staffing. That’s not a problem for most libraries. Right?!?!
I’m advocating that OCLC behave in a manner which makes their multitudinous products and services available in discrete, clearly described, defined components, with equal access and pricing to both libraries and for-profit firms that might be willing to use those discrete components as the basis for competitive products and services. Furthermore, the amount charged over actual costs should continue to be closely monitored by the OCLC Board of Trustees to make sure that it stays within a reasonable percentage, encouraging overall marketplace competition, open and widespread usage of their infrastructure products/services and a sustainable OCLC organization. Reasonable discounts for “bundles” should solely reflect the organization’s reduced cost of sales and administration and absolutely must not be aimed at reducing competitive offerings in the marketplace. In fact, it should encourage them.
This sustainability point gets confused, in my opinion, within OCLC. The operating results as a percent of revenue (targeted at 2-4% of OCLC’s net contribution to equity) are frequently used as an indication that they are not overcharging the membership for products and services. That might be true as a average, but how about when considered on a more granular level? You might want to remember this legal case before answering. Plus there are other items to be considered in evaluating that statement:
First, and equally important to the sustainability of OCLC, are the annual revenues, which (shown below and from their Annual Reports) don’t show such a positive picture:
Clearly, real growth continues to be absent. OCLC claims this is the result of the recession, divestiture of some assets, the reality of economic conditions of libraries and the fact that they’ve held a cap on fee increases.
However, growth needs to be restored and thus OCLC should be internally (and possibly are) asking two questions:
Now we have another example of that behavior with their recent decision to substitute WorldCat® Discovery Services for FirstSearch® or WorldCat Local in order to make the library’s cataloging accessible and visible in WorldCat.org.
For the uninitiated, a little background. Per OCLC’s website:
“FirstSearch is an online service that gives library and education professionals access to a rich collection of reference databases.”
“WorldCat Local is a webscale discovery solution that delivers single-search-box access to more than 1.7 billion items from your library and the world's library collections.”I often wondered why you had to buy FirstSearch and/or more recently WorldCat Local in order to get one’s library holdings to be accessible in WorldCat? Although, one must note that libraries appeared to have endorsed the model for many years by acquiescing to this policy.
OCLC’s response to this is that those libraries that buy just their cataloging or Inter-Library Loan service from OCLC (in other words, only the catalogers and ILL staff people at those libraries) will be able to add their holdings to WorldCat. WorldCat Discovery is NOT required for those holdings to be exposed to other cataloging libraries (again, just the catalogers and ILL staff). The cataloging service consists of the record supply, record quality, KB and holdings registration piece. FirstSearch and WorldCat Local were the components that supplied the exposure and discoverability pieces, which also includes the mobile interfaces, API’s and further syndication of the metadata.
Now, comes the most recent announcement, where we’re being told FirstSearch and WorldCat Local are being replaced with WorldCat Discovery Services and that’s what we’ll have to buy to make our records globally accessible. Here is the wording from the OCLC website:
“WorldCat® Discovery Services, is a new suite of cloud-based applications that brings the FirstSearch® and WorldCat® Local services together, so users and staff can discover more than 1.5 billion electronic, digital and physical resources in libraries around the world, through a single search of WorldCat and a central index that represents nearly 2,000 e-content collections. WorldCat Discovery provides libraries with the ability to add several individual fee-based options to their service. WorldCat Local subscribers have access to all these options as part of their current subscription, and are invited to participate in a WorldCat Local community beta phase starting in late April 2014.”This announcement should raise the hackles of many librarians. For instance, my library, not unlike others, has already purchased and is using a Discovery product. Now, we might also want to use WorldCat Discovery because we’re a research library and serve an incredibly large, diverse user/member group, but what we don’t want is to be told we must buy WorldCat Discovery Services, nor do we want the cost.
With regard to the costs, OCLC reps have publicly stated (emphasis is mine throughout the paragraph):
“All current FirstSearch subscribers receive access to WorldCat Discovery as part of their FirstSearch subscriptions at no additional charge. If your library subscribes to WorldCat Local, FirstSearch access is included in this subscription. The release of WorldCat Discovery means that many libraries with existing unlimited FirstSearch subscriptions may now benefit from a discovery service without incurring costs beyond their current subscriptions.”It might begin to sound a bit repetitive after my post last week about caveats in provider wording, but this paragraph again demonstrates how important it is for every library to read carefully the wording put out by supplier organizations. Because clearly, not everyone is going to get this new bundled offering for the same price as they were paying before. Furthermore, it doesn’t matter if it applies only to 10 libraries or 100, some libraries are going to be forced to pay increased costs, very likely to buy a service/product they may not want in order to get the product/service they do want.
Now sure, most of us buy cable TV services, so we’re quite familiar with this type of abusive behavior. But we hate it and complain about it constantly and loudly and recently, even that bundling appears to be under attack per this recent NY Times article. However, OCLC is owned by us and is supposed to be serving us! So someone please explain to me why we are doing this to ourselves?!?!
Again, let me step back for a moment and clarify why bundling is not only wrong, but raises other concerns. Bundling products and services must be done in such a way so as not to violate anti-competition laws. Wikipedia indicates anti-competitive practices:
- Restrict free trading and/or competition between businesses.
- Demonstrate abusive behavior by an organization that dominates a market. This includes anti-competitive behaviors that lead to a dominant position (such a behavior includes tying, defined as the practice of selling one product or service as a mandatory addition to the purchase of a different product or service.
Now, I’m reasonably certain that if someone asks one of the competing firms offering Discovery products (Ebsco®, Proquest®, Ex Libris®) if they think requiring WorldCat Discovery Services to be used by every library, in order to have their records accessible by all WorldCat users globally, constitutes a restriction on competition, I’d be surprised if they gave any answer other than: “Of course”. I think it’s very likely this behavior might result in some libraries feeling they need to cancel their preferred discovery solution and adopt WorldCat Discovery Services, rather than trying to explain to their boards and/or administrators why they’re maintaining/supporting two separate discovery services and bearing all the associated costs. Certainly, if that happens, it would seem competition in the marketplace has been restricted.
OCLC’s position is that FirstSearch has been expanded and improved with this offering and thus they’ve offered greater value to the membership by replacing the FirstSearch product, which solely searched reference databases, with WorldCat Discovery Services, which searches all of WorldCat and therefore serves as an important reference tool.
However, we have to view this in a larger context, which is that OCLC is an organization that dominates a market, i.e. bibliographic services and on a national, if not global scale. Their behavior in this case is clearly that of “tying” or bundling products/services together in such a way as to make WorldCat Discovery Services a mandatory purchase in order to obtain the maximum value of your OCLC cataloging service investment.
Now I’ll be the first to admit I’m no lawyer and this requires professional legal review to be certain, but the behavior certainly seems questionable and raises major concerns. Given this kind of convoluted business logic, there are librarians saying: “this seems like a road that could easily lead to OCLC requiring a library to purchase WorldShare Management System in order to make "accessible" the cataloging they contributed [and paid for].” If you need two discovery services for your metadata, well then why not require you to have two library management systems? I mean, what the heck, it’s only more money, time and staffing. That’s not a problem for most libraries. Right?!?!
I’m advocating that OCLC behave in a manner which makes their multitudinous products and services available in discrete, clearly described, defined components, with equal access and pricing to both libraries and for-profit firms that might be willing to use those discrete components as the basis for competitive products and services. Furthermore, the amount charged over actual costs should continue to be closely monitored by the OCLC Board of Trustees to make sure that it stays within a reasonable percentage, encouraging overall marketplace competition, open and widespread usage of their infrastructure products/services and a sustainable OCLC organization. Reasonable discounts for “bundles” should solely reflect the organization’s reduced cost of sales and administration and absolutely must not be aimed at reducing competitive offerings in the marketplace. In fact, it should encourage them.
This sustainability point gets confused, in my opinion, within OCLC. The operating results as a percent of revenue (targeted at 2-4% of OCLC’s net contribution to equity) are frequently used as an indication that they are not overcharging the membership for products and services. That might be true as a average, but how about when considered on a more granular level? You might want to remember this legal case before answering. Plus there are other items to be considered in evaluating that statement:
First, and equally important to the sustainability of OCLC, are the annual revenues, which (shown below and from their Annual Reports) don’t show such a positive picture:
(in millions)
2009 $240
2010 $228
2011 $205
2012 $203
2013 $206
Clearly, real growth continues to be absent. OCLC claims this is the result of the recession, divestiture of some assets, the reality of economic conditions of libraries and the fact that they’ve held a cap on fee increases.
However, growth needs to be restored and thus OCLC should be internally (and possibly are) asking two questions:
- Is OCLC making the right investments? This requires close analysis of the cost of developing a product/service, the revenue it is generating, where it is in the lifecycle of a product/service and the competitive landscape. Competing with existing products/services is a costly business and must be closely scrutinized unless it is offering a quantum leap (.i.e. major differentiation) forward for libraries and their end users. Furthermore, this must be balanced against areas where there is entirely new needs that would help broaden OCLC’s reach beyond libraries, yet stays within closely related areas, such as research data management/storage/access or knowledge creation platforms. Determining which investments will provide the greatest growth in revenue is the end goal here, particularly at a time of flat and/or declining revenues.
- How does OCLC best support the profession of librarianship? I keep wondering if we wouldn’t be better served by OCLC if they truly focused on developing core infrastructure services such that those services could be broadly built upon by libraries, the companies and OSS developers that serve them? The revenue model would be based on recurring subscription fees and I personally believe would ultimately lead to growing revenues because they could become a more widely trusted and utilized partner across the profession and among those companies and organizations that serve the profession.
