NEWS> The Enron of the Library and Research Worlds
- From: Gleason Sackmann <gleason@xxxxxxxxxxxxxxx>
- To: NetHappenings <nethappenings@xxxxxxxxxxxxx>
- Date: Tue, 18 Feb 2003 08:49:14 -0600
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Net Happenings - From Educational CyberPlayGround
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From: "David P. Dillard" <jwne@xxxxxxxxxxxxxxxxxxxxx>
Sent: Sat, 15 Feb 2003 09:26:29 -0500 (EST)
When one visits libraries, one sees that they own substantial collections
of books, magazines and journals. This is not startling news. These
books and journals do not just land on library shelves by magic. They
must be selected and purchased and in the case of periodicals a commitment
over years is made to keep that title coming so that one can see issues of
that journal for any of a number of years from when the subscription to
that journal began until the present time, the time when the library
budget forced cancellation of the title or the time when the journal
ceased publication. Maintaining subscriptions for hundreds or thousands
of individual journal publishers in a large library would be a daunting
task and involve tremendous staff time. Hence, companies have evolved
that provide journal subscription plans for all or most of the periodicals
that a library subscibes to. Even though databases and aggregators are
now providing a portion of a library's periodical or serials collection
online in these internet accessable online services, most libraries still
own large and perhaps growing collections of journals in print.
In the past year, a major crisis has developed in the library serials
collection world that has been threatening to leave a substantial group of
libraries including some very major ones without current years of
periodicals that have already been paid for. This is a problem not just
in say the United States but rather is worldwide in scope. A company that
has operated in the serials purchasing field and has handled the accounts
of many libraries, a company named Faxon, was purchased by Rowe.com and
Rowe.com was in turn purchased by Divine, the company that also owns the
search engine with a high proportion of fee based content, Northern Light.
Divine has been experiencing financial problems. Early last year Divine
began withdrawing money from Rowe.com that represented library payments
for periodical subscription fees for purchase of journals and magazines.
This money was used by other divisions of Divine rather than going as
payments to the journal publishers. In December of last year, Divine
announced that it could and would no longer finacially support the
operations of Rowecom. As a result a large group of libraries, including,
I believe, the United States National Library of Medicine, have been left
without journal issues for which they have already paid for one or
multiple years in the future. Libraries often take advantage of discounts
provided by serial subsription services for multiple year subsriptions to
journal titles. This set of developments has been described by some as
the Enron case of the library world.
The problem may be in great measure resolved by the takeover of all or a
major portion of the Rowecom library serials opertion by a major company
in the serials provision industry and in the databank (provider of
databases) industry as well. This company is EBSCO. It should not come as
a major surprise that there has been much discussion of this problem that
not only effects librarians, but also students and scholars who use
library resources for research. There has been much discussion of this
situation on library discussion groups including two in particular. One
was formed strictly for the creditors in this situation to discuss their
options on a restricted Yahoo Groups discussion group:
Rowecom Creditors
<http://groups.yahoo.com/group/rowecomcreditors/>
Another group that has featured substantial discussion of the issues in
this matter is the LibLicence-L discussion group moderated by Ann Okerson
of Harvard University. This list features public archives.
Liblicense-L List Archives
LICENSING DIGITAL INFORMATION, Liblicense-L List Archives
<http://www.library.yale.edu/~llicense/ListArchives/>
A search of this archive of the word "divine" produces 55 message links.
The issue has made media news as well and here is some sampling of press
coverage on this issue to give some idea regarding the seriousness of this
development and problem.
----------------------------
Company profile
RoweCom purchase haunting Divine :Buyer infected by problems
it couldn't cure
By Barbara Rose and Rob Kaiser
Tribune staff reporters
Chicago Tribune
Published February 9, 2003
<http://www.chicagotribune.com/business/
chi-0302090036feb09,0,951681.story?coll=chi-business-hed>
For a flamboyant dealmaker like Divine Inc.'s Andrew "Flip" Filipowski, it
would be hard to find a less sexy business than placing libraries'
subscriptions to obscure journals such as Tetrahedron, a must-read for
chemists.
Yet Divine's opportunistic CEO was determined in late 2001 to buy just
such a business--RoweCom Inc., a troubled Massachusetts public company.
Filipowski's chief financial officer counseled against the deal, as did at
least one outside financial adviser, according to one person who
participated in the discussions.
But Filipowski wanted to buy RoweCom for two reasons.
Despite its losses, RoweCom's $348 million in sales would build Divine's
revenues, helping Filipowski make good on his boast to shareholders to
create a $1 billion in sales company from the ashes of the dot-com
disaster that killed his Internet incubator.
Filipowski also was convinced he could turn RoweCom into a marketing
machine. He envisioned selling Divine's software to leading libraries and
publishers in the rarefied world in which scholars and scientists exchange
ideas.
==================================
RoweCom Files for Bankruptcy, Then Sues divine for Fraud
by Paula J. Hane
InfoToday
<http://www.infotoday.com/newsbreaks/nb030203-1.htm>
February 3, 2003 In a bizarre twist to the continuing saga of the
disappearing subscription money, RoweCom, the beleaguered subsidiary of
divine, inc., filed for bankruptcy on Monday Jan. 27 in U.S. Bankruptcy
Court, District of Massachusetts, Eastern Division. That same day, RoweCom
filed a 14-count lawsuit in the same court against its parent company,
alleging that divine had made fraudulent transfers of over $73.7 million
of RoweCom funds and had looted the company.
Our last NewsBreak on this topic
http://www.infotoday.com/newsbreaks/nb030127-1.htm
reported that, just a few days before the bankruptcy filing, Swets
Blackwell had withdrawn its bid to buy RoweCom and EBSCO had signed a
non-binding letter of intent to acquire the worldwide RoweCom business. At
that time, RoweCom said the transaction would be implemented through a
chapter 11 bankruptcy filing. When asked about the potential impact of
the lawsuit on the acquisition plans, EBSCO representatives said the
company had no official comment.
==================================
EBSCO acquires RoweCom's European division
Steven Mackay Staff
Birmingham Business Journal
<http://birmingham.bizjournals.com/birmingham/
stories/2003/02/03/daily36.html>
Birmingham-based EBSCO Industries Inc. has purchased the European division
of RoweCom, itself a subsidiary of Chicago-based Divine Inc. EBSCO plans
to buy the remaining worldwide operations of RoweCom, which recently filed
for bankruptcy as part of the purchase agreement.
==================================
EBSCO to Acquire Operations of RoweCom Worldwide
2003-01-25 11:13 - News Release
<http://new.stockwatch.com/newsit/newsit_newsit.pasp?
bid=U-pNYSA012-DVN-20030125&news_region=U&symbol=DVN>
BIRMINGHAM, Ala., Jan. 25 /PRNewswire/ -- RoweCom, Inc., doing business as
RoweCom, Faxon or divine Information Services ("RoweCom"), announced today
the signing of a non-binding letter of intent with EBSCO Industries, Inc.
("EBSCO"), the global leader for the delivery of integrated information
systems and services, for the proposed purchase of the RoweCom worldwide
subscription agent business (the "Business"). The proposed transaction was
also endorsed by the steering committee of the ad-hoc group of publishers
and library customers of RoweCom. The committee, including the publisher
members the American Institute of Physics, the Association of Learned &
Professional Society Publishers, Elsevier, Oxford University Press and
Wiley, will endeavor to expand the group of publishers supporting this
transaction as they believe the contemplated agreement is a significant
step forward for customers and publishers.
The proposed transaction is subject to due diligence and definitive
documentation, among other customary conditions to be satisfied prior to
completing the transaction, including regulatory approval and the like.
Additionally, the proposal will require publishers and libraries to work
with EBSCO regarding the fulfillment of prepaid RoweCom orders. The U.S.
transaction will be implemented through a chapter 11 bankruptcy filing of
RoweCom.
This announcement follows the December 20, 2002 press release by RoweCom's
parent company, divine inc. ("divine"), which indicated that divine had
decided to no longer support the Business. Since late December there has
been considerable concern and uncertainty among RoweCom's customers and
publishers with respect to orders placed with RoweCom, most of which have
not been placed with publishers. However, a number of publishers had
agreed to grace RoweCom customers while investigations and negotiations
ensued over a possible restructuring of the RoweCom business.
==================================
Miami's libraries lose $384,000
By Benjamin Poston
OXFORD PRESS
<http://www.oxfordpress.com/op/301707404671684.bsp>
Miami University libraries have been hit hard in the pocket book by the
financial collapse of a bankrupt subscription agent, losing $384,000 in
library funding in the process.
Miami's longtime subscription agent, RoweCom/Faxon, a Massachusetts-based
subsidiary of Divine Information Services Inc., informed the university in
late December that it had stopped making payments for subscription
renewals due to bankruptcy.
==================================
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WHY EBONICS IS A LANGUAGE
Stigmatized and Standardized Varieties in the Classroom:
Interference or Separation? What is among the most serious social
problems that our country faces? The failure of inner-city schools
to teach children to read.
<http://www.edu-cyberpg.com/Linguistics/Home_Linguistics.html>
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Tuesday, January 21, 2003
Library Losses Could Reach $50 Million in divine Suit
<http://www.econtentmag.com/ecxtra/2003/2003_0121/2003_0121_3.html>
The New York attorney general's office has filed a suit against divine
over the failure of divine's Faxon/RoweCom subscriptions unit to pay
publishers and place 2003 orders on behalf of New York libraries. An
article in the Chicago Tribune estimates that libraries nationwide could
lose as much as $50 million. According to a statement by divine's general
counsel, money collected from customers was used throughout 2002 to pay
operating costs and make debt payments. As it has in years past, the
company sought to borrow against future payments to carry it through the
end of 2002, but such financing was not obtained. The divine subsidiary,
RoweCom, aggregates periodical subscriptions from libraries and orders
them from publishers. A large library can order as many as 40,000
different publications. "What they have been told is RoweCom cannot place
their orders for 2003," according to Jude Sullivan, general counsel for
divine. He has also been quoted as saying divine is trying to sell RoweCom
to competitors, which might resolve the problem. According to Sullivan,
money the libraries paid to RoweCom was used in other divine operations
having nothing to do with the subscription business, but he also said
other divine money was used to fund RoweCom. On balance, he said, RoweCom
received a $10 million subsidy from divine. The service told libraries in
December it could not supply the publications they had ordered, and said
its corporate parent, divine, would not support the business going
forward, according to a RoweCom announcement. Executives have declined to
say how RoweCom's problems could affect divine, which has reportedly gone
through tens of millions of dollars is yet to earn a profit.
==================================
Full Articles and Documents May Be Read at the URLs Above.
Sincerely,
David Dillard Research Librarian
david@xxxxxxxxxxxxxxx
ECP RingLeader
http://www.edu-cyberpg.com/ringleaders/davidd.html
Temple University
(215) 204 - 4584
jwne@xxxxxxxxxxxxxxxx
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