Chronicle article: Subscription Service's Difficulties Could Be Costly for Libraries and Publishers

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This article is available online at this address:

http://chronicle.com/daily/2003/01/2003011003n.htm

  Friday, January 10, 2003

  Subscription Service's Difficulties Could Be Costly for
  Libraries and Publishers

  By ELIZABETH F. FARRELL
    
  Hundreds of university libraries and academic presses risk
  losing millions of dollars in subscription fees paid to or
  revenue expected from RoweCom Inc., a major subscription
  service for scholarly journals, following an announcement that
  its parent company will sell off the distributor as part of a
  corporate restructuring. Although the company has not filed
  for bankruptcy, RoweCom's uncertain financial future has
  prompted more than 400 libraries and publishers to join a
  creditors group and retain legal counsel.
  
  In a "Notice to Customers" filed with the Securities and
  Exchange Commission on December 23, Divine Inc., the parent
  company, stated that RoweCom was "currently experiencing
  financial difficulties" and was in the process of pursuing
  other possibilities that could include the "sale or shutdown
  of the business."
  
  Divine also guaranteed that RoweCom's journal clients would
  continue to distribute journals to libraries until the end of
  January, but stated that "there can be no assurance" that
  publishers will distribute journals after that.
  
  This ambiguity has alarmed many librarians, whose libraries
  operate on limited budgets and who paid RoweCom a year or more
  in advance for many journal subscriptions. On e-mail
  discussion groups among colleagues, journal publishers also
  have expressed concern that RoweCom might not pay them for
  journals they had already provided to libraries.
  
  "We're all very worried because it's a significant amount of
  money, and many journals operate on very thin margins," said
  Robert Shirrell, the journals manager for the University of
  Chicago Press. "We received orders from RoweCom, but no
  payment, and we're following the situation very closely."
  
  According to many experts in the field, RoweCom is one of the
  top three journal distributors, and its shutdown -- many
  speculate that it will file for bankruptcy under Chapter 11 --
  could be disruptive and costly to both publishers and
  libraries.
  
  Due to the large volume of journals to which most institutions
  subscribe, services like RoweCom's are essential to streamline
  their orders. Instead of paying separate fees to hundreds of
  journals, libraries fill one order with RoweCom, which serves
  as an intermediary between the libraries and the publishers.
  
  Divine has already signed a letter of intent with one of its
  competitors, EBSCO Industries, to buy the European branch of
  RoweCom's business. Divine announced on Thursday that two
  companies were conducting due-diligence procedures with the
  consideration of buying some or all of the U.S. portions of
  RoweCom. It did not name those potential buyers and would not
  comment beyond the information in a news release.
  
  Although many of RoweCom's customers are worried, they say
  they will wait until final decisions are made before they take
  any legal action against either RoweCom or its parent company.
  
  "We don't know that this whole thing won't have a happy
  ending," said Mr. Shirrell. "They could end up dividing up the
  business and paying us back" for the journals that publishers
  provided to libraries.
  


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Copyright 2003 by The Chronicle of Higher Education