Retrenchment Hits Electronic Publishing Industry
Digital Goods likely to fold; Reciprocal, netLibrary realign
Jim Milliot, Paul Hilts, Calvin Reid -- Publishers Weekly, 5/7/2001
A number of players in the electronic publishing arena have made moves in recent weeks to adapt to changing market conditions. In addition to the shifts made at Versaware reported in last week's issue, Digital Goods, netLibrary and Reciprocal all have made changes to their business plans that resulted in eliminating around 176 positions.
By far the most drastic steps occurred at Digital Goods, where 39 employees were fired last week, leaving the company with a skeleton crew of four. The downsizing came only weeks after the company cut 19 positions as part of its effort to make the transition from a digital rights management company to a digital marketing company (E-pub, Apr. 23). The latest round of layoffs was induced by Digital's unsuccessful search for additional financing; the company has been bleeding cash and lost $35 million over the last two years. NASDAQ suspended trading of Digital Goods' shares last Tuesday, pending receipt of additional information from the company. At press time, the suspension still held.
Among those let go last week was Scott Griffith, Digital's president and CEO. Dr. Jonathan Schull, company founder, has assumed Griffith's duties and will oversee what is likely to be the winding down of the company's operation. The company has hired Bramson and Pressman as an adviser to assist in maximizing the value of Digital Goods' intellectual property assets, including its portfolio of issued and pending patents.
At Reciprocal, the company has realigned its business organization in an bid to achieve higher efficiencies. "The company had been organized by industry focus, with separate divisions for publishing, music and software," Tony Telloni, head of public relations, told PW. "By realigning along more traditional lines of sales, marketing and business development, we can eliminate redundancy and be much more efficient. The new organization also supports Reciprocal's multi-industry media distribution and content inventory management. Film companies are always asking for music rights, and publishers are asking for video and music. "
The layoffs amounted to "about 47 people," or 29% of the company's total workforce, Telloni said. The company will keep all three of its offices (Buffalo, New York City and North Carolina) open. John Schwarz will remain president and CEO, and Matt Moynahan, formerly senior v-p, general manager for publishing, will take the title senior v-p, business development. Reciprocal is seeking, and rumored to be close to obtaining, a new round of financing, led primarily by current investors Microsoft and Softbank.
Pointing to cost savings and faster text conversion processes after its adoption of the Open e-Book specification standards, netLibrary, a Boulder, Colo.-based e-book distributor, has laid off about 90 employees in its text conversion division.
NetLibrary CEO Rob Kaufman said that publishers have been urging netLibrary to adopt the Open eBook standards. "NetLibrary will accept electronic files meeting OeBF standards directly from publishers, or manage the conversion process on behalf of the publisher," said Kaufman. Kaufman said the firm will now hire outside vendors to convert text into digital files. In addition, said Kaufman, adopting the standards "will create efficiencies that will strengthen our business model and allow us to focus more of our resources directly on supporting publishers."
The changes will not affect netLibrary's MetaText division.
