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US subscription agent EBSCO Information Services

When the average researcher pulls the latest issue of a journal off a library shelf, or downloads an article from their desktop computer, they barely think about what has gone on behind the scenes to make that happen.

Brooke: 'We have seen publishers trying to go it alone but they have not done a very good job and the marketplace has not been happy with them.'

Publishers have customers in libraries all over the world that might want both print versions and electronic access to journals, and they have a range of different subscription models and pricing structures available. On the library side, the subscription process needs to be managed, the library budget balanced and so on. They also need to get the best value from the various subscription models such as pay per view, subscription bundles or click-through access from a bibliographic service.

Agents relieve headaches

Ebsco plays a big role in handling these headaches for librarians and publishers. It has grown from a basic distributor of magazines and subscription agent to providing a bewildering array of services that make the whole academic publishing circus function.

It is a family firm, based in Birmingham, Alabama. According to Forbes Magazine in 2005 the parent company, Ebsco Industries, had annual revenues of $1.9 billion and was the 162th largest private company in the US. Along the way it has expanded beyond publishing services and even has a division making hunting, fishing and outdoor sports equipment. It is continuously acquiring new business and expanding its activities both as a service to publishers and a publisher itself, and providing services that make libraries work more efficiently. Any time something becomes a headache, it is an opportunity for Ebsco.

The story of Ebsco is one of a series of highly entrepreneurial twists and turns which has resulted in the conglomerate that it is today. Its founder, Elton B Stephens, qualified as a lawyer in the depression years in the southern US but found that he could make more money selling magazines door to door.

Towards the end of World War II he established a company supplying magazines and other morale-boosting goods to military bases. He started to expand across the USA and got his sales representatives to make calls on local libraries and schools when they were visiting military bases. Soon the company was supplying all sorts of libraries and he expanded into supplying companies with publications for their reception areas too. He bought a company making display racks and every time he came up with a new requirement created a service to meet it.

Stephens handed over to his son Jim Stephens in 1971 and the company continued to grow. From supplying libraries, Ebsco turned into a major service company for the publishing sector, establishing offices all over the world, representing publishers as subscription agents and billing in local currencies. Its headquarters is in Birmingham Alabama, but it now has 32 offices around the world. Last year Jim Stephens became chairman and handed over the presidency of the company to his brother-in-law, Dixon Brooke.

Brooke said that the history of the company has been a constant evolution where Ebsco continually looks for way to improve efficiency for libraries and publishers. He believes that Ebsco only has a role if it can offer a more superior service to customers than they could provide themselves, whether it is through the company’s investment in systems or its economies of scale.

Brooke said: ‘our founder showed great creativity and always looked for ways to grow the business. He was guided by the principle that it was better to be in three or four or five things, rather than just one, I think that comes from his background in the depression. Over the years we have been comfortable operating in a variety of business. We are privately held and do not pay a dividend. We invest our earnings in the operations of the business and in new ventures. This means we are constantly looking for new businesses that compliment what we are doing. We frequently encounter opportunities in business that we are not currently in but feel comfortable with.’

Brooke said that many opportunities arise because different businesses either use the same distribution network or address similar groups of customers. This means that Ebsco can take advantage of its existing infrastructure and resources to give economies of scale.

The primary business of the company is information, whether it is managing subscriptions or supply chains or, more recently, in publishing its own electronic databases. It has expanded its publishing business by licensing full text from publishers and acquiring database publishers.

Brooke said: ‘First and foremost we are a leading supplier of serial publications whatever the frequency or format. Over the years we have had to develop a range of services for each of the markets we are in. This means we have had to be extremely flexible in the way we design our systems so they can be leveraged appropriately into different marketplaces.

‘If there is anything we have learned over the last 50 years in this business, it is that we have to adapt to change. We tell our people that if they are not interested in being in a fast-changing environment then they should probably look for another job.’

Helping libraries and publishers

One of the main things that is changing is the way that the company helps libraries. ‘Staff budgets in libraries have not grown at the same rate as the costs,’ he explained. ‘We partner with libraries and publishers, looking for things that we can do to lower the cost of operations on both sides. Our services have evolved into helping with budgeting and collection, and blending in to whatever online system the libraries are using so that time is not wasted. That involves partnerships with third-party vendors and trying to add value to the process.

Helping balance time and money

‘The bottom line is saving time in the library and time is money. If the things we are doing were removed from the equation then library staff would have to go up and that would take away from acquisition budgets.’

The company also serves publishers. ‘Many publishers recognise that we are in a specialised business that is not really connected to the activity of publishing. One could adopt the opinion that they could take on what we do, but they are not going to be willing to spend as much to develop the strength, depth and flexibility that we can offer. We have seen publishers trying to go it alone but they have not done a very good job and the marketplace has not been happy with them. In the long run we don’t see it as a good use of their resources and we hope that eventually they will see that too.’

The biggest change has clearly been the introduction of electronic publishing and Ebsco has been evolving its electronic services to fit in with these changes. Electronic publishing accounts for 50 per cent of its journal business compared with less than two per cent six years ago. Its first electronic service, EBSCONET, started in the 1980s and provided bibliographic information to libraries to help manage their acquisitions. The next move was EBSCOOnline, which was for electronic journal ordering. Then EBSCO host, which hosted electronic journals for publishers. The services are now part of EBSCO A-to-Z and EBSCOhost E-Journal package. All these services are designed to help libraries manage their subscriptions and access and to produce the kind of management information they need.

After the Rowecom collapse

Over the years Ebsco has expanded its business by buying other similar companies. In 2003 it took on one of its biggest challenges when it took over the assets of Rowecom, one of its biggest rivals in the subscription agent business. Rowecom was insolvent but had been paid a reported $65 million in advanced subscriptions. The industry was on the brink of meltdown as most libraries would have been unable to pay again for their journals. Eventually a deal was reached in which publishers agreed to honour Rowecom orders in return for libraries signing over their bankruptcy claims to those publishers. Most publishers agreed as they did not want to risk losing library accounts.

Brooke said that Ebsco took a massive gamble in picking up the pieces after the Rowecom collapse. ‘We invested money without any assurance that customers would renew with us. We incurred operating expense for an entire year with no revenue on the calculated risk that libraries would favour us with renewal if we did a good job,’ he explained. ‘We invested a lot of time and energy in integrating that business into ours and working with Rowecom customers, getting them familiar with us and tailoring our services to meet their needs. That was a big job. We decided to keep the Westwood operation open so that people could continue to work with the same account managers.

‘Fortunately for us we had a high percentage of renewals and the risk we took worked out. When we look back on it we are very pleased.’

Looking into the future Brooke says that library customers have been asking for improvements to electronic authentication and considerable development resources are being brought to bear. He believes that the journal world is well behind, for example, TV services which can give instant access and authentication to new channels of pay per view.

He said: ‘With electronic journals it is too difficult. We are hoping that before long we will be able to offer the same kind of speed. But, although it is a priority for us, we cannot do anything without the co-operation of the publishers.’

Keeping an eye open for threats

He admits that there are threats on the horizon, but that has always been the case and he said that Ebsco has grown by treating them as opportunities. He is closely watching the open-access debate but at the moment he is not seeing any large numbers of cancellations of traditional journals. He believes that it is just as likely that open access will present an opportunity for Ebsco as a partner in the process as it is to undermine its core market.

He said: ‘Where there are challenges there are always opportunities. I am not aware of a business model out there that will seriously disrupt the market but we are always watching what might happen and developing contingency plans. We are not sitting here thinking things will always be like they are now.’

Another threat is the move for publishers to offer packages of publications to libraries. This has hit margins in the subscription business at a time when it is investing heavily in increasing its electronic services. However Brooke said that Ebsco is always improving its internal efficiency and adding value for its customers.

He explained: ‘Some libraries that have gone for big publisher packages have found that they are paying for information that they are not using. Our service helps them by providing an analysis of particular packages to track usage. If things get blended into a package then you end up with libraries not really knowing if they are getting good value for their organisation. When they get one invoice from a publisher they have to do a lot of work to break it down. The benefit that the agent provided in capturing and tracking is much harder to come by.’

At the moment the electronic subscriptions side of the business employs about 1200. Another 500 work in electronic publishing, which is the fastest growing part of the company. Brooke admits that managing such a complex set of services is not easy but he has grown up with the business over some 35 years, most of it in information services, so he has a very deep understanding of what is involved in every part of the company. He accepts that it can take staff a long time to understand how the business works and so the company tries to recruit very good people and works hard to keep them with the company.

He said: ‘When you evolve into a position it doesn’t feel so daunting. We depend on having the best people we can have. We are in a relationship business and maintaining those relationships is important. It takes time to train people in their work and once they are trained we like to keep them there as long as they are being effective. We tend to reward people for doing a good job and have been successful in keeping people long term. I was at a meeting recently with 15 people in the room and half of them had been with the company for more than 20 years.’

Brooke himself is one of the longest serving staff members. He joined Ebsco in 1973 having previously worked in a graduate training programme with the First National Bank of Birmingham, Alabama. He worked in many facets of the business before becoming Ebsco’s regional manager for the South Western US for the subscription services business. He then started working internationally in Australia, New Zealand, South Africa, the Middle East and Asia. He opened permanent offices in many countries. He came back to the USA to run the office that provided support for the international operations.

He went on to take over management of all the support services including IT systems, bibliographic services and publisher services.

Along the way he married Elton Stephen’s daughter, bringing him into the family which closely holds ownership of the company. He has been the chosen successor to Jim Stephens and has worked closely with him over the last three years with a view to becoming president and CEO last year.

No family favours

But he said that being part of the family has not bought him any favours and it is hard work and business results which count with the company rather than family connections.

He said: ‘We are a family business but we do not have large numbers of family members working in the business. We require family members who work with us to have a bona fide job and to work as hard if not harder than the next person. I have logged my time with the firm and have a proven track record. While a family firm would like to keep the leadership as much as possible within the family, as they move along our family is more interested in keeping the business strong and keeping us in a position where we can serve our customers with distinction. I understand that and the pressure is the same on me as on anyone else.

‘For me, leading the company is a great honour that I have aspired to over time. I worked closely with Elton Stephens and Jim Stephens; I admired them and learned a lot from them. I am 58 years old and I’m going to work hard at it for as long as my health will allow.’

John Murphy