Rakuten bolsters e-books by gobbling up distributor OverDrive

PCWorld News

Rakuten is trying to inject some black ink into its struggling ebook business with the acquisition of OverDrive Holdings, one of the largest providers of ebooks for rent to libraries and schools.

The Japan-based e-commerce giant will gain about 21 million users in the US$410 million deal as well as a digital distribution platform with over 2.5 million titles and relationships with thousands of publishers, libraries and schools.

Cleveland, Ohio-based OverDrive makes rental ebooks available as Web apps or e-reader files. While content on OverDrive’s lending-focused marketplace is available on multiple platforms including Kindle from Rakuten rival Amazon.com, the move could boost the profile of Kobo, Rakuten’s small e-reader company.

Rakuten sees huge growth potential in the public library ebook market, where spending on digital content is only 7 percent of library spending in the U.S., Takahito Aiki, who leads Rakuten’s ebooks business, said Thursday at an event in Tokyo.

“The near-term opportunity is for us to do a more direct integration with Kobo apps and devices, where you can instantly borrow a book from a school or library and have it appear on your Kobo bookshelf,” OverDrive CEO Steve Potash said.

In the U.S., the dominant ebook platform for OverDrive content is Kindle and the dominant hardware is iPad, Potash said, adding that smartphones are now used by a majority of school and library users when reading books in digital form.

The acquisition of OverDrive, a veteran player in the ebooks business, will bring Rakuten’s ebooks arm “close to break-even” on an EBITDA (earnings before interest, taxes, depreciation and amortization) basis in 2015, the Internet company said.

Rakuten bought Canada-based Kobo in 2012 and has enshrined digital contents as one of its three main pillars of business alongside e-commerce and finance.

OverDrive is the latest item in Rakuten’s cart, which also includes messaging app Viber, acquired for $900 million, video streaming service Wuaki.tv and TV and video site Viki. In another example of its digital commerce drive, earlier this week Rakuten said it would begin accepting bitcoin payments at its sites in the U.S., Germany and Austria.

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