The AHA and the RoweCom Subscriptions Crisis

Arnita A. Jones, May 2003

Readers of Perspectives have perhaps noticed accounts in the Chronicle of Higher Education and elsewhere of problems concerning a company called RoweCom, which fulfilled journal subscriptions to libraries, and whose parent company, divine, inc., has just filed for bankruptcy protection. Most of the publicity about this case has centered on the plight of the libraries that paid RoweCom millions of dollars for thousands of journal subscriptions that they will not now receive. The Library Journal has reported that both the parent company and its subsidiary, RoweCom, have contractual obligations for subscriptions worth some $65 million, but have very little cash left to meet these obligations (the details about this disaster and its impact upon libraries are described in the story on page 10).

What has not been the subject of as much discussion, however, is the plight of publishers—such as the AHA—who have large numbers of subscribers who placed orders through RoweCom. What is the potential impact of this subscription agency's declaration of bankruptcy upon the Association's obligations to our subscribers? We have about 290 subscriptions contracted for, but for which we have not yet received payment from RoweCom. It would appear to be an easy decision to make, to ask that the subscribers pay anew. But the sad fact is that most libraries will not be able to duplicate their journal budgets and pay again in the same year. Paying again for subscriptions becomes virtually impossible also because university budgets—and their library budgets in particular—are already under extreme fiscal pressures these days. The same is true (if not more germane) for other institutions that may be subscribers, such as historical societies, government agencies, community colleges, public libraries, and so on. Any amounts that subscribers may be able to recover through the bankruptcy proceedings will only be a small fraction of what they already paid RoweCom.

What, then, is the solution? Many publishers have decided to continue fulfilling the library subscriptions even though they do not expect to be paid. Why should publishers, rather than libraries, bear the losses involved, taking what appears to be a poor business decision? The argument is that we want to keep these subscribers into future years and that we want to ensure that complete runs of our journals remain available in libraries.

We do not yet know whether the bankruptcy proceedings will result in affected publishers receiving any amounts at all that could be set off against the unpaid subscriptions. The attorney we consult on intellectual property rights issues believes that it is highly unlikely that publishers will receive any payments in such scenarios. However, one arrangement that recently came up—signing up with EBSCO, Inc., another library subscription company that has agreed to take on the subscription services of RoweCom (which it has been allowed to acquire under the bankruptcy proceedings)—seems to be the best solution, one that offers benefits both for subscribers and for publishers. Under this arrangement, subscribers will continue to receive journals they subscribed for, thus ensuring the maintenance of goodwill and complete runs of journals on their shelves, and publishers who participate in this arrangement with EBSCO will have the status of creditors in the bankruptcy proceedings and may thus even gain partial repayment of the subscriptions that are being fulfilled.

After consultation with officers of the Association, I have signed, therefore, an agreement with EBSCO, and we will continue to fulfill the RoweCom subscriptions. According to our calculations, this will entail a shortfall in our income of $65,000, which is a significant amount for us. However, because we had budgeted for a projected surplus of $60,000 for the current fiscal year (ending June 30, 2003) and because the shortfall will be spread over this and the next fiscal year, we can absorb this loss without a major problem. We have to bear this loss not only because we will be helping our library subscribers and their patrons, but also because we will be making sure that publications of the AHA remain available to the widest possible readership.

—Arnita Jones is executive director of the AHA.