Subscription middleman withholds libraries' payments to publishers
Chicago's Divine Inc. and its subsidiary RoweCom have made an unheavenly hash of their subscription brokerage business. Libraries and publishers reportedly face losses of $50 million or more as a result of the companies' actions. They and potential suitors are negotiating with Divine and RoweCom to try to make the best of the situation.
Keeping library shelves filled with periodicals is hard work, especially at larger institutions where subscriptions can number in the tens of thousands. To help manage the flow, libraries turn to intermediaries, such as RoweCom, which accept library orders and payments on behalf of numerous publishers.
RoweCom accepted orders and checks from libraries for 2003 subscriptions but didn't forward them to publishers. Instead, the money was passed along to Divine, according to Kent Mulliner, collection development coordinator for Ohio University Libraries. Divine also allegedly held onto money that customers sent it directly. Published reports indicate that the parent company may have used the funds in part to support its other business activities.
Divine said in a press statement on Dec. 20 that it had "decided to no longer support the subscription aggregation business." It is now exploring alternatives including sale or closure of RoweCom. RoweCom, which is also known as Faxon, a company that it acquired in 1999, was itself acquired by Divine in 2001. Divine did not respond to C&EN's repeated requests for comment.
The firms' actions may affect a few thousand libraries. Libraries and publishers have formed a committee to investigate the situation and negotiate with RoweCom and Divine.
Ohio University has more than $1 million at stake, committee member Mulliner says. Subscriptions for some of Ohio University's periodicals began lapsing back in November. But the university can still obtain access to many affected periodicals through OhioLINK, which provides materials to the state's university libraries.
The State University of New York, Buffalo, had $1.3 million at risk. After the state's attorney general filed suit, Divine returned $500,000 in exchange for the university putting the suit on hold until late January. David J. Nuzzo, head of the acquisitions department for the university libraries, said Divine hoped this would make it easier to sell its brokerage business.
New York state doesn't have the funds to pay for missing subscriptions a second time. If the university can't extract further money from Divine, it will have to cut out its less important subscriptions and book purchases to pay for the critical periodicals, Nuzzo says. "It's an ugly scene."
Several publishers, including the American Chemical Society, will extend subscriptions through February to library customers whose payments were withheld by Divine. What will happen after that is unclear.