Rakuten Acquires Overdrive to Challenge Amazon in eBook Lending Market
In 2011, Japan’s largest internet retailer Rakuten acquired the Canadian eBook specialist Kobo. This acquisition cost the company 315 million US dollars. Even before this, Rakuten had been on a buying spree for a long time, predominantly purchasing various emerging online retailers to boost international e-commerce.
Since the Kobo acquisition, the company’s efforts have increasingly focused on expanding its eBook business. Its main competitor in this space is none other than Amazon, both in its home market of Japan and on the international stage.
eBook Lending Changes Hands
So far, however, the battle against the US shipping giant seemed to be progressing only with difficulty. Apparently, Rakuten also saw it that way and, as of today, is back on a shopping spree. As the Japanese company announced, it has just reached an agreement to acquire US eBook lending service Overdrive for 410 million US dollars.
Overdrive is the largest provider of digital library services in the United States. The system works similarly to the digital lending services seen domestically. The US provider enables partners to set up their own lending offerings and provides them access to its catalog.
Globally, Overdrive claims to have over 33,000 libraries, schools, and retailers as partners. In the US, the company also offers a lending option for Kindle eReaders—something not available through domestic digital lending services.
A Declaration of War on Amazon: Let the Actions Speak
The question is, for how much longer? Rakuten founder and CEO Hiroshi Mikitani has made no secret of the fact that they want to beat Amazon.
The acquisition of Overdrive could lead to the lending service eventually ending support for Kindle eBook readers. If this does happen, it would be a significant blow to Amazon. According to a 2012 survey, more than 80% of Overdrive users use a dedicated reading device for borrowed eBooks. Today, Amazon’s Kindle offerings are even stronger than they were back then, mainly due to the failings of its main competitor Barnes & Noble, allowing the shipping giant to hold by far the largest share of the eBook reader market in the US. This likely means that most Overdrive customers are currently using a Kindle eReader.
At any rate, Rakuten’s acquisition also casts new light on the recently reported delays in the availability of current eBooks for Kindle. Recently, only a few new titles seemed to make it into Overdrive’s Kindle catalog, which might not have been directly related to Amazon (as initially thought) but rather due to the now announced change in ownership.
The disappearance of the service could drastically increase the willingness of digital library customers with Kindle eReaders (primarily in North America) to switch, which would, in turn, benefit Rakuten’s subsidiary Kobo.
Growth Targeted in Europe and Other International Markets
Apart from such a potential direct competition with Amazon, Rakuten is already announcing plans to strengthen the international Kobo offerings. “Kobo […] and Overdrive will work together to enhance their capabilities to offer first-class content and reading services,” according to the press release.
The Canadian eBook specialist lacks a counterpart to Amazon’s Kindle Lending Library and Kindle Unlimited flat rate, which is likely to change in the future with stronger integration of the newly acquired library service.
In the past, Rakuten has emphasized that Europe is perceived as a growth market. “We see Europe as a region for growth. That’s why we want to make further acquisitions,” as it was stated back in 2012. The acquisition of Overdrive could therefore also spruce up the Kobo offering here.
The transaction is set to be completed within the next 30 days. After that, it will likely take some time before the impacts are felt in the consumer market.
