Bilbary caught in 'crossfire' of Amazon dispute

Tim Coates has blamed uncertainty over the e-book market for the collapse of his e-book site Bilbary. The e-bookseller went into liquidation in April, with a final creditors’ meeting to be held in December. Coates is now working on The Freckle Project, a new e-book venture aiming to bridge the gap between libraries and publishers.

Former Waterstones m.d. Coates unveiled Bilbary in late 2011 backed by private investors including John Bartle of ad agency Bartle Bogle Hegarty. A report from Portland Business Support and Financial Solutions, appointed Bilbary's liquidators, revealed the problems faced by the company. Coates originally conceived the business as an e-book sale and lending site, but after major publishers "proved unwilling to enter into contracts allowing the trade books to be loaned”, it launched instead as a sale-only site in April 2012 but "failed to secure significant revenue."

Following initial investments of £400k and £800k, additional investment from shareholders of £750,000 was used to get the website up and running properly and cover the cost of marketing in the hope that this would generate revenue, Portland said. "Despite the company’s efforts to cut costs by terminating staff contracts, vacating the rented premises and closing the Luxembourg office, funds of £1.5m was needed to continue with a re-structure of the business. An external investor had pledged to invest £750k, provided this was matched by existing or new shareholders, unfortunately the investor later took the decision not to invest."

Portland blamed "fundamental gaps in the company’s understanding of the market and the rise in level of competition that had developed" for Bilbary's demise. Coates told The Bookseller: "The dispute between Amazon and publishers on e-book pricing [and the agency model] makes it impossible to invest. We are in a situation where investors are terrified of risking a new venture because no-one knows what the pricing structure will be. As long as the argument has been going on, any investor says, 'What is the pricing model?' and you can't answer them. Bilbary was caught in the crossfire from the industry dispute and we weren't alone."

Coates is now working on The Freckle Project, a new venture, not yet incorporated, which again links e-books and libraries. "What I wanted was to come at the same thing from a different direction," he said. "It [e-books] is a very big market and there's no reason why there should be only one player in it.”

"One of my observations is that libraries and publishers don't have a close enough relationship. In print books, over years libraries have asked for things publishers didn't want to deal with – processing, or in academic libraries, 'collection management' - and specialist intermediaries have grown up: Ebrary, YBP, Dawson from Bertrams. When e-books came to be, they created equivalent operations for e-books as for print books, saying 'You need some intermediaries.' The problem is, publishers don't get data back in return. If they did, they would realise how significant library use is.

"What I've suggested is we bridge that gap between publishers and libraries – and the place to bridge it is the library management system. If a publisher produces a print book, it goes to Baker & Taylor, to YBP, to Ebrary – and then the information is placed on a library management system, a catalogue. The reader looks at the catalogue and says, 'Ah, they have this book.' What I suggest is that with e-books, you don't have to do that, you can take the complete output of publishers and place it on the catalogue and readers can make the choice. There's no reason why every library can't offer every e-book in the world.

"Publishers talk about limited use licences, rental models – I'm saying we should let publishers try all their models as suits the publisher. Libraries will still have control over their budget. Say a library has a $100 book – libraries can choose to acquire, or to wait until a patron asks for a copy, and pay $60 for that use only. The library has the opportunity to say, 'No.' It's a market where a clever library will make best use of their budget."

Coates said cutting out the cost of the supply chain - equivalent to 30–40% of the cost of the book – would "increase the spending power of the library". Coates said he was working with "three or four people in the US – wise old heads in the industry" to move The Freckle Project forward.