OCLC will not increase prices
in coming year

Jay Jordan

I am pleased to report that OCLC will hold the line on its prices in the coming fiscal year.

At the regular meeting of the OCLC Board of Trustees on April 15, OCLC management recommended that there be no price increases next fiscal year. The Board unanimously adopted the proposal to keep prices at their current levels for fiscal year 2004, which begins July 1, 2003. There will be no price increases in OCLC cataloging and metadata services, cooperative discovery services, and digital and preservation services. In those services where we provide access to third-party content (FirstSearch service, Electronic Collections Online and netLibrary) we will pass through to libraries only royalty increases that are charged to us by content owners.

The Board of Trustees and OCLC management are acutely aware of the severe pressures that the depressed worldwide economy is placing on already strained library budgets. In the United States, 45 state governments are projecting budget cuts. Book budgets, library operating hours and staffing levels have been reduced in many libraries. Stock market declines have reduced the endowment funds of the vast majority of public and private colleges and universities, which are an important source of funding for libraries. Similar bad tidings are being reported by libraries in many regions of the world.

New sources of revenue

In order to hold the line on prices, we must look for new sources of revenues and new areas for cost reduction and control. In the past year, we have introduced or acquired new services that are expected to generate incremental revenues for OCLC, including QuestionPoint, Digital and Preservation Resources, netLibrary and WebJunction, the public library portal that is initially being funded by the Bill & Melinda Gates Foundation. These new services are ramping up, but are not expected to generate sufficient revenues in fiscal 2004 to offset expenses. We must also continue to operate our current services on which our libraries depend. Our reduced revenues are hitting at the same time we are making major investments in a new technological platform for WorldCat and building new user support and business systems.

Cost control

On March 19, 2003, I announced to OCLC staff that in addition to stringent cost-cutting actions in funding for travel, consulting, training, maintenance and capital programs, OCLC will reduce the size of its workforce by up to 5 percent to bring expenses in line with revenues. We will achieve this reduction over the next several months through a combination of restructuring, attrition and an early retirement option. We are also freezing salaries of upper management and reducing the merit increase pool for all other staff. These actions are painful but necessary, and we are taking them in common with many of the institutions that we serve.

Reducing the rate of rise of library costs

Since OCLC’s founding in 1967, one of its chartered objectives has been to “reduce the rate of rise of per-unit library costs.” I call your attention to the chart at the right that compares OCLC’s prices with those in the Higher Education Price Index. Over the past 10 years, OCLC has held its cumulative price increases substantially below the level of inflation that educational institutions have experienced.

Whenever and wherever we are financially able to do so, we are committed to helping our members. While modest price increases will have to occur in the following year (fiscal 2005), we will continue to work hard to control our costs and keep any increases in prices as low as we can.

Credits reduce member costs

At the same time that we are keeping prices at current levels, we continue to provide libraries with credits for their cooperative efforts, which provides additional cost savings for members. For the fiscal year that will end June 30, 2003, we will provide libraries with an estimated $10 million in credits, primarily in cataloging and resource sharing, to encourage the growth and quality of WorldCat. In the last five years, we have provided more than $49 million in total credits.

Financial strength

Also since its founding, OCLC has issued an annual report to the membership, which includes financial statements and a candid discussion of the financial state of the organization. In the last decade, these financial statements have included the following preface:

OCLC is a nonprofit, membership, computer library service and research organization whose public purposes of furthering access to the world's information and reducing library costs dominate its plans and activities. In support of those purposes, OCLC strives to maintain a strong financial base by operating in a business-like manner in order to accommodate growth, upgrade technological platforms, conduct research and development and still subsidize worthwhile projects for the benefit of libraries and their users.

Because we have operated in a business-like manner, we have the financial strength to keep our prices at current levels even as we continue to invest in new services and the new technological platform for the WorldCat database, which is the cooperative’s most valuable asset. We will continue to operate in a business-like manner in the future. At the same time, we will continue to be mindful of our public purposes.

In April, OCLC closed on a Franklin County, Ohio, industrial revenue bond project in which we were able to borrow $25 million for 10 years at an average interest rate of 3.99 percent. The bond issue will enable us to purchase equipment and software needed for our services. We will also save some $2 million in future interest expense by paying off an earlier bond issue. The fact that OCLC’s bond issue received an “A” rating from Standard & Poor’s testifies to OCLC’s solid record of performance and solid reputation in the financial community. We intend to maintain that reputation.

Cooperation, collaboration and resource sharing—the core values of the OCLC cooperative—can help libraries rise to the challenge of these demanding economic times. We fully intend to continue to make your OCLC membership the best value in the worldwide library community. OCLC services offer practical solutions that can help you increase your productivity, extend your resources and improve your services.

Your continued participation in the cooperative, at both the personal and institutional levels, will create new opportunities that can help libraries not only survive, but thrive, in these turbulent economic times.

 

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