E-Books Are on the Rise, But Slowly

Google's move to digitize books has helped advance a cause that has seen several false starts

With Oprah pushing an e-reader to her audience, Google (GOOG) placing whole books online, and the popularity of programs such as Stanza, which turns the iPhone into a mobile library, the mass market has latched on to e-books in a big way. Witness Amazon.com's (AMZN) Kindle e-reader, which has already sold out for the holidays (the e-tailer doesn't disclose sales figures for the device). But while e-books have caught on in the public consciousnesses, they have yet to tap deeply into the public's pocketbook. Widespread popularity is still a few years—and cheaper devices—away.

Ana Maria Allessi, publisher for Harper Media at HarperCollins, says e-books accounted for less than 1% of total revenue at the publishing house in its fiscal year ended July 31, and she believes it could edge up to 2% in the next fiscal year. So while relatively speaking, the e-book revenue is doubling, its contribution is minimal—and is forecast to stay that way in the short term, rising to just 5% to 6% of sales by 2013. By comparison, audio books made up 9% of total sales for the same full-year period, but that number seems to be shrinking.

A survey by PricewaterhouseCoopers estimates that sales of e-books will be $9.6 billion annually by 2012, but won't pass sales of paper books until 2018. Ten years out is long time for a prediction to hold, but there is no doubt that consumer acceptance of e-readers and reading documents online appears to be nearing a tipping point after what Allessi calls "several notorious false starts."

It's clear that consumers want e-books, she notes, and book publishers would be silly not to reinvent themselves in a world where the value is moving from the paper to the prose itself. "We have to stop talking about books, and start talking about our authors," she explains. "We will continue to be their ally in reaching consumers, but will it be through hardcovers? Probably not. If consumers want a variety of formats, we will follow where they lead."

Cheaper readers

One of the key breakthroughs in the digital format will be a drop in the cost of dedicated electronic readers from $400 to less than $100, and good software that can turn a laptop or a mobile phone into a credible reader. Russell P. Reeder, CEO of LibreDigital, an Austin (Tex.) company that digitizes published content, envisions the price point of readers dropping—possibly even to free, if users buys a subscription contract—within the next five years.

Reeder, whose company takes everything, from hard copies of manuscripts to electronic newspaper files, and formats them for readers like the Stanza and the Kindle, says the desire for digitized books didn't ignite until Google started to put books online. Soon after that, LibreDigital found itself selling its content formatting, delivery, and digital-rights management services to not only its existing newspaper clients (such as The New York Times (NYT)) but to book publishers as well. Now the company counts among its customers seven of the top 10 book publishers in the country.

"Google is a disruptor for this industry, and tried to disintermediate the publishers," Reeder says. But publishers are jumping in quickly to give consumers the content how and when they want it. It's still going to cost readers, though.

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