In Cramped Japan, the iPad Is the Home Library

After his son was born in 2009, Satoshi Tagomori started having nightmares that the bookshelves lining his cramped living room would rain heavy tomes on the infant. Armed with a cutting board, the 28-year-old pharmaceutical company employee chopped his 850 titles to fit inside a cheap scanner and converted each book into a PDF file. His library now lives in his preferred tablet computer, a Samsung Galaxy Tab. "There was just no more room for books when my son was born," he says.

Japan's famously small living spaces—the country's average home size is half that of the U.S.—make it a natural market for such space-saving innovations as digital books. Japanese have taken to tablet computers, especially Apple's (AAPL) market-leading iPad. While the iPad has opened the doors for e-books, the publishing industry has been slow to walk through them and still offers few Japanese-language editions. A cottage industry of pulp-to-PDF scanning startups are filling the void and now offer to digitize books for a modest fee.

Some Japanese, such as Tagomori, are doing the scanning on their own. Fujitsu's PFU scanner-manufacturing subsidiary says sales of its consumer models rose 80 percent in June, the month after the iPad was released, and more than doubled the following month. The Tokyo-based company had to charter special flights from its China factories to meet demand, according to Tadashi Oura, PFU's head of marketing.

Publishers have been slow to react to the change in reading habits in part because they're reluctant to offer digital titles at reduced prices, as is common in the U.S., says Toshihiro Takagi, an analyst at market researcher Impress R&D. It also took time to develop standards for how Japanese characters, which are read from top to bottom rather than left to right, should be displayed on various screen formats. "People are taking matters in their own hands because the publishers are not meeting the market's needs," says Toshihiro Takagi, an analyst at Impress.

One of those people is Yusuke Ohki, a 28-year-old entrepreneur in Tokyo. As pre-release iPad fever hit Japan last April, Ohki and a childhood friend, Shinya Iwamatsu, founded Bookscan. The startup charges 100 yen, or $1.22, to digitize a book and produce PDFs replete with original highlighting and marginalia. After Takafumi Horie, a well-known Internet entrepreneur, tweeted about the company, a wave of media attention followed. Bookscan now has 140 employees and about 12,000 customers. Despite plenty of competition—Ohki estimates Bookscan is one of 60 such companies—the startup has a four-month waiting list.

Independent book scanners are filling a void but may also create headaches for copyright owners. Under Japanese law, book owners are allowed to digitize their libraries for personal use, but there's always the risk that "these homemade contents begin to circulate illegally," says Nobuo Kurahashi, an analyst at Mizuho Financial Group in Tokyo.

The bottom line: The rise of book-scanning startups in Japan is a sign of latent demand for e-books, which publishers have been slow to meet.

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