David vs. Goliath
The court battle between RosettaBooks and Random House has been well-documented in the media, extending beyond the circles of the book publishing industry. Round one of the imbroglio ended with Judge Sydney Stein's much-awaited decision that effectively gave the e-book publisher the right to electronically publish the works of previously published authors. But on September 13, 2001, the bell was soundly rung for round two when lawyers representing Random House filed a motion to appeal Judge Stein's ruling. The case continues to draw much attention due to the many ramifications that rest upon its final outcome. Taking time out of his busy schedule, CEO Arthur Klebanoff speaks about his confidence in the decision, the benefits of e-books and the factors that will eventually comprise a viable business model.
RC: You obviously have a lot of experience in the publishing industry. Did you have any sense of what the reaction would be once RosettaBooks began making deals directly with authors to reproduce their work electronically?
AK: From 30 years of experience in the publishing business, I was confident that authors owned the backlist electronic rights and that the community had acted on that assumption throughout the developments in electronic publishing. I thought there was a chance that some publishers might challenge this view, but that such a challenge would be both misguided and counterproductive—exactly what has happened.
RC: In reading your deposition [available on www.rosettabooks.com], one gets the sense that Random House sees itself as the victim and the authors, the people creating the content, and RosettaBooks have committed an egregious wrong (hence the legal action). What was the mood at RosettaBooks during the case and what was the typical response of your peers in the industry?
AK: Random House is awfully large to think of itself as a victim. It need only license electronic rights from authors—which it has sometimes done—in order to achieve its stated objectives. Our industry peers have been uniformly supportive—witness The Authors' Guild and The Association of Authors representatives filing a join amicus brief for the first time in 75 years, the dozen agents who provided supportive affidavits and the prominent authors who licensed to us despite the litigation. Not one author or agent has supported the Random House view and few prominent editors or subsidiary rights people have been quoted in support of the corporate position. Our mood throughout was that it was more important to be right than to be large. While we did not choose the fight, we have been steadfast throughout advocating the authors' position.
RC: In his decision, Judge Stein did not equivocate. Were you confident that the decision would be in RosettaBooks' favor?
AK: Yes. I so stated to the media on the day the litigation was filed. I am equally confident about the appeal.
RC: What kind of feedback have you gotten from those in the industry since the ruling was handed down?
AK: Since the Association of American Publishers has joined Random House as an amicus on appeal, presumably the larger publishers as a group are unhappy with the author's victory. Agents, authors, intellectual property lawyers, reporters and many employees of publishers have been very supportive.
RC: For you, what is the most tantalizing prospect that e-books offer?
AK: In the classroom, e-books can both expand the number of trade books read dramatically and can level the socio-economic playing field as all schools are armed with appropriate electronic appliances.
RC: How do you see the technology evolving?
AK: The screen experience will get better. The choice of hardware will get both wider and cheaper. The capabilities of the e-reader software will get broader and will include high quality text-to-speech functions and on-the-fly translations.
RC: What do you think will emerge as a profitable business model for the e-book?
AK: Ultimately, there will be a profitable e-book retail price based market, comparable to physical publishing, but with price points meaningfully lower than comparable print editions. The more important profit models are likely to emerge from the unique distribution capabilities which e-books represent—time-limited uses, subscription models and the like. The most powerful of these business models, in my opinion, cannot yet be predicted, except to say that it will happen.
RC: What role do you think will e-books play in the industry 30 years from now?
AK: The paper book will always be a fundamental part of the industry. The growth of a $2.5 billion recorded audio business hasn't hurt the physical business. Television, cable and home videos haven't hurt the theatrical business. E-books will be their own thriving business, helping the life of the physical book. Keep in mind that e-reading incorporates newspapers, magazines, texts, professional publishing, distanced learning, manuals, corporate documents, etc. Trade books are a relatively small piece of this "ink on paper" world. The e-reading world much sooner than observers think will be the first major change in ink on paper since Gutenberg.
Leo Dwyer, COO of RosettaBooks, will be at BookTech 2002 to present his thoughts on "Finding the 'Right' Business Model for the E-Book," Monday, February 11 from 9:30-10:45 a.m.