Strategically Speaking: How Will E-books Impact Your Bottom Line?

The end of a calendar year is always an interesting time for the publishing industry and perhaps never more so than the close of 2010. Industry insiders as well as Wall Street types are particularly interested in the full year's results because of the explosive growth of e-books and the prospects of this year's gains in e-book share and e-reader proliferation as a harbinger of days to come.

In late January, Amazon announced that, since the beginning of 2010, for every 100 paperback books it has sold, 115 Kindle books were sold. During this same period, Amazon sold three times as many Kindle books as hardcover books, sales that are across Amazon's entire U.S. book business.

While greeted with less media attention than Amazon's news, Barnes & Noble reported that 2010 holiday season results significantly exceeded both online and in-store sales forecasts, led by strong consumer demand for B&N's e-reading products, including both hardware and e-books. The company reported selling "virtually its entire inventory of NOOKcolor and E Ink" devices during the holiday season.

And perhaps most interesting of all is the continued surge in e-book sales as reported by the Association of American Publishers (AAP). 2010 e-book sales grew by 164.4 percent over 2009, as reported by a mere 14 AAP member companies, reaching more than $441 million.

None of this should come as a surprise to anyone who pays attention to media and technology news—surging Kindle, Nook and iPad sales, and analysts predicting big things for the new tablet devices now reaching the market—all auguring well for the continued migration from print to electronic. But what does this high-profile migration mean for the traditional business models of the book publishing industry?

It means that it is time to sit back, take a long, hard, unemotional look at your business' current structure and financial metrics (i.e., income statement, balance sheet and cash flow statement), give serious consideration to how e-books might affect business as we now know it, and consider potential structural and organizational changes as you plan for the long-term.