Cover Story - Outlook 2010: The Future of the Industry
"It's kind of, I don't want to say the Wild West, but it's a whole new model that's emerging. And who knows what Google will do with their cloud," he adds.
"I really do see that we are at a huge disruption point in publishing," Rubin says. "I make an analogy to television coming out. I know that's a little grandiose, but once the technologies get there in terms of a multipurpose [e-reader] device where you can get very good, crystalline, nonglare reading quality … and couple that with functions you can get from an iPhone and all these benefits of digitization on top of that—such as portability and ease of use—it's a real game changer."
Amid all the hullabaloo about e-books—reaching an unprecedented fever pitch just before the winter holidays with the release of the Barnes & Noble's Nook and the announcement of Borders' partnership with Kobo on a new e-book store—there is the still-sobering fact that these nifty digital readers only make up about 3 percent of the total book market.
This does not mean the industrywide effects of e-books are far off, however, cautions Gallagher.
For business models still built on hardcovers and large-print-run margins, "The challenge is not when e-books become the dominant [market] share, but when they gain about 4, 5 or 6 more percentage points," he says. "Then it gets to be a really sticky situation for publishers because they're basing their margins on hardcovers, which, at this point, will [still] be their primary binding type, but they'll be printing thousands less, so the per-unit price will go up."
E-books, in other words, while potentially a "good profit center," must be evaluated in terms of the coming disruption of pricing models. "It's something all publishers will have to contend with and wade their way through," he says.