To Infinity and Beyond
Publishers, distributors and e-retailers expect the advent and growth of smart phones and multifunctional personal digital assistants (PDAs) to stimulate the growth of the young e-book market.
Yet, no matter how young or how small the market is, publishers have made a commitment to e-books and are anticipating the market will take off.
The size of the e-book market in terms of revenue is based on the number of available titles, publishers' revenues or the revenues generated by
e-retailers. For example, the New York-based International Digital Publishing Forum (IDPF), formerly the Open eBook Forum, reported in its "eBook Statistics" for the fourth quarter of 2004, "eBook publishers reported significant gains in growth in the fourth quarter of 2004 with a 47-percent increase in units sold and an 81-percent increase in eBook revenues over the same quarter of 2003." The report takes into account information provided by 23 member publishers, retailing and technology companies to measure and quantify the e-book industry.
Nick Bogaty, executive director of IDPF, says the domestic e-book market is about $15 million and is growing at 50 percent per year. Kathryn Blough, executive director of the American Publishers Association (APA), concurs e-books are a growing market.
Jim Milliot, a senior editor with Publisher's Weekly, who covers the e-book market, also says the domestic e-book market is approximately $15 million and predicts strong growth for a market that has been "an over-hyped industry for a long time. It's never lived up to its promise, but it is solidly entrenched in the publishing market as a niche."
Steve Potash, president of IDPF and chief executive officer of Cleveland-based e-book distributor Overdrive Inc., says there are two to three times the number of publishers that do give numbers that aren't participating, and therefore estimates the retail and consumer market domestically is $25 million to $30 million annually and growing. Those that don't report include higher education, CD-ROM, reference, specialty segments and religious publishers. As a result, Potash estimates the retail and consumer
e-book market is "growing 150 percent to 200 percent per year."
Major Publishers Are on Board
Ultimately, many believe that publishers' commitment to this market is what will nourish it, and some major publishers are on board.
Random House Inc., for example, offers 2,500 titles in e-book form; Simon and Schuster offers more than 2,000 e-book titles; John Wiley & Sons offers a similar number of e-book titles; and The McGraw-Hill Cos. offers approximately 1,800 titles.
Keith Titan, vice president of new media at Random House, says technology is generating the new interest in e-books. "Technology is moving forward at a rapid pace, and digital media of all types is becoming more popular. E-books will ride this wave as consumers continue to demand that more and more of their information and entertainment [is] available in digital form." As a result, Random House offers its titles in Adobe, Microsoft, eReader and MobiPocket formats.
Not to be left behind, other publishers are getting into the digital act. "We take a book file and convert it into various formats," says Claire Israel, director of e-publishing and e-commerce at Simon and Schuster of New York. "Our strongest categories include education and reference, and certain nonfiction books that can be easily downloaded in sections because, with the advent of smart phones, people want smaller bits or pieces of content."
Gwenyth Jones, vice president of publishing information systems and technology at Hoboken, N.J.-based John Wiley & Sons Inc., says e-books are a modest, but growing market. Wiley entered the e-book market, she adds, "Because we felt people would migrate to online for content." Librarians also see an advantage and are gravitating toward e-books because they won't be stolen from the library or damaged, and don't require human resources to check them in and out, says Jones.
E-books at Wiley have an incremental cost, says Jones, and require customized systems and support, including specialized distribution processes. In addition, many distributors have different requirements in accepting the metadata associated with them. She says that a typical e-book is a converted print-book file from a print-optimized PDF to a Web-optimized PDF.
Wiley uses distributors to sell its e-books. It also sells direct via Wiley.com and supports its book distributors with joint promotions, including pre-publication promotions.
Maximizing the Reach
The key to increasing e-book sales is to create a better user experience, says Jones.
Jill Reese, manager of digital rights and alliances of The McGraw-Hill Digital Group, says, "McGraw-Hill is a content provider and looks for new channels for growth. We recognize e-books as one of these channels." Reese points out that the e-book market overall is growing at an annual rate of 20 percent to 25 percent, and "McGraw-Hill's e-book revenues are growing at the same rate." In the pursuit of growth, she says, McGraw-Hill is targeting the public, academic and large corporate-market sectors and is looking to convert between 400 and 500 titles by the end of this year.
"We are projecting growth based on third-party sales of new devices such as smart phones and PDAs," she explains. "We expect a spike in consumer sales because of these devices."
To increase e-book sales further, McGraw-Hill "partners with its online retailers and also does direct marketing to drive sales through the McGraw-Hill e-bookstore," says Reese.
Random House's current best-selling e-book category is science fiction, and its best seller in that category is "Star Wars: Episode III Revenge of the Sith—The Illustrated Screenplay." Titan says it is "the one and only official screenplay, available exclusively in e-book format, including scenes that don't appear in the movie."
Random House also markets its e-books through resellers, e-mail newsletters and its Web site, RandomHouse.com, says Titan. Random House e-books are "typically less expensive than their hardcover and trade paperback counterparts by up to 30 percent."
While prices vary on the cost of an e-book, Potash says the retail cost for an e-book is generally 20-percent to 30-percent less than that of a printed book.
Like Random House, McGraw-Hill uses online newsletters, direct mail and e-mail marketing as well as special offers in consumer magazines to facilitate e-book sales, says Reese. However, unlike some other publishers, McGraw-Hill does not discount its e-books. "We sell e-books at the same price as print books," Reese points out.
Bogaty attributes market growth to "an even larger-than-before selection of e-books, a greater public awareness of e-books and competitive pricing."
A Young Audience
The audience for e-books, Overdrive's Potash says, includes young business travelers, those in need of professional reference books and public-library users. "Public libraries are a big advocate of e-books," says Potash. "They find them to be a convenient way to reach new readers 24/7 and provide books to those who can't readily get to a library branch. E-books also facilitate self-service and they also allow books to be made available in a greater number of languages. We offer e-books in over 23 languages free at public-library Web sites."
Indeed, e-books have come a long way in a very short time. Bogaty says the e-book market "started around 2000. At that time, there were three companies who came out with e-books. They included Microsoft, Nouveau Media and Softbook."
The past five years have seen Microsoft remaining in the market while Gemstar/TV Guide gobbled up Nouveau Media and Softbook. The list of formats in which an e-book can be viewed, says Bogaty, includes Adobe PDF with 50,000 titles; and 15,000 to 20,000 titles in other formats such as eReader, Microsoft and MobiPocket.
The various e-book formats, he points out, are not cross-platform. "Occasionally, this causes market confusion. Over time, however, standardization will take place," Bogaty says, adding that IDPF members are studying a standard format. "The final standard could be a format not yet available."
Room for Growth
Bogaty also points out that while the market for e-books in Asia is about the same as it is in the United States, the European market is about half that of the U.S. market.
He adds that some of the advantages e-books have over printed hardcover and paperback books are sure to grow the market in the United States and overseas. These advantages include portability, the costs of production and shipping associated with a printed book, and the easy and rapid ability to update e-books.
He also notes that growth niches for e-books include corporate knowledge centers, and university and other academic library systems. Within these niches, he adds, the K-12 and higher education sectors offer the greatest potential for growth. Overdrive, which deals with more than 400 book publishers, distributes in excess of 50,000 e-book titles and is adding several thousand new titles per month.
According to Mike Violano, vice president and general manager of eReader.com, a division of mobile content publisher Motricity Inc. of Durham, N.C., eReader.com accounts for half of the $15 million domestic market. eReader.com offers 14,400 titles from more than 100 publishers. It targets individuals who haven't tried e-books to grow its customer base.
"Eighteen months ago," Violano says, "we carried few romance novels. The thinking was that e-book readers were more technology-oriented. Since then, we have added 1,000 romance titles, and now it is our third-largest sales category. The best-selling category is suspense thrillers such as 'The DaVinci Code,' and our second-largest sales category is science fiction."
Violano adds that eReader.com offered the script for "Star Wars: Episode III—Revenge of the Sith" in the science fiction category as an exclusive when the movie premiered.
Other popular categories include 'Best Sellers in Print,' such as the 'World Is Flat: A Brief History of the Twenty-first Century.' In the reference category, the best-selling e-book is the Merriam-Webster's Collegiate Dictionary, Eleventh Edition.
"Our 'Bestsellers in Print' list closely tracks with the New York Times' Bestseller List, Publisher's Weekly and USA Today," Violano notes.
eReader.com markets its e-books using newsletters, e-mailed to 500,000 subscribers.
"Every Thursday, the newsletters feature weekend specials, such as
e-book sets, by author, at a special price," he says. "Our customers tell us value is high on their list. E-books cost 25 percent to 50 percent of the price of a printed book. With e-newsletter discounts, customers can get an additional 10 percent off.
"Our customers also tell us they like the mobility of e-books. They can carry from four to 10 e-books on a hand-held device at any given time. And devices today can cost as little as $100 for a Palm Zire, though people are buying multifunctional devices such as Smart Phones or PDAs, which are integrated into their lifestyle."
Still a Niche Market
Violano maintains market growth will come from new readers, but the typical e-book reader is a male college graduate, no older than 35, with an income of more than $50,000. The challenge is to capture the 40- to 45-year-old book reader (typically female, Violano says, and making less than $50,000 annually) to flip open a laptop and access an e-book. Violano says his company's "Try Before You Buy" policy will go a long way to converting that group of readers.
"We also have user-friendly digital rights management," he says, which should help convert the technically challenged. "Every e-book we sell from a publisher is encrypted. The buyer needs a code to access the e-book. The access code is the credit card number the user used to buy the e-book online."
Overcoming these challenges, as well as the familiarity a bound book breeds reading it on a plane or train, or in the comfort of one's living room, is the next step for publishers and vendors of reading devices. But the commitment is there, and, as in anything else, time will tell if e-books will become the preferred form of delivering the written word.