Have e-books turned a page?

Although revenues remain tiny, industry surveys show encouraging signs of growth in e-book sales over the past year. Publishing executives and analysts say the industry is finally coming to grips with the most significant issues that have stalled e-book adoption to date.

The Open eBook Forum trade group tallied e-book sales of $3.23 million for the first calendar quarter of 2004--a mere rounding error compared to the multibillion-dollar market for paper books. But that figure marks a 28 percent jump from a year ago, suggesting that e-books are on track to meet optimistic forecasts for the year.

Adoption will continue to be gradual, insiders say. Apple Computer has put together compelling hardware design and an easy-to-use online service to push the music industry forward with its iPod/iTunes combination. But the publishing industry has a lot more work to do in figuring out an equivalent formula.

"I think it's going to be an evolution," said Jean Bedord, a publishing industry analyst at research firm Shore Communications. "I don't see any combination of device and service that'll just come together and create a major shift. Steve Jobs did a great job of getting all the music labels together and saying, 'Digital distribution is going to happen--let's get ready.' I don't see that happening with book publishers. They're more traditional, they're very decentralized, and it just takes them longer to work out issues."

Those issues include ongoing questions over what type of devices are suitable for reading e-books, effective ways to handle digital rights management and a proliferation of formats that can be confusing and frustrating for consumers.

The rights of The Man
Hardware issues have become less prominent since publishers have been more willing to format e-books for the devices people already have with them--PCs, laptops and handheld computers. Instead, concern about illegal copying of material is emerging as one of the biggest roadblocks to e-book adoption. Publishers have tried a bewildering variety of digital rights management (DRM) schemes, ranging from books that expire in 60 days to hands-off approaches that rely on customer honesty.

Bad experiences with heavy-handed DRM have soured many potential customers on e-books, said Mike Violano, vice president and general manager of eReader, which equips its titles with a security key based on the credit card number used to purchase it. The approach give wide latitude to the original buyer while effectively thwarting illegal copying, he said.

"There are far too many standards and ways of doing things now, and that's a source of frustration for customers," Violano said. "If they have a bad e-book experience the first time, where they have trouble reading something they've paid for, it's hard to get them back."

Analyst Bedord said nervous publishers have emphasized security over opening new markets.

"There's no good DRM, period," she said. "Publishers all want heavy-duty DRM, but the problem is that anything you do gets in the way of buying and using e-books. My bias is to use a lot of psychological DRM. You put a price on it; you have statements...making it very clear you can use this as you would a print book, and you rely on the fact that by and large, most people aren't out to break the law."

Violano said security concerns are one of the main reasons some top publishers offer limited or no support for e-books--particularly of top-selling authors. Printed-word stars like "Harry Potter" author J.K. Rowling and legal thriller specialist John Grisham have been notable holdouts in the e-book world.

"The major obstacle now is availability of titles," Violano said. "Some publishers just don't trust letting their content be available in digital form."

The right stuff
For publishers willing to brave the digital transition, hardware has become less of an issue. The tech landscape is littered with the remains of dedicated devices such as the Rocket eBook that tried to replicate the experience of a paper book. None of the devices achieved significant market penetration, yet Sony recently gave the concept another try with Librie, a Japan-only device with a high-resolution screen and a $500 price tag.

Current growth in e-books, however, has been fueled by people reading them on the compatible devices they already have--PCs and handheld computers, or personal digital assistants (PDAs).

"I think today, it's still a laptop-desktop marketplace," said Tom Prehn, senior business development manager for e-publishing at Adobe Systems, whose Portable Document Format (PDF) has become a mainstay of the e-book market.

"Consumers have been pretty clear that they want to use e-books on multifunction devices," Prehn said. In a recent Open eBook Forum survey, 70 percent of consumers said they'd be more likely to buy e-books that could be read on any common computing device.

By formatting e-books for the devices people are already carrying, enthusiastic readers can take advantage of downtime in 5- or 10-minute chunks to catch up on their reading. "Mobility" was the most significant motivating factor for buying e-books in the survey.

E-book content for dummies
eReader has become one of the leading e-book outlets by specializing in content for PDAs. "People like the convenience of carrying fewer devices around with them that can perform more functions," Violano said. "That doesn't mean dedicated devices will never take off, but they're going to have to offer very compelling advantages for people to bother with them."

Violano sees more potential in mobile phones, as increasingly sophisticated screens and storage capacity make reading more comfortable.

Phone-based reading is likely to further distinguish material suitable for e-book presentation--a six-line screen just isn't the kind of vehicle people are likely to embrace for plowing through a Thomas Pynchon novel.

"Reference content displays well in a small form factor--anything that's chunkable," Violano said.

Computer book specialist O'Reilly Media is even more bullish on the reference category--and on its Safari Bookshelf project, a joint online publishing venture between O'Reilly and educational-books specialist Pearson Education. The "electronic reference library" service gives subscribers access to online versions of titles, plus downloadable chapters in PDF.

Sean Devine, managing director of Safari Books, says the approach probably wouldn't work for literary material but offers compelling advantages with programming manuals and other educational text consumed in small, nonlinear chunks.

"The market will really change at a point where the readability on screen is as good as paper," Devine said. "Until then, you need to concentrate on areas where being in digital form is a real advantage. Reference is clearly one of those areas. The notion of having electronic access to a body of content that's searchable, where they can cut and paste examples of code right into the application they're working on--that's very compelling to our customers."

The more that information is digested in small electronic chunks, however, the harder it becomes to identify it as a book. Barrie Rappaport, an analyst for Ipsos North America, foresees a steadily growing market for electronic publishing, "but I don't know if it's going to be book-driven or article-driven.

"People may read a chapter of this and then a chapter of that," she said. "Which creates an issue of: How do you deal with paying for that; how do you determine the perceived value?"

Libraries are another market in which going digital has clear advantages over paper, eliminating problems with lost or damaged copies of books and allowing all patrons to get a hold of hot-selling titles.

"E-books are perfect for today's librarian,' Adobe's Prehn said. "It helps them meet their mission for 24-hour access to information, and they can do it very cost-effectively." Adobe is working with distributors Baker & Taylor and Overdrive to help libraries in numerous cities set up e-book collections.

Once publishers get comfortable with the e-book market, they'll find that the plumbing is already in place for a quick transition. Publishers are increasingly centralizing on Adobe's PDF and the XML (Extensible Markup Language) standard it utilizes to bring books through the editing, design and printing processes. The combination allows for content to be automatically reformatted for new versions, making e-book conversion as simple as toggling a few software switches.

"My advice to any publisher is to go to XML--just do it," Bedord said. "You can create a large-print version...It's so much more flexible than the old-style print processes, which are essentially just design. They're just a notch above Gutenberg."

Which brings up what some consider one of the biggest reasons why e-books will continue to be greeted with slow growth of acceptance. Current book reading habits are the result of centuries of accumulation, notes Gary Frost, conservator of the libraries art the University of Iowa in Iowa City.

Reading text on a screen and in search-equipped formats represents a profound behavioral shift, equivalent to the transition millennia ago from scrolls to multipage codexes, Frost said. Even digital enthusiasts will need time to adjust, he said.

"Think of how long it took the manuscript book to develop and transform itself into a print book," he said. "Here we are a decade into real online reading, and we expect to have the skill all developed. It takes generation of time to make a shift like that."