Microsoft teamed up with Viacom's Simon & Schuster, Barnesandnoble.com and Random House to offer books for its Pocket PC. Time Warner, which is involved in a pending merger with AOL, also said it would use Microsoft's display technology for the iRead channel of its new iPublish.com venture.
Online publishing got a big boost this spring when more than 400,000 copies of Stephen King's 66-page novella, "Riding the Bullet," were downloaded in less than 24 hours. But those numbers may overestimate the potential for the sector, analysts said.
"It was a case of having a book up for free by a mega-popular author who had nearly died and not written in a while," said Malcolm Maclachlan, a media analyst at International Data Corporation. King had been seriously injured after he was hit by a van in Maine. "That is not a good case for judging the paid market."
Indeed, the e-publishing story still has several plot twists to go through before publishers begin to reap profits and attract consumers. Analysts said the industry must overcome security and piracy concerns, as well as creating standard technologies that meet consumers' expectations for quality when downloading and reading books on portable devices.
"E-publishing is on the brink of acceptance but has to still fully develop into a common way to read," said Liz Leonard, an analyst at Gomez Advisors. "People won't be relaxing under a tree with their Palm Pilots or laptops to read a story."
"(The market) is a work in progress," said Gregory Voynow, head of the iPublish venture. "By the end of the year, there'll be a much greater installed base, more PDA devices, improvement of devices, and we'll see every other publisher" jump into the market.
Big Five consulting firm Andersen Consulting has projected that the e-books market will be 10 percent of the entire publishing market by 2004.
Currently, online publishing is often compared to online music, where competing technologies have divided the market. But Microsoft's entry might affect that, according to Adam Rothberg, a spokesman for Simon & Schuster.
"Microsoft looks like the company to create a dent in helping to standardize e-publishing," Maclachlan said.
"Clearly, the books are transmitted in an encryptive fashion," said Rothberg. "Nothing is foolproof."
Some analysts note that music listeners have long violated copyrights by making tapes of CDs and albums. The book industry has a very different history, and some say the impact of piracy is likely to be much smaller in e-publishing.
"What (publishers) have the capacity to do in publishing is to stem what happened in the music space before it happens by making sure that files are created in encrypted format and distributed with digital rights management (DRM) technology," said Aram Sinnreich, an analyst at Jupiter Communications.
Even with these hurdles, many say they think publishers will evolve toward online distribution of content as consumers become more comfortable with downloading content from the Internet.
"There's the potential to save millions upon billions by bringing distribution to the Net," Maclachlan said. "Publishing is notoriously inefficient because of the amount of pulp paper that needs to be shipped around the world."
Cutting out the inefficiencies is also likely to result in passing on lower prices to consumers, analysts said.