E-publishing posing threat to traditional book clubs

After marshaling their forces against the growing threat of Internet booksellers, old-fashioned book clubs now face a new challenge: electronic publishing.

Although still in its infancy, e-publishing has taken off recently as major publishing houses and large technology companies, including Microsoft, have jumped on board.

The book-club market garnered a strong following over its nearly 75-year

Gartner analyst Rita Knox says e-book initiatives as constituted today will likely not reduce sales of traditional books to any great extent. see commentary

history by catering to middle America, where bookstores--until recently--were few and far between. When joining the clubs, members received several books for $1 plus postage and committed to buying a few more books.

The rise of brick-and-mortar superstores like Borders and Barnes & Noble was the first tremor in the industry, followed by online behemoth Amazon.com.

Now, the uncertainty is whether publishing houses and authors will want to continue giving book clubs the same lucrative deals to distribute titles once the industry sees the viability of the download market, people in the publishing and book-club industry say.

At the same time, with the right strategy, e-publishing may present a golden opportunity for book clubs to leap into the digital age by leveraging their tremendous subscriber base onto the Net.

"We feel that e-publishing is going to allow us to create whole new kinds of clubs," said Seth Radwell, chief executive of Booksonline.com, a subsidiary of Bookspan, the world's largest book club. "We are testing e-book clubs where members would download books they want to buy."

Radwell said the electronic book clubs would launch next year.

"Consumers need a central place to go to look for books to download--they won't go to individual publishing houses," said Liz Leonard, an analyst at Gomez Advisors. "Book clubs could use the Web for what it does best: to drive people with a common interest to one central place."

While book clubs were caught flat-footed when Amazon and other online booksellers took the Internet by storm, they may have some time to prepare for the e-publishing onslaught.

Analysts said the industry must first overcome security and piracy concerns, as well as create standard technologies that meet consumers' expectations for quality when downloading and reading books on portable devices.

But the online challenge has bitten into book clubs' bottom line.

Book clubs' market share fell to 18 percent in 1998 from a high of 20.3 percent in 1997, according to a 1998 study done by the Book Industry Study Group (BISG) and the American Booksellers Association. The main culprit was Internet book sales, which grabbed 2 percent of the market but posted gains of more than 300 percent in 1998.

The association will release 1999 sales figures tomorrow for book clubs, as well as for books sold over the Internet.

One major repercussion from the Internet booksellers' success is the merger between two of the world's largest book clubs. Last December, Time Warner's Book-of-the-Month Club and Bertelsmann's Doubleday Direct agreed to merge their operations into Bookspan, a joint venture, to better compete with the online booksellers.

"The (merger) is a reflection of the fact that they had to protect themselves in the face of online sellers," said a source at one of the largest New York publishers who asked for anonymity because the company still deals with Bookspan. "E-publishing could be just one more thing chipping away at their dominance."

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.

And last week, Microsoft announced it was teaming 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, said it would also use Microsoft's display technology for the iRead channel of its new iPublish.com venture.

With the growing number of outlets for titles, licensing issues between book clubs and publishers is likely to be a point of contention. Currently, book clubs buy the rights to a title rather than the physical book itself, manufacturing the book using less expensive production methods and materials. Given that e-publishing would completely bypass production issues, publishers will probably want to renegotiate their deals with book clubs.

"The future relevance of the book clubs is completely and totally dependent upon publishers' willingness to pass along the same lucrative deals to the book clubs that they have in the past," said Ken Cassar, an analyst at Jupiter Communications.

Booksonline CEO Radwell said he is not too concerned about that issue: "The stuff is mitigated by the other side of the coin, which is the gigantic audience we bring to the authors and publishers."