May 2, 2001 5:30 PM PDT

E-book devices yet to hit bestseller's list

SAN FRANCISCO--E-books are a tough sell, Gemstar-TV Guide International's chief executive told analysts this week, saying his company has outsold all of its competitors combined by moving just 60,000 reading devices since late last fall.

"We know how little we sold," Henry Yuen said, speaking at the JP Morgan Chase H&Q securities conference in San Francisco. "It is not for this year to make a big splash."

He added the company now offers 4,000 titles with its REB1100 and REB1200 e-book devices.

Yuen's remarks come as publishers are reassessing the market for e-books after some high-profile successes last year. When horror writer Stephen King released his first Internet foray, "Riding the Bullet," readers downloaded some 400,000 free copies of the 66-page novella. Hackers subsequently broke into the software used to encrypt the e-book.

King last year also began a self-publishing experiment titled "The Plant," which he sold in installments on the honor system over several months before putting the project on hold.

Mostly, however, the e-book market has experienced setbacks.

Susan Kevorkian, an analyst at IDC, said e-book devices remain expensive, and e-book titles have yet to provide readers with a broad selection of reading material. Gemstar's 60,000 figure only represents early adopters, she said, and 4,000 titles are "just a drop in a bucket" when compared with what a library or bookstore offers.

IDC predicts that e-book device sales worldwide will only hit 153,000 for 2001 and 1.7 million for 2004. That's still considered to be relatively low, according to Kevorkian.

In addition, the number of companies attempting to offer e-book text and devices is declining.


Meta Group says the evolution of devices is only part of the e-book equation.

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Digital Goods, formerly known as Softlock.com, worked with Simon & Schuster as a distributor for King's "Riding the Bullet" last year. But the company said Tuesday that it was unsuccessful in capturing additional funding and as a result laid off 39 employees, including all vice presidents and the chief executive, leaving it with four employees.

In December, Bookface.com ceased operations. As a start-up, it built technology for delivering secure content online and acquired the nonexclusive rights to display more than 2,000 titles online for free. However, the company said it was unable to raise the money it needed to move forward.

Gemstar remains one of few success stories in the market. It entered the e-book business in January 2000 by acquiring the makers of Rocket eBook and Softbook Reader devices. Two months later, Thomson Multimedia, a manufacturer and marketer of RCA and General Electric products, struck a deal to license e-book technology from Gemstar and distribute content to consumers.

In October, Thomson unveiled the eBook devices, the paperback-sized REB1100 and the color-screen REB1200, which became available in stores after Thanksgiving. The REB 1100 costs approximately $300; the REB 1200 runs between $600 and $700.

"At this point, Gemstar is pretty much the biggest game in town as far as dedicated e-book devices," IDC's Kevorkian said. But "e-books are still a novelty item, and they're not an obvious substitute for traditional books as they need to be in order to drive adoption."

In addition, Kevorkian said Microsoft and Adobe e-book readers are the "biggest inhibitors of the dedicated e-book device market right now." Both companies offer free e-book reader software downloads that can be installed on PCs, laptops, and handheld devices.

Competition also comes from Franklin Electronic Publishers, which after delays began selling its eBookMan last March. Unlike Gemstar's e-book-only device, eBookMan serves as an e-book reader, personal digital assistant, and MP3 or digital music player.

"I think that e-books are coming," said Chris Strano, director of marketing at Franklin. "I think it's hard for some people to imagine...but there are people embracing it now. The demand for information being portable is overwhelming."

News.com's Michael Kanellos contributed to this report.

 

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