August 27, 2004 4:00 AM PDT

Have e-books turned a page?

After more than a decade of false starts and empty promises, publishers may finally be starting to understand what consumers want from electronic books.

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.


What's new:
Publishers are getting smarter about what consumers really want from e-books.

Bottom line:
Sales are growing steadily, but digital rights management and other issues are likely to prevent any mass-market breakthrough.

More stories on e-books

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.

"There's no good DRM, period. Publishers all want heavy-duty DRM, but the problem is that anything you do gets in the way of buying and using e-books."
--Jean Bedord,
publishing-industry analyst

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.

"Consumers have been pretty clear that they want to use e-books on multifunction devices."
--Tom Prehn, senior business development manager, Adobe Systems

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."


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Big ommission
I found the article about the acceptance of e-books very interesting, but I felt that one huge reason for their slow acceptance was left out. The price of e-books! The price of most e-books is the same as a hardcover book. I personally find that ridiculous. I rarely buy hardcover books because I don't like paying that much for a book (unless it's for business). Considering that there are no printing costs, I would expect an e-book to be cheaper than a regular book, not more expensive!

I would never be willing to pay more than the price of a paperback book at the most. However, I would buy a lot of e-books at that price. I would love being able to read my casual reading books on my Palm PDA. When they lower the price, I'm there.

Posted by Stefan G (2 comments )
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DRM pointless for e-books
The audience for e-books is quite different than that for digital music. These readers are not likely to engage in the kind of file-sharing that has music industry execs breaking into sweat over lost revenue.

If e-book publishers engage in the kind of "psychological DRM" that one of the interviewees mentions, most readers will respect that in the sense of "loaning" a copy of a file to a friend with the understanding that it won't be further passed on. But the friend is now far more likely to buy other books by that author than perhaps they were previously. This is just good peer-to-peer marketing.
Posted by (2 comments )
Reply Link Flag
Re: Have e-books turned a page?
Having started using my PDA as an ebook reader, I find the format pretty convenient, although the small screen is a a little annoying. My recommendations to ANYONE trying to come up with a new dedicated ebook reader would be to make something with a screen approximately the size of the page from a paperback novel, no thicker than the average paperback, with controls placed so the hand is in a natural position while reading. Make it reasonably priced (so that the return on investment is achieved in less than 100 books!) and you might just have something.
Posted by dpayment (8 comments )
Reply Link Flag
Another omission
What about MP3 format? The article didn't even address listening to e-books. I would love to be able to listen to books on my MP3 player. There are dedicated services such as IPOD and ITUNES. But, should you have to replace your MP3 player with another one? offers books in there own formats, but very fews players are compatible. If someone would make downloadable MP3 formats available to all MP3 players, I think sales would zoom.
Posted by T-rex (2 comments )
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Yet another omission
eReader, Adobe !!! let me laught.

Mobipocket is the leading format for eBooks.
- it works on more devices,
- it uses a real DRM, not a kind of password protection (stolen cards, temporary card numbers like in europe),
- more eBooks and dictionaries available in Mobi than in other format.

Do you guys really look at the market?
Posted by (1 comment )
Reply Link Flag
Points well made
As someone involved in the eBook publishing industry at editorial level ( I totally agree with the comments regarding pricing and DMR. Our own experience over the last twelve months is that the eBook market is growing with people buying titles despite the fact that they're in eBook format, not because of it. Original work, well-presented and aggressively priced coupled to a policy that allows the same flexibility over what you do with your eBook as if it were a paper book has seen a 30% increase in our sales. A long way to go before we get to the paper book sales figures but the future is approaching.
Posted by David Amerland (6 comments )
Reply Link Flag
Dennis, after the first burn of an ebook, where is the material cost? It is a digital file. It doesn't need to have a set amount of paper and ink processed for each copy printed. There is no manufacturing cost for the ebook product after the master is made. The retail cost right now should be no higher than a paperback.

I like the concept of ebooks but I'm not going to pay $15 or $20 for one when I can get the same paperback for $7.
Posted by d.livingston (4 comments )
Link Flag
Points well made
As someone involved in the eBook publishing industry at editorial level (<A HREF="">Cool Publications</A>) I totally agree with the comments regarding pricing and DMR. Our own experience over the last twelve months is that the eBook market is growing with people buying titles despite the fact that they're in eBook format, not because of it. Original work, well-presented and aggressively priced coupled to a policy that allows the same flexibility over what you do with your eBook as if it were a paper book has seen a 30% increase in our sales. A long way to go before we get to the paper book sales figures but the future is approaching.
Posted by David Amerland (6 comments )
Reply Link Flag
All-in for eBooks
I buy quite a few books on technology (formerly an IT consultant, now in corporate IT sector) and most of these books are quite hefty volumes. Transporting these volumes around is a major hassle that eBooks easily resolve. Facing a choice between two equally good books, I'll always chose the one that has a PDF copy on the supplementary disk and I'll read it on my laptop at work or on the plane.

I don't like reading them on devices with small screens (such as PDA or god forbid cell phones), but laptops and especially Tablet PCs are the ideal medium. I really see Tablet PCs type of devices become the eBook reading devices of the future and I wouldn't be surprised to see companies like Microsoft, Adobe and hardware manufacturers pushing eBook agenda in the very near future...

The whole idea of being able to take all your library with you on a trip to a park is very appealing, much like I currently take ALL of the music that I have with me on my iPod...

Major gripe against existing eBook offerings is the price - it is ridiculously high. By moving to eBook format, the publishers and retailers can achieve tremendous cost savings on printing, logistics (transportation, inventory management at multiple locations, distribution costs) and etc and pass those savings onto the customers while retaining or even improving their profit margins. Win-win situation for all: better prices for consumers, higher profits for publishers.

DRM issues are important and eventually suitable technology/processes will be worked out. There'll always be someone who would get around it, but that's inevitable with any technology. The industry will compensate for this by the fact that those who buy books will buy more of them more frequently...
Posted by hn20 (8 comments )
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Pass This On
I read some excellent comments here, I'm presently located in Thailand and good reading in English is hard to get. Having just got into the eBook arena, I say get thoes prices down, get an MP3 voice format going and get these comments to the publishers. They are shooting themselves in the foot by holding back.

Also think about books readable on a browser then all the bases are covered!

Posted by (3 comments )
Reply Link Flag
e-Books, must be required
I think that every publisher must be required to release all their books in PDF format. I for one am very tired of having to purchase non-digital books for my classes. I am starting to adopt a policy that if I can't get the book in a open digital format that will allow me to keep the book as long as I like, then I really don't need or want the book.
Posted by bigjim01 (75 comments )
Reply Link Flag
Simple Digital Rights Management Solution
Encode the purchaser's information into the publication. Have the purchase agreement state that any and all unpurchased copies found with a purchaser's code will be charged to that original purchaser at 10 times the purchase price. Stipulate that any possessor of an uncoded copy will pay 1,000 times the retail price, plus attorney's fees and court costs.

Original purchasers who have half a brain or more will be very protective of their copies. Liabilities could quickly grow into the millions for popular works.

Finally, sell inexpensive copy lifetime protection insurance to the purchasers. This will protect them if someone steals their copy and redistributes it.
Posted by (1 comment )
Reply Link Flag
I think that by adding lots of DRM to ebooks, they are making them difficult to use for the people who actually paid for them. If people want to get content for free, they will always find a way of getting around DRM.

And... I think that ebooks should have something more than just plain text. If you're going digital, you might as well make use of the technology available to you. Electric Book Works just released the Moxyland ebook (the fist ebook with a soundtrack). I haven't started reading it yet, but it looks quite cool. Can't wait to get started.
Posted by death3ater (1 comment )
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