E-Readers, Ebooks, and Publishing's Bottom Line: The Opportunities and Challenges Presented by the Explosion of the E-Reader Market

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Digital Reader Preferences Are Changing Quickly

All the improvements in digital readers are creating an increased consumer appetite for digital content, both from periodical and book publishers. The Association of American Publishers (AAP) announced in December that ebook content sales for the period of January 2009-October 2009 reached $130.7 million, compared to $46.6 million for the same period of 2008. That represents a 180.7% revenue increase. Keeping in mind that AAP data excludes major mfarkets such as education, libraries, and professional electronic sales, it's easy to believe Forrester's prediction from its December 2009 report, "The Battle for the Ebook Consumer," that overall ebook content revenues may reach $500 million in 2010.

That's still small potatoes compared to an overall market size for book publishing-the Book Industry Study Group (BISG) pegged revenues at $40.32 billion in 2008-but consider that estimates for overall industry revenue growth that year ranged from -3% (Nielsen Co.) to +1% (BISG), and the growth in digital demand looks like a godsend.

"What's really interesting is how quickly reader behaviors are changing," says Carlton. BISG released a report in January called "Consumer Attitudes Toward Ebook Reading," which found that almost one in five people surveyed said they've stopped purchasing print books within the past 12 months, in favor of purchasing the digital edition. The more mainstream e-reader usage moves, the less publishers will be able to argue that their readers don't fit a "digital reader profile."

Texterity, Inc. provides digital content and online image solutions for publishers including Meredith, Rodale, Mansueto, Disney, and United Business Media. Carl Scholz, Texterity's COO, says the key is to understand your readership. "How you address the digital opportunity really depends on reader demographics-how open are your readers to going digital? If what you publish is technically oriented or in a B2B space, readers generally appreciate the efficiency of reading digitally."

Addressing the Demand for Digital Content

In considering how to address the demand for digital content, there are three approaches to be considered, alone or in combination: converting an archive (or backlist) for book publishers, creating ongoing or current content in digital formats (or frontlist), and creating content for an enhanced digital version (essentially a brand extension).

One of the factors influencing the cost of conversion is the nature of the current content format. "Forward-thinking publishers have started creating content designed for [the] digital experience," says Scholz, utilizing larger fonts and landscape views and keeping in mind screen views rather than page views. Alternatively, publishers may provide PDFs of their print product. "We can work with that as well," Scholz says. "But then we have to decompose it to make it interactive." Offering flat, static PDFs could fit the definition of "going digital," and certainly many e-readers support the format. But it's not exactly leveraging the possibilities of the digital channel.

The second factor is the requirement page for fidelity and design control. LibreDigital client The Wall Street Journal believes its brand identity encompasses not just the editorial content but the format in which it's presented. "We probably spent 20 man hours with The Wall Street Journal just to perfect, almost at the pixel level, how it would appear on the Sony Reader," says Carlton. "Because we're in the early phases of the technology, it's probably from 8% [for a low-fidelity version] to more than 20% [for a higher-quality, interactive version] of a publisher's total cost to produce the digital version," he adds. That compares to the 15%-20% ballpark cost for printing and production in the print world. But as technologies improve and economies of scale in digital production grow, that percentage should decrease.

"Publishers may have to accept a world of page layout on-the-fly, instead of an art director overseeing every single detail," says Scholz. "It's a question of giving up some control so that the device can do what it's meant to."

Bob Miller is president and publisher of HarperStudio, a small imprint of HarperCollins tasked with experimental publishing models. "Certainly, going digital gives us ways to reach more readers more efficiently by removing the costs of physical production, not to mention returns," Miller says. "There are ecological and financial efficiencies."

But, he cautions, "You don't save on overhead or on author advances. To do this job well, you need a lot of people. Publishing is a business of a million details."

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[Note: Bob Miller announced on March 17 that he is leaving HarperStudio to become publisher at Workman Publishing. Michael Morrison of parent company Harper Collins will take Miller's place as HarperStudio publisher.]

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