What a difference five years of hard-headed experience has made to electronic publishing and how its potential is viewed by the publishing industry. In the late 1990's hyperbole about the future of the electronic book was a growth industry. E-books were an ingenious evolution from print, a watershed event that would free publishers from returns, raise profit margins and turn libraries into paper museums. Even better, it would all happen the day after tomorrow.
The industry has since entered an era of restraint. Its members still see potential in digital pleasure reading, but are primarily targeting education, reference publishing and institutional training, and basing their businesses on more realistic revenue projections. This attitude may be best epitomized by OverDrive, a Cleveland, Ohio-based company that has managed to span the pre-and post-dot.flop eras by serving the consumer e-book market—as e-book wholesaler, retail outfitter and general electronic reading enabler—and now, through the library market, education.
"Education was always significant," says OverDrive president Steve Potash, "but it wasn't always the focus of consumer e-publishers." Potash, who is also president of the Open eBook Forum, a trade association of electronic publishers, retailers and vendors, describes an e-book market today that encompasses, "one out of three dental students," and "a quarter million commuter students at the University of Phoenix with the option of using 100% digital texts." Microsoft, said Potash, is turning applications like Word and Excel into platforms for publishers to produce educational material. "The next version of Microsoft Office will be an educational platform with access to 500 million desktops," he said.
OverDrive isn't the only e-publishing company that survived the dot.com hangover and post 9/11 economic downturn. The current electronic publishing industry is filled with familiar names, people who once spent their days proselytizing to traditional print publishers. They're still believers, but they've refined their message—and they're not preaching quite so loudly anymore.
Remember Peanut Press, the 1998 startup that converted texts into an e-books format that could be read on handheld devices? Following a series of acquisitions, Peanut Press has become eReader.com, a technology company and e-book retailer. Even with an online e-book store offering 14,000 trade book titles, v-p and general manager Mike Violano says eReader.com is honing in on schools, targeting them with its collection of more than 500 literary classics. "We began paying close attention to the educational market about two years ago," says Violano. "Teachers and students born in the digital age expect digital solutions."
Another company that emerged from the remains of headier times is eBook Technologies Inc. Back in the day, a firm called Gemstar TV-Guide essentially promised that they could sell digital reading devices as easily as toasters. Gemstar acquired the companies that developed the Softbook and the Rocket eBook—the original dedicated e-book reading device. Gemstar eventually merged the Softbook and Rocket eBook into a single line of dedicated reading devices aimed at consumers before dropping e-books completely in 2003.
Since that time, eBook Technologies, launched by former Softbook/Gemstar executives John Rivlin and Garth Conboy, has leased the Gemstar technology and launched a line of e-book devices now aimed almost exclusively at the education and enterprise training market.
Rivlin says he estimates the size of the current consumer market for dedicated e-book devices at about "300,000 consumers," who have bought at least one e-book and probably buy "e-books a few times a year." By comparison, Rivlin estimates the institutional and corporate training market at about $76 billion and the educational market at about $7 billion. While his company services the consumer market (readers can purchase consumer titles in the ETI format at Fictionwise.com), it is more focused on the training and corporate enterprise market, offering its devices to the military, businesses and corporate training programs. "Clients that have to distribute hundreds of pages of information, they want e-book devices rather than huge paper documents," Rivlin says.
ETI offers two updated models of the older Rocket eBook devices: a $400 color device aimed at the educational market and $130 black-and-white device for the consumer e-books. The company partners with consumer firms like e-book retailer Fictionwise.com, which sells ETI devices as well as trade e-books in the ETI format. ETI also partners with Filament Books, an online book club that offers ETI devices for free as part of its subscription e-book service. "The consumer market is getting better," says Rivlin, "but the enterprise and educational market is under served."
Questia.com, a company that offers students subscription access to an online library of textbooks and educational trade books, is yet another firm that managed to survive the era of digital hubris. Questia was founded in the late 1990s by Troy Williams at the height of the Internet boom, marketing 24/7 Web-based access to all kinds of books to individual students. The company quickly raised more than $100 million and grew to more than 300 employees. But by 2002 funding had dried up, Questia had burned through more than $100 million and was down to 24 employees.
Today the company is on the rebound. Questia has 70 employees with subscribers in 198 countries. For $20 a month, $45 a semester or $100 a year, the site offers access to more than 50,000 books and more than a million articles, supplemented with online research tools like savable notes, easy searching and the ability to store and generate bibliographic data for student papers. Questia specializes in serious nonfiction, literature and reference, offering full-text access to individual students, not institutions.
ETI and Questia share a commitment to the education market but deliver their content in different ways. ETI obviously favors dedicated reading devices while Questia offers Web access through laptop or desktop computers. But Frank Daniels, CEO of Vital Source, a digital database of textbooks, licensed technical, research and professional content, offers another option. Vital Source is focused on offering media-rich textbooks and technical material on laptops and desktop computers, Daniels says. "The current crop of students are highly comfortable with the computer these days, unlike in the past. People want it all digital.
Through licenses from more than 33 publishers, Vital Source offers fully searchable digital textbooks and reference libraries for science and professional education or public high schools, providing everything from technical data to Shakespeare. Students who subscribe (at a rate of $900 to $1700) eventually own the e-books and get instant updates of textbooks included.
While the new conventional wisdom views education and training as the pillars of the e-book business, the consumer e-book market has not been abandoned. E-books for the trade book market—fiction, nonfiction entertainment reading and reference—keep chugging along, adding readers and ringing up sales. Indeed, some professionals think the dot.com crash took the focus off consumer e-books, allowing that market to grow in a reasonable manner, out of the glare of consumer expectations and publisher hype. E-publishing professionals also take encouragement from the increase in the digital sophistication of consumers, particularly young people, who are comfortable with an array of personal digital technology.
For now, statistics gathered by the Open eBook Forum show that sales of consumer e-books continue to grow in double-digits. Total e-book sales for 2004, according to the Forum, were nearly $10 million, a 31% increase over 2003. Unit sales of e-books in 2004, says executive director Nick Bogaty, were up 27%.
And e-books sales are growing, says Bogaty, at a time when publishers have reduced their number of titles, having learned what sells (namely reference and genre fiction) and adjusted accordingly.
Whether catering to romance readers, college students or executives seeking additional training, digital content companies may be in a better position to grow now than they were several years ago.
"In the 1990s, expectations just overran reality," says Rivlin. "Now we're all building our businesses from the bottom up. We're out looking for 10—20 customers, not trying to raise $100 million. It's a slower process but it's a much healthier approach than waiting for the big bang."
