E-books' holiday charge
As sales soar, digital works face season's crucial test

By Ylan Q. Mui
Washington Post Staff Writer
Thursday, November 5, 2009

Technology is stalking your bookcase.

It has already taken over your photo albums and emptied your film canisters. It overwhelmed your music collection and flooded Goodwill with CD towers. It canceled your newspaper subscription. (Sniff, tear.)

And now, digital evangelicals believe technology is on the verge of supplanting those dusty, yellowed tomes that weigh three times more than an iPod and don't even come with any cool free apps.

Sales of electronic books jumped 68.4 percent last year and skyrocketed 177 percent to $96.6 million for the year through August, according to the Association of American Publishers. That's not counting the millions downloaded for free at public libraries, where e-books are fast becoming one of the most popular features. And Amazon has said that its e-book reader, the Kindle, has become the best-selling product on its Web site.

But despite the staggering growth, e-books remain just a sliver of the overall publishing industry, at 1.5 percent of the $6.8 billion in sales this year -- about on par with audiobooks. And some experts believe that the $200-plus price tag for e-book readers will keep the market from exploding the way MP3s did.

Holiday hopes

This holiday season will be a crucial test of whether e-books can cross over from geeky novelty to mass-market must-have. Major retailers are pushing the format -- and, of course, the gadgets they've developed to display it. Barnes & Noble unveiled its first electronic book reader last month, with access to all of the retailer's titles and then some. Amazon and Sony, which make the two best-selling e-readers in the country, have introduced new versions just in time to stuff your stocking. And this holiday, for the first time, Best Buy is devoting store space to educating shoppers about e-readers.

All told, about 1.2 million e-readers are expected to be sold in the last three months of the year -- roughly 40 percent of the entire year's stock. By the end of 2010, industry experts predict, 10 million people will be carrying e-readers. As for the number of e-books that people have read, they've lost track.

Steve Haber, president of Sony's digital reading division, can hear his grandkids' grandkids now: You printed 1,000 pages and you made a million copies of those? Why did you do that?

"To me, it's just inevitable," says Haber, who knew printed books were goners when people told him they liked to touch and feel them. "I heard the same thing from LPs and CDs. The mass market, they want convenience and experience."

Already, we buy roughly as many printed books online as we do at chain bookstores. Each claims more than 20 percent of the market and alternates at the top spot, while independent sellers claim just 5 percent of the market, according to PubTrack, a survey conducted by publishing industry research firm Bowker. If it only takes one click to buy a book, why should we have to wait to read it?

The Amazon effect

Amazon executives have made near-instantaneous content a company goal. The latest Kindle, which began shipping last month, holds 1,500 titles and can wirelessly download books in 60 seconds. The company envisions a day when any book ever printed in any language can be downloaded in one minute.

Ginny Wolfe, 51, of Alexandria brought her Kindle to Afghanistan, where she is working for a few weeks as a private contractor; the device is loaded with 350 books, including "White Ghost Girls" by Alice Greenway and "The Invisible Mountain" by Carolina De Robertis. In the old days -- like, pre-2007, before the Kindle was released -- Wolfe would pack an extra suitcase on her work trips, just for books.

"I used to panic, thinking I might run out of things to read. That doesn't happen anymore," she writes in an e-mail, although she adds that she misplaced her Kindle for two days in Kabul, resulting in escalating drama until it turned up in a restaurant.

It is difficult to overstate the impact that Amazon has had on the publishing industry, both when Amazon began selling print books nearly 15 years ago and when it launched the Kindle two years ago. In both cases, the company struck fear in the hearts of publishers by lowering prices.

According to Bowker, the average price of an e-book this year is $8.30. The cost of a hardcover book -- the most profitable format for publishers -- is $14.55. The difference is particularly painful for publishers because e-book buyers tend to be readers who used to be hardcover buyers, says Kelly Gallagher, vice president of publishing services for Bowker.

Worse, the industry can't raise prices on e-books to match those of hardcovers because Amazon established $9.99 pricing for e-books, and consumers expect virtual products to be cheaper than actual ones, he says. To fight back, publisher HarperCollins is delaying the e-book version of former vice presidential candidate Sarah Palin's potentially best-selling memoir until after Christmas to help bolster hardcover sales.

"We've always kind of painted ourselves into a corner," Gallagher says.

Although the Association of American Publishers estimates that sales of e-books account for only 1.5 percent of all books, the medium's triple-digit growth has publishers on guard. Sales are outpacing most forecasts at a time when the book industry has seen sales declines. Adult paperbacks have dropped 9 percent to $908 million for the year through August, while hardcover sales plunged 12 percent to $738.6 million. Since it was launched last year, more than 2 million people have downloaded the free app Stanza to their iPhones to read e-books.

"The trend that the Kindle has started has grown far beyond Amazon," says Sarah Rotman Epps, senior analyst for consulting firm Forrester Research. "There are some companies that are on this for years and are finally seeing consumer demand building."

The e-reader market

Forrester's profile of the current e-reader enthusiast is a 47-year-old married man with a college degree and an average household income of $116,000. About 30 percent of e-reader owners use them on business trips, while about 17 percent rely on e-readers during commutes. They read about 3.5 books each month, more than the average Internet user. About 83 percent consider themselves "technology optimists."

The second wave that is emerging is composed of slightly younger men who may already be reading a few e-books on their iPhones or laptops and are graduating to e-readers. But to go truly mass-market, e-books will have to appeal to women, who tend to be warier of new technology and more price-conscious, Epps says. Harlequin, purveyor of those lusty supermarket bodice-rippers, has dipped into the market with an e-book subscription service for some series, like Silhouette Desire, "delivering the provocative passion you crave." And no one can see you put it in your shopping cart!

Can passion overcome the high price of e-readers? Epps performed an analysis of how much shoppers are willing to pay for an e-reader, and the point of mass appeal was $50 -- less than it costs to make the device.

Epps doesn't think that today's e-readers will do for e-books what the iPod did for MP3s. Even if 10 million people are toting an e-book reader at the end of next year, that's less than 1 percent of the 110 million people who have MP3 players. And at current prices, she believes the market for e-readers will top out at 25 million. Gallagher of Bowker says laptops still remain the primary mode for reading e-books.

Epps thinks the trend will look more like what happened to digital cameras, which took about a decade to catch on before exploding in popularity but are now taking a back seat to camera phones.

Book clubs and gadget geeks alike are buzzing about rumors that Apple is secretly developing a tablet-style device that combines an e-reader with other computing wizardry. An Apple spokeswoman did not respond to requests for information. But if the ubiquitous iPods and iPhones are yardsticks, an Apple e-reader could be the tipping point for digital books.

Sex appeal

Unless, of course, you are 40-something Hilton Henderson of Fairfax, who cannot fathom any reason why he would ever choose to read a book on a screen. Call him old-fashioned. Call him a Luddite. Or, Henderson helpfully suggests, call him a romantic.

A friend of his recently compared books to attractive women -- glorious to behold! -- and the comparison resonated with him. Reading an e-book, he says, is about as appealing to him as cybersex.

Yes, he went there.

"I prefer actually the experience, when reading a book, of using all my senses, like when I experience the world," Henderson says. "The touch of it, the feel of it, the scent of it."

All good points. But Sony's Haber argues that if it's women you're after, technology is man's best friend. Pull out a book in a bar and you look lonely. But whip out a Sony Reader and watch the magic happen.

"If you want to meet a girl," he says, "don't get a dog, get a reader."

© 2009 The Washington Post Company