Unlike music, the book industry didn't suffer dramatically from digital theft and, for years, couldn't figure out how to make money from e-books. There was no sense of urgency.
"It's fair to say that the leadership folks at the major trade publishers didn't believe until very recently that e-books had any economic life in them," says Arthur Klebanoff, chief executive of New York-based RosettaBooks LLC, an e-book publisher.
The success of Amazon.com Inc.'s Kindle e-reader recently changed all that, proving to publishers that the e-books market was real.
But it wasn't until the arrival of Apple Inc.'s iPad last month—with its promise of one day tapping more than 125 million iTunes customers—that the true potential of the e-book market became apparent. "It's taking digital books to a new level," says John Makinson, CEO of Pearson PLC's Penguin Group.
Google Inc. will join the fray in late June or July when it is expected to begin selling its own e-books.
"The store model is under pressure, whichever way you look at it," acknowledges Leonard Riggio, Barnes & Noble's 69-year-old chairman and largest shareholder. Over the next three to four years, Mr. Riggio says, a different, more diverse Barnes & Noble retail store will evolve, selling a variety of merchandise and serving as a showcase for digital products.
Borders Group Inc., the nation's second-largest book chain, saw same-store sales decline 14% at its superstores for the quarter ended Jan. 30. It laid off 884 people, more than 3% of its work force, last year, and now operates 175 Waldenbooks stores, down from 1,200 in 1992.
E-books have turned the economics of book retailing upside down.
Charlie Wolf, a senior analyst at Needham & Co., estimates that Apple will sell 5.5 million iPads in 2010, while Amazon will sell 3 million Kindles and Barnes & Noble will sell 1 million Nooks.
The future of Barnes & Noble's and Border's bookstores may boil down to one question: Will people prefer digital books as much as they preferred digital music? If that is the case, physical stores may all but disappear. Some in the industry say bookstores may serve an even more prominent role as a forum for authors and a showroom for readers seeking to discover what's new.
"By the end of 2012, digital books will be 20% to 25% of unit sales, and that's on the conservative side," predicts Mike Shatzkin, chief executive of the Idea Logical Co., publishing consultants. "Add in another 25% of units sold online, and roughly half of all unit sales will be on the Internet."
Source: The Wall Street Journal, May 21, 2010
