EBOOKS

What is an ebook?

The term ‘ebook’ is commonly used to mean one of two things: either a literary work that is published, stored and used in digital form, or an electronic device that displays books in digital form. In this article, I will refer to the first meaning simply as ‘ebook’ and the second as ‘ebook device’.

A note on spelling: When consumers and industry insiders write about ebooks, they spell it thus: ‘ebooks’. Journalists, academics and librarians often spell it ‘e-books’. In the early days, the ‘b’ was often capitalised, ‘eBooks’, although that is becoming less common as the term enters mainstream usage.

Origins of ebooks

Ebook devices first appeared as reading gadgets in science fiction novels and television series, like Star Trek, in the 1970s. But it was not until the late 1990s that dedicated ebook devices were marketed commercially in the USA. The first successful effort to assemble a body of  downloadable ebooks was started by Michael Hart at University of Illinois in 1971, under the name ‘Project Gutenberg’. The aim of the project was to aggregate over 10,000 public domain works and make them freely available to all.

The rapid adoption of the internet in the late 1990s saw the launch of a plethora of ebook initiatives from established companies and start-ups, mostly in the USA. But a stock market correction in 2000, combined with the generally poor adoption of downloadable books, sapped all available investment capital away from internet technology companies, leaving a wasteland of broken dreams in its wake. Over the next two years, over a billion dollars was written off the value of ebook companies, large and small.

The failure of ebooks to catch on has been variously attributed to:

(1) the relatively small range of ebooks available,

(2) the usage restrictions imposed by publishers,

(3) the complexity and instability of the ebook file formats, and

(4) the lack of an affordable and functional ebook device. 

Just one of these factors should have been sufficient to stifle digital adoption at the outset. However the market for downloadable books simply kept growing from its small initial user base, such that the total market for ebooks is now substantial This continuous growth is due to three unique features of the digital medium:

1. immediacy,
2. searchability, and
3. portability.

Ebooks today

Today, every major book publisher releases ebook versions of their frontlist titles. Thousands of new ebook titles are launched every month. The total number of ebooks now available from mainstream publishers is over 100,000. Amazon, Borders, Sony, Adobe and other market participants are investing heavily in their visions of the digital future of book distribution. And specialist ebook companies are reporting exceptional growth and profits.

Who is reading ebooks?

As expected, students, researchers and professionals have adopted ebooks much faster than the larger consumer market. This is likely due to the instant accessibility of ebooks, and the fact that you can search the entire contents of a book in a second.

Ebooks are very popular with travellers because of their portability: you can carry 50 books in your smart phone and thousands on a laptop, and download more while you're on the road. 

What is being read on ebooks?

The reading tastes of ebook users are very similar to those of mainstream book buyers.  
 

Where are ebooks being read?

Figure 2. Consumer ebook sales by region 

Figure 2 shows where ebooks are selling today. This data refers to trade sales (consumer), not academic or scholarly sales. North America accounts for 71% of global consumer ebook sales, compared with 7% for the UK and 6% for Australia. If you take the USA as the benchmark, Australia is hitting above its weight, considering its population and the size of its economy. But, market-for-market the UK is far behind: at this stage in the cycle it should account for over 13% of the global ebook market but instead it's sitting at just under 7%. This underperformance is largely attributable to the fact that UK trade publishers have simply not embraced the model. The results are in the figures.  

In contrast to their colleagues in the consumer book business, UK scholarly publisher Taylor & Francis (T&F), has been the absolute leader of the pack in driving the digital revolution. A division of Informa, T&F adopted an aggressive digital strategy from as early as 1999, when Christoph Chesher announced their extraordinary plan to digitise 19,000 backlist and frontlist titles. Because of their early entry to the digital space, T&F had all the bugs ironed out years ago, and is now running a very successful ebook programme.

In 2008 there was a shift in UK trade publishers' stance towards ebooks. By March, every major UK trade publisher was planning or had announced an ebook publishing programme that would parallel their print book publishing activities. It will be interesting to see how this plays out for UK consumers in the coming year.

Will ebooks affect book sales?

There are innumerable ways in which ebooks create incremental (additional) sales for authors. Ebooks reach parts of markets that printed books cannot. An expatriate geologist in Azerbaijan was never going to get those thrillers she downloaded via satellite in the steppes, except as ebooks. Busy travellers are clearly buying and reading ebooks on the fly now, where otherwise they would be reading in-flight magazines or watching movies. Students preparing at 3am for an exam the next day are buying ebooks and accessing them immediately.

The immediacy of the medium encourages a growing number of net-savvy readers to opt for digital access instead of the printed version; so, in addition to creating new sales, ebooks are also replacing some print book sales.

Because most major publishers only release ebooks in copy-protected formats, it is unlikely that unauthorised redistribution (i.e. piracy) will affect sales in the way that recorded music sales have been affected.

Will it be easier to get published?

When ebooks first appeared, many new writers saw it as a way to get their work out there on the internet. This is true today: at the very least, authors can post their work on their website and charge fees for access. But that's quite a different thing from being published. If you want a respected publisher to take your book, then the internet hasn't made things any easier. Whether a book is published in paper or digitally, the editorial policies and practices of major publishers are unlikely to shift.

Market size

The International Digital Publishing Foundation (IDPF), a US-based industry group, estimates the current ebook market to be about US$50 million per annum. The IDPF's figures are drawn from data provided by US trade (consumer) publishers. If library, educational and professional electronic sales are included, that figure will be closer to US$155 million.

The overall English language book market is over US$50 billion, which makes the ebook segment 0.31% of the total world book market. There's a long way to go. The printed book will be with us for a long time to come.

Ebook market sectors

The ebook market has coalesced into three general segments: Consumer (‘Trade’ books), Scientific, Technical and Medical (STM), and Business & Professional. Each segment is characterised by different pricing, access policies and business models, and is served by different providers.

Trade ebooks

If you're a writer of fiction or another category that aims for a wide, popular audience – the kind of books sold in your local bookshop – you'll want to have your book listed on the major consumer ebook services. This is not something that you can do yourself; it's the publisher's job to supply these vendors with your ebook files. There are hundreds of sites selling ebooks today, but only a handful of ‘aggregators’ which provide fulfilment services for those retailers. Your publisher will need to supply files to these aggregators (OverDrive, LightningSource, Ebooks Corporation, FictionWise, MobiPocket, Amazon, Sony). 

The pricing of a trade ebook is usually based on the lowest prevailing price for the printed version of the book. So, for example, a publisher might charge $29.95 for the ebook version of a work that is currently available in hardcover. However, when the paperback is released, the ebook price would drop accordingly.

When a consumer buys an ebook, they generally do so by presenting their credit card at the retailer's website and downloading the complete book as a file which can be read on a computer and/or hand-held device. Some retailers, like eBooks.com and Dymocks.com, also provide the end user with perpetual online access, via a web-based ‘reader’ called eb20.

Scientific, technical and medical ebooks

The market for STM ebooks is centered around academic and research libraries, and is dominated by a small number of gigantic international publishers. These publishers sell ebook collections direct to libraries, and also sell ebooks through wholesale booksellers, including netLibrary, ebrary, EBL: The Ebook Library, Blackwell ECHO and MyILibrary. 

The pricing of STM ebooks varies according to the business model that applies. If a library subscribes to a collection of ebooks, they will pay an annual fee which is anything from a few hundred dollars to tens of thousands of dollars, depending on the size and nature of the collection and the number of potential users of the library itself.

If a library selects ebooks one at a time to add to their collection in perpetuity, then the library typically pays separately for each ebook title. The price is usually the same as that of the printed version of the book, although some publishers add a ‘digital premium’.

When a library buys an ebook, it is typically granted the right to enable its patrons access to the work, subject to certain constraints. These constraints are imposed by book publishers in an effort to (a) protect them against the risk of digital piracy, and (b) ensure that, where a book is used by a large number of patrons, the library is required to pay more for the access.

Business and professional ebooks

A large number of business and professional ebooks are sold through trade ebookstores and to libraries. But there is also a very specialized business and professional ebook distribution channel wherein specialist aggregators provide ebooks direct to corporates and other organizations. The three leading aggregators in this field are books24x7, Safari and Knovel. 

Books24x7's strength has traditionally been in business books, while Safari's roots are in computing titles. Knovel targets applied scientists and practicing engineers. Each company offers organizations the ability to provide their members or personnel with access to a wide selection of current works in their fields.

The pricing model for business and professional ebooks is similar to that of STM ebooks; the customer organization subscribes to a collection of relevant material that is updated periodically by the aggregator.

Self-publishing

Authors often find that, although their book has considerable merit, they are unable to find a publisher to take it on. For centuries, one way around this bind has been for authors to publish their works themselves. Things are no different in the digital realm. A number of services have sprung up in recent years serving the needs of authors who want to bypass the traditional publishing route, for example www.scribd.com, www.lulu.com and www.lightningsource.com

DRM: protecting your assets

Digital rights management (DRM) refers to the technical and legal measures that publishers use to control how ebooks are used and distributed.

DRM has provoked controversy since concerns about digital piracy first emerged in the 1990s. On one side are those who argue that ‘knowledge wants to be free’, and on the other are the writers and publishers who believe that their hard work and investment ought to be rewarded. This sounds like an ideological debate, but it has enormous ramifications for the shape of the book industry in the coming years. For ten years book publishers watched aghast as the music industry was decimated by the advent of digital distribution.

In practice, publishers apply DRM by authorizing their ebooks to be stored, distributed and used in a few recognised encryption formats, the most common being Adobe, Mobipocket, eReader, Microsoft Reader, Sony (only used by Sony Connect and Borders) and Kindle (only used by Amazon). Ebooks are sold in the first four formats listed above by a large number of online retailers.

Recent developments

Sony, the global media giant, launched an ebook device called Sony Reader in 2006, which was marketed directly from Sony's content website, Sony Connect¹, and in Borders bookstores. By all accounts, the device has been a success and in 2007 Sony enabled Borders.com to sell ebooks alongside printed books. In July 2008, UK bookselling chain Waterstones began selling the Sony Reader from their stores.

In 2007 there emerged what many believe is the tipping point for ebooks: Amazon.com launched a dedicated ebook reading device called the Kindle. Its relatively low price and innovative wireless delivery system, combined with Amazon's massive brand reach suggest that they may be on a winner. The device sold out within days of its launch, and publishers are reported to be pleasantly surprised by the strength of initial ebook sales. Time will tell if these early positive indications do herald a new digital age. The Kindle is currently only for sale to residents of the USA, and will only display copy-protected ebooks that have been bought from Amazon’s own online ebookstore. It is expected that Amazon will launch the Kindle in the UK market in September 2008.

In Europe, iRex Technologies, a company associated with Phillips, launched an impressive dedicated ebook device called the iLiad. The iLiad has a larger screen than Amazon’s Kindle and has the added advantage of allowing users to download copy-protected ebooks from a large number of online ebook providers. In November 2007, the giant Australian bookseller Dymocks launched the iLiad in the Australian market, and in May 2008, Borders bookstores in the UK began selling the iLiad instore.

The future

Many industry watchers believe that the ebook market will take off once there is a ground-breaking device available on which to read ebooks. The next few years will show how that plays out. My own view is that the digital future of books is more complex. Devices are an important part of the picture, but there will be more to it.

The success of an ebook device depends on many factors including price, distribution and content availability; but the most important determinant is usability. The simplicity of the user experience will be paramount in determining the adoption of an ebook device.

In addition to targeting those people who might want to carry a portable ebook device around with them (who today number in the thousands) we should not overlook another installed user base: the billion of us that use computers and mobile phones every day. The sales of ebooks for use on computers and phones have, to date, been constrained by the complexity of the user experience. With each step forward in simplicity more and more mainstream readers are adopting digital books.

If the future of books is a hybrid, made up of paper, digital files, websites, mobile phones, computers and devices, it is also a global future. In this article I've spoken as if the ebook market is an English language, US-centric phenomenon. Until now, that is mostly what it has been but, as the axis of economic activity shifts, so will the consumption of ebooks. In Japan, Taiwan and Korea, for example, there is a growing audience for fiction that is delivered in snippets via SMS to mobile phones. Inevitably, authors are writing for a global audience, and that audience will increasingly discover, acquire and read their work on some kind of screen.  

Stephen Cole is the founder and CEO of Ebooks Corporation, an Australian public company that operates two of the world's leading ebook businesses, eBooks.com and EBL: The Ebook Library.