What do ebooks mean for publishers – The good, The Bad, and The Ugly.

For publishers, the risks and opportunities e-books represent are fairly straightforward. Between 30 and 40 percent of all published books go un-purchased, and must be remaindered or pulped. E-books would eliminate the costs associated with overruns, as well as with the printing and delivery of books. That’s the opportunity. The risk is that e-books will substantially and irrevocably reduce the amount of money consumers are willing to pay to buy new books.

In the fall of 2007, when Amazon launched the first Kindle, it decided to entice buyers by setting the price of most e-books at $9.99 or less. That price, with some upward variation, has since become the de facto norm for e-books across the industry, reminiscent of Apple’s clout in pricing iTunes except that there, the device is the loss leader, not the content.

This might be more palatable to publishers if the Kindle and other e-readers were leading people to buy more books. But so far, that hasn’t been the case. According to a May survey conducted by the Codex Group, a book market research company, when people buy Kindles the number of books they purchase increases by only a minor amount — about 7 percent. The average price of those books, in the meantime, decreases by 10 percent.

It’s widely speculated that e-books are losing Amazon money by cannibalizing sales of its print inventory, a belief that a spokesman for the company didn’t deny in a recent interview with Publisher’s Weekly. As more e-readers hit the market — the Apple Tablet is rumored be coming in the fall, and a handful of others are expected before 2011 — and the price of the Kindle is correspondingly reduced (as most analysts expect it to be), e-book prices may inch upwards. But there’s virtually universal agreement that digital books have a much lower price threshold than paper books.

This has put publishers in the knotty position of having to decide whether to release new titles in digital format. Peter Hildick-Smith, president of the Codex Group, believes emphatically that they should not. The only way publishers can protect their margins, he says, is to “stand firm and say, ‘When we do hardcover, we’re not going digital.’”

Recently Dominique Raccah, the head of Sourcebooks, an independent publisher based in Illinois, decided to delay by six months the e-book publication of Bran Hambric: The Farfield Curse, a hotly anticipated children’s book by Kaleb Nation. Her decision has been the talk of the book industry. In an interview, Raccah said that as long as e-books are priced like paperbacks, she sees no reason to release new titles in digital format. “If the e-book format is akin to a cheap trade paperback, or an expensive mass-market paperback, then we’ll delay digital release until we’re ready to publish it in paperback form.”

Any day, the Knopf Doubleday Publishing Group is expected to announce whether it will release The Lost Symbol, the new Dan Brown novel that’s being published in hardcover on Sept. 15, in e-book format — a decision that could end up representing a watershed moment in the evolution of e-books.

If publishers can find a way to coexist in a mutually beneficial relationship with Amazon, e-books could be a boon. Bookstores, already on a losing streak, stand only to lose from the digitalization of books. Bookstores have been hemorrhaging for years, due partly to a general turndown in storefront retail commerce around the country, and partly because of the huge growth of online booksellers.

For months, iconic bookstores across the country have been shutting down — Dalton’s in Los Angeles, Robin’s in Philadelphia, Olsson’s in Washington, D.C. Even the mighty Powell’s, of Portland, Ore., is in financial trouble. And the chains are faltering as well. Borders may be near bankruptcy, and Barnes & Noble’s shares have been plummeting, even as it has laid off hundreds of corporate employees. Among publishing houses, the crisis is even more pronounced. And although some of the bloodletting is ascribable to the recession, the problems in the book business long predate it.

But while this may seem to be a perhaps tragic but mostly local concern, it actually has implications for the entire industry. Surveys consistently show that the most important source of publicity for books intended for a general audience is through merchandizing, by a wide margin.  Miller McCune

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