Irrational Exuberance Over E-books?

For a business that amounted to all of $113 million last year, e-books sure are getting a lot of attention these days. In just the past week we’ve had an announcement from Google, concerning its e-book e-commerce platform, Google Editions, a sneak peak at the new Plastic Logic Que and hints of a “dramatically different” e-book reader coming from iRex. This week, Barnes & Noble will take center stage with the unveiling of its much-anticipated branded reading device expected to look a lot like the new Alex from Spring Design.

That all comes on the heels of recent announcements by Sony, Asus and Interead of new e-book readers and Barnes & Noble’s previous unveiling of its online eBookstore. Some of the new e-readers aren’t even on the market yet, but with so many big players chasing little business, can a shakeout be far behind?

True, e-book sales are growing. Through the first six months of this year they totaled $81.5 million, according to the Association of American Publishers, nearly triple the $29.8 million racked up through the same period in 2008. Sales of e-book readers are also growing, from roughly 800,000 last year to perhaps as many as 3 million this year, worth roughly $1 billion. According to Amazon, Kindle e-books account for as much as 40 percent of total unit sales among titles that are available in both print and electronic format.

Outside of Amazon, however, e-book sales remain tiny, relatively speaking, representing only 1.6 percent of total book sales. Even on a bestseller, like Dan Brown’s “The Lost Symbol,” e-books account for no more than 5 percent of total unit sales.

While sales of e-book readers may be growing, even the newest models are based on what can fairly be described as minimally acceptable, first-generation technology. E-ink screens are monochrome, painfully slow to refresh and graphically limited — not to mention expensive — making them unsuitable for applications beyond reading plain text. Even the new dual-screen Barnes & Noble reader is more reflective of design compromise than elegance. If you have to put two separate displays inside a single frame — limiting the size of both — to enable actual web browsing you’re still in the tinkering phase of the technology.

Some of the new e-readers, moreover, like the Que and the iRex reader, are premised on consumers adopting behaviors they have yet to demonstrate, such as making single-copy magazine and newspaper purchases online and using a dedicated device to access business documents.

Even Google, whose cross-platform approach is aimed at taking e-books beyond dedicated reading devices, is betting heavily that consumers will want to access books online, and read them in their web browser as they would an ordinary web site. Perhaps they will, but the data are yet to show it.

For anyone but Amazon, however, waiting is not really an option. Like music, publishing is moving inexorably toward digital platforms. And the first-mover advantage — now clearly held by Amazon — will only grow larger with time. The worst thing that could happen to Plastic Logic, iRex, or even Google, is for “Kindle” to become synonymous with digital publishing, foreclosing other options. Getting in now, therefore, and targeting niches not yet dominated by Amazon, such as periodical content, is probably their best strategy if they hope to be a factor down the line.

The other big near-term winners in the e-book land rush are the 3G wireless providers. The Kindle already drives significant subscriber growth for Sprint, without actually using a lot of bandwidth or costing much (really anything) to acquire. It’s no surprise that AT&T (Plastic Logic) and Verizon (reportedly supporting Barnes & Noble) are cutting deals with Kindle competitors to try to get in the game.

Sometimes, irrational exuberance can be downright rational.

Question of the week

Is the future of e-books in devices, or applications?