December 9, 1999

Racing to Convert Books to Bytes

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Evolving Market for E-Titles

By DOREEN CARVAJAL

arely does anything between covers astonish a librarian like Dennis Dillon, but he says he is shocked when he examines the latest reports about reading patterns of students at the University of Texas at Austin.

	Frank Curry for The New York Times
	Dennis Dillon, head of collections and information resources at the library of the University of Texas in Austin, says he is surprised at the popularity of the university's newly purchased electronic books.

Circulation is down. Turnstiles are moving at a slower pace at the most populous campus in the United States. But with a bare minimum of promotion, the university's newly purchased electronic books, like "From Barbie to Mortal Kombat" or "Euthanasia: A Reference Handbook," are suddenly circulating like freshly published Grisham novels.

"No one was sure whether anyone was going to read any digital books," said Dillon, the university's head of collections and information resources. "We were somewhat skeptical. Usually a book has a one-third chance of being checked out. So to have some title checked out 25 times in two months -- that's shocking."

With a $1 million budget for digital materials, the University of Texas is preparing to increase its 6,000-title collection of digital books. It is investing in the evolving electronic frontier of the book market, which is preparing for rapid change despite widespread skepticism that the vast majority of readers are truly ready to cuddle up to a good byte.

New players like netLibrary -- which sells collections of digital books to libraries -- are engaged in a frantic international race to convert paper books to bytes with the ultimate goal of dominating the evolving market.

And traditional publishers are cautiously preparing for an uncharted future, digitizing thousands of old backlist titles in preparation for an e-new world where books can live forever because they will never go out of print.

Yet some publishing experts doubt that changes will come rapidly, given the demographics of the American book market. The most reliable and free-spending group of book purchasers was raised on paper and they are edging into their mid-40's and up.

Nevertheless, a number of major publishers here and in Europe are preparing for the possibility of a surge in demand for electronic books that many believe could be driven by the same type of readers that powered the paperback revolution: the young.

As the market develops, the definition of a book is evolving into an exotic collection of literary hybrids -- electronic titles that can be read as e-mail, retrieved by a portable electronic reading device, downloaded on a computer or converted quickly from digital versions into bound copies that can be printed in less than 30 seconds.

And in the very near future, readers will be able to mince these digital versions into customized titles available by the chapter or page. For example, in the next six months, readers of IDG's Arthur Frommer's travel guides will be able to create am electronic book so narrow in scope that it explores restaurants in the Loire Valley in France with reservation links to recommended hotels or airlines.

With the immediacy of electronic books, digital titles can be published at greater speed and at greater peril for unchecked information. The forms of writing in electronic versions are shifting, allowing authors to create never-ending electronic books with constant revisions or expanded titles that include the literary flotsam of notes, diary entries, memos, images and maps.

Not everyone agrees as to when this new future will take hold. Technology giants are boldly promising swift change, with Microsoft predicting that many e-titles will outsell their paper cousins within a decade.

Random House, the nation's largest publisher, is not making the same boasts, but the company, part of Bertelsmann, has embarked on a two-year project to digitize all of the books on its entire backlist of 20,000 titles, with 5,000 already converted. Simon & Schuster, part of Viacom, is formatting all of its new books in digital form and is preparing to digitize at least 4,000 of its 20,000 backlist titles next year.

But because of security and piracy concerns, Simon & Schuster is still reluctant to allow Microsoft access to its titles for use with new digital display software that will be available next year for reading, searching and annotating books on a computer.

"We're trying to create a strategy for the future that is not totally clear because it's evolving and changing and converging at the same time," said Jack Romanos, the head of Simon & Schuster's consumer trade division, where electronic book sales at this point have totaled less than one-tenth of one percent of isales. Still, he added, "We believe there is an electronic future."

Publishers are preparing for an uncharted future.

In Europe, the French publisher Havas and the Italian publisher Mondadori announced agreements in October to publish electronic books that can be read on the coming Microsoft Reader software and downloaded from Web sites. Major European publishers of science, technical and medical books have joined with American publishers like John Wiley & Sons to electronically link citations listed in their journals -- a network that ultimately could lead to links between electronic textbooks.

And last month, the nation's leading bookseller, Barnes & Noble, purchased a 49 percent stake in iUniverse.com, a new electronic vanity publisher in Campbell, Calif., that charges a modest fee to would-be authors to post manuscripts in electronic versions.

Such newcomers to the book industry are spread far from the traditional capital of publishing in New York.

To a certain extent, these companies are caught up in a classic chicken-and-egg quandary. To attract readers, they must offer a wide variety of titles. But to persuade publishers to sell titles, they have to demonstrate that there is a market and that the technology is secure from piracy. As a result, many of the companies are expanding their collections with public domain titles.

NetLibrary, for instance, has outposts in China, India and the Philippines where workers are converting books to electronic copies by typing the text into computers. Scanning the material directly into a computer posed too much potential for errors, according to the company. And so now the digital versions are copied in other parts of the world and then edited and refined by "book builders" at netLibrary's rapidly expanding headquarters in Boulder, Colo., where two shifts of employees work, from 7 a.m. to midnight. The company is converting about 50 books a day, but by December, the rate will rise to 200, said David Melancon, the company's marketing director.

A start-up, with $105 million in new financing, netLibrary is aggressively pursuing major libraries to buy electronic collections so that library users will have 24-hour access to titles, with full-text searches. Since August, it has sold more than $1.5 million in electronic books to libraries like the one at the University of Texas, which bought 1,000 copies and acquired 5,000 more titles through consortium purchases. At this point, netLibrary's digital collection is dominated by reference and scholarly titles from academic presses, but the company intends to offer popular trade book titles that could also be offered to individual users by subscription.

"Everybody realizes how quickly the business is going to change," Melancon said. "And once it starts, having first-mover advantage is huge. The key to grabbing the market is having the most content."

Other Internet start-ups are expanding their offerings by making publishing as democratic as possible.

	Nico Toutenhoof for The New York Times
	Eileen Despain edits a book at netLibrary's headquarters in Boulder, Colo.

Fatbrain.com is an online bookseller of computer and technical books that started a few years ago in a Silicon Valley garage. Last month it announced an infusion of $20 million in venture capital to support a publishing program that allows authors to sell their works online for a 50 percent royalty.

The result has been the appearance of such works as Richard Bach's "Air Ferrets Aloft." A Fatbrain.com summary describes the title as "the first widely published disclosure of the remarkable activities of the world's domesticated ferret community, told through the stories of outstanding individual animals."

Soon to come: "Philosopher Ferrets in the Wilderness."

Already there is some restiveness about whether this new technology will produce wider selection or simply digital slush.

Netlibrary, for instance, will not accept any self-published titles on its site. The company's view is that books have more credibility when they are screened and filtered by professional editors.

"We're not allowing people to post their titles," Melancon said.

"If you do, it devalues the other books because it doesn't have credibility. Say I go to a Web site and I look up books on low birth weight and prenatal care in developing countries. I pull up a book by Sam Jones and I have no idea who Sam Jones is."

The price of netLibrary's books are the same as print versions, but other companies are already starting to experiment with e-book price discounts because of reduced costs for storage, inventory and paper.

Zéro Heure, a French publisher founded two years ago, is able to offer discounts for electronic titles that the Bertelsmann-owned online bookseller, Bol.Fr, cannot match for printed versions because of European rules regulating cover prices for conventional books.

A minute after an order is placed, the electronic publisher will e-mail some of the latest French best sellers at one third off the list price to American customers with no access to print versions in stores here.

Zéro Heure is buying the electronic rights for print books, but is also publishing its own original titles.

Next month, for instance, the company intends to publish "Ici Kaboul," a continuing book about an Afghan woman's experiences in Kabul that will be updated quarterly with new electronic chapters. "She's writing a chronicle of her life and this could continue as long as she wants," said Jean-Pierre Arbon, one of the company's founders and the former managing director of the French publisher Flammarion.

Related Articles Taking on New Forms, Electronic Books Turn a Page (July 2, 1998) Books to Bytes: The Electronic Archive (April 8, 1999)

This experimentation with literary forms has spread to new companies with no publishing experience like CyberGold, an e-commerce company that offers an array of digital products.

This month, CyberGold featured its first electronic title, "Dark Again," a thriller by David Saperstein, the author of the book, "Cocoon," which inspired the movie. It is available for $7.50 for the entire book or 50 cents a chapter. Each chapter includes additional material -- from the assassin's corporate memos to diary entries.

One very basic question that all these companies must confront is whether readers will warm to the new forms.

Some companies, like netFind, are counting on a generation of young readers, weaned on computers, that is ready to read on screens. But as skeptics have pointed out, for years to come companies will also have to reach the much larger group of older readers to make the market viable.

"I'm 48, and for me I can't do it," confessed Dillon, who is still in charge of amassing electronic titles for the University of Texas. "But my kids are in high school and they read books from beginning to end on the Web."

Despite his own personal misgivings, he is still betting on a generational shift that will raise the popularity of e-books. He noted, for example, that the library had expected that readers would only be interested in electronic versions exploring computer topics. But the taste in digital fare is far more eclectic, with readers checking out titles from "Art, Ideology and Economics in Nazi Germany" to "100 Years of Tomorrow: Brazilian Women's Fiction."

"We're willing to put the money there because we're guessing that's what will happen," he said of student demand. 'It's getting harder and harder to get them to go into their car to come to the library."