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With $1 Billion in Sales, There's No Stopping E-Books Now

There's a bit of a quiet crack-up going on in publishing right now. Unlike the massive layoffs of late 2008, publishers seem to be quietly pulling in their horns. In recent weeks we've seen News Corp. bury HarperCollins's results within a larger print category, Simon & Schuster post better profits on worse sales and industry leader Hachette come down from its great success with Stephanie Meyer.

Over the weekend, the Wall Street Journal reported that industry giant Random House is getting smaller and trying to sublease nearly a third of its New York headquarters. They're starting with the luxe top floor where senior management once held sway. It's admirable that Random's decision makers are going for the most value over their own comfort but there's no better illustration of how the mighty have fallen.

That's going to be an ongoing theme in the book business for some time to come of Forrester Research's James McQuivey is to be believed. McQuivey published a chilling piece on today that predicts publishing will have the fastest transition to digital of all media.

This prediction is occasioned by the revelation that e-book sales will finish 2010 near the $1 billion mark. McQuivey expects that number to triple in four years because although only 7% of those who read books read them digitally, that 7% is the most important group of readers. They are the heavy users who read and buy more books anyone else.

Oh, and those e-book readers who have Kindles and other ebook devices have basically already switched to digital. McQuivey says they consume two-thirds of their reading on their devices. That means print is the rump of their consumption.

Why is all moving so fast away from the printed page? Is e-reading really better reading than print? Many would argue that print is a superior product but that's hardly what's driving the shift. McQuivey makes the excellent point that books have the least resistance to switching to digital because they are less enmeshed in a complex business model of multiple revenue streams.

Books are pay-to-play consumption pure and simple. Movies have a complicated cascading revenue model that includes theater release, DVDs, cable and television rights. Books just have the one sale and that's it. McQuivey takes this a bit further:

Music used to generate revenue from the radio, from CD sales, and from concert tickets. Changing that business required upsetting several apple carts at once. TV is similarly complex, revenue is derived from advertising, cable carriage or retransmission fees, and direct sales of DVDs. You can't go digital without first rethinking the entire business (and not every player in the ecosystem takes that lying down). But not publishing. Books are published and sold at retail. In the end, once the only channel from which revenue is derived starts to get remodeled, it's not long before the whole structure gets torn down and rebuilt to accommodate the new dominant distribution model.
Already we've begun to see e-books outsell print during the first few weeks on sale reinforcing McQuivey's claim that the most avid readers have switched to electronic reading. The next big sign post will be when someone can make an e-book only hit or break out a new title through e-book distribution with print following up for the legacy audience. Will that happen in 2011?