iPads, Kindles, and the Close of a Chapter in Book Publishing

Surprise ending?
The industry may have bigger problems than how much to charge for a title. Less than half of all American adults ever read a book after leaving school. Most of the remainder read, at most, only one or two books a year. Industry estimates indicate that somewhere between 15 and 25 percent of the population purchase books on a somewhat regular basis.

So with competition for eyeballs increasing from the Internet, television, and video games, publishers know they have a tough road ahead, regardless of how digital readers change their business model.
"The situation is fraught with complications," Olson says. "It's a mess. It's wonderful."

"I think the fundamental issue is not the rate of adoption of the e-reader, or whether publishers will survive in their current form, or what their role will be in the future," Olson comments. "The fundamental question at the very bottom of this is, will people read books at all?"

The textbook market is another potential target for e-book disruption, especially as new devices such as the iPad add video and other immersive technologies to the mix.

"If we as a society are concerned about the next generation acquiring knowledge and skills, the e-reader offers tremendous potential to bridge the gap that a lot of young people experience between a very exciting digital reality and the dead world of the textbook."

On an emotional level, the death of the paper textbook will carry less societal angst than trade books, he adds. "We're not generally attached to our textbooks. If they go, nobody but the textbook publishers will cry."

Disruption happens
The Random House-Kindle case, recently taught in the first-year Strategy course at HBS, prompted some interesting conversations in the classroom, Olson says. Students were excited to discuss an ambiguous situation that is unfolding day by day.

"One thought they proposed that seems well worth pursuing is the idea of bundling the e-book and print book together," he says. "After all, why should they be viewed as adversaries? Why not offer both and see if you can make the market more attractive, with additional features like a video interview with the author? An e-book can be a much richer and deeper experience than anything we've seen before."

Students were also intrigued by the concept of dynamic pricing, or charging varying amounts based on how many "extras" are packaged with an e-book. Another discussion topic was the difficulty of downsizing the print publishing side of the business while simultaneously forging a new strategy for e-book publishing.

"The situation is fraught with complications," Olson says. "It's a mess. It's wonderful."

And as a former book publishing executive, Olson recognizes that his outlook might be a bit less cheerful if he was reporting to the company's head office in Gütersloh, Germany.

"It's a very nice time to be at HBS and not in the book industry. It's fun to watch, but it's probably not as much fun to be in the middle of this."

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