UVA-DRAFT Graduate School of Business Administration UVA-DRAFT University of Virginia e-Books downloads. Wrote King, “The pay-through rate has “My friends, we have a chance to become Big been higher than I dared hope.”3 Publishing’s worst nightmare.”1 This was not Stephen King’s first venture --Stephen King into electronic publishing. At his urging, King’s publisher, Simon & Schuster, published his 66-page novella “Riding the Bullet” in electronic form in March of 2000. Within the first two days of its In July of 2000, best selling horror writer debut, more than 400,000 fans downloaded the book. Stephen King released his latest thriller, a serialized Simon and Schuster charged $2.50 per download novel entitled “The Plant,” which described an evil through their Web site. Amazon.com and vine that terrorizes a publishing house and extorts BarnesandNoble.com initially offered the e-book for human sacrifices in exchange for financial success. free, then began charging a fee. Experts wondered To many, the image seemed appropriate. With “The whether King was leading a revolution in publishing, Plant,” King became the first major author to self- or merely exploring the power of celebrity.4 publish a book on the Internet. The book was offered in electronic installments through King’s Web site, Far from a celebrity, British potter Eric www.stephenking.com. Rowe penned A Potter’s Geology, a guide for assisting ceramicists in finding materials to create King offered a unique payment model, their wares by applying knowledge of geology. Due relying on the honor system. He asked readers to pay to its specialized nature, Rowe was unable to find a $1 for each chapter they downloaded, with publisher for his manuscript in England, though he Amazon.com handling payment processing. The knew that potters everywhere would be interested in catch was that King warned he would not post new his book. Tony Hansen of Medicine Hat, Alberta, installments of the book if he did not receive Canada, read about Rowe’s manuscript in a payments for at least 75 percent of all downloads. As ceramicists’ online chat forum. Hansen owned he wrote on his Web site, “If you pay, the story rolls. 2 Digitalfire, a company that specialized in software If you don’t, the story folds.” In the first week of for calculations in ceramics chemistry, and offered to availability of installment one, payment had been publish the book in an electronic format. Though received or promised for 76.4 percent of the 152,132 initially skeptical, Rowe was persuaded by the prospect of having immediate worldwide distribution. Digitalfire sold the book for $27 per download, or $35 on cd. His book had sold a few dozen copies by 1 David D. Kirkpatrick, “Stephen King Sows Dread in Publishers With His Latest E-tale,” The New York 3 “King’s e-book Nears Break-Even Point,” Times, July 24, 2000, p. C1. http://www.usatoday.com/life/cyber/tech/review/crh3 2 http://www.stephenking.com/download.html, 68.htm, accessed on September 29, 2000. accessed September 29, 2000. 4 Kirkpatrick, “Stephen…”. This case was prepared by Richard R. Johnson under the supervision of Paul Farris, Landmark Communications Professor of Business Administration. This case was written as a basis for class discussion rather than to illustrate effective or ineffective handling of an administrative situation. Copyright 2000 by the University of Virginia Darden School Foundation, Charlottesville, VA. All rights reserved. To order copies, send an e-mail to [email protected]. No part of this publication may be reproduced, stored in a retrieval system, used in a spreadsheet, or transmitted in any form or by any means—electronic, mechanical, photocopying, recording, or otherwise—without the permission of the Darden School Foundation. -2- UVA-DRAFT the summer of 2000. Said Rowe, ““It won’t be something that sells fast, but over a long time. It’s not a subject that will go out of date. Even so, in digital format it’s easy to update or improve.”5 What is an e-Book? Electronic books, or e-Books, are books in a digital format that can be read on computers and certain handheld devices. The first digital books appeared in 1971, when Michael Hart of the University of Illinois typed in the text of the Declaration of Independence on a mainframe computer. Thus began Project Gutenberg, a collection of more than 2000 classic works available online, for free.6 As of the October 2000, Project Gutenberg’s works remain plain text files, without formatting or other embellishments. Said Hart, “We encourage everyone to repost our books in whatever formats they want. The most books to the most people – that’s our only real goal.”7 See Exhibit 1 for a history of e-books. In 2000, e-book sales accounted for a fraction - $41 million – of the $20 billion publishing 8 industry. A study by Andersen Consulting estimated Figure 1: Projected e-book sales that sales of e-books would account for 10 percent ($2.3 billion) of total book sales in 2005 (see Figure Single Purpose Readers 1). 70 percent of those e-book sales were expected to be adding to, rather than replacing, sales of printed The first device whose sole purpose was to books.9 display reading material was the Franklin Electronic Publishers handheld electronic dictionary, which There are a number of different ways to read debuted in 1986. The device, named The Spelling e-books. The platforms include single-purpose Ace, was capable of displaying only a single line of readers, other handheld devices, and conventional text at a time. computers. Sony introduced its Data Discman in Japan in 1990, and the following year in the Unites States. The Data Discman featured a 3.5” LCD screen and books stored on CD-ROMs. The device was bundled with three titles – Compton’s Concise Encyclopedia, 5 Steve Ditlea, “The Real e-Books,” Technology Wellness Encyclopedia, and Passport’s World Travel Review, Jul/Aug 2000, pp. 70-78. Translator – and sold for around $550. Sony offered 6 See http://www.promo.net/pg/ a software package called the Sony Electronic Book 7 Ditlea. Authoring System that enabled the creation of e- 8 “Snapshot: Digital Book Sales Expected to Grow,” books compatible with the Data Discman. The USA Today, Sept. 20, 2000, p. B1. software sold for $9,000. Thus, only 20 titles in 9 Erin White, “Here’s a Web Trend Publishers Don’t Want to Follow – As Napster Roils Music World, Book Industry Looks to Get Ahead of the Piracy Game,” The Wall Street Journal, June 21, 2000, p. B1. -3- UVA-DRAFT addition to the bundle were originally available for The Rocket eBook included several features the Discman.10 that attempted to mimic the physical experience of reading a book. Pages were “turned” using By the summer of 2000, there were next/previous page buttons. The device included approximately 20,000 dedicated e-book reading features for setting bookmarks, underlining passages, devices in use.11 Andersen Consulting predicted that and adding notes. Other features meant to enhance the number of people likely to adopt devices for e- the reading experience included a built-in dictionary, book reading would reach 28 million by 2005.12 a “find” feature to look for keywords in the text, and the option to change the page orientation and font. Rocket eBook SoftBook Reader In October 1998, NuvoMedia, Inc. introduced the Rocket eBook. The Rocket eBook, In November 1998, SoftBook Press began weighing 22 ounces, featured a screen the size of a selling its leather-bound hardcover-sized SoftBook standard paperback book and was powered by Reader. The SoftBook Reader weighed 2.9 lbs., batteries with a 4-6 hour charge. With 4MB of featured an 8”x6” screen, and a battery with a 5 hour memory, the Rocket eBook Classic could store about charge. With 8MB of memory, the SoftBook Reader 10 books, or 3200 pages, while an upgraded version was capable of storing 4,000 pages of text, with 16 MB of memory (the Rocket eBook Pro) upgradeable to 85,000 pages of text with additional allowed for 40 books, or 15,200 pages. The price of memory cards. SoftBook offered two pricing options a Rocket eBook Classic debuted around $499, and in for its Reader: a one-time charge of $599.95, or a the summer of 2000 had dropped to $199, while the charge of $299.95 plus the purchase of a $19.95 per Pro version sold for $269. month content plan with a minimum two year commitment. Like the Rocket eBook, the SoftBook The Rocket eBook depended on a personal featured page-turning, bookmarks, and annotation computer for downloading text from the Internet. To capabilities, and required files to be in its proprietary download material, the Rocket eBook was set into a format. The company provided its reader software cradle connected directly to a computer, where book for free to encourage publication of documents in its selections were made and then downloaded from the specific format. Internet in an encrypted form. The Rocket eBook software then decoded the file and transferred them The SoftBook Reader did not require a to the eBook device. While one could share physical personal computer. The device was equipped with a eBook devices, it was impossible to share built-in 33.6 Kbps modem capable of downloading downloaded files between devices. Though the 100 pages per minute. To download data, the Reader Rocket eBook required files to be in its proprietary was connected to a telephone line, and then it dialed Rocket Edition format to be readable, the company the SoftBook network to receive content.