The news comes after a strong holiday season in which the bookseller said sales of digital content during the nine-week holiday season increased 113 percent over the same period last year. Sales of the Nook Simple Touch, Nook Color and Nook Tablet were up 70 percent over the last year, though sales of the Simple Touch were below expectations.

Barnes & Noble now expects fiscal 2012 digital content sales to come in around $450 million with a run rate for digital content sales to hit $700-$750 by the end of fiscal 2012. And the Nook operation is now expected to generate $1.5 billion in sales this fiscal year. Here’s what William Lynch, CEO of Barnes & Noble had to say about the Nook business:

We see substantial value in what we’ve built with our Nook business in only two years, and we believe it’s the right time to investigate our options to unlock that value. In Nook, we’ve established one of the world’s best retail platforms for the sale of digital copyright content. We have a large and growing installed base of millions of satisfied customers buying digital content from us, and we have a Nook business that’s growing rapidly year-over-year and should be approximately $1.5 billion in comparable sales this fiscal year. Between continued projected growth in the U.S., and the opportunity for Nook internationally in the next 12 months, we expect the business to continue to scale rapidly for the foreseeable future.

As Lynch mentioned, Barnes and & Noble is looking to expand internationally and is in talks with different potential partners including publishers, retailers, and technology companies. It’s understandable considering that the digital side of the business is outpacing the company’s traditional business. Barnes & Noble said retail store sales increased by 2.5 percent to $1.2 billion for the holiday season compared to the prior year. Comparable store sales increased by 3.4 percent this holiday season, but that was less than the 9.7 percent increase last year.

Meanwhile, BN.com holiday sales were up 43 percent to $327 million compared to the prior year, with comparable sales increasing 52 percent. The company said Nook business drove the increase of online sales and offset declines of physical product sales. Overall, the Nook business, including sales of digital content, device hardware and related accessories, increased 43 percent during the holiday period to $448 million. The company has lowered its full fiscal year 2012 forecast, saying consolidated sales will now be $7.0 billion to $7.2 billion with earnings before interest, taxes, depreciation and amortization to come in at $150 to $180 million because of the performance of the Simple Touch.

The stock is getting hammered prior to the open of the market, perhaps due to concerns that spinning off the Nook business could strip away the growing part of the company. But giving Nook its independence could allow that business to grow faster and make more aggressive moves if it’s not weighed down by the parent company.

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Chafie Creative Group, based in Dallas, is introducing a new iPad app called Immersedition, the first in what it believes is a new form of interactive book-reading apps. The app will feature as its first book a story called The Survivors, a young adult piece of fiction from new author Amanda Havard, who designed the story to ultimately be an enhanced media experience. The 283-page book, which went on sale earlier this year in print and tells the stories of descendants from participants in the Salem Witch Trial, includes 300 touch points that reveal 500 interactive frames of content embedded in the pages of the book through watermarks. 

The watermarks reveal things like historical facts, maps, photos, videos and character profiles that change depending on where in the story a user is. There’s also embedded music including three original tracks that can be turned on at key points. And there’s even live Twitter profiles from five of the main characters, who continue to tweet and add background to the story. All of the content works offline except the maps and Twitter feed.

The book works to preserve the reading experience for people, enabling them to still engage their imagination. So it doesn’t include images of the actual characters and instead shows runway shots of what they might wear. But it does include more than 50 location shots to give a broad sense of what a place looks like without getting into the details. The idea is to augment the reading experience and keep people involved while still respecting the traditional reading process.

A lot of the existing enhanced ebooks are children’s books that bring almost game-like elements into a story. Others like Our Choice employ infographics, videos, images and other elements that allow people to get deeper into the book as if it were a museum display that can be pinched, zoomed and manipulated. But it’s trickier to apply some of these elements to a novel, which can suffer if certain elements are too literally enhanced. Go too far and people feel like you’re robbing them of the experience of creating images in their head. Don’t go far enough and people will wonder what the point is of making the book interactive.

But I think just like we’re seeing with other books, we’ll see more publishers look to make fiction novels more interactive. I think it does have to be applied intelligently. And some books with some historical connections or a lot of locations might lend themselves better to this approach. But the right facts, background and extra details here and there can make the experience work well and deepen the engagement of readers. I don’t expect we’ll see all the classics get the ebook treatment overnight, but Immerseditions shows that it can work for new novels.

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In a statement, the European Commission said that it was looking into Apple’s deals with Simon & Schuster, HarperCollins, Hachette Livre, Penguin and Holtzbrinck over the question of whether they have colluded to keep other players out of the e-book market, fix prices or unfairly restrict competition.

The Commission will in particular investigate whether these publishing groups and Apple have engaged in illegal agreements or practices that would have the object or the effect of restricting competition in the EU or in the EEA.

The Commission is also examining the character and terms of the agency agreements entered into by the above named five publishers and retailers for the sale of e-books. The Commission has concerns, that these practices may breach EU antitrust rules that prohibit cartels and restrictive business practices.

News of the formal investigation might be new, but the claims are not. Earlier this year antitrust officials conducted raids on the offices of the companies involved, and there have been several lawsuits and legal challenges to Apple’s relationship with publishers in the U.S., as Mathew wrote over the summer.

The heart of the allegations against the various companies is that they may have conspired to fix prices through agreements around the so-called “agency model.” The EU is investigating whether this meant that the group was acting as a cartel or unfairly shaping the market for e-books. There is no doubt that publishers were desperate to try to keep prices for digital books up while under constant pressure from Amazon to drop them: The question is whether breaking that relationship involved breaking the law. They deny that anything untoward happened.

But notable by their absence are some of the other major players in this space: technology companies like Amazon and Google, as well as publishing houses like Macmillan and Random House.

That alone makes this picture much more complicated, which is one reason it has escalated to pan-European level (until now, Britain’s Office of Fair Trading had been conducting its own separate investigation into these claims, but it has closed down its operation, as the European inquiry takes jurisdiction).

There is no formal deadline for completion of the investigation.

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And while some channels of communication — such as cable TV, print news and talk radio — are fairly mature, history tells us early mastery of any new medium can give a candidate a discernible advantage in a given election cycle.

For example, it’s commonly accepted that Kennedy’s performance in his televised debate with Nixon helped him win in the 1960 presidential election, while Obama’s more evolved social media strategy gave the Democrat a competitive advantage that, in the end, helped deliver him the presidency.

But what about the book?  Judging by Obama’s success with The Audacity of Hope in 2008 and the rush by the current crop of 2012 candidates to push tomes out this primary election season, the book, while perhaps the oldest of all the mediums outside of speaking in the public square, is still one of the most effective ways for candidates to inject their messages into the stream of conversation.

As publisher Peter Cosnos puts it in this NPR piece, “If you can get somebody to buy it, a book has a great virtue. It’s just you and the reader. There is no interviewer; there is nobody to get in the way.”

However, while books can certainly be effective, the paper book is the product of an inarguably antiquated distribution model. To push a book out through traditional publishing means putting your message on the slow train to the voter; a book usually gets to the reader months after the final draft was written.

But just as the Internet (and in particular YouTube) has reshaped the way campaigns use video to get messages quickly out to the voter, is it possible e-books could create a similar disruption in how candidates reach voters through the written — and electronic — word?

If early e-book pioneers who were able to bypass the byzantine and slow-moving world of traditional book publishing are any indication, than yes.  John Locke, Bob Mayer and other authors have been able to go direct to consumer — with the help of Amazon — and reach a much wider audience.  So why couldn’t presidential candidates, or politicians in general, do the same?

In order to do so, candidates would need to change the way they think about the book today. Instead of viewing a book as a brute-force, one-size-fits-all message delivery vehicle it drops in one big package every election cycle, candidates need to instead think about how they could instead deliver a stream of targeted messaging throughout the long election cycle with electronic publishing.

Imagine for a moment if Obama or the prospective GOP candidate were able to publish e-books in advance of major debates, or to convey certain messages to address voter concerns.  One month a candidate could focus on national security, the next he or she could convey his or her personal story through a media-rich e-book with photos and video interviews.

Or, looking back, ponder how things might have been different last election cycle if, for example, McCain released an e-book with his plan for economic stability in the face of the financial crisis that assuaged concerns of those who thought he may not have had a plan, while also giving the faithful talking points to distribute by word of mouth.

Candidates also need to maximize what’s possible in this new medium.  By releasing enhanced e-books, they can create highly personalized messages rich with video and audio; they can become more humanized to the voter.

Lastly, with the traditional book model, candidates are often their own biggest enemy as they seek high book advances and try to climb the bestseller lists to put more money into their pockets.  This traditional approach to the traditional model only serves to create expensive books the vast majority of voters never buy.

But what if a candidate looked at the e-book as an interactive application complete with fundraising capabilities built in?  Would they possibly consider distributing all their e-books for free if they could, somehow, garner campaign contributions through an in-book (or in-app) payment model? E-books and enhanced e-book apps could become the main way in which candidates could come into many voters homes and, in a sense, fill their campaign coffers.

Book and e-book purists may be moaning at the thought of a flood of campaign e-books filled with talking points and calls for contributions. But that is, for better or for worse, what campaigns are about, and if these same messages are flooding every other medium during campaign seasons, it was only inevitable that the campaign would eventually come to the e-book.

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Amazon has released a browser-based version of its Kindle e-book app, called the Kindle Cloud Reader, in what appears to be an attempt to detour around Apple’s in-app purchasing requirements. But what the e-book retailer has also done is provide a great example of how media companies should be looking beyond the world of apps to the future of the web: one in which websites behave like apps, thanks to the magic of HTML5, and publishers can get the benefits of both without having to sell their souls to one app-store provider after another.

As Darrell notes in his review, the Kindle app mimics the native Kindle app for the iPad in almost every way (although it lacks some features such as the ability to create new notes or highlight passages). In my own use of the Cloud Reader, the one thing I noticed most of all was how fast it was at rendering pages. One of the complaints some have about browser-based apps is that they can be slow, but the Kindle app doesn’t suffer from this problem. The app also allows you to download books so they are available when you don’t have an Internet connection.

An app-based store without Apple

But the most important part of the app, at least from Amazon’s perspective, is the built-in access to the Kindle store: Clicking on a button takes you to a special version of the store optimized for the iPad’s touch interface. As Darrell explains, this allows Amazon to make it easy for users to buy books without having to go through Apple, which recently changed the terms of its license to require that retailers funnel purchases through their apps, and thus give Apple a 30-percent cut of any sale.

Amazon isn’t the first to do an end-run around Apple with an HTML5-based browser app: the Financial Times recently came out with a similar web-based, app-style version of the paper, which mimics the native iPad application, and Fortune  magazine has also experimented with an HTML5 version of one of its targeted publications. A German design firm has even come out with a browser-based prototype of an entire magazine called Aside, in part to show the ability of HTML5 to recreate the look and feel of a native app.

Another startup we have written about before, OnSwipe, is making a bid to capitalize on a web-based future for media companies: Jason Baptiste, co-founder and CEO of the company — which recently closed a $5-million Series A round of financing from a venture-capital group including Lightbank, Betaworks and Lerer Ventures — says his pitch to content publishers is that “apps are bull****,” in part because they prevent media companies from taking full advantage of the web.

Most media apps are still walled gardens

The OnSwipe founder has a point. Most apps from traditional media companies — including those from the New York Times, Wired and other publications — try hard to mimic the website version of the newspaper or magazine they are based on, but do little to take advantage of actually being part of the internet. Although some such apps offer live updates, and allow articles to be shared on Twitter or Facebook, other things are missing — including any links to web-based content outside the walled garden of that particular app, as well as reader comments, and so on.

There are other benefits to having an HTML5 browser-based app as well, as the creator of the Financial Times‘ new web version noted in an interview: A main one is that publishers don’t have to create multiple apps for different platforms such as the iPhone/iPad, Android devices, the RIM Playbook, etc. One browser-based app, done properly, is available to anyone regardless of which device they use — and it doesn’t have to go through an often torturous and opaque review process before it becomes available.

One of the most appealing things about browser-based apps, however, isn’t just that they allow publishers to get out of the clutches of Apple; it’s that they fulfill the original promise of the web, which was the ability for anyone with a browser to get access to any content regardless of what operating system or platform they were using. The web’s creator, Sir Tim Berners-Lee, wrote a long essay earlier this year about his fear that walled gardens created by Apple and Facebook were taking over from the web, saying that if the process went unchecked:

[W]e could lose the freedom to connect with whichever Web sites we want [and] the ill effects could extend to smartphones and pads, which are also portals to the extensive information that the Web provides.

Browser-based apps are not the solution for every company, of course. While games like Angry Birds can be recreated fairly well with HTML5, there are some things that only native apps can do: such as including support for using the iPad’s camera, or the accelerometer that allows an app to behave differently if the device is tilted. But for content publishers such as newspapers and magazines, the ability to produce an app-like experience while maintaining control over the purchasing process should be a powerful incentive to take a cue from Amazon and start thinking about HTML5.

Post and thumbnail photos courtesy of Flickr user Rego Korosi

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Mahaney said based on recent disclosures by Amazon and Citi’s own analysis, he believes that Amazon will sell 17.5 million Kindle units this year, worth more than $2 billion in revenue, and 310 million Kindle books, which will generate more than $1.7 billion this year. He said that would mean a combined revenue of almost $3.8 billion or about 8 percent of revenue through Kindle activites.

Next year, Mahaney said he expects Amazon to sell 26.2 million Kindles and 751.5 million Kindle books, worth a combined $6.1 billion in revenue or 9.9 percent of Amazon’s total. Mahaney said when a business segment reaches 10 percent, it has the potential to impact the growth rate of the total business.

The analysis comes on the heels of news last month that Amazon is now selling more ebooks than physical titles. As of April 1, Amazon is selling 105 ebooks to every 100 physical books, not including free Kindle titles. The company should see even more mainstream adoption of its Kindle readers as the hardware price comes down below $100, which Mahaney believes will happen by the end of this year. Amazon’s cheapest unit is now the $114 ad-supported Kindle, which Mahaney said is the best selling unit in the Kindle family.

This is pretty impressive growth no matter how you slice it. And it shows how quickly consumers have shifted their reading habits to digital content on a plethora of devices. Amazon is on a roll and seems to have even bigger ambitions for its book business. As my colleague Michael Wolf reported, Amazon has been adding new imprints to become a “book industry in a box.”

Mahaney said there are still challenges posed by the iPad and offline retailers getting their act together in the ebook industry. But Amazon seems to be in the driver seat with ebook sales and it’s now realizing how big a businesses it has on its hands.

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Updated: Lendle, an ebook-sharing service that allows users to find and trade Kindle books, sounds like a great idea — except that it doesn’t work anymore, because Amazon pulled the plug on the site by blocking access to the Amazon API. According to Lendle co-founder Jeff Croft, there was no warning from the online retailer, only a cryptically worded email. So Lendle becomes the latest poster child for a simple maxim: Building your service on top of someone else’s API, no matter how “open” the API is supposed to be, is a very dangerous road.

Update: Lendle has posted an update on its blog to say that it has modified its service as requested by Amazon (removing a feature that allowed Lendle users to synchronize their books with their Kindle account) and API access has been restored. However, the company also said that as a result of the incident it had “come to realize we need to work towards a Lendle product that does not rely on APIs provided by Amazon or any other third party.”

No one knows the downside of this approach better than Bill Gross, the founder of UberMedia, which the veteran Silicon Valley entrepreneur has built into a kind of Twitter client rollup by acquiring services and apps such as UberTwitter and Echofon. Gross originally had a great idea for selling advertising around tweets as well, but then Twitter launched its own identical advertising platform. Earlier this year, after what Twitter said was bad behavior by some of UberMedia’s apps, the social-media platform shut down the company’s access to the Twitter API.

In UberMedia’s case, the company made some changes to its apps, and Twitter turned the API tap back on. It’s not clear whether Lendle will be able to modify the way its service works to make Amazon happy, however. The online retailer hasn’t made any statement about the action it has taken against the ebook-lending service other than to say Lendle doesn’t “serve the principal purpose of driving sales of products and services on the Amazon site.” We’ve emailed Amazon and will update this post if there is any response.

Is Amazon planning its own lending service, or is it simply afraid that more borrowing of books equals less buying? The answers to those questions remain unclear until the company clarifies its reasoning (Lendle says users buy more books after borrowing them).

Twitter used to be the most obvious example of a company that was willing to let developers do pretty much whatever they wanted with the service’s data, and that open approach arguably helped to create much of the network’s value, including popular conventions such as the retweet, the @ mention and so on. But Twitter has been tightening the reins on what it allows for some time now, and its latest pronouncement made it clear certain aspects of its business are simply off-limits for third-party developers.

In some ways, that’s a natural evolution for a company: to be open with its data when it is trying to grow, then to shut down or restrict that as it tries to become a functioning business and make money. Amazon has long since passed that point, of course, and Lendle is only the latest to find out that what it thinks is a good service and what a company like Amazon thinks can be two very different things — and whoever controls the API wins.

Post and thumbnail photos courtesy of Flickr user Will Clayton

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These questions are difficult to answer, given that the publishing industry — and particularly Amazon — doesn’t like to share numbers. Even Apple, which jealously guards information, will point out unit sales, but Amazon doesn’t break those figures out. The suspicion among skeptical observers (and I would classify myself as one) is that since Amazon only tells us things that make it sound incredibly successful, it might be keeping some unpleasant information away from prying eyes.

So to find out more, I talked Jo Henry, the managing director of U.K.-based Book Marketing Ltd, a research firm that does field research and surveys to understand public book consumption habits. According to data her company collected on e-book purchasing, Apple’s iOS products are outperforming the Kindle for reading in the U.K.

The figures, taken from BML’s research in Britain and from parent company Bowker’s PubTrack Consumer survey in the U.S., compare the growth curve of American e-book habits with those in the U.K. The industry generally seems to believe that British adoption is around 18 months behind the U.S. market; the numbers bear that out, at least in part.

The data shows that Kindle use rocketed in the U.S. between November 2009 and November 2010. Devices using iOS (i.e., iPhone, iPad and iPod) capture a significant portion of the market, followed by generic smartphones, Sony and Barnes & Noble’s Nook.

(It may seem a little perverse that computer reading has increased at the same time, but the rising tide of e-book releases makes it easier than ever to do this. A lot of e-book reading, Henry suggested, is done at work.)

In the U.K., however, you can see that adoption is behind. Computer reading is still by far and away the most popular method, the Kindle ranks as highly as the iPad, and iOS devices in general scoop up more than twice as much share as Amazon does.

It’s not clear whether the market will stay this way, but it’s going to be interesting to see how the war between the two heats up (particularly given their battle over subscriptions)

So that’s how they read. But who is doing the reading?

Well, in the United States, the average e-book buyer seems to have changed quite a lot over the past couple of years. They are now beginning to resemble the print buyer: skewed toward older, female and slightly less-well educated consumers.

In Britain, the average e-book purchaser still fits the pattern of an early adopter, more or less: they are younger, significantly more likely to be male than female, and with a higher education level and income. That seems to fit the idea that this is still a nascent market outside north America, yet to really break into the mainstream.

So, that leaves some questions for both countries.

Will e-book adoption outside the U.S. follow the same pattern as inside? Will other countries fall behind the Kindle in the same way as the home market? There’s some evidence to indicate that the 18 month gap could quickly reduce once e-book reading begins to pick up. After all in Europe, winning brands tend to dominate more than across the Atlantic: Google’s market share is significantly higher than in the U.S., for example.

Does this mean the Kindle is just waiting to make a major breakthrough that will suddenly catapult it way beyond its rivals? Given that Barnes & Noble has not released the Nook to the international market, is there more room for Sony and Apple to step into the breach? BML is currently compiling data from the holiday period, which should make good reading.

Update: CM in the comments points out that this data is focussed on hardware: there is also a Kindle app for the iPhone, computer and other devices, which means that you could argue that Amazon is a much larger platform for reading. Hopefully one day we’ll see figures from the company that tell us exactly what’s going on.

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Google today launched its long-awaited electronic book store, called simply Google eBooks, with more than 3 million titles and 4,000 publishers participating as partners, including most of the major industry names. Independent booksellers will also be able to offer Google eBooks through a partnership with the American Booksellers’ Association, and the company is launching an affiliate network that will allow any website to do the same. The web giant’s offering — which is based on a “buy anywhere, read anywhere” philosophy — is likely to ramp up competition in the electronic book market, which until now has been dominated by Amazon and Apple.

James Crawford, director of engineering for the Google Books team, said the company has scanned in over 15 million books through its massive book-scanning project, which “makes us one of the largest libraries in the world.” In the Google eBook store, there will be 2.8 million books available to download free of charge, since they are in the public domain, and the rest will have a “buy” button next to them that takes readers directly to the eBook store. Google’s publishing partners include major names such as Random House, Simon & Schuster and Penguin, but also a range of smaller publishers and scholarly houses such as the Oxford University Press and Reed Elsevier.

Google will pay the publisher 52 percent of the list price if a title is sold through Google’s store, or 45 percent if it’s sold through the company’s retail partners, which include Powell’s and Alibris. The web giant said it did not take a stand on whether to accept the relatively new “agency model” for selling e-books (which was introduced when Apple joined the market with the iPad), in which the publisher gets to set the price in the e-book store, rather than letting the retailer choose. Less than 10 percent of Google’s publishing partners asked for an agency deal, but they represent over half of the best-sellers in the store, the company said, and they get 70 percent of the sale price.

The bookstore is available only in the U.S. for now, but is expected to roll out in Europe and other countries early next year. In addition to the publisher partnerships, Google is also launching an affiliate network, although Amanda Edmonds, director of strategic partnerships for the Google Books team, said the company so far only has one affiliate signed up, a site called Goodreads, which is devoted to books and discussion about books. Anyone reading a discussion forum or thread about a book available in the Google eBooks store will be able to click “buy” from within the discussion and go directly to the checkout at Google’s store, Edmonds said, and the site will get a share of the proceeds.

As part of today’s launch, Google is releasing a dedicated eBook-reading app for Android devices, and is “working on getting one into the iPhone store,” says Crawford. Google e-books will also be compatible with the Sony Reader and the Nook reader from Barnes & Noble — but only titles without digital-rights management controls will be available for reading on the Kindle, he said, because the Kindle has a closed content-protection system for its books. Most books will also be available in the open-source ePub format.

“We’re not peddling devices here –we want to focus on selling books,” Crawford said. Google e-books will be readable in any modern web browser, and for books the company has scanned in, readers will also be able to toggle between standard view and image format, which will show the actual scans of the physical book’s pages and any photos or illustrations from the original book.

The Google e-book manager said the company is focused on what he called a “cloud-based model of consumption,” in which “you never have to worry about where your book is, what page you were on, or where you bought it,” because it’s always available in your browser or app. “We think ultimately e-books should be like physical books,” Crawford said. “Most people don’t have bookshelves sorted by which retailer they bought it from.” In the longer term, the Google manager said, “maybe the industry can come together and agree on a standard for e-books so they can be shared” across devices.

Will Google be able to disrupt the market with its new store? Right out of the gate, it’s one of the largest e-book stores on the Internet, and the cross-platform nature of the service will definitely appeal to many. That said, however, Amazon has a substantial head start, a lot of existing relationships with publishers, and there are many fans of both the Kindle e-book reader and the Kindle software for iPad and Android. If nothing else, book lovers should benefit from the competition.

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Post and thumbnail photos courtesy of Flickr user Timetrax23

Naturally, the popularity of e-books has a lot of people worried. Should this format take over as the dominant medium for books, publishers will be forced to re-examine their place in the world. And if publishers suffer, so do the writers. The problem is even more worrying for bookstores, which face redundancy with the demise of the printed book.

So as a midlist author, what does all this mean to me? Change, but change I can work with. I’ve seen a lot of side-taking amongst my writing brethren. You’re either sticking with a dead technology or you’re part of a brave new world. Personally, I don’t see why I have to pick a side. Maybe I’m greedy, but why can’t I have both? I view e-books the same way I view audio books or foreign translations: They’re another revenue stream. To choose one over another seems a little short-sighted. If the public demands e-books, print books and audio books, I want my stories in all those formats. e-books are a new source of income for me, so I love ‘em, and no less than any other format that my books are currently published in.

So, I’ve embraced e-books for a number of reasons. First off, e-publishing has a very low barrier to entry. I don’t have to deal with a printer, distribution, getting into stores, or returns, nor do I need access to a recording studio to produce an audio book. All I have to do is format the manuscript to meet the needs of the various e-book-reading devices, and can have an e-book-ready manuscript in a couple of hours. The only real cost comes in the form of cover art, and that’s not much of a hardship. Even if I’m purchasing stock images or commissioning original artwork, I can pull together a professional-looking product for under $100.

Secondly, I don’t need a publisher for an e-book. As a midlist author, I’m used to having to play a number of roles and managing my e-book portfolio isn’t a hardship, especially when I can reap the reward of a larger royalty. Thirdly, I get to utilize a sizeable backlist that would be gathering dust under normal circumstances. I possess a number of out-of-print works that aren’t financially viable for a new print run, but are viable to resurrect as e-books. The same applies to stories where the electronic rights haven’t been utilized. I’d be a fool not to embrace e-book publishing.

I don’t really know where the e-book revolution will go. It might be a tougher proposition to replace the printed book than people might think. I believe printed books will be around for some time. There’s probably going to be even more consolidation among the publishers, which will limit places for midlist authors, but even that’s not the end of the world. It might not be financially viable for the big publishing houses to support midlisters, but that isn’t to say there isn’t profit to be made. Advances in technology when it comes to book manufacturing and audio production means it’s pretty cost-effective to produce a print book or an audio book. Orphaned writers might want to take a leaf out of W. Griffith, Charlie Chaplin, Mary Pickford and Douglas Fairbanks’ collective book when they created United Artists and formed author cooperatives to produce their own print, audio and e-books. The potential is there.

And before anyone gets too complacent about e-books, who’s to say that in five years something else won’t come along make the e-book redundant? That’s technology.

The e-book revolution might affect the publishing industry with devastating consequences, but the important thing for me to do as a writer is roll with the punches. The one constant in all this change is that the world will always need storytellers regardless of the medium.

Simon Wood has had over 150 stories and articles published. His short fiction has appeared in a variety of magazines and anthologies, such as Seattle Noir, Thriller 2 and Woman’s World. He’s a frequent contributor to Writer’s Digest. His latest works are “Terminated” and “Asking for Trouble.”

iPad owners must have found plenty of quality titles, too — the iTunes App Store has so far delivered more than 35 million iPad software downloads. One of those titles is Apple’s own iBooks; Jobs says that to date, 5 million e-book titles have been downloaded for iBooks. The application is getting a bit of an upgrade with support for Adobe PDF files, making it easier to read and manage digital documents in a single piece of software.

Image credit: Engadget

According to a New York Times report, Amazon is threatening to remove the “buy” button from major publishers’ e-books if they don’t accede to a detailed list of its demands, including that it not be undersold by other e-book retailers. Although Amazon agreed in principle following the Macmillan dust-up to let publishers set retail prices for their Kindle books while it collects a 30 percent commission, the retailer is apparently keen to maintain its most-favored nation status vs. other e-book sellers, including Apple.

The immediate bone of contention, according to the Times, is Amazon’s demand that publishers sign three-year contracts guaranteeing that no other competitor get lower prices or better terms than it does. Publishers are said to be reluctant to commit to three-year deals when prices and consumer behavior are still in flux.

Amazon’s demand also puts publishers in a tight spot with Apple, which is insisting on most-favored nation status for its iBookstore.

While Amazon may have picked the wrong fight with Macmillan, and then overplayed its hand, the outcome of the  latest battle really could be critical to the Kindle-maker’s long-term strategy, not because of what it could mean for retail e-book prices but for what it could mean for the Kindle platform.

Both Amazon and Apple share the same long-term e-book strategy. Each wants its device, the Kindle and iPad, respectively, to emerge as the dominant e-reading platform. As Apple itself demonstrated with the iPod and iTunes — a strategy deliberately aped by Amazon — controlling the distribution platform gives you control of the value chain. By locking both iPod users and the record companies into the iTunes platform, Apple was able to capture the lion’s share of the value from online music (mostly by selling expensive iPods).

The key to Apple’s success in music wasn’t just the relatively low 99-cent price of individual tracks but that the value in using an iPod for music was competitive against other consumer options, including illegal downloads and other MP3 players.

For both Amazon and Apple, then, it’s critical that the value of using a Kindle or an iPad for reading remains competitive against all other options, especially at this early stage of the market’s development when consumer habits are still up for grabs.

That means not just keeping a lid on e-book prices but making sure you’re the lowest-cost provider of e-books in the market. In this case, most-favored nation means most likely to succeed.

As for how publishers should respond to Amazon and Apple’s mutually exclusive demands for favor, the situation presents a paradox. Normally, supplying both sides in a war is an enviable position for a vendor. In this case, however, the battle is over driving down prices, which is not a fight most vendors want to find themselves in.

Their best strategy is to hold the line with both and hope that no clear winner emerges quickly.

Paul Sweeting is analyst with GigaOM Pro and the author of The Evolution of the e-Book Market (sub. required).

Amazon has been in the crosshairs of the traditional publishing industry for some time now, with regard to numerous issues. Its standard $9.99-per-title charge for e-books is the same kind of clear and present threat to existing business models in the publishing industry that the music industry faced as low-priced music became available on ubiquitous digital players. The music industry continues to reel from the effects of that revolution, and instead of reaching for workable digital business strategies, aims laterally for questionable solutions such as slapping a performance tax on radio stations.

I got into a discussion on a videocast yesterday with Dan Goodin, one of the best writers over at The Register, about the equally seismic shifts we’re seeing in book distribution and the publishing industry. He made the point that with the low pricing models for digital books, and more devices for reading them, the ultimate effect may be that the quality of written content suffers. Authors, in addition to publishers, stand to have their livelihoods threatened under the new e-book regime, he noted:

“Do we want to live in a world where content providers can’t support themselves? That is exactly where we are moving with the Kindle and the iPad because people suddenly want books for $9.99. I’ve got news: It takes about a year to write a book, you have to travel extensively, you have to do a lot of fact-checking. What Amazon and Apple are trying to do is significantly decrease the amount of money that publishers, and specifically authors, can make.”

“The quality of books and other types of published material is going to significantly deteriorate,” he added. He’s not the first person to allege that the sweeping changes in the publishing industry threaten quality content. Warren Buffett, for example, has predicted that with newspapers dying and reporters losing their jobs, widespread dishonesty will ensue.

I’m inclined to agree — up to a point — with both of them, and I say that as a book author who has always worked in the publishing industry. However, it also seems clear that new publishing models will arise amidst the carnage. For example, Mathew recently noted that some authors are signing exclusive Kindle deals with Amazon. One popular author, Stephen Covey, has struck a deal with Amazon where he gets about 50 percent of the revenues from his Kindle-delivered books, far above the royalty deals that most authors get. Perhaps the very providers of digital content and distribution devices will end up being the ones to make the publishing industry work again.

Let’s not forget that we’re seeing exciting new kinds of devices arrive for reading. I suspect that devices such as the iPad will be both a blessing and a curse for the publishing industry, creating short-term chaos but also long-term promise.  Om has noted that the instant he laid his hands on the iPad, he had visions of exciting new content types that will surely take shape for it. Apple may also introduce higher pricing models for content on the iPad than we’ve seen from Amazon for the Kindle. For a visual tour of how the iPad might be a promising trend for publishing, I recommend watching the video below of Wired Magazine’s concept app for the iPad, which looks quite slick.

The ubiquitous availability of e-books may also usher in more reading, and it’s a fact that readers of e-books buy more books. As a BlackBerry user, I already like the free Kindle for BlackBerry app, and I can see myself using it to read on the train when I might otherwise busy myself with other things. One way or another, quality content will make its way to interested readers on digital platforms, and new types of rewards for authors will arrive, too. In the meantime, though, anyone who writes better prepare for a bumpy — though never boring — ride.

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With the iPad, Apple Takes Google to the Mat

Now that Apple has unveiled its iPad, plenty of people seem ready to buy the Kindle a coffin and tell the band to start playing the Funeral March. Heck, after seeing Apple’s sleek touch tablet, even Om came to the conclusion that it would kill the Kindle.

One of the few tech bloggers defending the Amazon e-reader (apart from those who write for Kindle-related web sites, of course) is Brad Stone at the New York Times, who has a list of “Three Reasons Why the iPad WON’T Kill the Amazon Kindle.” Undeterred by his colleague’s arguments, NYT tech blogger Nick Bilton followed up with a response detailing three reasons why the iPad will kill the Kindle. (Ben Elowitz of WetPaint, meanwhile, has come up with 10 reasons.)

It’s fun to talk about how new products will kill other products (which rarely happens, of course), but a more interesting discussion would be about how Amazon could fight back against the iPad. One way it can do that is by strengthening its relationship with authors and publishers, which it has already tried to do by raising its royalty rates substantially (in return for lower book prices, which it no doubt hopes will increase demand). Publishers may be tempted by a relationship with Apple as well, but Amazon has been around longer and has some solid deals on which it can build. Plus it’s just focused on books, whereas Apple’s attention extends to a host of other media, including music, print, movies, etc.

Here are four other ways I think Amazon could fight back:

• Open Up: One surprising announcement from Apple was that it will support the epub format, the same open-source standard that Google uses for Google Books. Amazon still uses its own proprietary format, which is likely to be a disincentive for some users, particularly if they also want an iPad. Amazon should open up or at least make translation easy. Building an app ecosystem is a good idea, too.
• Brighten Up: One most obvious difference between the two devices is that the iPad sports bright color, while the Kindle is dim and gray. Colorlessness may be easier on the eyes (although it sucks if you want to read in bed without the light on) but it detracts from any book that has pictures, theoretically a large market. Amazon needs to upgrade the screen, possibly by using the PixelQi screen.
• Get Social: As Nick Bilton mentions in his post, one of the big drawbacks of the Kindle is that it’s a single-use device. That might impress purists, who don’t want to be distracted while they read a book, but it makes the Kindle fundamentally unsocial. Even smart readers like to share links, send snippets to friends, maybe write a blog post or Twitter message about a great book. Why make them pick up another device?
• Get Cheaper: One of the things that iPad fans continue to mention is that the Kindle DX is only $10 more expensive than the iPad (although that compares it to the cheapest one without 3G wireless), but has none of the added features such as games, apps, movies, etc. Amazon needs to defuse this criticism by dropping the price of the KindleDX (which will likely make it even more appealing to buyers who don’t want all the bells and whistles of the iPad). Why not make the KindleDX $289 instead of $489?

Jeff Bezos didn’t get to be where he is by backing down from a challenge, so I imagine he’s looking forward to doing battle with Apple on the e-reader front (Om collected some entrepreneurship tips from Bezos in this post, and also did an interview with him after he spoke at the D6 conference). If you have any thoughts as to how Amazon could compete effectively with the iPad, feel free to share them in the comments.

Related posts from GigaOm Pro (subscription required): The Evolution of the E-Book Market and
Irrational Exuberance Over E-Books.

Thumbnail photo courtesy of Flickr user aaronisnotcool

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In the near term, Barnes & Noble, along with other marketers of e-book readers, faces a serious hardware production bottleneck. The Nook, like Amazon’s Kindle, Sony’s Reader and the upcoming device from Plastic Logic, is assembled by Prime View International of Taiwan, which controls the E-Ink technology used in nearly all electronic paper displays.

Increasing production of the Nook, therefore, is not simply a matter of Barnes & Noble sending a bigger purchase order. It must compete for displays and manufacturing capacity with Amazon, Sony and others, all of which are experiencing similar spikes in consumer demand for their e-book readers. Securing a bigger share of those finite resources could mean an increased cost-per-unit for Barnes & Noble.

Company executives on a conference call to discuss the latest results declined to say by how much they’re boosting Nook production but stressed that the increased investment reflects more than just the higher manufacturing costs. “It’s a whole capital investment in the market opportunity,” president William Lynch said. “It’s the content acquisition, it’s the people, it’s the in-store marketing. It’s everything.”

Despite the problems meeting demand, Barnes & Noble executives remain extremely bullish on the e-book and e-book reader category (for a more in-depth look at the company’s prospects in the space, see our GigaOM Pro report, How Barnes & Noble Can Avoid Getting Netflixed, sub. req’d). “This will be a multibillion-dollar business for Barnes & Noble,” CEO Stephen Riggio said. That’s partly due to the many barriers to entry facing new players, he said, among them content acquisition and aggregation costs, rights management, synchronizing products across multiple sales platforms and other challenges. “Digital content is going to be a much-less fragmented business than selling [physical] books,” Riggio said. In essence, when it comes to e-books, size matters.

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Maybe that will happen sooner than later. Amazon says it’s going to start selling the device internationally and this new version will be able to download books in 100 countries. Some analysts have estimated that there will be about 6 million Kindles in the hands of consumers, and with these new international devices, that number could go up sharply, giving Amazon the scale it needs and thereby allowing it to bring down the price.

Forrester Research today increased its forecast for e-reader sales in the U.S. to 3 million units, up from a previous forecast of 2 million -– with 900,000 of them seen selling during the holiday season. “Lower prices, more content, better distribution, and lots of media hype are contributing to faster-than-expected adoption of eReader devices in 2009,” Forrester analyst Sarah Rotman Epps writes in the new report.

“We expect sales to double in 2010, bringing cumulative sales of eReaders to 10 million by year-end 2010,” she continues. “If the category expands beyond E Ink-based displays in a substantial way, 2010 sales can easily surpass this projection.” Forrester estimates that Amazon will account for 60 percent of the e-reader market share, followed by Sony, with 35 percent, while other device makers like Foxit, Interead and IREX will account for approximately 5 percent of U.S. e-reader sales.

The new international version of the device is going to use AT&T’s 3G network, which utilizes the more popular GSM-based technologies. So far, Sprint has been the connectivity provider to Amazon’s WhisperNet and the company will continue to use Sprint for its U.S.-only edition of Kindle. There is a battle brewing between the carriers when it comes to providing communications for machine-to-machine networks. (Related Post: Amazon Kindles Good for Telcos, Bad for ARPU.)

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I bet Amazon is going to see a big bump in the number of books downloaded over Kindle as a result of this global edition. Amazon CEO Jeff Bezos tells the New York Times that when both physical and digital copies of book became available, Kindle took in 48 percent of total book sales vs. 35 percent last May. “This has grown much faster than any of us ever anticipated,” Bezos told the Times. Amazon, it seems, is Netflixing its rival, Barnes & Noble. (Related reports from GigaOM Pro: Evolution of the e-Book Market & How Barnes & Noble Can Avoid Getting Netflixed.)

When I was in New York recently, I met with many large media houses, and they have all embraced the Kindle. In fact, e-books/e-readers are being viewed as a panacea for the beleaguered publishing business. As more content becomes available, the utility of e-readers is only going to increase. But as we have said in the past, standalone e-readers are a bridge to newfangled, all-purpose Internet devices that will do everything.

I can wait and give my mom one of those new super devices. Or I can bring her a Kindle the next time I go to see her in New Delhi!

Related research and analysis from GigaOM Pro:
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• Evolution of the E-book Market
• How Barnes & Noble Can Avoid Getting Netflixed