While there have been great expectations for e-books before, it may be e-paper technology that provides a much needed impetus to push e-books into the mainstream. Displaybank forecasts that the flexible display market will grow from $280 million in 2010 to to $12.2 billion in 2017. Not bad, considering that the entire U.S. book market earned $25 billion in 2005. (For Statastic’s full essay about the future of e-ink and e-books, visit here.)

But the market for e-paper and flexible displays extends far beyond e-books. Imagine instantly customizable billboards, or ever-changing e-paper facades that wrap the outside of skyscrapers.

Perhaps the promise of a new advertising medium will finally drive the development of e-paper; e-books sales certainly haven’t. While Sony keeps pitching its rather pedestrian $300 black and white 7″ e-reader, LG Philips taunts us with a 14″ flexible e-paper display featuring more than 4000 colors. Fujitsu and HP are even jumping into the fray with e-reader prototypes. Unfortunately, these new e-readers likely won’t be ready for the consumer market until well into the Gore-Obama administration.
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Chart courtesy of Tech-On based on research from Displaybank.

Yesterday we left several unanswered questions: who should digitize the world’s books? How do we ensure that authors get paid? What is the future of libraries in the digital age?

U.S. libraries have the potential to lead the digital book revolution. Libraries have a large market, consistent funding sources, and good relationships with private partners. Unfortunately, a lack of funding, a lack of focus, and usual bureaucratic hurdles have given Google the lead. Google certainly isn’t evil, but their market power does reduce the likelihood that public libraries will ever gain the political traction needed to fund this vision.

Before we start assessing the future of e-books and public libraries, let’s set the framework for how authors should get paid and who has the power to provide a digital library for the world.

The E-Book Market

It might be instructive to take a brief look at how Google has inserted itself into the e-book market. There are five major players in delivering e-books to readers:

1. 1. Authors: The vast majority of authors are crucial but in many ways peripheral to the development of e-books. That may change (as it has in journalism) but in the near future, their power is distributed too widely.
2. 2. Publishers: Publishers select authors, preen their works and prepare them for public consumption. Resembling the intransigence of record labels in the music industry, publishers are effectively dragging their feet on e-books by not offering any type of discount that would realistically lure readers away from paper books. Publishers fear that the sharing of e-books and emergence of virtual publishing will cut them out of the value chain.
3. 3. Google: Google has used its deep pockets to rapidly insert itself into the e-books value chain. Google already reaches out directly to authors, so it’s easy to imagine that publishers may lose power and influence.
4. 4. Libraries: Libraries are a widely distributed market and reliable customer, purchasing millions of books every year for their collections. The role of libraries in the digital world is rapidly changing. They may lag behind and slowly adapt to e-books, but taking initiative sooner could them more control over the e-books market than any other player.
5. 5. Bookstores: Bookstores - online and off - have lagged on developing a viable e-book model. E-book sellers are often small web companies with specialized catalogs (see statastic! below). Your corner bookstores should be shaking in their bricks and mortar when it comes to e-books, and finding an e-book at Amazon.com is a confounding experience.

Copyright Issues

Now that we know the players, let’s look at one sticky issue that may be delaying the widespread adoption of e-books. Copyright is fundamentally a commercial problem, not a legal one. Intellectual property protection enables authors and musicians to derive profit from their works. Digital Rights Management (DRM) is absolutely critical to protecting the rights of authors. While many of us are familiar with the shortcomings of DRM in music, it is much better suited to e-books - with some adjustments:

• -Customers who purchase e-books must be given a discount. Of the $20 you pay for a new hardback book, up to half is allocated to shipping, printing, publishing, and marketing costs. When you eliminate those costs by selling it in electronic format, you can charge less (say $12) while increasing publisher and author profits.
• -Customers who purchase e-books should have the right to re-sell those books. Although Apple is having no trouble selling DRM music that cannot be re-sold, music downloads are fundamentally different: music is designed for repetition. Just try reading an e-book as many times as your little sister listens to the latest Justin Timberlake CD.
• -E-books must be sold in sections. Just like being able to buy an MP3 single rather than the full album, e-books must give customers the option to part of a book - especially in non-fiction. For a few cents, customers should be able to buy a single recipe (rather than the cookbook), or city museum guide (rather than the entire country guide).
• -E-books must be rent-able (a.k.a. subscription model or DRM time bombs). This is especially critical for the success of electronic public libraries.

If low-priced e-books are protected by reliable DRM and rent-able for public libraries, copyright protection should cease to be an issue. Why? Because people will have almost no incentive to share e-books and e-libraries would create a reliable profit center for publishers and authors.

The Wal-Mart Library?

Now that we have the commercial fundamentals of our new e-book world established, let’s take a look at how this would impact the players.

Wal-Mart flipped the supplier-buyer relationship upside-down. Because of Wal-Mart’s size and market share, suppliers are hesitant to be dropped from Wal-Mart shelves. This gives Wal-Mart increased power to negotiate supplier prices down (often to a fault). Suppliers make less profit per item, but they bet on making it up on volume.

When Google enters the e-book market, it will do so as the market leader (see statastic! below). This may have been Google’s strategy all along: the network effect. For example, where would you go to auction an item? If you want the most eyes on your item, you will auction it at Ebay where there are the most items for sale. Google’s huge database of digitized books will provide a similar draw for readers, giving Google buyer power over suppliers - in this case publishers. With the promise of massive volumes of e-books being sold on Google Books, Google should be able to negotiate lower e-book prices with publishers.

If libraries across the country were to unite and pool their resources, they could also create a single digital library. The federal government could also negotiate lower e-book prices for its public libraries, just as Congress is considering using the market power of 300 million citizens to negotiate lower prescription drug prices for its Medicare beneficiaries.

There are several advantages to a publicly-funded initiative to digitize the world’s books. Google Books search is proprietary. In other words, if you use Yahoo as your search engine, no Google Book results will show up. In contrast, a U.S. Digital Library would be searchable by anyone. Tomorrow we will explore how a such a nationalized virtual library might be implemented in the Washington DC Public Library system.
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If e-books have been a commercial flop thus far, then how do Americans access books? In 2004-2005 we were divided equally between purchasing 2.3 billion books and checking out 2.4 billion books from libraries. Libraries remain a critical steward of our world’s knowledge. But even as the world wide web has made information more global, most libraries remain local in their focus.

For librarians, it must seem that the web has turned information gathering on its head. The Internet is a heady young fellow, self-obsessed, self-referential, and unflinchingly modern in its focus (see right). Libraries house history, centuries of wisdom buried deep in stacks, and even deeper in the un-searchable text of yellowing book pages. So how can libraries remain relevant?

Let’s first examine the mission of public libraries versus the mission of major search engines. The following excerpts are from the mission statements of several major libraries and a certain web giant - see if you can distinguish between them (hover over or click the link for the answers):

A. “Helping people advance knowledge to enrich lives”

B. “…to organize the world’s information and make it universally accessible and useful.”

C. “…to sustain and preserve a universal collection of knowledge and creativity for future generations.”

D. “…collecting, cataloging, and conserving books and other materials…. to serve as a great storehouse of knowledge… and to function as an integral part of a fabric of information and learning that stretches across the nation and the world.”

E. “…to create a comprehensive, searchable, virtual card catalog of all books in all languages that helps users discover new books and publishers discover new readers.”

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Private Sector Libraries

Clearly the missions of Google (and other search engines) are converging with those of the leading libraries. Google recognized this as an opportunity and launched the Google Library Project in late 2004. The project started with five major library partners, but has since extended to 11 libraries in three countries. Google is digitizing the contents of prestigious libraries such as Harvard, Stanford and Oxford, increasing access to tens of millions of unique books that were once accessible only to a small, elite group.

Google spends between $10 and $30 for every book it scans. The entire project, which will span at least a decade, will only cost Google the equivalent of its 4th quarter profits in 2006. Not a bad investment for the web giant.

Google has already made these books available on its Google Book Search, a fascinating portal that for the first time in human history opens up rare and not-so-rare books to anyone in the world. Not only are these books are fully text searchable, Google has recently announced an integration with Google Maps, making librarians, technologists and Google-philes giddy. No more leafing through musty books to find a quote or location.

Google’s Library Project is distinctive from several others such as the Open Content Alliance sponsored by Yahoo and Microsoft because Google is barreling ahead and scanning copyrighted texts. This has not only provoked lawsuits, but more importantly, it has also provided a necessary impetus to publishers and libraries to address the issue of how to manage copyrighted books in the digital era.

Google Book Search allows full text search for copyrighted works by simply telling you that the terms you searched for are in the book. Google then provides a tantalizing “snippet view” of the text as if it was torn right from the page. If you want to read the whole book online, however, you’ll have to wait. Rather than selling the e-book, Google paradoxically directs you to amazon.com which will happily mail you a hardback in 5 to 7 days for $21.95.

This is about to change dramatically. On January 21, 2007, Google announced to the Times of London that it would launch an e-book service. Details are murky, but it seems likely that users will be able to purchase all or part of copyrighted books. I can only reiterate that pricing matters. With e-books, publishers can increase the exposure of previously obscure books and eliminate publishing costs. Ideally, this will increase profit margins and create significant savings for consumers. Because digitized books are easily divided, e-books could lead to a new model of micropayments enabling consumers to purchase only what they need, be it a chapter, a paragraph, or even just a quote.

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Public Library Reactions

Google’s mission is not without its critics. Jean-Noël Jeanneney, president of France’s Bibliothèque Nationale wrote a plaintive book called Google And the Myth of Universal Knowledge warning of Anglo-Saxon cultural imperialism and the risk of market-driven libraries:

“As anyone who uses Google knows, what is intrinsic to all the information it provides is hierarchization. Even if there are many pages of results, the searcher rarely goes beyond the first few. …The profit motive will necessarily promote one product over another.”

As long as there have been publishers with a marketing budget, there have been attempts to woo readers. And while the psychological effect of publishers’ advertising cannot be stopped at the door of library, our French friend would like to see it diminished.

There is some merit to this view, but not much. Libraries and library science will continue to weigh market forces against intellectual ones, but this new digital medium should not be made the culprit. If a library were to license, buy, or rent the contents Google’s digital library, couldn’t they simply reorganize it in a neutral, intellectualized way that would make even Mr. Dewey Decimal proud? Or should the public libraries simply create their own digital library system from scratch?

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Public Library Initiatives

Most libraries do see the upside to digitizing their libraries or they wouldn’t be working with Google. In fact, Google recently gave a $3 million grant to the Library of Congress for its World Digital Library Project in conjunction with UNESCO. The project is focused on improving web access to rare materials that, “…are physically stored in geographically dispersed locations, and which, when brought together with other collections through cross-national and cross-cultural multilingual search and browse capabilities, will yield new knowledge and insights.”

The World Digital Library may sound ambitious, but its scope is much more limited than that of Google Books. It will focus primarily on the long end of the tail: rare cultural treasures that most of us don’t use, rather than popular literature that most of us check out from our local libraries.

So we have the ivory tower approach and the commercial approach. Caught in the middle are the libraries that most Americans use.

Is Google the only answer? To be sure, they have a massive head start (see statastic below). In a decade they may have more books in their digital collection than any library system on earth. But if there is true intellectual concern about the earth’s largest library being in the hands of a profit-driven company, why not launch a public initiative? Can the U.S. government even afford it?

It’s all about priorities. If the U.S. government decided to scan and digitize every one of the 65 million books on earth, it would only cost about $2 billion. That’s less than we are spending for one week in Iraq, and it’s less than kids (I presume it’s kids) are paying for cell phone ring tones each year. We can afford it; so far, we just haven’t chosen to.

Even if the public sector did spend resources digitizing, libraries would face copyright issues. Tomorrow I will look at that as well as e-books initiatives at local libraries. And later this week, a case study that imagines the The DC Public Library in 2017.

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Sources and assumptions: Google has not disclosed the number of books it is digitizing or its timeline for completing the project. Early in the project Google claimed that it would scan 3,000 books per day. This figure was used for the low estimate. The high estimate was based on expanded date searches (1500 to 2007) on Google Books that returned about 4.5 million books. This was extrapolated back to the beginning of the project to find the scan rate, which was then used to project the high estimate. Statastic believes that the high estimate is probably more accurate because the 3,000 books per day figure referred to a contract with only the University of California library system. The fact that Google continues to add libraries to the project indicates that Google is likely to accelerate the scanning rate.

With the advent of e-ink and e-paper, the only thing missing is the electronic content: e-books. E-books offer several clear advantages over print media: students able to tote all of their textbooks back and forth to classes in one 7 ounce e-reader; traveling the world with detailed guidebooks and foreign language dictionaries for dozens of countries; the ability to store hundreds of your favorite books in a tiny urban apartment; and finally, the potential to revolutionize libraries around the world (more on that tomorrow).

Many analysts agreed that e-books would revolutionize publishing. In 2000, Accenture predicted that e-books would make up 10% of the book market by 2005. Unfortunately, e-books didn’t live up to their great expectations. In fact, e-books only made up .07% of the 2.3 billion books sold in 2005: less than 1 of every 1200 books sold was in electronic format. Moreover, sales of e-books were flat between 2004 and 2005.

So why has the public rejected the digitization of print media? One problem is that, unlike CDs, there is no way to digitize your current library of paperbacks. E-books and e-readers also present the classic chicken and egg conundrum. Without most titles available in e-book form, expensive e-readers lose their appeal. And without flashy new e-readers to energize consumers (as iPod did for digital music), publishers are naturally less willing to commit to the new format.

Some of that may be changing: Apple’s new iPhone is making bloggers like Booksquare all tingly:

“…the iPhone could either kill the nascent e-reader business or take it to new levels. We’ve been saying just about forever that the problem with dedicated e-reader is the fact that the consumer isn’t seeking a device that does only one thing. With its “smart” orientation features, the iPhone could usher in the mass market e-book era.”

Even as Apple might revitalize the market, if they insist on Digital Rights Management (DRM) as they do in the music market, they may undermine their potential success. Just as Apple iTunes makes it difficult to share digital music downloads with friends, some e-book sellers impose similar restrictions. That makes the paperbacks more attractive than DRM-controlled e-books: you bought it, you can share it with friends. Not so with DRM e-books.

Traditional publishing houses are also delusional when it comes to pricing e-books. If you want to read Tom Sawyer’s The Adventures of Huckleberry Finn, for example, you can buy the Penguin Classic paperback for $5.95, or for a modest 10% discount, you can download the same Penguin Classic from ereader.com.

But consider this: Copyrights on many classic titles have entered public domain. This means that almost everything written before 1923 in the United States is free to use.

In the past, Penguin Classics made profit by reprinting classic titles that would otherwise be unavailable.The Internet changes the equation. Take away the public’s need for the printing press, and e-books would seemingly be a major threat to Penguin Classics.

Fear not, for lovers of classics there is good news: Project Gutenberg has taken the Wikipedia approach to sharing e-books in the public domain. With 20,000 free e-books in their catalog - including Huck Finn - Project Gutenberg claimed more than 2 million downloads last month. Contrast this with the 1.7 million e-books sold in all of 2005 and we see once again that consumers of e-books are extremely price sensitive. (More on price sensitivity in music here.)

And the pricing premium for e-books isn’t restricted to the classics. Jimmy Carter’s bestseller, Palestine: Peace Not Apartheid is actually cheaper in hardback at amazon.com ($16.20) than the e-book version at ereader.com or fictionwise.com ($16.99).

Publishers seem wedded to the paper publishing business model. This antiquated pricing model is bad for consumers and worse for the environment. If the 2.3 billion paper books sold in 2005 had been e-books, we would have saved more than 7 million trees. Until publishers drop prices and loosen Digital Rights Management restrictions, the convenience and sensibility of e-books may remain a pipe dream.

But what if our public libraries could help revolutionize the e-book market? More on that soon.

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Sources: Statastic research, Accenture, International Digital Publishing Forum

In the near future, most of our media will be found on a hard drive. 35mm film is rapidly going extinct, CDs are giving way to MP3s. Filmmakers like David Lynch have announced that they will never use anything but digital video cameras. Meanwhile, Netflix has introduced movie downloads. And whether the execs are ready or not, television is being revolutionized by YouTube among others. But our most ancient media of all hasn’t budged: books. Sure we read and write on computers for school and for work, but at the end of the day when you curl up with a good book, it’s unlikely to be on your laptop. Why hasn’t the e-book taken off? And what happens when it does?

Books are long overdue (ahem) for the digital revolution. For the rest of the week, statastic! will consider the future of e-ink, e-paper, and e-books. What are the implications for our public libraries? Stay tuned for a case study on the e-library of the not-so-distant future. But first things first: You can’t have an e-book without e-ink.

In the 1970s, the legendary Xerox PARC first developed something they called electronic ink, or e-ink. E-ink is comprised of millions of microcapsules the diameter of a human hair. Each microcapsule contains positively charged white particles and negatively charged black particles suspended in a clear fluid. When a minimal electrical charge is applied, the microcapsules flip and remain flipped until the next electrical impulse tells them otherwise.

E-ink is perhaps best explained by what it is not. It is not an LCD or a plasma display that you may be accustomed to seeing on a laptop computer. Unlike laptop displays, e-ink is not backlit, meaning that if you want to read in bed, you’d better have a light on. The fact that e-ink doesn’t rely on backlighting results in several advantages:

• -Easier to read: E-ink has nearly the same resolution and reflectivity as printed text. Reading using reflected light is much easier on the eyes than backlit screens, and much easier to read in sunlight. Unlike plasma or LCD flat screens, you can view e-ink from several angles just like regular paper.
• -Flexible e-paper: Because e-ink doesn’t require backlighting, it also doesn’t require a rigid glass screen. The simplicity of e-ink means that it can be paired with flexible materials creating an e-paper that can be bent, or even rolled up.
• -No need to recharge: Once the electrical current tells the microcapsules whether to turn black or white, they remain in that state indefinitely with no power input. A page using e-ink (also called e-paper) can remain open indefinitely without drawing down of a battery source. You can read thirty books before you need to plug in an e-reader using e-ink.

Currently several companies are pursuing e-ink and e-paper. Plastic Logic, the developer of the “E Ink,” announced on January 3rd, 2007 that it had completed a $100 million round of equity financing. Their research currently is focused on flexible displays that will enable an electronic reader to hold hundreds of e-books and weigh less than a thin newspaper. For video on the flexible display prototypes, click here.

Several companies have already licensed E Ink for their own devices. Sony’s $300 e-reader holds 80 books, weighs about as much as a paperback and can turn 7,500 pages before it needs a charge. Star eBook just released its 6.2 ounce e-reader in Japan, claiming that it’s the lightest reader on the market. And late in 2006, Hitachi released a 4,000 color e-reader, an innovation that could rapidly earn some converts.

If the $300 to $500 price tag seems unrealistic, consider this: In 1996 DVD players hit the American market for about $600 (in 1996 dollars, no less). The least expensive DVD player at Walmart.com is now $30, less than 5% of the price a decade ago. If e-readers have similar adoption rates, you might be able to pick up an e-reader for less than the price of a hard cover within a few years.

Tomorrow: the e-book market

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The Russian Futurists - imagine the Magnetic Fields playing with a full electronic symphony underwater. Try to pick out the honking geese on the track “Our Pen’s Out of Ink.” A relative inconvenience in this age of e-ink.

Sources: Statastic research, Wikipedia, e-paper.org,