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Tech Report – Get Ready for the Digital Book Wars

By Michael Connolly

Barnes & Noble yesterday unveiled what they referred to as the world’s largest online bookstore, with more than 700,000 e-book titles. They also announced that they will be the exclusive provider of digital books for the Plastic Logic e-reader, a device expected to launch early next year and compete with Amazon’s Kindle.

So far, the leading players in the emerging but fast-growing digital book market have taken a single-platform approach to distribution. Amazon’s digital titles can only be read on the Kindle and books from Sony’s eBook Store are only compatible with Sony eReaders.

Barnes & Noble plans a very different approach. Its books can be read on the iPhone and iPod Touch, RIM’s BlackBerry device, and most Mac and PC laptop and desktop computers. “Readers should have access to the books in their digital library from any device, from anywhere, at any time,” argues William Lynch, president of barnesandnoble.com.

Barnes & Noble’s move comes at a time when booksellers have been battling a slump in sales of traditional books, as readers head online or seek alternative entertainment. Lynch hopes to eventually make digital book fans of its more than “77 million voracious readers” who currently buy physical copies of books.

The cost of downloading an e-book from BN.com is $9.99, the same price that Amazon charges for its Kindle-compatible titles. The pricing of e-books has quickly become a source of contention with authors and publishers, who believe that the relatively low cost of the electronic format will undercut sales of hardcover editions and lead to an erosion of their fees and margins.

They may have a point. Barnes & Noble appears to be encouraging the  switch to electronic books with its pricing comparisons. A click on Malcolm Gladwell’s Outliers, one of its featured tiles and a current bestseller, lists the hardcover price at $27.99, followed by $9.99 for the e-book version and an exhortation to ‘save 64%’! You can also download the B&N eReader for free off their eBooks home page.

Although the market for digital books remains relatively small – just 4.9 percent of books sold in May, up from 3.7 percent in March – sales are expected to increase rapidly. Nervous publishers and booksellers need only look at what has happened to the music industry over the last few years to get a taste of things to come. The switch away from CDs in favor of electronic downloads has resulted in a wholesale realignment of the business model and more than a few empty storefronts!    

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