A Short History of EBooks Part 3

1994: SOME PUBLISHERS GET BOLD AND GO DIGITAL

= [Overview]

Some bold publishers decided to use the web as a marketing tool. In the U.S., NAP (National Academy Press) was the first publisher in 1994 to post the full text of some books, for free, with the authors' consent. NAP was followed by MIT Press in 1995. Michael Hart, founder of Project Gutenberg, wrote in 1997: "As university publishers struggle to find the right business model for offering scholarly doc.u.ments online, some early innovators are finding that making a monograph available electronically can boost sales of hard copies" (excerpt from the Project Gutenberg Newsletter of October 1997). Digital publis.h.i.+ng became mainstream in 1997. Digitization accelerated the publication process. Editors, designers and other contributors could all work at the same time on the same book.

For educational, academic and scientific publications, digital publis.h.i.+ng was a cheaper solution than print books, with regular updates to include the latest information.

= Publishers get bold

Some publishers decided to use the web as a marketing tool. In the U.S., NAP (National Academy Press) was the first publisher in 1994 to post the full text of some books, for free, with the authors' consent. NAP was followed by MIT Press (MIT: Ma.s.sachusetts Inst.i.tute of Technology) in 1995.

NAP was created by the National Academy of Sciences to publish its own reports and the ones of the National Academy of Engineering, the Inst.i.tute of Medicine, and the National Research Council. In 1994, NAP was publis.h.i.+ng 200 new books a year in science, engineering, and health. The new NAP Reading Room offered 1,000 entire books, available online for free in various formats: "image" format, HTML format and PDF format.

Oddly enough, there was no drop in sales - on the contrary, sales increased.

In 1995, MIT Press was publis.h.i.+ng 200 new books per year and 40 journals, in science and technology, architecture, social theory, economics, cognitive science, and computational science. MIT Press also decided to put a number of books online for free, as "a long-term commitment to the efficient and creative use of new technologies". Sales of print books with a free online version increased.

Michael Hart, founder of Project Gutenberg, wrote in 1997: "As university publishers struggle to find the right business model for offering scholarly doc.u.ments online, some early innovators are finding that making a monograph available electronically can boost sales of hard copies. The National Academy Press has already put 1,700 of its books online, and is finding that the electronic versions of some books have boosted sales of the hard copy monographs - often by two to three times the previous level. It's 'great advertising', says the Press's director. The MIT Press is experiencing similar results: 'For each of our electronic books, we've approximately doubled our sales. The plain fact is that no one is going to sit there and read a whole book online. And it costs money and time to download it'." (excerpt from the Project Gutenberg Newsletter of October 1997)

= Publishers go digital

Digital publis.h.i.+ng became mainstream in 1997, as the latest trend in the many changes underwent by traditional publis.h.i.+ng since the 1970s. Traditional printing was first disrupted by new photocomposition machines, with lower costs. Text and image processing began to be handed over to desktop publis.h.i.+ng and graphic art studios. Impression costs went on decreasing with photocopiers, color photocopiers and digital printing.

Digitization also accelerated the publication process. Editors, designers and other contributors could all work at the same time on the same book.

For educational, academic and scientific publications, online publis.h.i.+ng became a cheaper solution than print books, with regular updates to include the latest information. Readers didn't need any more to wait for a new printed edition, often postponed if not cancelled because of commercial constraints.

Some universities began to create their own textbooks online, with chapters selected in an extensive database, as well as papers and comments from professors. For a seminar, a few print copies could be made upon request, with a selection of online articles sent to a printer.

Digital publis.h.i.+ng and traditional publis.h.i.+ng became complementary. The frontier between the two supports - electronic and paper - began to vanish. Recent print media already stem from an electronic version anyway, on a word processor, a spreadsheet or a database. More and more doc.u.ments became "only" electronic, and more and more print books were digitized to be included in digital libraries and bookstores.

In the mid-1990s, though, there was no proof that electronic doc.u.ments would make us paperless in the near future, and save some trees. Many people still needed a print version for easier reading, or for their archives, in the fear the electronic file would be accidentally deleted. We were still a transition period, from paper to digital.

1995: AMAZON.COM IS THE FIRST MAIN ONLINE BOOKSTORE

= [Overview]

The online bookstore Amazon.com was launched by Jeff Bezos in July 1995, in Seattle, on the West coast of the U.S., after a market study which led him to conclude that books were the best "products" to sell on the internet. When Amazon.com started, it had 10 employees and a catalog of 3 million books. Unlike traditional bookstores, Amazon doesn't have windows looking out on the street and books skillfully lined up on shelves or piled upon displays. The "virtual" windows are its webpages, with all transactions made through the internet. Books are stored in huge storage facilities before being put into boxes and sent by mail. In November 2000, Amazon had 7,500 employees, a catalog of 28 million items, 23 million clients worldwide and four subsidiaries in United Kingdom (launched in August 1998), Germany (August 1998), France (August 2000) and j.a.pan (November 2000). A fifth subsidiary opened in Canada in June 2002, and a sixth subsidiary, named Joyo, opened in China in September 2004.

= Amazon in the U.S.

# First steps

The online bookstore Amazon.com was launched by Jeff Bezos in July 1995, in Seattle, on the West coast of the U.S., after a market study which led him to conclude that books were the best products to sell on the internet. When Amazon.com started, it had 10 employees and a catalog of 3 million books. Unlike traditional bookstores, Amazon.com didn't have windows looking out on the street and books skillfully lined up on shelves or piled upon displays. The "virtual" windows are its webpages, with all transactions made through the internet. Books are stored in huge storage facilities before being put into boxes and sent by mail.

What exactly was the idea behind Amazon.com? In Spring 1994, Jeff Bezos drew up a list of twenty products that could be sold online, ranging from clothing to gardening tools, and then researched the top five, which were CDs, videos, computer hardware, computer software, and books.

As recalled by Jeff Bezos in Amazon's press kit (in its 1998 version), "I used a whole bunch of criteria to evaluate the potential of each product, but among the main criteria was the size of the relative markets. Books, I found out, were an $82 billion market worldwide. The price point was another major criterion: I wanted a low-priced product. I reasoned that since this was the first purchase many people would make online, it had to be non-threatening in size. A third criterion was the range of choice: there were 3 million items in the book category and only a tenth of that in CDs, for example. This was important because the wider the choice, the more the organizing and selection capabilities of the computer could be put in good use."

People could search the online catalog by author, t.i.tle, subject, date, or ISBN. The website was offering excerpts from books, book reviews, customer reviews, and author interviews.

People could "leaf" through extracts and reviews, order some books online, and pay with their credit card. Books arrived within a week at their doorstep. As an online retailer, Amazon.com could offer lower prices than local bookstores, a larger selection, and a wealth of product information.

Customers could subscribe to a mailing list to get reviews of new books by their favorite authors, or new books in their favorite topics, with 44 topics to choose from.

In 1998, there were discounts on 400,000 t.i.tles, with 40% on some feature books, 30% on hardcovers, and 20% on paperbacks.

Amazon.com was also selling CDs, DVDs, audiobooks and computer games, with 3 million clients in 160 countries, and a catalog with ten times as many t.i.tles as the largest supermarkets'

bookstores.

As mentioned by Jeff Bezos in Amazon's press kit: "Businesses can do things on the web that simply cannot be done any other way. We are changing the way people buy books and music. Our leaders.h.i.+p position comes from our obsessive focus on customers. (...) Customers want selection, ease of use, and the lowest prices. These are the elements we work hard to provide.

We continued to improve our customer experience during the quarter [the second quarter 1998] with the opening of our music store, our easier-to-navigate store layout, and our expansion into the local U.K. and German book markets. These initiatives will continue to require aggressive investment and entail significant execution challenges."

# Expansion

People began buying books across borders. What we take for granted now - buy a book in Europe from the U.S. website Amazon.com, or buy a book in the U.S. from the German website Amazon.de - was making big waves at the time. The local online bookstores called it "unfair compet.i.tion".

There were also issues about custom taxes. A first outline agreement was reached between the U.S. and the European Union in December 1997. This agreement was followed by an international convention. The internet was decided a free trade area, i.e. without any custom taxes for software, films and digital books bought online. Material goods (books, CDs, DVDs) and services were subject to existing regulations, with collection of VAT (value added tax) for example, but with no additional custom taxes.

On the footsteps of the Internet Bookstore, based in United Kingdom and the largest online bookstore in Europe, Amazon.com launched is a.s.sociates Program. As stated in a press release dated June 8, 1998: "The Amazon.com a.s.sociates Program allows website owners to easily partic.i.p.ate in ha.s.sle-free electronic commerce by recommending books on their site and referring visitors to Amazon.com. In return, partic.i.p.ants earn referral fees of up to 15 percent of the sales they generate. Amazon.com handles the secure online ordering, customer service, and s.h.i.+pping and sends weekly email sales reports. Enrollment in the program is free, and partic.i.p.ants can be up and running the same day. a.s.sociates range from large and small businesses to nonprofits, authors, publishers, personal home pages, and more.

The popularity of the program is reflected in the range of additions to the a.s.sociates Community in the past few months: Adobe, InfoBeat, Kemper Funds, PR Newswire, Travelocity, Virtual Vineyards, and Xoom." There were 60,000 "a.s.sociates" in June 1998.

Barnes & n.o.ble, a leading U.S. bookseller, entered the world of e-commerce in 1997.

Barnes & n.o.ble had 481 stores nationwide in 1997, in 48 states out of 50, as well as 520 bookstores (B. Dalton stores) in shopping malls, and a catalog of 175,000 t.i.tles from 20,000 publishers. Barnes & n.o.ble also published books under its own imprint for exclusive sale through its retail stores - and its nationwide mail-order catalogs.

Barnes & n.o.ble first launched its America OnLine (AOL) website in March 1997 - as the exclusive bookseller for the 12 million AOL customers -, before launching its own website, barnesandn.o.ble.com, in May 1997. The site was offering reviews from authors and publishers, with a catalog of 630,000 t.i.tles available for immediate s.h.i.+pping, and significant discounts: 30% off all in-stock hardcovers, 20% off all in-stock paperbacks, 40% off select t.i.tles, and up to 90% off bargain books. Its Affiliate Network spread quickly, with 12,000 affiliate websites in May 1998, including CNN Interactive, Lycos and ZDNet.

In May 1998, Barnes & n.o.ble.com launched a revamped website with a better design, and an Express Lane one-click ordering, improved book search capabilities, and expanded product offerings with a new software "superstore". Jeff Killeen, chief operating officer, stated in a press release dated May 27, 1998: "Through our first year in business we have listened intently to what our customers have asked for and believe we have delivered a vastly superior product based on those requests. (...) Innovation based on customer-focus has been the hallmark of our success and we see our new site as proof- positive of our commitment to be the leader in online bookselling and related products. We're also extremely excited to have Intel, a leader in the technology products category, open its SoftwareForPCs.com site at barnesandn.o.ble.com."

Barnes & n.o.ble.com began a fierce price war with Amazon.com for the best book discounts. Amazon.com came to be known as "Amazon.toast". Jeff Bezos, Amazon's CEO, didn't mind the compet.i.tion. In the magazine Success of July 1998, he explained to journalist Lesley Hazleton: "The gap has increased rather than decreased. We went from $60 million annualized sales revenue in May to $260 million by the end of the year, and from 340,000 customers to 1.5 million, 58 percent of them repeat customers - all that in the context of 'Amazon.toast'. We're doing more than eight times the sales of Barnes & n.o.ble. And we're not a stationary target. We were blessed with a two-year head start, and our goal is to increase that gap."

= Amazon in Europe

The European presence of Amazon began in October 1998, with the creation of two subsidiaries in Germany and in United Kingdom.

In August 2000, Amazon had 1.8 million customers in U.K., 1.2 million customers in Germany, and less than 1 million customers in France. Amazon opened its third subsidiary, Amazon France, with books, music, DVDs and videos - software and video games were added later, in June 2001 - and a 48-hour delivery. At the time, online sales represented only 0.5% of the book market in France, against 5.4% in the United States.

The opening of Amazon France was announced at the last minute, on August 23, 2000, after months of secrecy surrounding the next "American cultural invasion". The French subsidiary opened in Guyancourt, in the suburbs of Paris, with 100 employees - some of them trained in the U.S. headquarters in Seattle - for administration, technical services, and marketing. The distribution service opened in Boigny-sur-Bionne, near Orleans, a town in the south of Paris. The customer service landed in The Hague, Netherlands, because Amazon was expecting to broaden its European network.

Amazon France had four compet.i.tors: Fnac.com, Alapage, Chapitre.com, and BOL.fr.

Fnac.com was the online branch of Fnac, a network of "traditional" bookstores spread throughout France and other European countries, and run by the group Pinault-Printemps- Redoute.

Alapage was an online bookstore founded in 1996 by Patrice Magnard, before being bought by France Telecom in September 1999. Alapage became a subsidiary of Wanadoo, the internet service provider of France Telecom, in July 2000.

Chapitre.com was an independent online bookstore, created in 1997 by Juan Pirlot de Corbion.