Electronic Books Are Coming At Last! They've left the shelf of science fiction, and soon you'll see them at the beach. At a cost of $300 to $500, they're not cheap--yet. But they weigh less than three pounds, have beautiful screens, and can hold many of your favorite novels.
By Carol Vinzant

(FORTUNE Magazine) – Jack Christie wants to take a load off the backs of Texas schoolchildren. At a meeting this spring to discuss new technology, the chairman of the Texas board of education posed an intriguing question: "What if I gave you something-- hypothetically--that looked like a book, felt like a book, and weighed a little less than a book, with no hard drive, that could hold 50,000 pages of text? Would that be better than the traditional textbook?" Gary Chapman, a lecturer at the University of Texas who was the token invited critic at the meeting, scoffed. "People have been after this so-called Dynabook, or whatever you would call it, for a long, long time," he said. "We're not even close. Anybody who tells you we're close doesn't know what they're talking about." Christie knew better; the previous night he had met with executives of SoftBook Press who had shown him just such a device. "Now, I don't want to say that I'm really excited," Christie says. "But I think I am."

What Christie saw was one of three electronic books due out in the next several months. Any day now two Silicon Valley companies--SoftBook Press of Menlo Park and NuvoMedia of Palo Alto--will preview E-books for the public to buy this fall. Both devices will have a black-and-white touch screen. Later on Everybook of Middletown, Pa., hopes to sell an electronic book that opens to two color screens. Even an old-media guy like Michael Lynton, chairman of Penguin Publishing, says the E-books look "very strong." Adds Jonathan Guttenberg, vice president for new media at Bantam Doubleday Dell: "This is the first time we're actually expecting people to come to market with these products."

E-books offer some familiar comforts along with a few new tricks. You can still dog-ear pages by pressing a corner of the touch-sensitive screens, write notes with a stylus, and underline. You can also search, change fonts, and touch a word to look it up in the dictionary. E-books are not cheap, at least not yet. Prices range from $299 to an extravagant $1,600--and that's just for the devices themselves. The actual content--novels, textbooks, reference material--is extra, though prices will probably be lower than what you'd pay in a bookstore. After you charge your purchase, you download it immediately, either through your computer or directly to your E-book.

If it sounds like something out of science fiction, that's because the electronic book has been a sci-fi prop since the 1940s. It made cameo appearances in Star Trek and Alien Resurrection. It starred in The Hitchhiker's Guide to the Galaxy as a "device that looked like a largish calculator" holding so much information that "if it were printed in normal book form, an interstellar hitchhiker would require several inconveniently large buildings to carry it around in."

The E-book, in other words, has been part of the collective consumer unconscious for a long time. Turning it into an embraceable product has taken a long time too. Remember Knight Ridder's News Tablet? How about Sony's Data Discman? "There have been a lot of tries and a lot of failures," says Martin Eberhard, 38, co-founder of NuvoMedia. Jim Sachs, 43, founder of SoftBook, has a collection of failed E-books in his office, where he also preserves his first model--made of sprinkler tubing and clear plastic--under glass. What makes Sachs and Eberhard think they can do better now? In a word, laptops. Electronic books are essentially repackaged laptop computers, whose component prices have fallen swiftly in recent years. The developers enhanced features needed for reading--like screens--and got rid of almost everything else, including heavy-duty processors. They also took advantage of the ability to send volumes of material cheaply over the Internet (previous electronic books held their texts on disks and cards). As for publishers' worries that folks would E-mail each other the new Grisham novel as if it were the Neiman Marcus cookie recipe, encryption prevents E-book users from passing around copies.

The big question is this: Now that electronic books are here, will anyone read them? The newest were developed before designers realized that every time users begin to read a longish document online, they feel an urge to hit PRINT. Still, E-books seem likely to appeal to two broad groups: students and professionals who have required reading, and those who do a lot of reading under difficult circumstances. Call it "extreme reading." What if you're on a 12-hour flight to Asia? What if you want to read the Bible in Saudi Arabia, where it might be confiscated? What if you marry someone who won't let you turn on a light to read in bed? The academic market seems especially promising. One-fourth of all books sold in the U.S. are textbooks, a $5.7-billion-a-year market. Students tend to like new gadgets, and schools might welcome technology that makes it easier to keep textbooks up to date.

Penguin's Michael Lynton says he would use E-books for "stuff that was less about the visceral pleasure of reading--where I'm more concerned with getting information off the page than with the pleasure of turning the page." He believes that once people get used to the format, electronic books may account for about the same share of the $21-billion-a-year traditional market as audio books--10%.

Old-fashioned readers may be lured to the new technology by the hope of finding out-of-print books; once the system catches on, almost no book will be condemned to that fate. Formatting an out-of-print book (or any book for that matter) is inexpensive for a publisher, costing only the $350 or so paid to the keypuncher who types it. Electronic readers will also be able to get some books with expired copyrights free or dirt cheap. Since 1971, volunteers at Project Gutenberg have been typing in public-domain titles, from Hamlet to The Adventures of Tom Sawyer, then posting them at www.gutenberg.net, patiently waiting for the right reading technology.

Interestingly, the electronic-book companies expect to make most of their money from a cut of book sales, rather than from E-books themselves. As part of their business strategy, the companies are marketing themselves as the solution to publishers' recent difficulties. Publishers used to get as much as 60% of a book's cover price, but over the past few years the figure has slipped to about 50%. Out of that, the publishers must pay for royalties, marketing, distribution, and printing. Printing alone costs $2 to $2.50 for hardcovers, and $1 to $1.50 for trade paperbacks. Publishers must also absorb the cost of unsold books; the return rate has recently climbed as high as 40%, executives say. Electronic book companies will offer publishers roughly the same cut, but will eliminate many costs, chiefly printing and distribution. "E-books could potentially be a more profitable bit of business than bound books," Lynton says.

Here's a look at the products and strategies of the three companies that hope to bring E-books to market soon.

NUVOMEDIA

Buying an electronic book through NuvoMedia will be like buying today from an online bookstore such as Amazon.com. In fact, you'll use those online suppliers; the only difference is that instead of having a hard copy sent to you, you'll buy an electronic version that will download to your computer instantly. You'll store it there for loading into NuvoMedia's paperback-sized RocketBook (cost: under $500) whenever you want. NuvoMedia is the only E-book company with significant new hardware; its device features a gorgeous customized screen that's readable from almost any angle and a cradle that recharges the 20-hour batteries and loads the texts from your PC.

Unlike other E-book companies, NuvoMedia will not take over the role of retailer but instead will play the invisible distributor. Barnes & Noble is so pleased with this don't-rock-the-boat-too-much strategy that it has invested $2 million in NuvoMedia and is considering in-store promotions. Bertelsmann Ventures, whose parent company recently bought Random House, has also invested a significant amount. "What captivated me with the RocketBook was the instant I picked it up and held it, I knew I would be reading books with that device someday," says Steve Riggio, vice chairman of Barnes & Noble. "I can envision carrying it to the beach." Although NuvoMedia will not give readers a preset discount on books, CEO Eberhard expects publishers and bookstores to offer one.

SOFTBOOK PRESS

SoftBook is going at the E-book business the opposite way: eliminating middlemen and using cheap, leftover technology. "We're on the leading edge of trailing-edge technology," says Sachs, who was a co-inventor of the Macintosh mouse. "Costs are low, and reliability is high." In September, Sachs will begin selling a leather-bound, 2.9-pound, notebook-sized SoftBook for $299; customers must also agree to buy $10 to $20 of books or other reading material every month from SoftBook's online store for two years.

To get started, you connect a phone line to your SoftBook and hit a button; the machine's internal modem dials the store. When you touch the title you want, SoftBook charges your credit card and downloads the book. It stays in your SoftBook until you're ready to delete it. If you want it back again, you can get it free, because your master account at SoftBook shows you've already paid for it. Since there's no retail markup, SoftBook, which originally went by the name Virtual Press, expects to cut the cover price of books it sells by at least 20% to 25%. "There's enough room for customers to pay less, for publishers to make more, and for us to make money," Sachs says. "That, to me, is a formula for success."

SoftBook is working on the broadest range of documents for readers. It is in discussions with corporations and universities, several national newspaper and magazine publishers, Fodor's, and a major legal publisher. Thomas Pomeroy, the company's chief publishing officer, thinks he can work out deals so that readers can buy only the sections they want of a newspaper or travel book. Users of both SoftBook and the RocketBook will also be able to add their own documents, such as legal briefs.

EVERYBOOK

In 1995, as he watched a businessman struggling to read in an airplane's poor light, Dan Munyan says he had an epiphany. Munyan, 38, a computer consultant and an evangelical Christian, envisioned an electronic book with two backlit color screens. "The idea was so resonant with people," he says, "that everyone was sure they'd heard of this before." He researched the idea on his lunch hour and found no serious competition. Two days after his first child was born, he quit his job, cashed in part of his 401(k), and set about creating the Everybook from his castle-like office in Amish country.

Though all Munyan has now are nonworking prototypes, futurist Frank Ogden and Microsoft executive Steve Madigan have invested their own money with him. He's waiting for engineers to bring him a model he can demonstrate to the professionals and students who, he says, will be his primary market. One problem is that Munyan's insistence on color screens has boosted the starting price to $1,600, way beyond most reading budgets. He plans a smaller, personal version that would make its debut in 2000 for $750. But even he agrees that the Everybook won't be for everyone until its price dips below $500.

If it ever comes to market, Everybook will be the most visually oriented of the E-books, able to do high-quality reproductions of textbook graphics. Munyan plans for readers to dial the virtual Everybook store, where they'll get up to 40% off all titles. Publishers will get the same cut they do now, and Everybook will keep 10% to 15%.

The introduction of these products, no matter how successful, is hardly the simple, happy ending to the electronic-book story. As with most good tales, there will be sequels. The new E-books will inevitably look dowdy and expensive after better, thinner displays appear. Not all the competitors are on the field yet, choosing instead to work in secrecy until their products are perfected. Xerox New Enterprises is up to something related but won't say what. Both Disney and Microsoft admit they're watching the technological developments. In a recent speech Bill Gates said Microsoft researchers were experimenting with the comfort of reading devices, which he figured were years away. "The key point is that it is going to happen," Gates said.

Electronic books will truly catch on when their technology and their complicated pricing structures become invisible to consumers. "The thing I really await," says Project Gutenberg founder Michael Hart, "is the paperback-sized text reader you can buy at Kmart for $20, with 200 books already loaded in." You may have to wait a while for the blue-light special, but the E-book, finally, has left the shelf of science fiction.