TERENCE SMITH: In very simple terms, what is an e-book?
LARRY KIRSHBAUM: Electronic book would be a book that has been downloaded or is available for download onto either a stationary workstation, a laptop, or a hand-held device.
TERENCE SMITH: And for people who are totally unfamiliar with them, how do they receive them or purchase them?
LARRY KIRSHBAUM: Well, there are a variety of ways. There are a number of retailers and also some manufacturers who make these e-books available on Web sites, and they can then be downloaded, either through the Web site or in some cases through a telephone modem.
TERENCE SMITH: For a fee?
LARRY KIRSHBAUM: For a fee.
TERENCE SMITH: Roughly comparable to the price of the book on paper?
LARRY KIRSHBAUM: In general. It's hard to generalize, but as a rule of thumb, probably 20 to 30 percent less than the retail price of a comparable print edition.
TERENCE SMITH: And for this you receive it on whatever screen is in front of you.
LARRY KIRSHBAUM: That's right.
TERENCE SMITH: So then you have the book. You read it, let's say. What do you do with it then?
LARRY KIRSHBAUM: In most cases, it's now part of your library. I suppose if you want to trash it, you can do that and get rid of it very easily, but in general, people are building up digital libraries just the way they have accumulated print libraries, only it takes up a lot less space. That's the good news. And some manufacturers, distributors of electronic books, actually keep the books on their server, and they're available for download whenever you want, but they reside still on that server, so that there's no need for you to keep the book, tying up your own memory. You can, in effect, give it back to the server, and then when you want it again, download it again.
TERENCE SMITH: What--you said you struggle with it.
LARRY KIRSHBAUM: Right.
TERENCE SMITH: What part of it do you struggle with?
LARRY KIRSHBAUM: Well, you struggle with all of it, Terry. You struggle with the technology part of it, downloading it and making sure that you've got the book that you want, and you struggle with the reader. It's still not as easy as throwing a book into your beach bag and there it is. So, it takes a little getting used to and a little technological knowledge, and a little bit of willingness to try a format that you've never tried before and you're not totally comfortable with.
TERENCE SMITH: Do you find it fatiguing to read on a screen?
LARRY KIRSHBAUM: No. I have no trouble with that. I believe that one of the great strengths, actually, of the electronic book, is that you can adjust the font size. The devices are much better back lit now than the earlier versions, so I don't have that problem. But I would never read--I don't read off of a laptop or a stationary workstation kind of device. That I think I would find very, very tiring.
TERENCE SMITH: Yeah. And I think most people would. I think that's more akin to work than pleasure.
LARRY KIRSHBAUM: Right, that's right. The hand-held readers though are getting better, and I find that -- certainly from a convenience standpoint, if you want to carry multiple titles with you, say on an airplane, for example, it's nice to load half a dozen titles into a hand-held, and then you've got it, and it's there for you.
TERENCE SMITH: What do you think is the audience for this? Who do you think makes up the audience?
LARRY KIRSHBAUM: Well, at this point the readers are certainly younger, or they are professionals who feel very conversant with hand-held computers or laptop computers. Right now we're in the early adopter phase, where for the most part, people are downloading books just to see what it's like, to get the hang of it, and to see whether or not they like it. We certainly have not, at this point, managed to infiltrate into the broader society the way we have with print books.
TERENCE SMITH: Do you read books on screens?
LARRY KIRSHBAUM: I do. I do. And I will be honest, I struggle with it. I'm not yet there to the point where I will read, do most of my reading onscreen. But I'm older, and I'm a sort of dyed-in-the-wool print kind of guy, so, to some extent, there's a little bit of "do as I say, not as I do" in this world for me. But I see it coming, and I certainly think that younger readers are enjoying these books.
LARRY KIRSHBAUM: We have a relationship with a company called I-Picture Books.com, that is making children's picture books available onscreen, and they are the future in a sense. This is really a generational thing. The younger readers who are very, very familiar with and comfortable with computers, are going to find electronic books a very satisfying experience in the future.
TERENCE SMITH: It sounds as though you, as a publisher, are sort of betting on the future.
LARRY KIRSHBAUM: Definitely.
TERENCE SMITH: Rather than the present.
LARRY KIRSHBAUM: Right. My motto right now is longer, slower, harder. This is not going to be an overnight sensation.
When we first got into e-books, we [thought] "Gee whiz, isn't this cool? Everybody’s going to be reading e-books in a week." Well, we are chastened now. We know that this is going to take a lot longer. It's going to be a much more gradual kind of business. But the beauty of what we've accomplished is that we are starting to build databases, electronic databases.
And these are the key to the future because they will lead us to the ability to distribute content instantaneously all over the world, and that is an enormously appealing idea.
TERENCE SMITH: What's necessary for e-books to gain in popularity?
LARRY KIRSHBAUM: The devices have to get better. They have to get cheaper. We need much more critical mass in terms of titles, and we need a closer interface with the computers themselves, because I don't think that people want to carry a separate reader just in order to read books.
TERENCE SMITH: There's a great deal of talk about Microsoft's effort to develop a so-called tablet computer.
LARRY KIRSHBAUM: That's right.
TERENCE SMITH: Is that the sort of instrument you have in mind?
LARRY KIRSHBAUM: Yes. I think the tablet PC is precisely what we need, because it is going to be a combination of a computer and a reader. And once you have that in your hands, it seems to me, you've got the future of the book business in your hands as well. I think a huge piece of the future is going to come from those kinds of devices. Print is still going to be an important business…
TERENCE SMITH: Permanently?
LARRY KIRSHBAUM: Print permanently? Absolutely. You know, I was just, over the weekend, watching performances of Shakespeare, and he's still around and still being performed in the same way that he was at the Globe Theater. By the same token, people will be reading books in print, but, as we move to the future, the growth of 21st century information and information retrieval all lead me to believe that the tablet PC or devices like it have the future in our hands and in their hands.
TERENCE SMITH: How many years would you suppose before e-books become more prominent?
LARRY KIRSHBAUM: Well, this is--this is so difficult to say. You need to reach a certain critical mass, and then I think it will ramp up very, very quickly. But I'm certainly looking at a time frame that is no more than 5 years, where digital books will be a major part of the business, and by "major" I mean at least 10 percent and possibly even 15 or 20 percent. If we have a universe today of a billion books being sold to consumers each year, we could be talking about hundreds of millions of books that are sold and distributed electronically.
TERENCE SMITH: What does it offer you as a publisher? Is it greater profit, or a wider audience?
LARRY KIRSHBAUM: It's combinations of things. Certainly, from a standpoint of promotion, the idea of being able to move books digitally into all kinds of networks to have them available for promotion purposes, to allow them to be browsed before they're purchased, these are all great advertising capabilities.
TERENCE SMITH: Marketing tool?
LARRY KIRSHBAUM: Marketing kinds of exercises. And by the same token, I believe that we also are going to actually sell a lot of books. Now, one of the things that's very interesting is we may have what I think will be an overlap with magazines, which of course in the case of our own company, where the Time Magazine group is a huge part of our company, this opens up a whole new arena as well.
But I believe that people are going to want searchable information in major ways as we move forward into the century. And when that happens, it seems to me, that you're looking for digital distribution, because the only way that you can search large databases is digitally. You're not going to go to libraries and thumb through thousands and thousands of titles. You're going to go to digital libraries, and you're going to download the information you want, and use it, and pay for it.
TERENCE SMITH: And you imagine this could be 10 or 20 percent of your business?
LARRY KIRSHBAUM: Yes, I think it easily could, and interestingly enough, it's also going to drive a larger piece of the business.
Right now the online retailers like Amazon.com, Barnes and Noble.com, Borders.com, Booksamillion.com, all of these great online retailers only represent about 6 or 7 percent of our total business, but they've had an impact on us that is much, much greater than that 6 or 7 percent, because they are organizing content, making it searchable, showing people the broad range of titles. These are very, very important, if you will, psychological dimensions that are being added to the business.
When I first started in the book business in the early '70s, the large bookstores then had somewhere between 20,000 to 30,000 titles. Today a super store has 150,000 to 200,000 titles. And yet, people are now ordering through databases over 2 million titles a year. So the need to have a large database, fully searchable and with the ability to download titles, I think makes a lot of sense from a consumer point of view.
A bricks and mortar bookstore would simply not be able to stock all the titles that people want, although I think they will continue to be the center of book-buying activity, and they will, in fact, have kiosks with databases in them that allow people to search and order thousands of titles that may not be available on the premises.
And, of course, there's one other feature that I should mention, which is print-on-demand. Print-on-demand is the ability to use a digital database and actually print from it a physical book that looks like and feels like a normal physical book.
TERENCE SMITH: It's bound and has a cover?
LARRY KIRSHBAUM: Bound and has a cover, the whole works. I could show you print-on-demand books, and you would not be able to tell that they are any different than the regularly printed physical books.
TERENCE SMITH: So I could go into a store or to a kiosk and decide I want a book and print it on demand?
LARRY KIRSHBAUM: And have it printed on demand. Today it would have to come from a central warehouse, but in the next couple of years, with distributed computer processing technology developing as it's developing, you'll be able to print that book out in a store, have it bound right there while you go have a cup of coffee.
TERENCE SMITH: And that will cost as much, or less, or more?
LARRY KIRSHBAUM: Well, it will probably--there will be a surcharge of a couple dollars, but what's amazing to me is we can print 100,000 copies of a title and it will cost us, say, $2.00 apiece to print, we can print one copy of that title and it will cost an extra probably $2.00.
So for $2.00 additional, that's a very small surcharge, I think, for a consumer that really desperately needs a book that might be out of stock or out of print.
TERENCE SMITH: And I can see an advantage for the publisher, no inventory.
LARRY KIRSHBAUM: Right, right. Well, that's an enormous transformation in the business. The idea of inventory on demand rather than inventory sitting and growing dusty in a warehouse, is enormously appealing. Plus with books of technology, books on business, books on health, where information is changing very, very rapidly, we'll be able to update these books much more easily.
Right now a print book has a gestation period that might be anywhere from 6 months to a year and a half, while if you're doing a book on cellular biology, you can't wait a year and a half because the whole landscape is likely to change.
So the idea of putting a book into a digital database and then having it updated periodically, and then printed out as you need it, is, I think, an enormously appealing one.
TERENCE SMITH: Do you encrypt these books in some way so that the person who pays a fee and downloads a book, can't simply forward it to a friend?
LARRY KIRSHBAUM: Yes, yes. This is, of course, a major argument and a long discussion in itself. We do encrypt them, but we have to be careful that the encryption isn't so complex that the readers can't download the books at all. So that there's no question that a skilled hacker, who really wants to work at it, can probably steal books.
But thus far, we've been able--and of course I hope this continues--to avoid some of the problems that the record industry has had with respect to theft. And there has been, fortunately again, no equivalent to a Napster, which was encouraging file sharing of copyrighted materials.
TERENCE SMITH: No, but there is a psychology about the Internet that suggests its contents should be free.
LARRY KIRSHBAUM: Yes. Well, that is probably one of our greatest hurdles, is the fact that people, and especially younger readers, have come to feel that so much of the content on the Internet is free, that books, as a logical extension of this content, ought to be free as well. And we have a real selling challenge ahead of us to make people aware that this content is copyrighted because it represents, in many cases, the life's work of an individual, and it ought to be bought on a compensated basis, that it should not just be made available free.
But chapters may be available free, tables of contents may be available free, introductory material may be available free, so that our readers can get accustomed to downloading books, and we can entice them by showing them and giving them the kind of information that they need to make an intelligent buying decision.
TERENCE SMITH: What do you charge for an e-book now?
LARRY KIRSHBAUM: Right now the rule of thumb is we are charging approximately 20 to 30 percent less for an electronic book than we do for a print book.
TERENCE SMITH: Than the retail price.
LARRY KIRSHBAUM: Than the retail price.
TERENCE SMITH: Fine, but I can get that at any of the discount houses.
LARRY KIRSHBAUM: Well, that's a very good point. I believe that as time goes on and the technology becomes much more sophisticated and widely accepted, that we are going to have to bring our prices down. There's no question that somewhere between free distribution, which we of course abhor, and the current print retail prices, there's a middle ground. So I would expect to see the prices dropping fairly significantly over the next couple of years and particularly as we can get a return on our investment.
There's a little chicken and egg going on here. Most people are not attracted to e-books yet because there's not significant distribution of the readers, and there are simply not enough titles available for downloading.
So the publishers have held back their digital conversion because they don't see the market, and the market has held back on buying digital books because they don't see the availability of titles.
But all of this, I think, leads us to more titles at lower prices.
TERENCE SMITH: If this technology perfects itself or is perfected, why shouldn't authors skip you and go directly either to the sellers, the booksellers, or to the public?
LARRY KIRSHBAUM: Well, there's certainly a lot of jostling for position here as we ride down the rail in the publishing business. The authors are thinking about going directly to their readers. The retailers are going to authors and offering to circumvent the publishers. The publishers are doing some direct selling to readers themselves. So everybody's in there trying to jockey for position.
But in the long run, I believe there's a real fundamental reason why publishers do what they do best, retailers do what they do best, authors do what they do best, and of course, readers--God bless them--are at the end of the channel here waiting for the best books to come down the stream.
I think that an author really wants to write, does not want to get involved in the myriad details of marketing their books beyond working with a publisher on promotion. I think that publishers have a mission to publish and to do all of the editing and distribution functions that publishing entails.
The retailers, it seems to me, are the best at finding readers, helping readers to get the books that they want, and of course, also, by having physical locations, to be available for browsing and information and so on.
And libraries, to take another segment, have an enormous role as information curators of the future. As information becomes more readily available it also becomes more complex. And libraries will serve the function of helping readers to sort out the myriad possibilities and to determine what's real and what's bogus. I mean the Internet, after all, has a lot of information floating around, and not all of it is vetted or in a sense correct.
So I am one who believes that the existing channels may vary some. They may enlarge or diminish slightly, but I still believe authors are going to write, publishers are going to publish, and distributors distribute, and retailers are going to vend their books to customers.
TERENCE SMITH: How many e-books, how many titles are available electronically today?
LARRY KIRSHBAUM: Well, those numbers vary, but all told, I would say at this point you have about 25 to 50,000 titles available if you count books that are up on Web sites and so on. You know, it's probably at the higher end, but if you just take titles that are really being distributed and promoted in a significant way, you're probably working in a universe of 10,000 titles, so it's not very significant compared to a super store bookstore that has 150 to 200,000 titles. It's certainly not significant if you take databases that are available to book stores that list 2 million or more titles. This is just probably 1 to 2 percent of that universe.
So right now we still have the critical mass problem that not enough titles are available to be easily downloaded, and this is holding us back in terms of the growth of the business.