Business Week reports on the gradual affection the publishing industry has for the Internet. It's worrisome how slow they've taken to the biggest revolution in print since Gutenberg (the press, not the
Three Men and a Baby actor). But at least revenue is up in the first half of 2009:
Book publishers are learning to love the Web. They have to. In hopes of avoiding the toll inflicted by the Internet on newspapers and the music business, the publishing industry is experimenting with a growing array of ways to distribute reading materials digitally. Some might even boost profits.
Publishers already sell digital versions of books for electronic readers such as Amazon.com's (AMZN) Kindle and Sony's (SNE) Reader. But other, newer methods being considered or tried out include Netflix-like online book rentals, sales of individual chapters, and placement of ads alongside digital books.
Selling lower-priced books online is likely to cut into revenue, but margins could hold up or even widen in some cases as publishers save on printing and returns—which can account for as much of 40% of the sale of a physical book, analysts say. "If they can migrate to the [digital] model and eliminate manufacturing and inventory costs, the economics could be a lot more interesting," says Peter Appert, an analyst at Piper Jaffray (PJC). "That'll drive margin upside." Today, publishers' margins hover in the high single digits, although some companies, especially those selling textbooks to college students, fare better.
Across the publishing industry, revenue rose 1.8%, to $3.71 billion, in the first half of 2009, according to the Association of American Publishers. In the first half of 2009, e-book sales reached $61.2 million, up from $24.6 million a year earlier, the AAP says.
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