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Future of Publishing In Past


Industry puts new spin on old model.

Remember those graduate students who spent an entire semester reading James Joyce's Ulysses? You thought, Who has that kind of attention span? Yet, like most lengthy novels of the early 20th century, Ulysses was originally serialized over the course of two years in a literary magazine. It took another 14 years before a complete version appeared, courtesy of Random House in 1934.

Serialization of books is an old trick of an even older trade, but Random House is giving it another go. Only this time, the format's digital. Individual chapters of Chip and Dan Heath's Made to Stick: Why Some Ideas Survive and Others Die will be made available for $2.99. Customers plunk down the cash, are emailed a link, download the file and can start reading the popular marketing tome on their computers before they can blink… Or say "tipping point."

The experiment comes at a time when the publishing industry, like most of its media brethren, is looking for new ways to deliver content against the backdrop of a slowing economy. Book retailers are already feeling the pinch. In 2007, the price of Barnes & Noble (BKS) shares dropped 13.2%. Earlier this month it reached a three-year low of $26.24, on account of weak holiday sales. Meanwhile, the company's chief competitor, Borders Group (BGP), saw a 52% plunge in its stock.

But here's one very important statistic: According to Nielsen, books remain the number one selling item on the Internet. 875 million consumers have shopped online; 41% of them have bought books. While online hasn't been as kind to magazines, the boon to book sales can be summed up in one word: Amazon (AMZN).

Makes sense, then, that Random House isn't the only publisher dipping its toe in the shallow water of digital reading. News Corporation's HarperCollins recently announced that it will be making available select titles on its website for free. The publishing industry appears to be saying, "We know people buy books online, but can we get them to read there, too?"

Amazon thinks so. The online bookstore-gone-giant-retailer has invested huge sums in eBooks and digital literacy. A few weeks ago Amazon bought, a provider of digital audio books, for $300 million. Meanwhile, company executives continue to insist that supplies of Kindle -- the iPod of books -- are far outpacing demand. Sure, no one's actually seen one of these high-tech devices in real life, but numbers don't lie.

If online book buyers become online book readers, expect a major shift in the industry. Who needs Barnes & Noble when you can buy directly from Random House? And who needs a paperback when you've got a Kindle? If this is starting to sound akin to the online music industry saga, you might be on to something. For tonight's performance, the role of Apple (APPL) will be played by Amazon. Borders can be found rehearsing its one line of dialogue in the wings along with Tower Records.

But there are a few snags.

After all, books are personal. They often contain artwork. Burning them -- even digitally -- sounds slightly fascist. We need them to stack up on shelves to impress our friends. Are we ready to give up the great tangible quality of our books?

What's that you say? CD? Never heard of it.
No positions in stocks mentioned.

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