The future of publishing: Why ebooks failed in 2000, and what that means for 2010

This post is adapted from a speech I gave at the O'Reilly Tools of Change publishing industry conference in February.

It's a great time for ebooks. There are at least six ebook reader devices on the market or in preparation. A major business magazine predicts that up to seven million of these devices will be sold next year. A major consulting firm says ebook sales will account for ten percent of the publishing market in five years. And an executive at the leading computing firm predicts that 90 percent of all publishing will switch to electronic form in just 20 years.

But the year isn't 2010 -- it's 2000, and the ebook market is about to go into hibernation for a decade. What went wrong, and what can the failure tell us about the prospects for ebooks in 2010?

I had a front row seat for the last generation of ebooks: In 1999 I was at Softbook (one of the early ebook reader companies), and later I interacted with the folks at Peanut Press (an ebook publisher) after they were bought by Palm. My short summary of the lessons I learned: Although some of the barriers that stopped ebooks in 2000 have been reduced, most of them are still in place. So I think the market isn't likely to grow as quickly as many optimists are predicting. However, the economics of traditional publishing are very vulnerable to a paradigm change. That change is likely to happen later than most people expect, but once it happens it'll probably move very quickly indeed. So stay out of the avalanche zone.

Here are the details on why, and how to avoid the avalanche when it does happen.

Why ebooks failed in 2000

I know I'm going to get some comments reminding me that ebooks didn't ever completely fail. They've been around for a long time, and some people read books on their computers every day. Granted. But the market for ebooks and ebook reader devices utterly failed to take off the way that most observers expected in 2000. It's important to understand why, or we may be at risk of repeating history.

I think the failure of ebooks ten years ago was due to five problems:

1. Not enough ebooks. The core customers for an ebook reader are reading enthusiasts, meaning they like to read a lot of books. If you ask them how many books they'd like to have available for their reader, they'll look at you funny and say, "All of them, of course. What's the point in paying for an ebook reader device that doesn't let you any book you want to read?"

In 2000, we had a huge problem with ebook availability. They were expensive to convert to ebook format (hundreds of dollars per title), and publishers were reluctant to make that sort of investment. I don't have any statistics on the number of ebooks available back then, but I remember that it was an ongoing, major problem for the company.

Today, the situation is better but not ideal. Looking at the New York Times bestseller list for February 28, all but one of the top 10 books in hardcover fiction and nonfiction were available in ebook format. However, there is still a problem with the timing of availability. Barnes & Noble had 15 books on its "Coming Soon" list for March 10, but only six of them were to be released as ebooks at the same time as they came out in print. That's a poor ratio, and would be a significant annoyance to an ebook user.

Looking at older books, availability seems to be hit or miss. Many more books are available in ebook format today than in 2000, but there are weird gaps. For example, many of the most popular works of Robert Heinlein (one of the leading science fiction authors of all time) are not currently available in the Kindle store, but are available for Barnes & Noble's Nook device. For Isaac Asimov (another all-time great), only a small subset of his work is available electronically from either Amazon or Barnes & Noble.

This sort of confusion frustrates many ebook users.

2. Ebooks were too expensive. Many book buyers feel they get extra value when they buy a hardcover book. It's more substantial than a paperback, and has a nice slipcover. The pages don't turn yellow, and the printing is generally very clear. If they like the book, they can put it on a bookcase somewhere to show their friends how tasteful they are. An ebook has none of these benefits. To many users, it feels more like a paperback -- disposable, intangible, slightly cheap. But in 2000, many ebooks were priced the same as hardcover books.

Combine high book pricing with limited availability, and most people didn't feel ebook readers were a reasonable value. The market stalled right there.

The problem with ebook vs. hardcover pricing is that publishers bundle two sorts of value when they create a hardcover book: The physical product is more impressive, and you get earlier availability of the book, often a year or more before the paperback version comes out. Unfortunately, book buyers think most of the extra value they're paying for from a hardcover is the physical book. Meanwhile, publishers (and authors) often think the main value of a hardcover is early availability. Many authors and publishers don't want to say this to the public, but hardcover books are a tax on the most enthusiastic fans of an author.

E-publishing breaks that cozy little arrangement, by separating the early availability value from the better production value. Publishers couldn't figure out what to do about that in 2000. So they often did the conservative thing, pricing ebooks the same as hardcovers. To ebook customers, that felt like exploitation, if not outright fraud.

It still feels that way today.

The situation now is somewhat improved, in that ebook prices are often somewhat lower than hardcover prices. But it has not been resolved. For example, Amazon lists Payback Time by Phil Town as a hot new release. Its list price is $26.99 and the ebook price is $13.36, so that looks like a huge discount. But the hardcover version is already being discounted to $14.57. So the ebook price is about the same as the hardcover's street price. That's not acceptable to a lot of ebook customers.

Until very recently, Amazon had been subsidizing down the price of most ebooks to $9.99 in an effort to deal with conflicts just like this, but that arrangement broke down when challenged by Macmillan. The result was a very nasty public spat in which Amazon briefly pulled all Macmillan books (paper and electronic) from its online store. That drove many book authors into a frenzy, with most of them siding with Macmillan (examples here and here and here).

Hey, you want to know how to piss off an author? It’s easy: Keep people from buying their books. You want to know how to really piss them off? Keep people from buying their books for reasons that have nothing to do with them. And you know how to make them absolutely incandescent with rage? Keep people from buying their books for reasons that have nothing to do with them, and keep it a surprise until it happens. Which, as it happens, is exactly what Amazon did. As a result: Angry, angry authors. Oh so very angry.
Amazon apparently forgot that when it moved against Macmillan, it also moved against Macmillan’s authors. Macmillan may be a faceless, soulless baby-consuming corporate entity with no feelings or emotions, but authors have both of those, and are also twitchy neurotic messes who obsess about their sales, a fact which Amazon should be well aware of because we check our Amazon numbers four hundred times a day, and a one-star Amazon review causes us to crush up six Zoloft and snort them into our nasal cavities, because waiting for the pills to digest would just take too long.
These are the people Amazon pissed off. Which was not a smart thing, because as we all know, the salient feature of writers is that they write. And they did, about this, all weekend long. And not just Macmillan’s authors, but other authors as well, who reasonably feared that their corporate parent might be the next victim of Amazon’s foot-stompery.
--Science fiction writer John Scalzi

Hey, Amazon. When cutting off publishers, don’t start with the one that has the most science fiction writers. We will blog you dead!
--Science fiction author Scott Westerfield

What is it about the tech industry and authors? Both Amazon and Google have shown a unique ability to make authors bond with publishers, people they otherwise tend to view as parasitic scum.

The relationship between Amazon and Macmillan is very complicated, and I don't want to get into the details of their contracts here. There's ample evidence for labeling either one of them a villain and/or idiot if you want to. But my point is that ebook pricing remains screwed up today. Maybe not as uniformly screwed up as it was in 2000, but it's still a mess.

3. The hardware form factor was wrong. When ebook readers failed to sell well, ebook producers tried to focus on other electronic devices -- PCs, PDAs, and smartphones.

The trouble is that for most people, the ergonomics and psychology of reading are wrong on computers and smartphones. A laptop is the wrong size and weight to create an immersive reading experience, and the backlit displays on most laptops create eyestrain compared to reading ink on paper.

PDAs and smartphones are too small for immersive reading for most people, and besides people are usually in a different mindset when they use a pocket device. They use it briefly, in short spurts throughout the day, when they are bored or need to find a bit of information. It's like the information equivalent of snacking. A reference book might be useful in this context, and holy books like the Bible sell well in electronic form because some people take comfort in reading a bit of them every day. But for most people, a pocket device isn't something that you'd curl up with for a couple of hours, the way you would with a book.

This is an area where we're obviously making a lot of progress. Amazon and Sony have both been willing to subsidize their tablet devices for years while the ebook market develops, and Apple and other big computer companies are now entering the tablet market, not to mention a host of smaller startups.

Just remember that most electronics companies are sheep. If tablets don't sell well, they will exit the market as quickly as they entered it.

4. Periodicals weren't ready. Although we call these devices "ebook readers," if you look at user attitudes and usage patterns, in many ways they are a better fit for reading periodicals (newspapers and magazines) than they are for books. Most printed magazines and newspapers are viewed as disposable, so many people don't object to paying the same price for an e-version as they do for the printed version. And most periodicals can be read in short bursts, which fits the usage pattern for mobile devices.

Even better, an e-magazine can get to the reader faster than a printed version, because it doesn't have to be printed and mailed.

When I was at Softbook, there was a lot of user interest in getting magazines on our devices. Unfortunately, very few were available, and the effort to get them converted started too late to save the company.

Today, there are electronic versions of a number of publications targeted at the ebook readers. But a couple of additional problems have surfaced. One is that often the e-versions are inferior to the printed versions. On the Kindle store, 64% of the reviews for the e-version of The Economist magazine are a single star (the lowest possible rating). Here are some sample comments:

"I was very happy and interested in the Economist on Kindle despite the cost until I learned that the subscriber content on the Economist web site is not included....For the cost involved the Kindle subscription should at least equal the print subscription benefits."
"Why does it take a week to make the Kindle version available. I find it very convenient to read and search but do not want to be a week behind in reading."
"I only receive part of the magazine. Overseas users don't get images -- including the cover image and graphs/charts."
"Many of the charts and graphs are so small the legend is unreadable which in turn renders the displays meaningless."

Time Magazine, 46% of reviews are one star:

"This is a rather embarrassing electronic version of Time Magazine. There are NO pictures, no charts, no illustrations. Instead whenever you run into an article that has these in any decent amount, they've inserted an entry telling you to go get a PDF or print version....It looks and feels like some cheap RSS reader collected this rather than being an electronic version of the magazine."
"I'd like to read some parts of Time but not others, so I very much miss having a convenient table of contents. As it is, we have to (slowly) leaf thru all articles to find out what's of interest."

Wall Street Journal, 50% of reviews are one star:

"The pricing makes absolutely no sense: $99/year for the WSJ print edition with the Online Web edition included. $119.88/year ($9.99/month) for the Kindle edition.... That makes no sense because I could buy the Web edition and read it through the Kindle Browser for no additional charge."
"I also subscribe to the print and which shows how the Kindle edition is very limited in his layout and pizzaz....Compared to the NYTimes Reader or even the it is a sad commentary on their apparent lack of effort. There should be a more detailed table of contents instead of just very general catagories of articles. To find a specific article is sort of a blind proposition...being forced to go through the all article until you find what you're looking for."

In fairness, some other publications are better-reviewed. The Kindle version of the International Herald Tribune has an average rating of four stars, as does the New England Journal of Medicine. But overall, there are a lot of teething problems as the publishers figure out how to produce their e-versions and how to price them. This is likely to hinder customer adoption until the problems get sorted out.

5. Poor marketing. In my opinion, the right way to create a technology product is to identify a group of customers who have a major problem, and to solve that problem decisively. It's not clear that ebooks, especially as they are constituted today, do that. Paper books simply aren't broken, from the perspective of most users. S. David Mash had a good quote on this (link):

The reading device for the paperback is widely available for free (sunlight). This device can be used for other tasks as well.

A lot of the investment in ebook devices today seems to be driven more by strategy than by user needs. E-books are believed to be an important future business opportunity, and companies are maneuvering to be in position when that opportunity takes off.

The problem is, unless they solve a user problem, and communicate it to the users, the market won't take off in the first place. This tripped up the ebook companies in 2000, and I think it is still true today. Check out Amazon's pitch for why you should buy Kindle:

Can you spot the problem? It's a list of features, not a list of benefits. Now let's look at Sony:

They're doing a tiny bit better, in that they do list a user benefit. Unfortunately, how many people do you know who want to carry 350 books at one time? I call this situation "phantom value," and it's something that happens a lot to tech companies. They've made a product without really thinking through the value proposition. When it comes time to market it, they pick one feature of the product and try through brute force to persuade customers that they should care about it. Usually the only people they convince are themselves.

This same thing happened when the music industry was first trying to defend itself from MP3 players. There was a huge fuss over the superior audio quality of CDs, and a lot of people in the music industry put a lot of effort into talking up the quality aspect of CDs. The only problem was that the average music listener couldn't hear the difference and didn't care about it.

What it means for ebooks in 2010

Although ebooks are doing much better than they were in 2000, there are still very significant structural barriers to the broad adoption of ebooks. We're in a chicken and egg situation where the content isn't fully ready for use because there aren't enough device users to force investment, but people won't buy more devices until the content gets better. As long as Amazon and Sony continue to subsidize the market, I think it will continue to grow moderately. And I think the iPad and related tablet products may help. But overall, the prospects for near-term explosive growth don't look good.

What happens next, and what can we do about it?

First, let's talk about a couple of opportunities. Paper books published today are not broken, but there are a couple of notable places where the publishing industry as it works today really is breaking down, and ebooks could help.

Save the short story. The first problem is the market for short stories. I wrote about this several years ago at length (link), so I won't repeat the whole situation here. But a quick summary is that the magazines that used to produce a lucrative market for short stories have mostly gone out of business or moved on to other sorts of content. As a result, authors have relatively little incentive to write short fiction these days.

Speaking as someone who grew up reading and appreciating short fiction, this is a loss for readers and an opportunity for e-reader devices. Short fiction is a great fit for e-readers because it can be consumed in small bites, and if authors could sell directly to their readers, the revenue could eventually be good enough that people would go back to writing short fiction. Plus it would give e-reader devices a real benefit -- content that you can't get anywhere else.

What's missing is the marketplace to make that happen. We need the equivalent of an iTunes store for short stories, tied to a mass market tablet device.

Free the backlist. At the O'Reilly conference I heard a fascinating statistic from Brewster Kahle of the Internet Archive: 70% of all the books ever written in English are out of print but still under copyright. In other words, you can't legally make copies of them, but there's not enough demand for them that the publishers can afford to reprint them. They are orphans.

These aren't just obscure books. In science fiction, my favorite category, award-winning books from the 1950s and 1960s are frequently out of print, and forget about finding less-known books even from major authors. The best you can do is a used book search, which if you're lucky will get you a smelly and dog-eared paperback in the mail. And those are the famous authors! Books from many others are unavailable in any form.

In my opinion, this is appalling. And it's also an opportunity.

Kahle is working on a project to let universities lend out electronic copies of the books in their stacks, which include many of these orphan books. As I understand it, the idea is that the library owns the right to lend out one copy of the book. If a central server keeps track of that single electronic copy, it's possible to legally read e-versions of orphaned books. It sounds like an incredibly cumbersome approach -- and it is. But it's better than nothing, and once again it's producing content for e-readers that can't be obtained any other way.

The project is called BookServer, and 1,000 more books are being digitized every day (link). It's the most hopeful thing I've heard about the future of libraries in years.

Rethink the periodical

The Internet is flooded with videos of prototype electronic magazines that publishers have been working on. Most of them look pretty similar -- there's an electronic image that looks just like a printed magazine page. The user moves from page to page by swiping a finger back and forth on the device's screen. You can zoom in to look at a graphic more closely, and zoom out to a thumbnail view that shows several pages side by side. The pages include both ads and stories, just like the magazine. In some prototypes, static pictures are replaced by videos and animations. Most of the demo is made up of page swiping and zooming, and you're left thinking, "hey, that looks just like a print magazine on the screen."

I am reminded of this:

It's called the Horsey Horseless Carriage. Time Magazine wrote about it in 2007 (link). It was supposedly an early automobile design in which a horse's head (thankfully a carved wooden one rather than stuffed) was mounted on the front of an automobile. The idea was apparently to make the car look more like a horse-drawn carriage, so the real horses would not be frightened by it. Just as striking as the horse's head is the rest of the car's design. From the wheels to the body design to the weird tiller the driver uses to steer, it is a basically a horse-drawn carriage that has a motor affixed to it.

We laugh now because we know the carriage needed a total rethink to translate it into a car -- everything from the wheels to the controls to the seat designs had to change radically. And yet when it's our turn to create something new, we create electronic magazines that look just like printed magazines.

It's a failure of the imagination, in my opinion. Most of the design of a magazine was driven by the economics of printing and mailing a paper publication. Why are the ads and text arranged the way they are? Because in a paper magazine, you can force people to skim past the ads while they look for the articles. Why is a magazine that particular size? Because that's what the post office will deliver, it fits easily in mailboxes, and it's a paper size we're used to handling. Why does it come out once a month or once a week? Because you have to bundle up a critical mass of content and ads before it makes financial sense to mail it. And on and on and on.

None of those assumptions apply to an electronic publication. They are all rules that we've absorbed from the print world, so deeply that we don't even think to question them. Some of those assumptions may still make sense in the electronic world, but many of them won't. One area where I feel strongly that our assumptions are faulty is advertising.

People reading paper magazines are used to fumbling past ads while they read. It's a standard part of the experience. But people using an electronic device have been conditioned by the web to expect to click and jump directly to the content they want. Making them flip through simulated electronic pages full of ads simply won't work. That means the ads in an electronic publication probably can't be as numerous as they are in a print publication. What's worse, the ads that pay the most money -- the inside front cover and the back cover -- don't even necessarily exist in an electronic publication.

I think some magazines believe they can force the current ad experience on users. Some of them even have persuaded themselves that readers see the ads as part of the value of the magazine (see my discussion of phantom value, above). But publications need to understand that they'll be competing with a new crop of publishers who grew up online and are not hamstrung by the same thinking.

The best example of this new thinking is Yahoo. It's very trendy to dismiss Yahoo these days because it's not Google, but in reality the company is a very different beast. Google is all about search and direct-response advertising associated with it. Yahoo is basically an electronic publisher supported by "display" ads -- brand-building ads created by large national advertisers, targeted at the specific demographic groups Yahoo delivers.

Yahoo today runs a hugely successful electronic newspaper. It has a news section:

A finance section:

And a sports section:

All of them are totally supported by ads, with no subscription fee.

If you're a magazine or newspaper publisher, you may think that e-publishing finally gives you a path out of the free-web-content trap. But ask yourself what happens when companies like Yahoo realize they too can create electronic publications for ebook readers. Will they charge for subscriptions, or will they create completely ad-supported publications? What does that do to your business model?

I think the periodical has to be rethought much more thoroughly than it has been to date. At its core, the thing that makes a magazine or newspaper valuable to readers is its editorial staff -- a group of writers, editors, and artists who work in synergy to produce a unified product. Rather than asking how to make a magazine electronic, we need to ask what must be built around an editorial staff to make it viable in the electronic world. I don't know what the result will be, but I'm pretty sure it won't look like a print magazine scanned and transferred to a screen.

Publishers: Rethink your value

Although publishers today are focusing on what ebooks do to their distribution channels, the real threat to them, in my opinion, is the likelihood that in the future authors will publish their books directly to the public, bypassing the entire publishing value chain. To understand this challenge, it's necessary to look at the current value chain for books...

An author typically gets about 12% of the list price of a book. The rest of the revenue is consumed by the distribution channel -- the publisher's overhead, the cost of printing and shipping books, the expenses of the bookseller, etc. This is not to say that publishers and booksellers are getting rich. Typically a small number of bestselling books generate the revenue that covers the losses a publisher takes on everything else it publishes. Something similar happens to bookstores. The reality is that the whole publishing value chain is grossly inefficient -- it absorbs a lot of cash, and almost no one gets rich from it.

This distribution chain was stable only when it was the sole way to get a book to a customer. It's already under attack by Amazon, which avoids the overhead of a physical bookstore; and by discount retailers who skim off the best-selling books, absorbing the revenue that formerly supported local bookstores. But that's only a prelude to what's coming.

Because authors get such a small percentage of the sales price of a book today, any system that let them capture more of the revenue from a book sale will be very attractive to them, even if it sells a lot fewer books.

The chart below illustrates my point. For simplicity, I've assumed a best-selling author who gets 15% of the book's revenue, a bit more than usual. The author's new book is going to sell 100 printed copies through the traditional retail channel at $20 each. That means the total revenue for the book will be $2,000, of which the author gets $300.

But if the author sells the book direct to the public as an ebook, he or she will be able to keep 70% to 80% of the revenue (because that's what the online content stores are typically returning). If the store's cut is 25%, the author will make $300 after he or she sells only 20 books.

The red and blue bars show the author's revenue as ebook readers reach various levels of penetration in the book-buying population. The chart's kind of complex, but its main message is that once e-readers are in the hands of about 20% of the book-buying public, an author has a financial incentive to sell direct rather than selling through a publisher.

Fortunately for publishers, e-readers are far below 20% penetration today. They're probably at about 2%. So the business is stable for the moment. In fact, it's probably a little more stable than a lot of publishers believe. We're likely to have a latency period of at least several years while the e-reader installed base gradually grows. During this time nothing terribly dramatic will happen to publishers, and they may think they have the situation under control. But then we'll reach a tipping point, and suddenly established authors will have a financial incentive to go direct rather than bothering with paper publication of their books. Once that happens, all book buyers will have a very strong incentive to get e-readers -- some books by bestselling authors simply won't be available in paper form, or will be available first electronically. This will drive more rapid sales of e-readers, which will give authors even more incentive to bypass the publishers.

Once the dam cracks, the water will move very quickly.

Some notes on this scenario:

--I simplified the pricing story by assuming that ebooks are priced the same as hardcovers. They aren't, so the tipping point is probably a bit higher than 20%.

--On the other hand, Macmillan's move to raise the price of ebooks actually brings the tipping point closer. Every time ebook prices go up, that creates more incentive for an author to go electronic.

--The authors most likely to switch to electronic publication are the established names who don't need a publisher's help in marketing. Those authors are also often the most profitable for a publisher. That means the impact of the switch may be even greater than what I laid out here.

--Products like the iPad bring the tipping point closer, because they are tablets that do other things than just reading books. This bypasses the chicken and egg situation that killed e-readers in 2000. Every time Apple convinces someone to buy an iPad to do browsing or watch videos, that's another potential book-buyer who's ready for ebooks.

--The competition between Apple and Amazon will also probably bring the tipping point closer, because it holds down the cut charged by the online ebook stores. In January, anticipating the iPad announcement, Amazon cut its charge on self-published ebooks to 30%, matching Apple's terms on the iPhone app store (link).

Six critical questions for book publishers

Are publishers doomed? Not necessarily. I think we're going to end up with a range of situations in which some authors sell direct on their own, some use selected services to help them self-publish, and some partner with publishers for services similar to the things they do today. But the publishers will be dealing with new competitors and new economics, and they'll need to rethink who their customers are, and what unique value they can add from the perspective of those people. The time to do that thinking is now, before e-readers reach the tipping point. Here are the questions to ask:

1. Who is my customer, the author or the book-buyer? Most publishers today would say "both," and might add the bookstore to that list as well. But that reflects the print publishing channel structure. In the electronic world, those audiences do not have to be bundled together. There may be some publishers who partner primarily with authors, and are more or less invisible to readers. There may be other publishers that play a very prominent role in the eyes of readers (examples below). The point is to understand which type of publisher you are, and adjust your business accordingly.

2. How much value do my editing services add from the reader's point of view? I've seen quotes from publishers saying that ebook consumers will want to pay more for ebooks that are properly edited. If you believe this, I invite you to re-read the discussion of CDs vs. MP3s above. If a book is poorly edited, people will just blame the author. That means editing is actually a service for authors, not readers. Which brings us to the next question...

3. How much value do my editing services add from the author's point of view? Many authors acknowledge that their editors add tremendous value to their books; others hate their editors. But the key question is, could they hire a freelancer to do the same thing? Question for a publisher: What if some of the people you just laid off form an editing cooperative and then contact your authors with a cut-rate offer?

4. How much demand generation do we really do? This is a place where the perspectives of authors and publishers often differ. Publishers tell me that they do a lot to create demand for books. Authors typically say the publishers just shovel books onto the market and wait to see which ones sell themselves. If the publisher doesn't generate demand, then an author might as well self-publish electronically as soon as it pays more money.

5. Which brand are the readers buying? This varies tremendously from publisher to publisher. In fiction, the author's name is generally the brand that readers respond to. No reader cares who published Steven King's latest book; they just buy Steven King. But in other fields, especially nonfiction, it's more common for a publisher to control the brand. Think of the For Dummies franchise, or Sunset's How-to books, or the role that O'Reilly plays in technical books. I think e-publishing may make those brands even more powerful. A traditional publisher can help a paper book sell well by working behind the scenes to get bookstores to promote it -- put it on the table out front, place it on an endcap, and so on. Most of that promotional opportunity doesn't exist in an online store. Instead, your product is just tossed out there in a sea of other products, and it has to succeed or fail on its own. In that world, a recognized brand naturally floats to the top. That's why the Madden football game on iPhone costs $7 while many other iPhone games sell for 99 cents.

6. What sort of book am I selling? Writer/publisher Craig Mod wrote a splendid essay discussing the difference between books that have form and books that do not have form (link). Books that have form get some value from the physical book itself -- maybe it's the arrangement of text and images that creates a certain impression, or maybe it's the need for something physical (think of a coffee table book or a gift book). Those books are not going to be cannibalized easily by electronic publishing.

On the other hand, formless books (those that don't get any special value from the physical form of the book) are ripe for the picking. Think paperbacks and general-consumption fiction and nonfiction.

I'll leave you with Craig's hopeful picture of what this all means for the future of books:

You already know the potential gains: edgier, riskier books in digital form, born from a lower barrier-to-entry to publish. New modes of storytelling. Less environmental impact. A rise in importance of editors. And, yes — paradoxically — a marked increase in the quality of things that do get printed.

When we're confronted by all the downsides of change, it's important to remember that change also brings progress. If publishing gets a lot more efficient, we should see greater diversity of new sorts of publications, as well as the rebirth of a lot of old books and stories that we can't get to today. That's a future to look forward to -- as long as you can figure out how to keep your job during the transition.

Browsing the web for $10,000 an hour

Over the years I've seen those stories about travelers who make the mistake of using mobile data services outside of their home countries and end up with ridiculously big phone bills. But I didn't realize how easily it could happen until my colleague, Nilofer Merchant (link), got her phone bill last week.

Nilofer recently made a business trip through Canada. While waiting in the Toronto airport for her flight home, she fired up her laptop. The WiFi service in the airport costs about $10 a day, so she decided to use her AT&T data card instead.

Big mistake. Big, big, big mistake.

When her phone bill arrived last week, the total charge for that airport session was $10,609.27.

Needless to say, this was a topic of pretty intense discussion at the office last week.

The stories I'd heard about people with big roaming bills were usually about someone on vacation who used data for a couple of weeks. I was very surprised to find that you could run up such a huge bill in just a few hours. Here's how it happens:

AT&T's Data Connect plan gives five gigabytes of data transfer a month, with additional data priced at five cents per megabyte. But when you're roaming in Canada, there is no prepaid data allowance, and the charge is $15 per megabyte -- 300 times higher than the charge at home.

Nilofer supposedly transferred 707 megabytes in that airport session, which adds up to over $10,000.

I'm not sure how she could have generated that much traffic in a few hours. She said she was doing normal business tasks, not watching videos. It's barely theoretically possible for someone to use that much data in the time available. PC World reports that AT&T's network can transfer about 1,400 kilobits per second (link), which means 707 megabytes could theoretically be transferred in a little bit over an hour. But that assumes a single continuous connection, running at full speed for the entire time. You're not likely to get that in a real-world browsing session, which is full of starts and stops.

You'd think AT&T would warn a customer when they're building up this sort of charge, but that's not the case. The only notification was two form e-mails AT&T sent after the data session was already over. The first said her data service had been shut off due to excessive charges, and the second --dated one minute after the first one -- warned of high usage. That message claimed that "AT&T has sent your end user multiple text messages regarding their high level of international data usage." No text messages were ever received, and in fact I don't know how you would send text messages to a data card.

But the biggest question is not how much data was transferred, or why AT&T doesn't notify customers properly; it's why the roaming charges are so high in the first place. There are a lot of excuses given for that by the operators, but what it comes down to is a cooperative effort between the operators to fleece each-others' customers when they roam. When AT&T customers roam to Canada, they pay 300 times the home rate for data. Meanwhile, when Canadians on the Rogers network roam to the US, they pay 200 times the home rate for data -- unless they have Rogers new One Rate plan, which eliminates roaming charges in the US (link).

The interesting thing about the new Rogers plan, which was introduced last month, is that it proves it's possible to create reasonable roaming charges throughout North America. The operators just choose not to. Because they make a lot of money from it.

The data roaming charges, and their impact on your bill, are not completely hidden by the operators, but they come pretty close. The information is scattered in several locations, and little or no effort is made to explain what the charges mean in practical terms. To find the charge at Rogers, you have to look on their website here, click on the "Legal Disclaimer" link in the tiny type at the bottom of the page, and scroll down to footnote 4. Unless you're technical enough to understand the difference between MB and kb, you may not even realize that roaming costs extra.

AT&T's site is almost as obscure. The company's page with tips on international roaming is here. It discloses the charges for roaming, but doesn't explain how those charges compare to home-country charges. As is the case with Rogers, you're expected to spot the KB vs. MB distinction, and know what it means.

AT&T also provides a helpful map showing its coverage in the US and Canada. Nowhere does it warn of the roaming charges for data in Canada.

The closest thing I could find to a warning about charges was another window with "laptop travel tips" that contains this message: "Your LaptopConnect service provides access to email, Web browsing, and VPN applications that can use a significant amount of data, so remember -international data roaming can get expensive quickly."

A more honest notification might be printed in big red letters, and would say something like this:

"Using wireless data outside your home country is about as smart as juggling chainsaws. In a single day, you can build up charges large enough to buy us a new car. We're constantly amazed that people keep falling for the roaming thing, but you know what PT Barnum supposedly said about suckers. If after reading this you're still stupid enough to use roaming data, please stop by our headquarters the next time you're in Dallas and we'll buy you a drink (although knowing you, we can probably stick you with the tab for that as well.)"

There's a continuous buzz online from people who have been caught by the roaming trap.

Adam Savage, co-host of the television show Mythbusters, had a similar incident last year (link). After he raised a stink on Twitter, the charges were dropped.

You can read some more examples here and here and here and here and here. It makes you wonder why some politician hasn't taken up this issue. A nice round of Congressional hearings would be fun (I'm looking at you, Nancy Pelosi).

In response to complaints in Europe, the EU recently regulated roaming fees and capped roaming data charges at one Euro per megabyte, about a tenth of AT&T's charge (link). As a rugged, individualistic American, I'm generally skeptical of the EU's reliance on the dead hand of regulation. But in this case, I congratulate my friends in Europe, and I say bring on the bureaucrats.