Can Sony Make E-Books Succeed?

A story broken by Business Week today, about Sony's plans to launch a new e-book reader at next month's Consumer Electronics Show in Las Vegas, sent me on a trip down memory lane.

From November 1999 to April 2001, I took a detour from journalism to run a website for NuvoMedia, a Silicon Valley startup that sold both e-book reading devices and the books to go in them. NuvoMedia made a nifty hand-held device called the Rocket E-Book, later the Gemstar E-Book. About the size and weight of a hardcover book, the device had simple controls (page-forward and page-back) and a high-resolution, high-contrast LCD screen that made for very easy reading. I'd fallen in love with the gadget after writing a product review for Technology Review, and had decided that any company that could make a device that cool must be worth working for.

Shortly after I joined the company, both NuvoMedia and its principal competitor, Softbook, were acquired by Gemstar, whose CEO, Henry Yuen, had made his fortune by inventing the VCR+ system for programming videocassette recorders. (The system depended on numerical codes published alongside TV listings in newspapers and TV Guide.) Not long before, Yuen had managed to wrest control of TV Guide from Rupert Murdoch's News Corp., and had some kind of vision -- none of us NuvoMedia folks quite understood the details -- for making e-publishing and e-books part of his cross-media empire.

The vision fell by the wayside as Gemstar became entangled in patent lawsuits, clashed with a vengeful Murdoch, and faced questions over its accounting practices. Yuen never delivered on a promised $100 million marketing campaign to make e-books into a popular consumer category, and alienated most of the already-wary publishers whose content the company needed in order to give device owners something to read. By mid-2001 nearly all of NuvoMedia and Softbook's original staffers had resigned -- or, like me, had been laid off.

(The day Gemstar let me go, I was told I would receive severance pay only if I signed an agreement not to write about the company in the future. I decided to forego the severance -- hence my ability to write this today.)

Many of us e-book believers could not help but smirk as we watched Gemstar shareholders force Yuen out in 2002. The next year, the Securities and Exchange Commission charged Yuen and former Gemstar CFO Elsie Leung with fraud, saying they'd inflated the company's revenues by $248 million between March 2000 and September 2002 to boost Gemstar's stock. In September 2005, Yuen finally pleaded guilty to one count of felony obstruction of justice -- for allegedly erasing financial data from his Gemstar computer -- and is currently awaiting sentencing.

So I was amused when I read the following sentence in Business Week's report: "Back in 2000, a bunch of e-book readers hit the market, only to tank because the technology didn't adequately duplicate the book-reading experience."

BW's dates are slightly off -- the first bunch of e-book readers, including the Rocket E-Book and the Softbook Reader, hit the market in 1998 and 1999, not 2000. But more importantly, the article gets the cause of the category's decline wrong. In my opinion, the technology didn't tank because the devices didn't simulate real books well enough; it tanked because of Yuen's mismanagement and because leading New York book publishers weren't ready to release their content electronically at realistic prices. (Wary of cannibalizing sales of their print books, most publishers charged the full hardcover price for their electronic editions.)

Indeed, if an authentic book-reading experience is what consumers are looking for, the new Sony e-reader -- which BW's sources said is based on an earlier device marketed in Japan called the Librie -- won't have a much better shot at success than the previous generation of e-book devices. While the Librie is based on an innovative "electronic paper" technology from E Ink, it is cut from the same mold as the Rocket E-Book, with a flat, inflexible, monochrome screen, operated by push-buttons.

Given that handheld information devices from Palm and Handspring were becoming commonplace around 2000-01 -- and given the huge success of Apple's iPod and iTunes, in the music arena -- I'm convinced that the Rocket E-Book and/or the Softbook Reader could have caught on. The missing elements back then were intelligent marketing and convenient, compelling reading material at reasonable prices.

Business Week writes: "Sony will take a page from Apple by setting up an online store, which will be run as part of its existing music downloading service, Connect. And as Apple did with music, Sony has lined up major players in publishing, including Random House, Simon & Schuster, and HarperCollins, to sell books through the store."

If that's true, and if the prices for Sony's books are as bearable as the $0.99 per song that Apple's iTunes charges, and if Sony figures out a less draconian digital-rights-management scheme than the one it uses in Japan (Librie books expire and erase themselves after 60 days), then the U.S. version of the Librie may well succeed where the previous generation of e-book devices failed.

I'd be delighted to see that happen. Let's just hope that Sony -- which has suffered from a few management missteps of its own lately -- doesn't fumble the technology the way Gemstar did.