King E-Book Polarizes Publishing World

Last week, the online sale of Stephen King's new novella tied up the servers of major e-commerce sites and also widened the gulf between old line and Internet Age publishers.

After King's 66-page novella "Riding the Bullet" sold more than 500,000 copies in just two days, it appeared that Simon & Schuster had clearly proven that old line publishers have nothing to fear by making their authors' new books available online.

After all, the novella was successfully marketed by such online book giants as Barnesandnoble.com and Amazon.com.

Fatbrain Banned

However, surprisingly, Simon & Schuster banned upstart Web publisher Fatbrain.com from carrying the book. Additionally, Simon & Schuster told Fatbrain that it must get approval before it can solicit any original material from any of Simon & Schuster's authors.

This measure was an obvious slap at Fatbrain's recent eMatter publishing initiative.

Last year, when Fatbrain introduced the new model for selling books, magazine articles and other documents, the company boasted that the method would radically change the publishing world.

Before introducing eMatter, the Palo Alto, California-based Fatbrain had focused upon selling business and professional books. However, with the advent of its new system, magazine publishers as well as individuals were able to sell digitized documents online -- and earn royalties on every copy sold.

Fatbrain's Model Pays More Royalties

Fatbrain contends that this new model is to writers what MP3 is to musicians. In addition, it points out that there has never been an economical channel to sell the 10 to 100-page document. Using Fatbrain's secure Web site, the author can simply set a price, provide a summary of the material, and then place the work into one of the thousands of subject categories.

With eMatter, authors receive 50 percent royalties for each sale of work posted. Traditional publishers currently pay authors a mere 5 percent to 10 percent of profits.

Heart of the eMatter

Meanwhile, Simon & Schuster lamely claimed that Fatbrain's encryption systems, which allow readers to download the material twice, were not up to standards. In my view, however, remarks by Simon & Schuster CEO Jack Romanos point to the real issue.

"Fatbrain can do anything they want as it relates to their business," Romanos told the Wall Street Journal. "But my position is, let me know and I'll then decide if they are a customer or a competitor."

Slow To Catch On

While eMatter is definitely seen as a threat by many old line publishers, the model has hardly soared off the charts.

According to U.S. Bancorp Piper Jaffray analyst Tim Klein, the reasons for eMatter's lower-than-expected sales were "slower than anticipated acquisition of titles and an inappropriate distribution channel for consumer-related issues."

Additionally, even though Robertson Stephens analyst Michael Graham kept his buy rating on Fatbrain, he pointed out in a recent research note that eMatter was "seeing a bit of a chicken/egg problem as authors appear to be waiting until commerce on the site reaches critical mass."

Interesting Concept

Nonetheless, the eMatter concept has a great deal of growth potential. According to Fatbrain, 19 publishing firms have committed to providing content for purchase, including self-help legal publisher Nolo.com, Macmillan USA, McGraw-Hill Professional Books Club, and technology magazines Red Herring and The Industry Standard.

In addition, more than 5,400 writers have already signed up to self-publish eMatter content. It seems to me that while eMatter may not be setting the world on fire right now, even its harshest critics must acknowledge its long-term potential.

Therefore, I believe that Simon & Schuster should re-examine its hostility toward Fatbrain. Who knows how many more copies of King's novella would have sold if Fatbrain were in the fold? Furthermore, Simon & Schuster might well have learned a valuable lesson about life in the new economy.

In the end, the old line publisher fell into a trap that has engulfed many a brick-and-mortar operation -- instead of embracing e-commerce wholeheartedly, it shot the messenger.