An Escalation of the E-Book Battle

The battle over e-book sales heated up today as Internet portal Yahoo! Inc.
signed an e-book sales deal with four major publishing
houses.

E-books are a tiny part of the current online book market, but both
publishing companies and online retailers clearly are expecting significant
growth in this sector. Both Amazon.com and Barnes&Noble.com have had e-book
sales areas for some time.

The market reaction was less than enthusiastic over the deal, as Yahoo!’s
stock was down $1.08 in mid-morning trading to $10.62, and at one time
touched a 52-week low of $10.53.

Yahoo!’s deal is with Penguin Putnam, Simon & Schuster, Random House and
HarperCollins. Financial terms were not disclosed, but Yahoo! is expected to
get a piece of each sale at the e-books site.. The
books division of AOL Time Warner is not participating.

“As technology enables consumers to access digital content more conveniently,
we anticipate that there will be increasing demand for e-books,” said Rob
Solomon, vice president and general manager of Yahoo! Shopping. “Aggregating
a broad collection of titles in multiple e-book formats positions us
effectively to meet these needs today and to meet growing consumer demand in
the future.”

Virtually all book categories are represented on the site, including recent
bestsellers, mysteries, thrillers, romance, science fiction, desktop
reference books, college textbooks, travel and business.

The deal give the publishers a neutral ground, so to speak, in which to sell
their books, and allows them some direct contact with online buyers.

Rob Solomon, general manager of Yahoo! Shopping, was quoted by the New York
Times as saying that e-books are part of the company’s plan to build a
business as a distributor of digital media by capitalizing on its “neutral status, like
Switzerland.” Since Yahoo is not part of a major media company, it can
provide a venue for rival media companies to sell digital books, music and
video together, he said.

“What’s exciting about the Yahoo! e-book site is that all parties involved
are converging to do what they do best in their core businesses,” said
Phyllis Grann, chief executive officer and president of Penguin Putnam.

Interestingly, Yahoo! is also competing with barnesandnoble.com, which pays to
be a featured seller in the book section. Solomon was quoted as saying that
he hopes the sale of e-books would inspire sales of printed books as well.

Barnesandnoble.com
created an e-book store in conjunction with Microsoft more than a year
ago.

Amazon.com
launched its e-books store in November of 2000. Last April, both
Amazon and B&N signed deals that hinted at just how seriously they are
taking e-books.

Clearly it’s a small coup for Yahoo!, which has been aggressively trying to
diversify its revenue stream to lessen its dependence on lagging Internet
advertising.