A Tumultuous Year in Books

Borders fell and Kindle soared as more and more people adopted e-readers

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This has been a tumultuous year for the book business, a time of profound change in the way books are distributed and read. It is no exaggeration to say that the widespread acceptance of digital devices and a simultaneous contraction of shelf-space in stores qualify as a historic shift. The demise of Borders, the country's second-largest book chain as recently as a year ago, was largely offset by the sale of millions of e-readers and electronic books on a vast scale in a market now dominated by Amazon, Apple, Barnes & Noble, and Google. In May, Amazon announced that it was selling more e-books than print books. On "Black Friday," November 25, Amazon said it had sold four times as many Kindles in a single day as it did in 2010. At this rate, it seems increasingly likely that e-books will match printed books in the next few years, and eventually overtake them.

The popularity of multi-use tablets--Apple's iPads, the Kindle Fire (which has drawn criticism for a variety of technical glitches), B&N's Nook, and several others--has been another dominant feature of the year, serving up thousands of apps for games, music, magazines, and news sites, depending on your choice of device and price. As measured by IHS iSuppli research, and reported in the New York Times, Apple will ship about 18.6 million iPads in this quarter; the Kindle Fire, which went on sale in November, will sell about four million devices; and the Nook tablet will ship 1.3 million. While tablets have scores of uses, e-books have so far held their own as defining attractions in the digital era. Their role is reminiscent of the way DVDs transformed the movie business in the 1990s, posing a major challenge for theaters while expanding the market for players to be used at home.

Bookstores have finally recognized the enormous potential of e-books and the threat they pose to bookstores' future share of the market. Hundreds of independent stores, with the strong backing of the American Booksellers Association, have signed on to a Google-supported system for e-book sales and now need to persuade customers that they can serve them digital products as well as Amazon, Apple, and the other industry leaders. The ABA said that members' website sales were up 60 percent over last year, and that business overall was noticeably stronger.

With so much change under way, it is hardly surprising that there are a number of disputes yet to be resolved that could determine the structure of the business in the coming years. Publishers have managed, at least for now, to prevail in the tug-of-war over the setting of prices for e-books. As long as Amazon's Kindle had what amounted to a virtual monopoly on e-books, from 2007 to 2010, the company was selling the titles most in demand at prices so low they were losing money on them while building a customer base for their e-readers. Over time, publishers assumed Amazon would condition the consumer to those rock-bottom prices and eventually expect the publishers to absorb the loss. But as competitors to the Kindle emerged, particularly the glamorous iPad, Apple and the publishers devised what is called "agency" pricing. Under this model, publishers set the price for books, and Apple takes a 30 percent cut as the retailer.

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Peter Osnos is a contributing writer for The Atlantic. He is the founder and editor at large of PublicAffairs books and a media fellow at the Century Foundation.

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