PressBooks prepares to launch its eBook publishing service

PressBooks, an eBook editing and self-publishing service based on WordPress, has announced its pricing plans and is nearing a formal launch. The service, which has been in beta for some time, enables writers to collaboratively create eBooks, either online or via file uploads. Existing WordPress users can selectively convert their blogs into eBooks using PressBooks. The service outputs EPUBs for Apple iBooks, Barnes & Noble's Nook and Kobo, converts EPUBs to Amazon's Kindle formats, creates public or private web versions of eBooks and exports to PDF for print-on-demand. PressBooks offers an assortment of templates that are optimized for different eReading platforms. It can directly post eBooks into Apple's, Barnes & Noble's and Kobo's eBookstores, or self-publishers can download the files and manage their own distribution. (Apparently, self-publishers will have to post titles into Amazon's Kindle Store themselves.)

The new pricing plans, which appear to still be under discussion, are as follows:

• The first five books are free (beta users who've already created eBooks are exempt from monthly pricing on those titles, and will be entitled to five more free titles.)
• Up to 20 books: $50/month.
• Up to 200 books: $200/month.
• Distribution to the Apple, Barnes & Noble and Kindle eBookstores will cost a one-time fee of $100/book + $25/year/book.

In a move that surprises no one, the Book Industry Study Group endorses EPUB 3

In a move that surprised absolutely no one, the Book Industry Study Group has endorsed EPUB 3. The actual endorsement amounts to little more than a solicitation for new members for the BISG and IDPF (International Digital Publishing Fourm, the industry group that created and manages EPUB):

"ISG encourages organizations interested in the advancement of EPUB 3 to become members of both IDPF and BISG in order to work directly with those creating the standard and developing best practices."

The reality is that companies that join the two groups now are going to have virtually no influence over EPUB 3--and the specifications are public, so there's no real benefit to spending thousands, or tens of thousands, of dollars to join. (Yes, I'm suggesting being a "free rider".)

In addition, EPUB 3 is less a standard than a suggestion: The IDPF doesn't require that companies implement the complete specification, nor does it prohibit implementation of proprietary extensions--which is why Apple, Barnes & Noble and Kobo all have their own proprietary multimedia extensions to EPUB 2.X. Also, Apple hasn't endorsed EPUB 3, and isn't likely to do so.

Rakuten makes it clear that it intends to dominate the Japanese eBook market

Publishing Perspectives reports on a panel discussion at last week's Tokyo E-Book Expo, which featured Hiroshi Mikitani, the head of Rakuten, the Japanese eCommerce company that acquired Kobo, and Seiji Noma of Kodansha, the largest Japanese publisher. Before the panel even began, Noma held up a T-shirt he had been given by Mikitani, which said "Destroy Amazon". That's not how things are normally done in Japan, and it was a sign that the two companies are serious about preventing Amazon from becoming a major player in the Japanese market. For its part, Rakuten is now calling its eBook business "Rakuten Kobo," and is de-emphasizing the Kobo name for everything except the eReaders themselves. Mikitani's target is to get one million Japanese-language books digitized--a lofty goal, given that Japan has one of the lowest rates of eBook usage of any developed country.

Kobo partners with Italy's Mondadori Group

The Digital Reader reports that Kobo has partnered with Italy's Mondadori Group, which is the country's largest book and magazine publisher, to sell its Kobo Touch eReader and compatible eBooks. 400 of Mondadori Group's 628 owned and franchised stores will carry the Kobo Touch, and the eReader and eBooks will also be sold online.

Who's winning and losing due to the shift to eBooks?

In my last post, I wrote that eBooks aren't expanding the market for books in general. However, even if eBooks are, overall, simply shifting money from one bucket to another, there are definite winners and losers:

Winners:

• Amazon: The company sells the most popular eReaders and more eBooks than anyone else in the U.S. (although a lot of those sales are unprofitable.) Amazon's dominance in the eBook market scared five of the six biggest publishers into (according to the U.S. Justice Department and more than 30 states) illegal price-fixing in order to take away Amazon's price advantage.
• Barnes & Noble: In the U.S., the bookseller is Amazon's only serious competitor for both eBooks and eReaders. Barnes and Noble has between 25% and 30% of the U.S. eBook market.
• Kobo: The company is Amazon's primary eBook and eReader competitor outside the U.S. It's recovered from the failure of Borders and Borders' licensees (at least, outside the U.S.) Now that it's owned by Rakuten, it has both the financial resources it needs and a natural advantage in Asia.
• Major publishers: Even though eBooks are shifting money around rather than increasing overall sales, publishers are earning more money on each sale, because eBooks have no printing, binding, shipping, warehousing or return processing costs.
• Self-publishers: eBooks have opened up the market to both writers who couldn't find publishers or agents, and writers who've been previously published but didn't earn much money. Royalty rates on self-published eBooks are much higher than those from major publishers, so writers can sell fewer copies at lower prices and still make more money.
• Consumers: Even though the Big 6 publishers have raised the prices of their eBooks under agency pricing, in most cases their eBooks are still less expensive than print. Self-published eBooks are dramatically less expensive than equivalent print titles. In addition, eReaders and tablets are far more convenient for consumers than carrying around multiple print books.

Losers:

• Independent booksellers: Few independent booksellers have successful online eBook businesses, and none of them have the same ease of ordering and delivery that Amazon and Barnes & Noble have. The American Booksellers Association inadvertently tied itself to the "albatross" of eRetailers, Google. which has since given notice that it plans to cancel its distribution agreements with independent booksellers. Whether independents will ever have a significant share of the U.S. eBook business depends almost entirely on who the ABA decides to partner with next.
• Small publishers: Small publishers that are still focused on print are tied very directly to the fate of retail booksellers. They need shelf space in order to build awareness and sales of their books.

Too early to tell:

• Apple: With no more than 10% of the U.S. eBook market and even less internationally, Apple's jump into the eBook business has largely been a bust, plus it's become entangled in Federal, state and private price-fixing lawsuits. Competitors such as Kobo are gaining share more quickly in international markets. Apple may ultimately decide that eBooks are more of a problem than they're worth, and settle for taking 30% of sales from other booksellers.
• Sony: At one time, Sony was the undisputed leader in the eReader market, but a series of missteps have left it an also-ran, even in its original strongholds of Japan and the U.S. Sony can turn things around by aggressively pursuing partnerships with booksellers outside the U.S. and Canada.

None of these judgments are set in stone: Barnes & Noble's partnership with Microsoft could help it build an international business, or its slowly-sinking retail bookstores could bring down the entire enterprise. Major publishers could fail to transition to digital-first strategies and end up with costs that are much too high for their revenues. Independent booksellers could find the right partner and become a viable competitor for eBook and eReader sales. Small publishers could start producing far more eBooks and become more visible in online eBookstores. Apple's rumored new "iPad mini" could be the perfect tablet for reading eBooks and could drive sales of many more titles.

Kobo licenses Access EPUB 3 eReader software for Japanese market

Kobo announced that it's licensed EPUB 3 viewer software from the Japanese vendor Access. The press release says that Kobo will be using Access' NetFront BookReader software in Japan for the Kobo Touch, Android and Windows. It appears that Kobo will be using NetFront only in Japan, and will continue in-house development of its own EPUB 3 eReaders for other markets.

New Kobo Vox Coming This Fall?

On The Digital Reader blog, Nate Hoffelder writes about a MobileRead post from a current Kobo Vox user who was told by an Indigo Books salesperson that a new Vox model is coming in the fall. Given Google's new Nexus 7 and the multiple rumors about new Kindle tablets coming as early as the end of July, it makes sense for Kobo to be working on a new version of the Vox.

Samsung may be dropping Kobo as its European eBook supplier

The Digital Reader reports that some users of Samsung Android devices in Europe are getting a warning message when they open Samsung's own eReader app. The warning informs users that they need to download Kobo's app from the Google Play store if they want to continue reading the eBooks that they purchased for use in Samsung's eReader app, and that Samsung plans to release its own "new and improved" eReader service soon.

Kobo has provided the eBooks and back-end transaction services for Samsung in Europe, but it looks like that deal is coming to an end. When Kobo and Samsung originally struck their deal, Kobo only had black & white hardware eReaders, but it's now competing with Samsung via its Vox Android tablet. Samsung may have decided that it doesn't want to funnel revenue to a competitor. There are many alternative vendors that Samsung could work with (txtr and Blio are two possibilities.)

Barnes & Noble's Q4 financial results

Reuters reports that Barnes & Noble released its Q4 financial results Tuesday morning:

• Revenue was $1.38 billion, up slightly from a year ago but below analysts' estimates of $1.48 billion. 
• The company had a net loss of $57.7 million, or $1.08/share, slightly lower than its Q4 loss of $59.4 million, or $1.04/share, a year ago. 
• Same-store sales at its 700 superstores were up 4.5% compared with Q4 last year. 
• The company had higher-than-expected returns of Nook devices from retailers after the 2011 holiday season, and a decline in sales of its eReaders and tablets in Q4. 
• Revenues at its Nook business, including eBooks, eMagazines and apps as well as devices, fell 19% to $164 million in the quarter. 
• B&N now has 27% of the U.S. eBook market, compared to 60% for Amazon. (That leaves 13% for Apple, Kobo, Sony and everyone else.) 

Independent U.K. booksellers look for eBook options

The Bookseller reports on a meeting held by the U.K.'s Booksellers Association last week, where members heard from three eBook vendors: Kobo, Hive and Anobii. Kobo is proposing that independent booksellers link to Kobo's site, and Kobo will give them a cut of every eBook sold from then on, whether they purchase inside the bookseller's physical store or directly from Kobo. However, Kobo already has a distribution agreement with WHSmith, and Kobo VP Michael Tamblyn said that it would be "quite difficult" for independents to get a cut of transactions from Kobo readers sold by WHSmith. In other words, existing Kobo owners would have to purchase a second Kobo eReader or install a second software eReader on their PC or tablet (which would likely wipe out their existing library of WHSmith eBooks.)

Anobii CEO Matteo Berlucchi proposed a "classic affiliate" model where booksellers would get a commission on each sale made through their links to the Anobii website. Neither Anobii nor Kobo publicly stated what their commission rate for sales through independent booksellers would be.

Gardners' development manager Julie Howkins said that the company plans to launch a new Hive eReader app in the next two weeks for PCs, iOS and Android devices. The company is also endorsing the GoTab range of eReaders and tablets from Yarvik. Booksellers will only get a 5% commission from Hive on eBook sales, but Howkins told The Bookseller that the company's commission model is "under review."

Kobo’s Vox eReader Gets Full Access To Google Play

TechCrunch reports that Kobo's Vox eReader has gotten full access to Google Play, which makes all 500,000 Android Marketplace apps available to the Vox. Google had previously only given access to its Marketplace to one Android 2.X tablet, the original Samsung Galaxy Tab. It appears (although the article doesn't say) that Kobo has received Android certification for the Vox from Google. Google may have loosened its requirements for Kobo in response to the success of the Kindle Fire, which has helped to create a viable competitive Android app marketplace, and Barnes & Noble's deal with Microsoft, which will almost certainly lead to a Windows RT-based Nook tablet.

Amazon Publishing's getting around bookseller objections by selling eBooks through HMH

Publishers Lunch Deluxe reports that at least two Amazon Publishing eBooks, including Oliver Pötzsch's The Dark Monk: A Hangman's Daughter Tale, the follow-up to his bestseller The Hangman's Daughter, are being sold by Barnes & Noble, Apple and Kobo. The eBooks are being sold to the retailers by Houghton Mifflin Harcourt under the New Harvest imprint. Previously, Amazon Publishing had licensed HMH only print rights to selected titles, and Amazon exclusively sold its own eBooks.

According to the article, Amazon has informally said from the beginning that it intended to make eBook versions of all Amazon Publishing New York titles available for sale outside of the Kindle Store. This new arrangement will enable the resellers that refused to sell Amazon Publishing titles in their stores unless they could also sell the eBook versions to lift their ban, at least on titles sold through HMH.

U.S. State Department considers $16.5 million contract for Amazon Kindles and content

According to Nextgov, the U.S. State Department is considering a $16.5 million no-bid contract with Amazon that could include as many as 35,000 Kindle eReaders and content. The Kindles would be placed in designated libraries and "U.S.-friendly" educational centers around the world, for people who want to learn English and learn about the U.S. The State Department will guarantee approximately $2.3 million in the first year for at least 2,500 Kindles and 50 titles, with one-year options for the four subsequent years, and is waiting for Amazon to reply with a proposal.

According to the contracting notice that announced the decision, State Department officials decided that Kindles were the only appropriate devices because "they come with a built-in English dictionary, support foreign languages, translate text to speech, and receive information securely from a content distribution platform managed by the State Department."

Other eReaders, such as the Barnes & Noble Nook, Sony Reader Daily and Kobo eReader were considered but deemed unsuitable because "they couldn’t offer the same the text-to-speech function, battery life and free global Wi-Fi connectivity." (I believe that the State Department was actually referring to free global 3G connectivity, which is mentioned in other places.) iPads were also considered, but were rejected because they presented “unacceptable security and usability risks for the government’s needs in this particular project.” In addition, iPad wouldn't give the State Department the same control over dissemination of content as the Kindles.

Rakuten to save taxes by supplying eBooks to Japan via Canada

GoodEReader reports that Rakuten, the Japanese eCommerce giant that purchased Kobo, plans to start selling eBooks in Japan. To avoid having to charge the Japanese 5% consumption tax, which will increase to 15% by the end of the year, the eBooks will actually be sold from Kobo's headquarters in Canada. This strategy is the same as Amazon's tactic of basing an eBook distribution center in Luxembourg, which opened in December of last year. Instead of paying the U.K.'s 20% VAT on eBooks, Amazon customers pay only Luxembourg's 3% eBook VAT.

eBook Wars: Browser Wars All Over Again

At the IDPF Digital Book 2012 Conference earlier this week, Michael Tamblyn, who's Kobo's Executive Vice-President for Content, Sales and Merchandising, gave a status report on his company's market success and progress in implementing an EPUB 3-compliant eReader. Mr. Tamblyn said that because there are "a half-dozen ways to do anything in EPUB 3," it's essential that his developers test Kobo's EPUB 3 prototype using live samples, but his company is having difficulty getting enough document samples for testing. He also said that some publishers are waiting to actually get commercial EPUB 3 readers in-house, so that they can develop their documents to use the features actually implemented by eReader developers.

The next day, I spoke to a manager from a document conversion and app development company on the BEA show floor. He said that his company recommends to publishers that they use EPUB 3  as the basis for creating eBooks. I asked, "But what about Amazon? They don't use EPUB 3." The representative said that Kindle Format 8 is "very close" to EPUB 3, and that Amazon might adopt EPUB 3 in the future. In any event, he said, it's fairly easy for his firm to convert EPUB 3 to KF8.

The era of "Browser Wars"

I came back from New York with a bad case of déjà vu. Anyone who was involved with the Internet from 1995 on remembers "Browser Wars," the battle between Netscape and Microsoft to dominate the web browser market. The engineering team that developed Mosaic, the first graphical web browser, at the University of Illinois, moved to Silicon Valley and wrote a new browser, code-named Mozilla, that became the Netscape browser. Netscape quickly became the most popular Internet software ever released to that date. Then, Microsoft licensed the original Mosaic code from the University of Illinois and released its own browser, called Internet Explorer.

Early on, Netscape introduced new tags and functionality to its browser at a fast clip. Some of these tags, such as frames, gave web designers more options for creating web page layouts, but the tags were implemented without being adopted by the World Wide Web Consortium (W3C,) the international standards-setting body for the Web. Microsoft adopted some of Netscape's tags and added many of its own. However, even when it adopted a Netscape tag, it would often adopt a different set of attributes (the settings that tell the tag what to do.) There were also variations in how browsers rendered tags: The exact same web page, using the same HTML tags and attributes, in two browsers that supported all the tags and attributes used in the page, could look different in the two browsers. For example, in one browser, the page might be displayed with a background color that bled all the way to the edges of the window, while in another browser, the same page might be displayed with a white border around the edges.

It wasn't only HTML that got "innovated" to pieces. The same scripting language got two different names--JavaScript at Netscape (where Brendan Eich invented it), and JScript at Microsoft. As with HTML, the two companies' implementations were different in subtle (and sometimes not so subtle) ways. This was the era of "Looks best in (Browser X)" and "We prefer (Browser X)". In some cases, web pages wouldn't even open in some browsers, and the user would be told to use or install a different browser.

Browser developers encouraged these differences in order to lock customers in, but they were a nightmare for website designers, who had to design different versions of their sites for different browsers, and even for different versions of the same browsers. Pressure from designers and software developers on browser vendors and standards organizations reduced, but to this day still hasn't completely eliminated, the requirement to do things in different ways for different browsers. The W3C took charge of defining new versions of HTML and pushed vendors to stop implementing their own new tags until they'd been reviewed and accepted by the W3C. The W3C also adopted Cascading Style Sheets (CSS,) which over the years have made it easier to tightly define the layout of web pages that work across browsers. Ecma International (formerly the European  Computer Manufacturers Association) took over standardization of JavaScript, and changed the name of the standardized version to ECMAScript.

However, even with all these standardization efforts, supported in some cases by companies whose annual revenues exceed those of the entire book publishing industry, there are still incompatibilities among browsers, and even among versions of the same browsers. For example, Mozilla has JavaScript in its Firefox browser, and Microsoft still has JScript in its Internet Explorer. Both are compatible with ECMAScript at a basic level, but both have additional features that are incompatible with each other.

From Browser Wars to eReader Wars

eBook designers have a variety of formats that they have to work with: Amazon's .AZW (based on the Mobipocket format acquired by Amazon) and Kindle Format 8 (based on HTML5 and CSS with extensions), EPUB 2.X, Apple's iBooks (EPUB 2 .X with Apple's extensions), Kobo Color Content (EPUB 2.X  with Kobo's extensions,) Nook Digital Replica Plus (EPUB 2.X with Barnes & Noble's extensions,) EPUB 3 (HTML5 and CSS3 with the IDPF's extensions) and PDF.

To eBook designers, the word "extensions" is a synonym for "incompatibilities." Two different eReaders may perform the same functions, but if the tags or attributes that tell the eReaders what to do are even slightly different, eBook designers will have to either design around the differences or not use the functions.

Can we draw lessons for the eBook industry from the Browser Wars years? I think that we can:

1. Incompatibilities among eReaders from different vendors, and even among different generations of eReaders from the same vendor, are inevitable and won't go away.
2. Amazon will adopt EPUB 3 48 hours after Apple provides full support of Flash in iOS. In other words, it'll never happen. Amazon's eBook formats are strategic technologies for the company, and it won't allow any competitor or group of competitors to dictate how a strategic technology must work.
3. Despite the best of intentions, browsers' implementations of HTML5, CSS3 and JavaScript are still incomplete, although they're much less incompatible than they once were.
4. EPUB 3 is based on HTML5 and CSS3, and most eReader developers will either base their software and devices on an existing web browser to avoid "reinventing the wheel," or will use the customer's existing web browser and then support the EPUB 3 extensions with JavaScript. Either case makes EPUB 3 subject to lesson 3 above.
5. In order to minimize time and cost, eBook designers and developers will inevitably gravitate to a "lowest common denominator" approach, where they'll either only use features supported compatibly by the largest number of eReaders, or will design eBooks so that features that aren't supported by a particular eReader are either simulated or ignored without crashing.

If publishers hate Amazon so much, why do they sell to them?

I haven't been able to wrap my head around the fact that the Big 6 publishers hate Amazon so much that they were willing to risk antitrust prosecution, yet they still sell their books to the company. If Amazon is truly such a threat to publishers, there's a simple solution: Stop selling to them. I'm not a lawyer, and I don't claim to be an expert on U.S. antitrust law, but my understanding is that sellers can refuse to deal with a class of customers, so long as they uniformly apply their standard to all applicable customers. That means that publishers could refuse to sell to online-only retailers. That wouldn't prohibit online sales, but it would require that retailers also sell their books through physical stores.

Imposing this standard would mean that the publishers would no longer sell to Amazon, Apple, Kobo, Sony and other online-only book retailers. Of course, it would make Barnes & Noble a de facto monopoly for online book sales in the U.S.; publishers may find over time that B&N becomes just as demanding and difficult to work with as Amazon was. On the other hand, it would strengthen independent booksellers, which would no longer have to compete with Amazon.

The ball is in publishers' courts--they can cut off Amazon if they want to. The real question is, why haven't they already done so?

The end of Borders

By now, most of my readers know that Borders in the U.S. has given up on trying to find a buyer to keep its stores in operation, and plans to submit a liquidation plan to the bankruptcy court on Thursday. Despite Borders' management's claims, most of its wounds were self-inflicted: The company missed the key transitions in the book industry over the past several years. First, instead of investing in its own online presence, it partnered with Amazon and ended up sending traffic and revenue to the company that became its biggest competitor. (It eventually withdrew from the Amazon deal and created its own online store, but the damage was done.) Next, instead of building its own eReader and eBook infrastructure, it invested in Canada's Kobo and marketed its eReaders, as well as a mishmash of other models and brands. Kobo has only had a truly competitive eReader in the last two months, far too late to help Borders.

Now, at the 11th hour, Kobo is trying to get the bankruptcy court to give it a right of first refusal for repurchasing of Borders' share of the company. It's unlikely that Kobo's request will derail the liquidation plan. Assuming that the judge approves at least the retail store portion of the plan, going-out-of-business sales will begin in some Borders locations as early as Friday, with all stores expected to close by the end of September.

Beyond the loss of over 10,000 full- and part-time jobs, the biggest loss will be the closure of Borders' retail stores. No more than 50 stores are likely to be taken over by Books-a-Million and Barnes & Noble after Borders closes, and some areas will be completely without a local bookstore. Unlike Barnes & Noble, which built "cookie cutter" stores, many of Borders' locations are architecturally interesting, like its store in a converted movie theater in Palo Alto, CA.

Perhaps the saddest point is that Barnes & Noble's and Borders' aggressive discounting drove thousands of independent bookstores out of business. Now, Borders is closing, Barnes & Noble is struggling, and Amazon's strength makes it very unlikely that we'll see a renaissance of independent bookstores.

Could a Borders bankruptcy bring Indigo Books to the U.S.?

Borders' financial struggles are well-known; I wrote about the company's decision to delay payments to some of its publisher vendors, and its notice that if it can't raise additional capital, it will be in default on its existing financing by the end of Q1 2011. The most obvious scenario is that if Borders is unable to raise more capital, it will go bankrupt and its stores will close. However, there's an alternative scenario that's intriguing (it's also entirely speculative at this point).

Rather than develop its own eBook reader as Amazon and Barnes & Noble did, Borders decided to partner with a Canadian company, Indigo Books, for its Kobo reader. Indigo has 70% of the retail market for books in Canada under the Chapters and Indigo brands. If Borders goes bankrupt, it could become an appealing acquisition for Indigo. Under U.S. law, all of Borders' leases would be cancelled, and Indigo could pick and choose the stores that it wants to keep open. Borders' debt, pension and benefits obligations would also be wiped out. Indigo could bring its successful merchandising approach to the U.S. Together with its operations in Canada, it would have the purchasing power to compete with Barnes & Noble, albeit on a smaller, more economical scale.

Indigo could also dump the non-Kobo eReaders (Sony, Aluratek, Velocity, etc.) sold at Borders and focus exclusively on its own devices. This would decrease consumer confusion and increase Kobo's market share.

Rather than Borders buying Barnes & Noble (unlikely), Barnes & Noble buying Borders (unwise) or Borders going out of business (unfortunate), an acquisition of Borders out of bankruptcy by Indigo could make a lot of sense for Indigo, publishers and consumers.

"Do-or-Die" time for Sony's eBook business

According to Engadget, Sony has dropped the prices of all of the eBook readers that it sells in the U.S. The entry-level Pocket Edition dropped from $169 to $149, the mid-range Touch Edition went from $199 to $169, and the high-end Daily Edition with 3G went from $349 to $299. The problem is that none of the models are competitive with comparable models from Amazon and Barnes & Noble. The Sony Pocket Edition has a smaller screen and lacks the WiFi of the comparably priced nook. The Daily Edition has essentially the same features of the Kindle 2 and nook 3G, but it costs $100 to $110 more. The Touch Edition is priced $20 less than the Kindle 3G but offers much less value for the money.

Sony has a very difficult decision to make, at least in the U.S. eBook market: Dramatically decrease costs and/or improve specifications to be competitive with the Kindle and nook, or get out of the business. Borders, which was one of Sony's primary sales channels, now has its own hardware reader, the Kobo, which is comparable to the Pocket Reader. It's in Borders' interest to promote the Kobo over Sony's products. Also, the deal that Sony had to make the Wall Street Journal available on the Daily Edition is non-exclusive, and readers can get a much better experience with the iPad.

Sony's eBook business has always been opportunistic; the eBook business unit is headquartered in San Diego, while most of Sony's businesses are headquartered in Tokyo. It's inconceivable that Sony's Vaio PC business unit isn't working on a tablet to compete with the iPad, and the eBook team may well find itself competing with its sister PC business unit.

I suspect that Sony will get out of the dedicated eBook reader business and shift its focus to Vaio-branded tablets and convertible PCs. The eBook group in San Diego may be maintained in order to write eBook reader software and to operate Sony's own eBookstore. However, the "sweet spot" for dedicated eBook readers is rapidly falling below $100, and it's not likely to be an attractive business for Sony.