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NYTimes.com Article: AOL Retreats From Big Push for E-Books

Of possible relevance. Ann Okerson

---------- Forwarded message ----------
AOL Retreats From Big Push for E-Books

December 5, 2001


In the latest setback to the once- promising future of electronic books,
the books division of AOL Time Warner (news/quote) said yesterday that it
was cutting back its expensive line of digital books and laying off almost
all 29 employees, citing a slump in sales of all books and especially
digital ones.

"Perhaps Mr. Gutenberg has the last laugh here," said Laurence Kirshbaum,
chairman of the books division. He said the remaining electronic book
publishing would be consolidated with the company's Warner Books and
Little, Brown units.

The cutbacks are an abrupt turnaround for Mr. Kirshbaum. He was among the
industry's biggest champions of the idea that consumers would pay to read
books on digital screens. In an interview last August about the lackluster
demand thus far, he said, "It is taking longer than expected, but
everything in my gut says now is the time to push harder rather than slow

At the time, he said AOL Time Warner's top executives concurred, based
mainly on a philosophical belief in digital media.

Yesterday, however, Mr. Kirshbaum said that unexpectedly low sales of all
books this fall necessitated a change in course.

"At some point reality sets in and one has to be realistic about how much
of an uphill climb this is going to be," he said, "I have been wrong so
far - I have been overoptimistic from the beginning, so at a certain point
you have to question whether your logic is sound."

The books division of AOL was the first publisher to announce the creation
of a special imprint of electronic books, called iPublish. It was also the
first publisher to begin selling copies of its electronic books directly
to consumers from its own Web site.

Its most innovative project was a kind of online writing workshop,
inviting mostly unpublished writers to submit samples and evaluate one
another's work. The company published some of the most popular works in
electronic and printed form.

But the proceeds were slim. Mr. Kirschbaum said the division had lost
about $13 million on electronic publishing so far, a considerable sum
against the division's total annual revenue of about $400 million.

Then Reciprocal, the company that provided much of AOL Time Warner's
technology for selling digital books, went out of business this fall.

AOL Time Warner follows the Random House Trade Group of Bertelsmann's
Random House division, which recently consolidated its specialized program
for digital books into its other lines. But the Simon & Schuster division
of Viacom (news/quote) recently began selling electronic editions from its
Web site for the first time.