Barnes & Noble Joins E-Publishing Race

The online publishing industry continued to gain momentum Tuesday as Internet bookseller Barnesandnoble.com announced an investment of $20 million (US$) in exchange for a 30 percent stake in Mighty Words, a subsidiary of Internet bookstore and publisher Fatbrain.com.

In addition to offering the works of best-selling authors, Mighty Words allows aspiring writers, essayists, poets and others to sell their work online.

Inside the Deal

Since announcing last month that it was seeking outside funding, Mighty Words has secured $36 million in investments.

In addition to Barnesandnoble.com’s $20 million investment, $16 million comes from venture capital firms, including Vulcan Ventures, the company owned by Microsoft co-founder Paul Allen.

As part of the agreement, Barnesandnoble.com will distribute works from Mighty Words on its Web site. Mighty Words will also look for other distribution deals with high profile Web sites. Fatbrain will retain a 23 percent stake in Mighty Words and will receive $8.5 million as reimbursement for expenses incurred on behalf of the subsidiary over the past five months.

Every Company Is a Publisher

The publishing business seems to have discovered the Internet in the past few weeks, with a slew of new deals involving everyone from Time Warner to venerable publishing giant Simon & Schuster.

Fatbrain, which went public in November 1998, started as an online book seller focusing on computer books. It has since expanded its inventory to include interactive training products and books on technology, business, finance, engineering and general interest topics. Fatbrain also provides digital publishing services such as print-on-demand, and secure hosting and distribution of corporate documentation.

New Fatbrain.com CEO Dennis Capovilla said earlier this year his goal was to capture a significant portion of the $94 billion in revenue that traditional printers realize annually. Mighty Words is part of that strategic plan, as is another Fatbrain subsidiary, the Information Exchange, which operates as a virtual bookstore for companies to buy books and get their own documents produced on paper or portable document format (PDF).

Wheeling and Dealing

Meanwhile, the mad rush to close online publishing deals continues. Last week, Time Warner invested in Bookface.com, a site that lets users read books over the Internet. Reportedly, a number of respected publishing houses, including Penguin, St. Martin’s Press and Harper Collins, will provide content to Bookface.

Time Warner unveiled plans last month for the creation of a separate online publishing venture called iPublish.com. Microsoft also gained widespread attention in May when it teamed with RandomHouse to offer Michael Crichton’s new novel on pocket PCs. Whether e-publishing can generate enough revenue and consumer attention to give traditional publishing houses a true run for their money remains to be seen, but established publishers are scrambling to find their place in the Internet culture.

How E-Publishers Compete

Developing an online business model may be more difficult for traditional publisher than it appears. Mighty Words, for example provides a 50-50 split of royalties with authors, while traditional publishing houses generally provide a ten percent royalty to writers.

Additionally, e-publishers have the potential to reach a tremendous audience online, incurring much lower expenses than those incurred by offline publishing companies that have traditionally spent top dollar for advertising in print publications.

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