For most of the large UK publishers, it is no longer a question of if, but how and when digital books will take off

<p>Over the past 18 months, trade publishers have been forced to confront the reality of a rapidly evolving digital marketplace. Aggressive moves from Google and Amazon, a proliferation of new e-book readers, and an exploding audio download market have compelled them to consider what their place will be in this brave new world.</p><p>Digital warehouses are--metaphorically speaking--springing up everywhere; the latest is being set up by the Random House Group, which this month revealed plans to invest &#163;5m over the next three years in a UK-based digital archive.</p><p>The publisher has contracted IT company Virtusales to build the digital warehouse, which will be offered as a service to existing distribution clients and other interested parties. The warehouse will be ready for file upload by the New Year, when RHG expects to start digitising backlist "quite aggressively", prioritising titles it thinks have most potential to make money.Group m.d. Peter Bowron says RHG is "a matter of months" behind HarperCollins, which announced its digitisation strategy with greater fanfare last December. HC is working along the same lines as RHG, having selected an external developer, NewsStand, to create its digital warehouse, and also estimating the cost of the project to be "in the seven-figure range". But HC's warehouse will be global, whereas RHG's is for the UK only.</p><p>Multi-platform approachPenguin, meanwhile, believes the one-warehouse-fits-all approach is wrong. "We are probably not going to create a single enormous depository," John Makinson, chairman and c.e.o., says. "I don't think it's the best answer in terms of flexibility and how assets are managed to have a single giant repository. That is an old-fashioned approach. To store travel books in the same way as Penguin Classics doesn't make sense."</p><p>Penguin already has the Pearson Asset Library, "the heart of our digital repository"; Makinson looked at using this as an overall digital warehouse, but decided against it. He says the publisher is likely to have a series of digital storage systems that will share common standards, rather than one big archive.</p><p>The cost of the project for Penguin is not so much about digitising Penguin backlist (which comprises "sending Penguin Classics to India to be, effectively, scanned and sent back"). "It is much more complicated and expensive to take, for example, DK Eyewitness Guides and take every component of the book, so any image or piece of text can be stored and identified in relation to rights information. That is quite a sophisticated thing to be able to do and is what complicates matters," Makinson says.</p><p>"What's different about our approach at Pearson is that HarperCollins has a HarperCollins strategy, and Random House has a Random House strategy, but these are not a News Corp or a Bertelsmann approach. We are definitely taking a Pearson-wide approach, as I am convinced common standards have to be applied across the company."</p><p>Macmillan's offer comes from its MPS Technologies division, which unveiled at Frankfurt the digital book platform BookStore. Like RHG's warehouse, it is open to third-party publishers. The technology for BookStore is built in India and allows publishers to tailor-make their own solutions; for example, Pan Macmillan will use it next spring as the back-end platform to launch up to 40 titles as e-books. "All our books are in a digital format of one sort or another, but they are in different places," Sara Lloyd, Pan Macmillan head of digital publishing, says. "Our e-book platform developed in conjunction with BookStore will bring them into one place." </p><p>Playing a waiting gameThis means there are currently at least five digital warehouses in development, and smaller publishers are watching all moves with interest. "Those who are more medium or small-scale need to let the market mature a bit before making choices," says Stephen Page, c.e.o. and publisher at Faber. Page believes the market for digital warehouses will, over time, consolidate along similar lines as the marketplace for physical warehouses has done. "It's immediately obvious to me that there will be a range of partners for this. The cost of entry is a bit like it was for [physical] warehouses, and we have come down to a sensible number of those."</p><p>RHG believes digitisation is an "absolute priority", Bowron says: "We've seen what's happening with music and newspapers, and we are lucky our business is being affected later and less. But we don't want to be caught with our trousers down. This is about evolving ahead of market developments." But other publishers are playing more of a waiting game. Hachette Livre UK "is in the planning stage", says c.e.o. Tim Hely Hutchinson, who feels that, as the e-book market has not yet taken off for trade publishing, "there doesn't seem to me to be a vast hurry".</p><p>Burned by an experience in 2002 when "a huge amount of time and money" was spent on digital initiatives but the market did not develop, he adds: "I don't want to spend potential millions until I know exactly what it's all for. I would feel a fool if I invested in a particular way if it turned out to be not what the public wanted." Hachette's digital initiatives will be led by Hachette Book Group USA. "In the US, we sell e-books and have a vast audio download business. They are further advanced," Hely Hutchinson says. "We will tend to work with them and use their resources and leadership."</p><p>Tipping pointThe first fruits from publishers' digital warehouses are already on show. HarperCollins unveiled in August a "browse inside" function that enables web users to read pages from some of its books online; Penguin is about to launch a site for Dorling Kindersley's Top 10 Travel Guides that will allow users to combine elements of different guides.</p><p>Penguin is also making "small numbers of millions of pounds" from the syndication of content to business-to-business information providers, and says that downloadable audio [revenue] is running to several millions of pounds.</p><p>HarperCollins is making "decent, highly profitable revenue" on the Collins side of its business, where it has been licensing dictionary content for a year. It has also been experimenting for several months with other revenue streams, producing a version of a Collins bird guide for use on mobile phones, and working with ICUE to make 10 fiction titles available for download to phones. Jim Green, digital development director, says: "I guess it's been relatively slow. It's a trial, and hasn't been broadly publicised."</p><p>Serious revenue from digital initiatives may take longer to arrive, publishers say. But "fairly quickly, digital content will be used for promotional purposes and will therefore increase sales of physical copies", Bowron says. The tipping point