The Kids Book Company

In March, Anna Quindlen wrote in Newsweek, "Well, what is a book, really? Is it its body, or its soul?" Publishers of all stripes are struggling with that definition, including children's publishers. Picture books have used artwork as a core part of their storytelling as long as the art form as existed, yet they have always evolved, too. "The printed book hasn't stayed static—look how popular graphic novels are with kids," says Eliza Dresang, the Beverly Cleary professor for children and youth services at the University of Washington and author of Radical Change: Books for Youth in a Digital Age. "Things aren't the same, and they never will be."

Although children's book publishers are pretty confident in the long-term survival of printed books for children—"Children are still going to have a bookshelf," says Susan Katz, president and publisher of HarperCollins Children's Books—they are far from ignoring the elephant in the room. Katz admits: "They'll have shelves with many other things, too."

On those shelves no doubt will be plenty of electronic gadgetry, and children's publishers are working to determine what defines a book, which devices to embrace, how to handle digital rights (and who has them), and how they can make money with e-products.

Certain trends are already emerging, chief among them being interactivity. "We're entering into a new interactive art form," says Rick Richter, formerly the president of Simon & Schuster Children's Publishing and now a digital media consultant. Freed from rules about page count and paper weight, digital creators enjoy great flexibility. In the process, they can appeal to nonbookworms, such as computer and game geeks. "If anything, it will lead a lot of kids to books," says Richter. He's not alone in this belief. "Early reports indicate that this content is not replacing traditional books. It's replacing games," says Kristen McLean, executive director of the Association of Booksellers for Children. "Parents would rather see their kids engaged in book content than in game content."

And after all, personal computers were just starting to catch on three decades ago, so what happens in the next 30 years is a roll of the dice. Yet publishers say it's invigorating. "About the digital revolution in the children's space I feel a bit like Paul on the road to Damascus: knocked abruptly from my mule, I rise a sudden, passionate, all-consumed E-postle!" says Chip Gibson, president and publisher of Random House Children's Books.

Print & E: Room for Both?

Cannibalization of print sales has often been the chief concern about the increasing foothold of e-books and other digital products, but none of the publishers PW spoke with expressed worry that digital products would supplant traditional print (a few large publishers declined to comment for this story). "It's never been our intention for one to replace the other," says Jeanne Mosure, senior v-p and group publisher of Disney Publishing Worldwide. "Our intent is that it's always going to push the sale of our books." Indeed, with Disney's Kingdom Keepers app, readers must have the book to "unlock" the game. Scholastic's 39 Clues series requires readers to both use the computer and read the books. "I have never believed in cannibalization," says Nicholas Callaway, chairman of Callaway Arts & Entertainment, which created the iPad app for Miss Spider's Tea Party, with enhanced narration, animation, interactivity, and sound effects. Author David Kirk has sold more than six million copies of his 1994 book, but the app has given his story a new lease on life. It currently sits at #16 on Apple's list of top paid iPad book apps. "I also believe the nature of technology is both and not either/or. The print-based book is one of civilization's greatest inventions," says Callaway.

Publishers and authors typically say they want kids to be able to read (and interact with) a story in any form, including electronic devices. "They're not so much competitors as they are companions," says author Amy Krouse Rosenthal, whose Little Pea is the book of the month for Readeo.com, a subscription site that lets children and adults in different cities see live video of each other sharing digital picture books. "You might own it in both forms. One doesn't preclude the other."

Indeed, a child today may read a print book at home—and an app version of the same title on his mother's iPhone in the grocery store. To tap into the new reality, publishers are taking some risks. "Everyone is experimenting to some degree—retailers, publishers, authors," says Neil De Young, executive director of Hachette Digital.

An Apple a Day... or Maybe a Kindle or Nook

With its sleek and powerful iPad, iPod Touch, and iPhone, Apple dominates discussions of the future of children's digital publishing. Customers have downloaded more than four million apps, though Apple doesn't track how many of those are children's titles. And they have purchased 1.5 million e-books for all three devices. (E-books for the iPhone and iPod Touch became available last month with the introduction of a software update.) Disney appears to be an early leader in terms of children's e-book sales. At Apple, the top 20 bestselling children's e-books include Donald Duck Goes Camping, Toy Story 3 Junior Novel, The Little Mermaid: A Special Song, Cars: Race Day, Cars: Red's Tune-Up Blues, and So Long, Partner. When it comes to paid iPad apps, Disney and Dr. Seuss are the big winners, with Toy Story 3 Read-along, Toy Story 2 Read-along, Green Eggs and Ham, The Cat in the Hat, MeeGenius!, Alice for the iPad, and Jack and the Beanstalk.

The cost of iPad apps ranges from $1.99 (for Dr. Seuss's Gertrude McFuzz) to $9.99 (for the elaborate Miss Spider's Tea Party), but it's unclear whether parents will fork over the money for kids to use a $499 iPad that might easily fall into the toilet or sandbox. "We do think it's going to take a little bit of time to determine how relevant this platform is going to be for kids," says Deborah Forte, president of Scholastic Media, which has brought Clifford's Be Big with Words and I Spy Spooky Mansion, its top-ranking apps from the iPhone and iPod Touch, to the iPad. "We're not just doing iPad content because the iPad is there. We're doing it because we feel it's a new and exciting way to connect our kids and to expose our book-based brands to them."

However, Apple's products are hardly the only show in town. E-readers include the Fisher-Price iXL, Leapfrog's Leapster Explorer, the Sony Reader Digital Book, the Kindle, the Nook, and the V.Reader, which VTech introduced at Toy Fair in February. At $59.99, the V.Reader offers titles such as The Little Engine That Could, Shrek, Olivia, and Dora the Explorer.

Publishers express little preference for one device over another. "We're neutral," says Simon & Schuster spokesman Adam Rothberg. "Our job is to bring the books to the readers at the outlets they're shopping in." But certainly some devices will become obsolete. "There's a pretty strong argument to be made that the single-use device—the Kindle and the Nook—is going to be an endangered species in a couple of years," says Richter. He expects that someone will design a more rugged version of fancier devices such as the iPad, which will increase their use among kids and teens.

But even the developers worry about parents plopping their kids in front of devices. "You can't put a two-and-a-half-year-old in front of a computer screen and engage them like you can with a book," says Brent Steiner, president of Ripple Reader, a do-it-yourself program that lets parents, kids, or grandparents record children's stories in their own voices. "Ripple is not designed to be a baby-sitter."

Improving on Traditional Books

The challenge for publishers, according to Hirschhorn, is to enhance books and keep the content fresh, original, and high quality. Devices let publishers blend animation and text, so readers can use books that repeat back to them or let them follow the bouncing ball. "It opens itself up beyond formal reading," says Hirschhorn.

Children can now "literally participate" in a book, says Sharon Streger, owner of Sequel Creative/Sequel Digital, which develops interactive, sing-and-record kids' apps. "Why do a pan-and-scan version when you can actually put the child into the book for a complete experience?" she asks. "The iPad and other color devices like it will continue to evolve and form a new standard for publishing children's product that is a mixture of reading and activity." Callaway's Miss Spider's Tea Party app lets kids do everything from play matching games to color images on screen as in a coloring book, while Oceanhouse Media's Dr. Seuss apps, which include The Lorax and new releases Green Eggs and Ham, Hop on Pop, and Gertrude McFuzz allow them to touch a picture and see the word pop out.

Still, some apps are basically scans of the pages, Streger says. Publishers are figuring out how to use apps to give novelty books, such as expensive lift-the-flaps, a new lease on life. So far it's not possible to make lift-the-flap, pop-up, or touch-and-feel titles, such as Pat the Bunny. But no one doubts that they're coming. "We have to figure that out!" says Umesh Shukla, chief creative officer for Auryn Inc., a Los Angeles developer of animated titles for the iPad and other app-based devices.

"We fundamentally focus on trying to make the content come to life," says Josh Koppel, co-founder and chief creative officer of ScrollMotion, which works with Sesame Workshop and Houghton Mifflin Harcourt, among others. "We're trying to bolster what is fantastic and what we love about children's content, but only supporting it with technology, not creating something that is in any way foreign."

Many smaller companies are in on the act. FableVision Studios, for example, creates interactive graphic novels, digital storybooks, and iPhone apps. Tiny Oceanhouse Media, with one full-time employee (and 24 contractors) has the exclusive right to make apps of Dr. Seuss's work. And MeeGenius! is a children's app that digitizes children's classics and new stories and lets parents and kids personalize books. The trick may be resisting the impulse to overdo. "A lot of people go too far," says Oceanhouse president Michel Kripalani. He avoids turning books into games. "That's not teaching a child to read," he says.

Digital books for teens are a small but growing market as well. Already, they are using their parents' Nooks and Kindles. And especially in Japan, they appear willing to read e-books on smartphones. Their motto, says Richter, is: "I want to consume media when I want to consume media." Already, adolescents with iPhones and iPod Touches can read Cathy's Book, an interactive romantic thriller about a girl whose dad dies unexpectedly and whose boyfriend breaks up with her. "It fully exploits the possibilities," says Richter. He considers it groundbreaking, like Stephen King's Riding the Bullet, which was the world's first mass-market electronic book when it was released in 2000. (King defied skeptics by selling a half million or so $2.50 downloads in one day.) "Pay attention to these watershed moments," he says. "There are things that are happening that don't have anything to do with a catalogue or a galley."

And thanks to texting, teens are already very accustomed to looking at tiny type on cellphones. "Smartphones along with tablets and other electronic devices will be among the many devices that kids and teens will use to access their favorite books," says Forte of Scholastic Media. "We must look at the market as a multiplatform opportunity for electronic books, because young people are interested in connecting with each other and the things that they love, including their books, 24/7, wherever they are."

The Financial Picture

The trick is figuring out how everyone can make money. (Large publishers will also need to prove that they're necessary since it's easy to self-publish e-books and small companies can make apps.) So far publishers seem to be acquiescing to Apple's iTunes model (30 cents on the dollar to Apple vs. 70 cents to the "content owner"). And to date, there is no consensus on how that 70 cents gets divided among the publishers and authors.

For now, on a $10 e-book or app sale, Apple gets $3 and the publishers and authors split the $7. The author typically get 25% of that $7—so $1.25. But that's on a $10 app, such as Miss Spider's Tea Party. On a $1.99 app, such as Gertrude McFuzz, the economics are worse. Traditional hardcover picture books sell for $15 to $18, and authors might get a 10% royalty based on the retail price—$1.50 for a $15 hardcover book. Paperback children's books typically sell for $6.99 to $7.99 and give authors an 8% royalty based on retail price. The bottom line: "The higher the price of the app goes, the more comparable it gets to traditional publishing," says Richter.

Not surprisingly, authors of e-books with low prices worry about whether they have traded their price down, says Richter, who doubts that app prices will remain so low. Just as iTunes hooked listeners with 99¢ songs and then raised its prices, the app store and iBookstore could do the same with books.

Readers may not want to fork over more money, even for high-quality fare. "There's a lot of pressure to reduce the price the consumer pays," says Katz. "[But] we're here to run a business. We have to pay our authors and artists." Perhaps publishers could get advertising sponsors, she postulates—"like on PBS."

Publishers will increasingly take on the role of "curator," Richter predicts. "The physical distribution will become less and less important." Instead, publishers will focus on producing the best possible stories—and then making them "discoverable." Apple, after all, is not going to push specific titles. "They're agnostic," he says. "They don't care."

A Role for Booksellers

Meanwhile, booksellers are figuring out how they will sell e-content for these devices. Barnes & Noble and Amazon sell e-books through their sites, and Borders has recently entered the e-book game as well. But at the moment, the American Booksellers Association's IndieCommerce program is the only option for indies. "It's the best hope for independent retailers to be able to be competitive in e-content," says McLean at the ABC. To participate in IndieCommerce, independent booksellers pay a one-time, $350 setup fee, a $225 monthly fee, and fees for credit-card processing. For the near future, e-books will continue to be sold through stores' Web sites only, though some sellers have set up kiosks in their physical stores with access to their sites. "Our goal is to ensure our members have the tools to serve their customers however those customers want to be served—whether that means print or digital," says Matt Supko, who, as technology director for the ABA, oversees IndieCommerce. The ABA recently partnered with Google Editions, which will offer books that are readable on any e-reading device.

McLean believes that readers will still go to local stores for tender loving care, service, and reviews, however. "The curation of books is one of bookstores' greatest roles. Online booksellers are terrible at helping you with the more intuitive process of recommending a book." But booksellers will need to evolve. "[They] can't think of themselves as libraries," she says. "They don't have to carry everything."

Who's Got the Rights?

Rights are a thorny issue, and publishers can't assume they've got them. "Whether or not publishers own electronic rights is a point of convention," says Richter. He predicts "a bifurcation," with authors signing separate contracts for digital and print. With the Dr. Seuss titles, Random House owns the print rights, but Oceanhouse Media owns the rights to make apps. "It's a very different process to make an app," says Richter. "It's closer to making a movie. The competition is going to get very intense." That's partly because publishers will find it more difficult to uphold territorial rights. "It's going to be an uphill battle to enforce that in the long term," Richter adds. Any contract signed today addresses electronic rights, but until recent years, authors did not routinely sign them away. "Many of the old contracts are silent on digital rights—on royalties specifically," Hirschhorn says. "We're going to have to go back on a case-by-case basis."

So in many cases, publishers need to get digital rights retroactively. "We've been negotiating with all our live authors and illustrators," says Katz. "If the author or illustrator is not with us any more, we work with the estate."

Some publishers may think an exclusive right to publish a story in book form includes e-book rights, but they need to be careful. "Where there is a real ambiguity in the language, courts do put a thumb on the scale in favor of the author," says Paul Goldstein, a Stanford law professor who specializes in copyright. "It's risky because we're dealing with contracts that go back to a time well before anyone thought about this."

Under the Copyright Act, a reproduction right permits "the right to make a literal copy," which could be electronic or print, says Goldstein. To alter a book and turn it into a movie, producers need to get a separate derivative right that deals with adaptations.

Still, an old-fashioned book leaves things up to the child's imagination. "The battery-free book is hard to improve upon," says Richter. "Children are the animators in their mind. By animating a picture book in a substantial way, you're stripping out some of the imaginative qualities." And it's safe to assume that books—regardless of their form—still need great plots, writing, and characters. All the bells and whistles in the world can't turn a lemon of a book into a winner. "The basic thing across every kind of media—I don't care whether it's handheld or digitized—is the story," says Dresang. "If it's a bad story—redundant, pedestrian—I don't care what form it's in, it's going to lose children's attention."

But publishers seem determined to take full advantage of the brave new digital world. "The possibilities for extraordinary picture book development enabled by the new and imminent color devices are vast, and our editors and creative folks are absolutely galvanized," says Gibson at Random House. "It is the most exciting development I have ever experienced in my eons-long career. So saying, we are holding all digital development to the extraordinarily high standards that we bring to print. The digital picture books we bring to market must be innovative, must be technologically flawless, must exceed the expectations of the consumer, and must—above all else—delight kids."

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