One E-book Per Student

I have a problem. I really want an e-book device that can display 8.5"x11" .pdf files in a highly readable format, but there are none on the market.

So, I have devised a business plan to turn this product into a billion dollar a year industry, in the hopes that some Silicon Valley entrepreneur will run with it and build me my device. As always, I am too lazy to actually make this happen, but you are free to take this plan and make millions off of it. I ask for nothing in return other than an "Inspired by Fat Knowledge" reference somewhere in your pitch to the venture capitalists.

And, because there are those that don't think making a kick ass e-book is something noble in and of itself, this plan also gives all students an e-book while saving the government money, and helps to make college more affordable.

E-book Specifications

To display a 8.5" x 11" PDF file in a highly readable format, I think you need a minimum screen size of 7" x 9" screen (11" diagonal). The device would also need a resolution of at least 200 dots per inch (dpi). For comparison, a computer monitor is typically 75-90 dpi , book, magazine and professional printers as well as photographs use 300 dpi and laser printers can print at up to 600-1200 dpi. 200 dpi on a 7" by 9" screen is a resolution of 1400 x 1800 pixels.

Nothing currently released matches these specifications. The $300 Sony Reader (the little guy in the picture) and the $400 Amazon Kindle have 4.9" x 3.6" (6" diagonal), have 600 x 800 pixel 167 dpi screens. The $700 iRex has a 8.1" diagonal, 768 x 1024 pixel, 160 dpi screen.

There are three 8" x 5.8" (9.7" diagonal) 150 dpi, 825 x 1200 resolution e-books on the horizon: the Hanlin V9 (big guy in the picture), the Netronix EB-300 and the Astak E-book reader. No word on price, but an educated guess puts it at around $6-700.

In the corporate research labs, Seiko Epson has a 7"x 5", 1200 x 1600, 230 dpi screen e-book. LG.Philips's has a 14.3" diagonal, 1280 x 800 pixels, 100 dpi screen which doesn't sound overly impressive until you learn it both displays in color and has a flexible screen. Epson unveiled a 13.4-inch (A4-size) electronic paper at SID 2008, in Los Angeles, the US. Its pixel count is 3104 × 4128 and definition is as high as 385ppi.

Based on the models that have been released and what has been shown off from research labs, I think a 7" x 9", 1400 x 1800 pixel e-book would be doable in the near future.

Adoption Phases

I see adoption of this device in 4 distinct phases each marketed at a different population. At each phase, more devices are made, allowing for more experience in manufacturing, leading to lower prices which leads to more people willing to purchase the device and moving on to the next phase.

Phase 1: $1,000 device marketed to professionals.

The first market for this device would be high end professionals that read a lot of .pdfs and other documents. Example include doctors reading all the latest medical research, lawyers reading about previous cases, computer engineers reading technical documents and professors reading academic journals. These would be individuals making $100,000 or more that could justify a $1,000 expenditure with just a 1% increase in productivity (or who have no problem spending $1,000 for a status symbol).

In the US there are 633,000 doctors, 761,000 lawyers, 232,000 tenured professors, and 857,000 computer software engineers for a total of 2.5 million. There are also 2.5 million graduate students.

If 1% of them purchased an e-book a year that would be 50,000 units and $50 million in revenue.

Phase 2: $600 device marketed to college students.

College students spend on average $900 a year on textbooks and supplies. Assuming that a student can resell books for $300, this is $600 a year in net textbook costs. A $600 e-book would pay for itself in one year, and would save an additional $1,800 over the next three years. This of course assumes that the textbook content is pirated, but one thing we know about college students is that have no scruples about doing that. All it would take is for one person to scan in a copy of the book and then everyone else can access it for free.

The $1,800 benefit over 4 years might lead some to believe that college students would pay even more for an e-book, but I think the typical broke college student could only justify the purchase if the payback period was one year.

While this is good for students, it is bad for the publishers of the $3.35 billion annual textbook market. Fortunately, I have no love for the the publishers as they charge exorbitant prices for their books. Since 1986 textbook prices have risen almost 6% a year far outpacing inflation. This industry has actually gone as far as filing a lawsuit that claims that students' lecture notes infringe on professor's copyright in order to protect their high book prices. It has gotten so bad that Congress has gotten involved trying to pass legislation that would require publishers to tell faculty how much their choices for textbooks will cost students, and require schools to post the list of required and recommended books long before students need to buy them.

As more students got e-books, the publishing industry would probably crack down on the illegitimate copies and offer e-books of their own. These would be of lower price as seen by McGraw-Hill's e-books that are 55% cheaper than printed editions. But, I think a new model of selling textbooks would emerge, possibly bundling access to the textbook content as part of tuition or maybe an open-source content model like Textbook Revolution.

There are 3 million new college students each year in the US and 18 million undergraduate students total. If 5% of new students purchased an e-book that is 150,000 * $600 = $90 million in revenue.

Phase 3: $300 device given to all students entering junior high.

This is where the one e-book per student plan kicks in. Just like the One Laptop Per Child (OLPC) project attempts to give a laptop to every child in the 3rd world, the One E-book Per Student (OEPS) project attempts to put an e-book in the hands of every student in the 1st world.

California currently spends $400 million annually on K-12 textbooks. With 6 million students that works out to $66 a student a year. Over the six years of junior high and high school that comes to $396 a student. Purchasing every student entering junior high a $300 e-book for use over the next 6 years would be $96 cheaper. That savings could be used to pay writers (or possibly have teachers work over the summer time) to create open source content for the books.

The initial pilot schools could be funded via a Gates Foundation grant or possibly an elite prep school with an endowment worth hundreds of millions of dollars.

Besides saving money, this will also save the backs of our youth. The unspoken truth about the steroid epidemic in schools these days is that books have become so heavy that the kids are shooting up just so they can lift their backpacks.

There are 4 million new students entering Junior High each year in the US. Equipping 25% of them with an e-book would make for a market of 1 million * $300 = $300 million a year.

4: $150 device marketed to the reading public at large.
There 300 million Americans. If just 2.2% of them purchased the device a year that would be a market of 6.6 million * $150 = $1 billion.

For comparison, Apple sold 50 million iPods in 2007.

Conclusion

This business plan shows how you turn selling an e-book that can display .pdf files into a billion dollar a year market. It shows the adoption curve that would be used and who to market the product at in each step. The numbers here are just for America, and are therefore highly conservative as including Europe, Japan and the rest of the world would lead to numbers 3 times as large.

So please, for the sake of the children, for the sake of poor college students, and most importantly, for my sake, will someone build this device?