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Wednesday, Feb. 16, 2011

E-readers spawn scanning cottage industry


Yusuke Ohki's 2,000 books were crowding out his Tokyo apartment, so he scanned them all into an Apple iPad. Six months later the 28-year-old is running a 120-strong startup doing the same thing for customers.

News photo
It prints, it fits: A worker checks books that have been cut for scanning at the office of Bookscan in Tokyo in December. BLOOMBERG

Japan's cramped living conditions and the arrival of the iPad in May have spawned as many as 60 companies offering to turn paper books into e-books as publishers have been slow to provide content for new electronic readers.

Japan has lagged behind the U.S. in introducing e-books because of a rigid pricing system, uncertainty over copyrights and early problems reproducing Japanese characters on screens, according to Toshihiro Takagi, an analyst at market researcher Impress R&D in Tokyo.

"People are taking matters into their own hands because the publishers are not meeting the market's needs," Takagi said.

Japan's ¥2 trillion market for paper books and magazines, the world's largest, may see an explosion in e-books as Samsung Electronics's Galaxy Tab tablet computer and readers by Sharp Corp. and Sony Corp. take on the iPad.

Sales of electronic books in the country will probably more than double in the next three years to ¥160 billion, according to Yano Research Institute in Tokyo.

Ohki and rivals, including and Scan Honpo, are tapping that demand. Ohki founded Bookscan with childhood friend Shinya Iwamatsu in April, converting books into PDF files that can be read on the iPad, iPhone, Amazon's Kindle and Barnes & Noble's Nook. The company charges ¥100 per book for a service called "jisui," or "cooking for oneself."

"The homemade e-book market will continue to exist as long as the copyright situation isn't dealt with and people can't find books they want in electronic format," said Masashi Ueno, a researcher at Yano Research Institute.

"In Japan, copyright agreements vary depending on the author, meaning a publisher could serialize a comic book but may or may not have the rights to publish it as a separate book."

Japan's copyright laws permit users to digitize protected works for personal and family use, according to Seichi Higuchi, secretary general of the Japan Book Publishers Association.

Reproduction of a purchased work by a third party requires a publisher's permission, Higuchi said. Bookscan requires customers to tick a box to say they have this permission.

"There are more than 30 or 40 scanning companies and a huge amount of books are scanned every day, so I can hardly believe all the scanning is legal," Higuchi said in an interview last month.

"The pressure is building on the publishing industry to meet consumer needs before these homemade contents begin to circulate illegally," said Nobuo Kurahashi, an analyst at Mizuho Financial Group. "This is a sign of latent demand."

Japanese will buy ¥68 billion worth of e-books in the fiscal year ending March 31, most of them comics for mobile phones, Yano Research Institute's Ueno said. Content for tablet computers and e-readers will account for more than half of e-book sales in the year to March 2015, compared with about 3 percent now, Ueno said.

Electronic books were equivalent to 8.7 percent of the $4 billion market for paper print in the U.S. in the first 10 months of 2010, the Association of American Publishers said in December. Sales of e-books in the country are set to almost triple to $2.8 billion by 2015, according to Forrester Research Inc. in Cambridge, Mass.

Sales of iPads and Web-based document storage services such as Evernote and Dropbox have helped spur the cottage industry.

"The iPad's release is the biggest factor in making this business possible," Ohki said. The company in July bought industrial scanners to reduce the four-month wait faced by its more than 12,000 customers, he said.

Sales of consumer scanners at PFU rose 80 percent in June and more than doubled the following month because of the iPad's release, according to Tadashi Oura, head of marketing for imaging products at the company.

The Tokyo-based subsidiary of Fujitsu chartered flights to rush the devices from its factories in China to meet the spike in demand, Oura said.

Japanese buyers of Amazon's Kindle reader are redirected to the company's U.S. site because no Japanese-language titles are available. Lack of content and low demand forced Sony to stop selling e-readers in its home market in 2007. Panasonic gave up in 2008.

Sony, which resumed Japan sales of its e-readers in December, formed a venture last year with KDDI Corp., Asahi Shimbun Publishing Corp. and Toppan Printing Co. to provide electronic publications. The group will take on an e-book alliance of NTT DoCoMo and Dai Nippon Printing Co.

"We are at year zero for e-books in Japan," Toshihiro Konno, who heads the venture between Sony, KDDI, Asahi and Toppan, said at a briefing in December. Konno estimates Japanese will buy about 780,000 e-readers and more than ¥80 billion worth of content in the year to March 31.

Meanwhile, customers are turning to scanners to make room in a country where average living space per person is about 130 sq. meters, or almost half that in the U.S., according to real estate service provider Mitsui Fudosan Co.

Satoshi Tagomori, 28, who works for a pharmaceutical company in Kyushu, had his books scanned to make room for his newborn child, cutting the space occupied by books in his 50-sq.-meter apartment by about 75 percent.

"There was just no more room for books when my son was born," he said. "Plus, I was worried about the shelves falling over."

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