In early 2001, Publishers Weekly did a small story about a new online e-book store called Fictionwise, with offices in Chatham, N.J. The site was launched and directed by two brothers, Scott (above left) and Stephen Pendergrast, and offered about 500 unencrypted e-book titles for sale. Fictionwise specialized in short stories and science fiction; had a staff of about five employees; and was selling about 10,000 units a month.
Eight years later, Fictionwise has just been acquired by Barnes & Noble (the chain folded its own e-book store back in 2003) for more than $15 million. In 2009, Fictionwise (and its sister site eReader) now offers more than 60,000 e-book titles in every format available. In 2008 the site sold well over 100,000 units a month. Oh, and they still have five employees.
Welcome to the e-bookwise world of the Pendergrasts and their vision of a general-purpose e-book store offering titles for any kind of hardware a consumer may have. “It's been a slow tipping point,” says Scott of the market for e-books, “but the market is accelerating.” Since its launch in late 2000, Fictionwise has grown steadily in both its offerings and sales. To their credit, the brothers have managed to resist the pendulum swings of opinion about the e-book market. They smiled at the early hype about a fast-growing e-book market that would make paper books obsolete and set their sights on slow but steady growth. When the conventional wisdom said consumers would read only business, reference and SF e-books, the brothers brought in more kinds of fiction, adding romance, mystery, action and other genres.
“We've had five employees for years,” Stephen says. “We automated everything. We knew other dotcoms were overstaffed, so we concentrated on getting content and keeping costs down. People said the e-book market would reach $3 billion in two years. We knew that wasn't true.”
First, the brothers—Scott is a businessman and entrepreneur with a background in corporate training; Stephen is a software engineer who used to work for Bell Labs—looked for a venture that would combine their skills and training. Scott had already launched Mindwise, a B2B Web site offering corporate training. In 2000 he hired Stephen as a software consultant and together they began to plan a new online venture. Since online training sites like Mindwise are “essentially about managing digital content, we decided to stick with e-books,” Scott says, noting that this was just months before Stephen King's Riding the Bullet sparked a media sensation over the potential of the e-book market. Later, in 2000, they launched Fictionwise as a password-protected site. “We took off the password and within a few hours sold 17 titles with no promotion,” Scott recalls. (They've since given that original customer a lifetime membership).
Fictionwise's growth was driven by the early popularity of PDAs, handheld personal information devices from companies like Sony and Palm. “Then Sony pulled out of the PDA market in 2003, realizing that the cell phone would be the device,” Stephen says. “That hit us hard, but there was still solid growth.” But nothing compares to the impact of the iPhone in 2006, says Scott, “that and the App Store have changed everything.” Now, Scott says, “everyone wants a phone with a large color touch screen. It changed the smartphone business, and larger screens have helped reading on phones.” Fictionwise is also a software developer—the company quickly developed its own e-book software for the iPhone. And having the App Store right on the device “was like having a banner on prime-time TV,” Scott says.
In 2008 the company acquired eReader.com (the old Peanut Press/Palm Digital Media format). “It gave us our own e-book format,” Stephen says. “We could design the product and add platforms like Mac OSX, Symbian, Blackberry and Android.” By early 2008, Fictionwise began getting offers from a number of companies looking to acquire it. Scott says, “We were intrigued by [B&N president] Steve Riggio's vision.” The brothers believe Fictionwise should be “platform-neutral, no lockdowns, and we wanted our format everywhere. B&N's vision matched ours and they offered a lot of resources.”
Although still relatively small, today's e-book market is poised for continued growth. “Ninety percent of the top 50,000 trade book titles are all available as e-books,” Scott notes. “And there are still tens of thousands of secondary titles waiting to come into the market. There's been no retreat in the e-book market and there are tremendous opportunities ahead.”