In addition to Wales, other CK-12 advisory board members include CEO of Sun Microsystems Vinod Khosla, CTO of JotSpot Graham Spencer and founding principal of the High Tech High charter school program, Larry Rosenstock.

CK-12 intends to make use of the Creative Commons Attribution-Share Alike license. Meanwhile, Wales' other open textbook project, Wikibooks, is licensed as GNU Free Documentation. Both licenses ensure that the book content is free to be copied, redistributed and modified for either commercial or non-commercial use with the only major stipulation being that author's receive attribution. Wikibooks currently has over 38,602 volunteer edited pages with subject matter in natural sciences, computing, humanities and social sciences. The project already includes books from at least 15 different languages.

According to CK-12, the difference between Wikipedia and CK-12 is that the organization "specifically focuses on K-12 standards-based content centered around the STEM (science, technology, engineering, and math) subjects vs. serving as an encyclopedia of knowledge...CK-12 offers materials such as lesson objectives, vocabulary, and Q & A - similar to those found in textbooks." However, the group does not address comparisons with Wikibooks. At this early stage with CK-12, the key difference between Wikibooks and CK-12 appears to be that the latter organization envisions one day supplying printed textbooks via an on-demand press similar to Lulu or Blurb.

Data on market size is hard to come by. Albert N. Greco, in his book "The Book Publishing Industry" (the relevant extract of which is available, ironically, on Google Books), pegs the number at $65 billion in 1993. The value is probably higher by now. In any case, it is big.

An author writes a book, and you read it. A lot of money is exchanged between those two actions. Consider the steps an author has had to go through in the past to make a living from writing books:

1. Find an agent, who takes a cut and finds a...
2. Publisher, who arranges everything and takes a very big cut and delivers the manuscript to the...
3. Printer, who takes a cut and delivers the product to the...
4. Distributor, who takes a cut and delivers the books to the...
5. Retailers, who sell one to you.

Courtesy of iReaderReview, we have created a very simplistic view of how the pie is currently divided:

• Author: 10% (This in fact ranges between 8% and 15%, depending on the author's clout -- e.g. Stephen King does better than most. If the author has an agent, the agent's cut comes out of this. It is indeed tough for new authors.)
• Publisher: 30% (This ranges between 25% and 32%, again depending on the author's clout -- e.g. their percentage is less with Stephen King because the risk is lower too. Note: this is their net revenue, after deducting author royalties and printer fees.)
• Printer: 10%
• Distributor: 10%
• Retailer: 40%

Enter the Dragon: Amazon

Jeff Bezos, who could go down in history as the most driven and talented entrepreneur of the Internet age, shook up this last stage: retail. About a decade ago, people were talking about how retailers were "getting Amazoned." But then a couple of things happened:

1. Amazon discovered that pick-and-pack distribution through warehouses was almost as expensive as running stores on Main Street.
2. Because the end product was still a physical object, many people still liked browsing in bookstores.

During all of these bruising battles, the publishers did just fine. The long-tail of online media enabled them to sell more of their back catalog.

So, we know how e-commerce played out. But then along came three more waves.

The Three Big Waves Hitting the Industry

One massive wave crashing down is confusing enough. But when three crash at the same time, even seeing what's going on (let alone predicting how things will play out) becomes really difficult. These three big new waves are:

1. The digitization of print books by Google Book Search.
2. Increasing consumer acceptance of e-books, mostly because of the Kindle.
3. Print on demand.

Wave #1: Google Book Search Archive Digitization

The first wave, Google Book Search, has kicked up a storm of controversy, with some waving lawsuits in the air. Google threw down the gauntlet in classic Google style, threatening every player in the industry. Its initiative has reached an impressive scale:

"On October 28, 2008, Google stated that it had 7 million books searchable through Google Book Search." (Source: Wikipedia)

Google is dealing with three types of books here:

1. Books in the public domain but no longer in print or easily accessible outside of libraries. These are useful for research and can be downloaded as PDFs. Google has scanned these at considerable cost, and the content does not seem to be a good platform for selling ads, and so we would assume this is not a directly commercial venture. Non-profit initiatives in Europe are doing the same sort thing. No one could really argue with this point.
2. Books that are out of print but still copyrighted. These were the subject of legal action taken by the Authors' Guild and the Association of American Publishers to protect publishers' revenue from back catalogs and authors' royalty streams. The case was settled in October 2008.
3. Books that were scanned by 20,000 publishing partners and sent to Google, which restricts how much of any one you can read online. Publishers are using Google in its classic role as a source of traffic. They hope the extracts entice you to buy the books.

But this does not bear on the best-sellers and books that you buy at airports. Google is simply performing its normal role of directing online traffic.

That is where the second wave, Amazon's Kindle, comes in.

Wave #2: E-Books

With the Kindle, Jeff Bezos finally gets rid of those warehouses and delivery trucks. He still works through major publishers. As Steve Jobs did with the iPod and iPhone, Bezos is using a device to extract high rent for digital products delivered through the device.

Alternatives to the Kindle exist, of course. But alternatives to the iPod and iPhone exist, too, and Bezos is betting that his device will exact similar loyalty in consumers, forcing all of the major players to work with Amazon.

So, what does the book publishing revenue pie look like with the Kindle now in the eco-system? Let's look at this from the point of view of authors. That seems a good starting point. Without authors, there would be no readers and thus no value for intermediaries to extract. Well, it turns out that the Authors' Guild (yes, the one that sued Google and got a settlement) has a strong opinion on the Kindle, as its President, Roy Blount, explains in an article in the New York Times.

Blount probably gets good legal advice. He is going after a weak link in Amazon's legal defense, as he explains:

"Serves readers, pays writers: so far, so good. But there's another thing about Kindle 2 -- its heavily marketed text-to-speech function. Kindle 2 can read books aloud. And Kindle 2 is not paying anyone for audio rights."

But this seems like a side issue. The real questions are:

1. Does the reader get a cheaper product? Well, not yet. But consumers seem to be sending a loud message that e-books should be cheaper.
2. Will authors get more than the 8 to 15% share of the pie that they currently get? That should be possible, because a few big pie-sharers have been eliminated by the Kindle, namely:
   • Printer: 10%
   • Distributor: 10%
   • Retailer: 40%.
   Unless Amazon is giving a bigger percentage to publishers (which is unlikely, but possible), 60% of the pie is available to be shared between Amazon, publishers, authors, and readers.

Here is an author asking all the right questions. And in the comments, another writer addresses the question of royalties on Kindle sales:

"One-third of the cover price. If Amazon discounts the book, they still pay you one-third of the cover price you submit."

He goes on to explain that authors are paid monthly, and they do not ask for exclusivity and do not get advance royalties. That all sounds fine. You can check the actual terms and conditions on Amazon's Digital Text Platform, and the forums contain other advice.

But note that one-third of the cover price goes to the publisher. That is not the author's cut. So, with the Kindle in the mix, the pie appears to be more like this:

• Author: 8%
• Publisher: 33%
• Printer: 0%
• Distributor: 0%
• Retailer: 0%
• Amazon: 59%

In other words, publishers and authors get no more than they did before, and Amazon takes everyone else's cut. This is very good if you own Amazon stock and quite a worry if you are a printer, distributor, or retailer.

Wave #3: Print on Demand

Not everybody wants to pay $359 for a Kindle, particularly when e-books for it are not significantly cheaper than print versions. Also, most books are not yet available on the Kindle, and many (for example, ones with a lot of high-quality images) are not suitable for the device (at least not the current version).

This is where the third wave, print on demand (POD), comes in.

While printing single copies of books using traditional technology such as letterpress and offset printing was simply never economical, digital printing technology now makes it possible.

POD caters to the new long tail: new books that are not best-sellers. Authors go through one of the POD intermediaries: Lulu and Blurb.

In simple terms, the intermediaries allow you, the author, to sell books one at a time. (You could give your book away for free, but you would still have to pay Lulu or Blurb for printing costs.) The model requires no up-front cost from you and no minimum purchase from the reader. Your print-ready content goes to Lulu or Blurb's printing partners, which print and send the books to readers. The printers are willing to work with these intermediaries because they aggregate demand.

You, the reader, see no difference. You order online, pay by credit card or PayPal, and get the book delivered to your home or office.

This initially caught on in the self-publishing and vanity publishing industry, where books often had no market beyond the author's immediate circle of friends, family, and associates. For a good breakdown of the types of publishers in this industry and what to look out for, see this article.

A lot of publishers specialize in this area, including Epigraph, Xlibris, I-Universe, AuthorHouse, SelfPublishing.com, and BookSurge. But they typically require a minimum order, albeit a small one. Blurb and Lulu have used the Web to take this idea to its extreme: no up-front costs, and books printed one order at a time.

Part 2: Wiping the Muck from Our Crystal Ball

In part 2 of this series tomorrow, we will look at how this could play out for the major players:

1. Readers: will we all get more choice at better prices? Almost certainly.
2. Authors: will making a living from writing books be any easier for them? This is important to a lot of people but far from certain.
3. How will the other players (publishers, printers, distributors, and retailers) evolve to meet the challenges of this new world?
4. What new intermediary models will emerge, and which players stand to profit from them?

UPDATE: Part 2 of this series is now available. It explores how this could play out in the future, specifically for the major players of book publishing: readers, authors, printers, publishers, retailers, and e-book device vendors.

Said Hewlett-Packard's Andrew Bolwell in a recent ABC World News feature on the book,"We think a book like this that's printed only after it's ordered, that's personalized for the end user, is absolutely the future of publishing. You can have your own family cookbook with Grandma's recipe through to Martha Stewart's recipe."

It appears that unbeknown to Bolwell, the future (much like President Obama) has already arrived. RWW has already covered a number of companies where products are produced on an individual basis and personalized to the user. Below is a list of companies that allow users to upload, price and purchase their personalized books:

1. Blurb: Blurb offers users the chance to personalize books in a variety of formats. The quality of this product is extremely striking and buyers can opt for a number of page layouts and finishes. The company is one of the few businesses able to earn healthy revenue in our down economy.

2. Lulu: Similar to Blurb, Lulu also allows customers to personalize and create books. Users can upload photos from their Facebook, Flickr and Photobucket accounts as well as directly from their computers. The finished products are sold in the Lulu online storefront as eBooks or physical hard covers. The company even offers square, compact and wallet sized options.

3. CreateSpace: In late 2007, Amazon launched CreateSpace as an on-demand book publishing service. In addition to being able to create a personalized book and sell it in the Amazon storefront, users can also create Kindle-specific books, audio CDs, MP3s, DVD's and video downloads. While the service isn't as sleek as Lulu or Blurb, the potential to reach the Amazon audience is a huge draw to those looking to earn money with their creative talents.

4. Scribd: Another site with a large audience, Scribd recently launched their own store this past April. With 60 million unique visitors per month, the company is a great platform for those looking to publish their original works. Budding authors can price and publish their books alongside Simon and Schuster titles in the Scribd storefront. For now, the storefront only services the eBook audience.

5. Tastebook: Both Grandma and Martha Stewart's recipes can live side-by-side in this personalized cookbook making site. Featured in a RWW article on recipe resources, this tool offers users the chance to personalize cookbooks and produce them on an individual basis.

The Obama Time Capsule is obviously a very cool project, but it's clear to see that personalized book production is certainly not a new concept. That being said, regardless of whether or not it's a paradigm shifter for publishing, the quality of The Obama Time Capsule, coupled with Smolan's recognition as a TIME photographer and TED speaker will likely still draw fans.

UPDATE: It turns out Obama's Time Capsule IS actually made possible by Blurb's global print partner network, a partnership which exclusively uses the HP Indigo digital printing presses. Other partners include Google, Facebook, AOL, Glam Media and paper manufacturer NewPage.

Seeing the Blogosphere afire with tales of crisis in start-up land, with emails going from the wise investors to their portfolio companies, makes me think: no duh! Driving with your eye only on the rear view mirror is not smart. I hate to say "I told you so" but some times I cannot help myself. We have been banging this drum for a year. Not that it took a genius to see that a downturn was coming, it was bleeding obvious! We followed up with perspective here and here. When the sky started to fall a few weeks ago we started to look on the positive side.

Of course companies should keep their costs as low as possible. That has been the obvious for centuries. So last week the advice was "spend like drunken sailors?". Seriously, this kind of boom one day, gloom the next reminds me of the crazy behavior that got us into this mess and which, if you want a good laugh, you can watch here or embedded below. By the way, that video was from a year ago!

Blurb Is Just An Old Fashioned Story

The key points that came from Eileen Gittins don't sound terribly interesting, except that in today's world they are so unusual:

1. A "seasoned" management team. Like somebody at the helm who has sailed through a storm before.

2. Aligned with their VC. Some VCs push the "shoot for the moon at all costs" approach. Blurb's backer, Canaan Partners, was aligned with the push to profitability before that was fashionable.

3. Willingness to make trade offs. Sure we all want profits asap. But in the real world there are decisions and trade-offs. These may involve deferring features, leaving a market until later, being more niche than generalist. It is almost always a growth vs profit trade-off ("revenues are vanity, profits are sanity"). The Blurb story is full of those. Now Blurb are in a position to do the things they delayed earlier, while their competition is retrenching.

4. Being contrarian to some degree. Blurb got funded in 2005. They had nothing to do with advertising and you would have to be a spinmeister to call Blurb "Web 2.0". Blurb uses Internet technology (er, who doesn't) to deliver a different value proposition to satisfy a demand that has not changed since Gutenberg. Canaan was clearly ready to be Real VC and back an unfashionable concept.

And, What About The Impact Of The Financial Crisis?

We ask that question to everybody. Eileen Gittins said "we watch the economy like a hawk, because that is what we have always done, it is in our DNA". But so far, so good, they grew in September and the last quarter looks very strong. At least they don't need to go to (more) VCs, who are spending all their time with their problem companies, to ask for more capital. With all the talk of revenue vs profits trade-offs, Blurb grew revenues this year around 3x - not shabby.

Beginning this month on the self-publishing site lulu.com, you will soon find a broad selection of some of the site's most popular free content made available via the iPaper format. There will be numerous titles offered from a variety of genres including cookbooks, biographies, photo books, books about computers and Internet, and books about arts and photography. And thanks to iPaper's ability to embed AdSense ads within the documents, content creators will now have a way to offer free e-books that also have the potential to earn them an income.

Over the next three months, Lulu will test the use of Scribd's iPaper on their site, and, if all goes well, they will then explore rolling out iPaper to include more of their site's content.

Net Applications has been tracking the uptake of Firefox 3 since yesterday morning, and it is now at around 4.5% -- not bad for its first 24 hours. Firefox on the whole is closing in on 20% market share and is higher among tech savvy crowds (over 50% on this blog, for example). That 4.5% of Firefox web browser users are already using version 3 indicates that about 25% of its user base has upgraded overnight -- that's very impressive.

If you're still on the fence about upgrading, check out the pair of great overviews of FF3 from Lifehacker here and here.

Are you using Firefox 3? Do you plan to upgrade? Let us know in the comments and vote in our poll below.

Then in January of this year, Author Solutions, Inc., who own AuthorHouse and iUniversere -- both POD publishers on the full-service end of the spectrum -- launched a new Lulu-esque service called Wordclay. Wordclay offers a menu of do-it-yourself and premium services including, printing, distribution, editing, and design (or, the iUniverse package offered a la carte). Wordclay currently only offers black and white paperback publishing, with hardcover and color publishing coming later this year.

Earlier this month, Lulu made waves by announcing a partnership with Borders -- the second largest bookseller in the US -- to power kiosks in new concept stores where customers can upload and sell POD books. They'll also provide the muscle for an online print on demand service called Borders Personal Publishing. Participants in the program may have the option to take part in in-store activities, such as author readings and book signings.

It is also probably worth mentioning that along with the release of their Kindle eBook reader (our coverage), Amazon has provided a method for authors to self publish books to the Kindle Marketplace, which has prompted some authors to take rather innovative approaches to the publishing process.

Why all the sudden movement in the POD space? Wordclay president Dave McCauley equates it to the evolution of the music industry. "Really, it's like music," he told me. "10 years ago it was all about big labels, now it's all about the independent artists, with MP3s and MySpace." The book publishing industry is just a little behind the times.

"I think what the industry is trying to do is remove all the barriers," he said. According to McCauley, in the traditional pubishing industry publishers put in a lot of time and money to overcome barriers to get to market -- things like editing, layout, design, distribution, and marketing. What POD publishers are doing, is using web 2.0 tools to try and break down those barriers and put publishing tools in the hands of authors.

For less serious writers, who don't want to get their books on store shelves but rather just want to publish a few copies for family and friends, there are casual POD publishers as well. CafePress has offered print on demand books since 2003 without all the bells and whistles of more author-centric services, and Blurb, which launched at DEMO in 2006, specializes in more visual books and books based on blogs and photo sharing sites.

While there is still a certain negative stigma associated with self publishing, the tools to do it cheaply, easily, and effectively are continually getting better. It's also nice to see that even though, as Steve Jobs says, people don't read anymore, at least what people are writing is being given more of an opportunity to be read.

Amazon is also dangling a carrot for readers to motivate them to participate in the process: anyone who reviews at least 25 ABNA semifinalists is entered to win a prize package including a Kindle, $2000 Amazon gift card, and an HP photo printer. The book excerpts are available as a free downloads until March 2nd, and with over 800 semifinalists still in the running, there are enough for even the most avid reviewers to keep busy (most excerpts are just a few pages long).

After the finalists are chosen, the ultimate winner of the book deal will be chosen via a vote by Amazon customers.

The whole thing has a very "Threadless.com" feel about it. Assuming that they can muster enough reader participation during the voting and review period, Amazon and Penguin are almost guaranteed to have a winner on their hands because whichever book is published, it will come with a pre-built audience of people who are already willing to pay to read the rest of the story that they began with the free excerpt.

Oddly enough, the book excerpts are not available as Amazon Kindle downloads. It seems that Amazon has missed what could be a perfect opportunity to promote their ebook reader device. Theoretically, because users can email any content they want to their Kindle, the ABNA book excerpts are technically available on the device, but Amazon is making a minor mistake in not making it easier for Kindle users to download the 800+ entries that make up the semifinal round.

Earlier this month we wrote about author Daniel Oran, who is using the Kindle to beta test his sophomore book. Oran wrote to us recently to let us know that so far the experiment has been a success. His book currently sits at #14 on the Kindle bestseller list, and has gone as high as #7. It is clear that Kindle users are not opposed to reading new authors on the device -- especially since new authors have the option to publish their books well below market prices (and in the case of ABNA, the excerpts are free).

Amazon is using the contest to promote one of their other recently launched businesses: CreateSpace, a print-on-demand publisher that they launched in August to compete with Lulu. Every entrant to the ABNA contest receives a free proof copy of their book via CreateSpace. Amazon clearly hopes that authors who don't win will decide to go the self publishing route and use Amazon's service rather than Lulu (or a traditional vanity press) to sell books to their friends and relatives.