Launched in 2006, Sony’s Reader was a Lamborghini to the Model Ts of earlier attempts at electronic book readers. Slim and lightweight, with a highly praised “electronic ink” technology that was as easy on the eyes as was paper, it was touted as the iPod of the book industry. It achieved what no other reader had managed: a reading experience that approximated traditional print, with all the advantages (storage, search, and portability) inherent to digital media. The launch met with much fanfare from the press, where the Reader was hailed as “the electronic gadget that could change the way we read.” So why, having delivered this exceptional device, did Sony fail to deliver on its promise?

Sony brought massive technology resources to the Reader project. But a great e-reader is not enough to complete the value proposition for the customer. They also need something to read. Enter Sony’s complementers.

Sony’s plan for getting e-books to readers depended on bringing on board authors, publishers, and its own e-book retailer, Connect.com.

Even though some authors could have been convinced to issue e-books, it was the publisher who controlled the flow of content. As co-innovators, publishers looked like reasonable partners. They would need to innovate, modifying their internal processes and systems to manage and package e-books. This was a technical hurdle but a manageable one.

Amazon created conditions that made the e-book revolution attractive to publishers.

As adopters, however, publishers were highly ambivalent about whether and how to approach e-books. First, the economic and legal aspects of this new offering had to be hashed out: What is an e-book worth? What will the royalty payouts to authors be? How should the contractual language read? What would margins look like? The publishers–conservative firms clinging to a traditional business model–would not commit to e-books until these concerns were settled. And Sony was in no position to settle them. Publisher red light number one.

Second, was the question of digital standards. The very idea of having their copyrighted content in the digital wilderness–a hacker’s dream–sent shudders down the publishers’ spines. Sony’s proposed digital rights management (DRM) solution, the BBeB format, was just one more unproven option in a crowded field. Publisher red light number two.