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On Monday, Amazon CEO Jeff Bezos unveiled Amazon's Kindle 2 e-book

reading device at the Morgan Library in New York. Most of the changes

from the first version of the Kindle are incremental improvements: the

new Kindle is lighter and thinner, for example, and Amazon eliminated

the scroll wheel. One update, however, is wholly new: Amazon has added

a "Text to Speech" function that reads the e-book aloud through the use

of special software.

This presents a significant challenge to the publishing industry.

Audiobooks surpassed $1 billion in sales in 2007; e-book sales are just

a small fraction of that. While the audio quality of the Kindle 2,

judging from Amazon's promotional materials, is best described as

serviceable, it's far better than the text-to-speech audio of just a few

years ago. We expect this software to improve rapidly.

We're studying this matter closely and will report back to you. In the

meantime, we recommend that if you haven't yet granted your e-book

rights to backlist or other titles, this isn't the time to start. If

you have a new book contract and are negotiating your e-book rights,

make sure Amazon's use of those rights is part of the dialog. Publishers

certainly could contractually prohibit Amazon from adding audio

functionality to its e-books without authorization, and Amazon could

comply by adding a software tag that would prohibit its machine from

creating an audio version of a book unless Amazon has acquired the

appropriate rights. Until this issue is worked out, Amazon may be

undermining your audio market as it exploits your e-books.

Bundling e-books and audio books has been discussed for a long time in

the industry. It's a good idea, but it shouldn't be accomplished by

fiat by an e-book distributor.