As American publishers gathered in New York this week to promote the best of what's coming in the year ahead, more and more attention was focused on the growing influence of digital publishing.

Companies at this week's BookExpo America agreed that while the book publishing industry is losing money overall, the increasing sales of e-books and e-readers are offering investors a chance to bet on the winners and losers in the future of publishing where print books may become obsolete.

While digital companies this week were still relegated to one small corner of the massive exposition floor space, the number of companies and traffic through it increased as the publishing world agree e-books and e-readers are here to stay.

I used to joke about it as the digital ghetto, said Kobo chief executive Michael Serbinis, who launched a new touch edition of their e-reader this week for $129.

The Canadian company, which also sells books online and has apps for mobile devices, said this week it has closed a C$50 million ($53 million) investment round.

In the first quarter of 2011, e-book sales increased more than 159.8 per cent to $233.1 million, according to the Association of American publishers, while during the same period print books saw a 23.4 percent sales decline from the previous year. Online retailer Amazon said this month it now sells more digital e-books than paper books.

Serbinis recalled that just two years ago the digital section of such book fairs consisted of a few lonely people sent off in the corner or the basement while everyone else gets to enjoy the fair in the center of it all.

That digital ghetto is getting far more impressive in scale and traffic, he said.

Each company at the convention aimed to dazzle publishing executives with their e-reading products.

Some offered simple, cheap, print to e-book conversion services. Others, like BlueFire Productions, produce white label e-reading apps, while New York-based start-up Vook showed off how slick video and text can be combined for apps and e-books to make reading a more interactive experience.

SPACE EXPLODING

New companies such as BookBaby, which launched last year and is the sister company to e-music distributor CD Baby, are seeking dominance and market share before profits, just like Internet start-ups did more than a decade ago.

It is kind of a gold rush, the space is exploding, said Tony van Veen, chief executive of BookBaby.

BookBaby targets indy authors and converts their manuscripts straight to ePub and mobi, the formats that allow e-books to be published on e-readers and mobile devices, to be sold on the major e-book stores.

Van Veen likened publishing's turmoil to what happened to the music industry, without the problems of piracy.

If you look at the number of companies that are doing digital distribution ... there is no doubt ... there is going to be shake out, he said.

While some smaller authors are already skipping the traditional publishing route, larger publishers are often offering e-books along with print versions of books.

There will come a time when most everything is on some form of e-book, best-selling author James Patterson told Reuters.

The biggest challenge ... should be thinking about and really trying to figure out where is this all going, and what is the effect of it, and how do we feel about putting half the independent book stores out of business?

Major players also weighed in. Barnes & Noble this week launched its latest $139 new e-reader, called the Nook, designed to help it compete with Amazon.com Inc's Kindle and Apple Inc's iPad, while companies like Kobo aim to become a top 3 player in the digital book market.

For now, as readers, publishers and authors increasingly seek to understand how they can benefit from e-books and e-reading devices, the rush is on.

Every second counts, said Kobo's Serbinis. This is absolutely a critical time in the market's development, some would call it a land grab.

(Editing by Jill Serjeant)

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