Rachel Morarjee in Moscow and Graham Stack in Kyiv -

E-books and digital readers could give a shot in the arm to Russia's ailing publishing industry, opening up the market of Russia's regions and the former Soviet Union to more literature, industry observers say.

"Russia has very little physical distribution of books. There are no nationwide chains like Barnes & Noble or Waterstones," says Simon Dunlop, founder of the Russian digital download company Bookmate.

At present, 80% of books in Russia are sold in Moscow and St Petersburg, with only 20% sold in the regions according to estimates from booksellers Bookmate and Ozon.ru. However, digital distribution of literature could overcome the huge logistical challenges of selling books across the vast territory in Russia. "With digital media, there are no border controls, no customs and no transport costs," says Dunlop.

One of the former Soviet Union's claims to fame was to be a "nation of readers," and Russia remains a highly literate society with literacy rates on a par or higher than its peers in Western Europe. However, internet piracy has held back the development of the publishing industry, with illegal downloads robbing publishers of the revenues they need to promote young and up-coming authors. E-book downloads allow people to read pirated material, but could also boost legitimate readership.

Virtual book chain

Oleg Naumenko, the 29-year-old Ukrainian entrepreneur who launched the best-selling Pocketbook e-reader on the Commonwealth of Independent States market, has worked out how take advantage of the new techology and used it to found a legitimate online bookstore.

Naumenko's realised that an e-reader designed for the Russian-language market could profit from the huge amount of free (ie. pirated) files the internet is awash in, without itself infringing in any way on copyright laws.

The drawback to date with such files was the inconvenience of reading from printouts or LED displays. Naumenko's Pocketbook e-reader range, which costs around $300, does not come cheap, but users recoup their investment quickly if they use it to substitute for buying hard copy.

The crisis year of 2009 was a breakthrough for Pocketbook; it sold 142,000 devices in 2009, earning $37m, with around 60% of the devices sold in Russia and most of the rest in Ukraine. According to SmartMarketing, Pocketbook took 43% of the Russian market, with Sony coming in second with 24%. The success is expected to continue in 2010, with the company expecting to earn $150m.

Illustrating how fast this has all happened, despite last year's rocketing sales figures, only now is Pocketbook starting to build up a sales network - 85% of 2009 sales were made via the Internet. Meanwhile, Naumenko also got an e-book store up and running, where licensed files cost a fraction of hard copy.

With 150m Russians and 110m in the CIS online, and double-digit growth in the numbers of people getting wired, the market has huge growth potential.

Dunlop of Bookmate said the rise of e-book downloads will be positive thing for the publishing market in general. "As long as people have an internet connection, you can start to use the power of technology to crack open new markets," he says.