Random House Unit Buys Into Books-to-Order Firm

Committing millions of dollars to authors that the publishing world usually ignores, a subsidiary of Random House Inc. has purchased a stake in digital custom press Xlibris.

Founded three years ago, Xlibris makes books to order and sells them over the Internet through retail outlets such as Barnesandnoble.com and Amazon.com. Xlibris has published about 600 books so far, some selling as many as 1,000 copies, and hopes to release “tens of thousands” of books during the next few years.

“With the help of Random House, we should be able to support a mind-boggling number of authors,” said John Feldcamp, chief executive of Philadelphia-based Xlibris.

Neither company would discuss exact terms of the deal, but they said the transaction is worth at least seven figures. Random House, a subsidiary of German media giant Bertelsmann, made the deal through its recently formed Random House Ventures unit, which invests in technology firms.

“We thought it would be interesting to get involved with what Xlibris is doing,” said Richard Sarnoff, president of Random House Ventures. “Given the revolution in communications the Internet allows, there’s no reason the audience shouldn’t get to find authors they otherwise wouldn’t know about.”

The deal with Random House already has changed how Xlibris does business. The company had been charging authors a basic fee of $450 to take a manuscript and make it ready to be ordered as a book, but now that service will be offered for free.

The deal continues a trend in which traditional publishers and bookstores are increasingly putting money into new formats. In the past year, Barnes & Noble Inc. purchased 49% of IUniverse.com Inc., the main competitor of Xlibris; several publishers started experimenting with electronic books; and Stephen King, a Simon & Schuster author, published his novella “Riding the Bullet” exclusively online.