MP3 and audio downloads wreaked havoc on the music industry, siphoning revenue away from record labels and driving many traditional brick-and-mortar music retailers out of business.

Now, publishers and retail bookstores are standing at the precipice of a similar fate as digital readers - like Amazon.com Inc.’s (Nasdaq: ) Kindle and Sony Corp.’s (NYSE ADR: ) Reader Digital Book - lure readers out of the cozy confines of Barnes & Noble and Borders Books and Music by offering a wide selection of portable e-books.

Barnes & Noble Inc. (NYSE: ) fell short of expectations in the first quarter with a net loss of $2.2 million, or $0.04 per share. The company also lowered its full-year comparable store sales guidance at Barnes & Noble stores from slightly positive to slightly negative.

Eager not to become a relic, Barnes & Noble last week launched the world’s largest e-book store - an online bazaar that will make roughly 700,000 titles available for download. New releases and best sellers will cost $9.95 each, but the site will also offer nearly 500,000 public-domain books for free.

"Today marks the first phase of our digital strategy, which is rooted in the belief that readers should have access to the books in their digital library from any device, from anywhere, at any time," said William J.