Tim Waterstone: 'If reading is going be all digital in 50 years, so be it'

Tim Waterstone's house in Holland Park, west London, sits on the edge of a small cluster of book-industry landmarks. Round the corner is the HQ of Granta, the publisher and literary quarterly. Just as close is a sumptuous branch of Daunt Books, the six-shop bookselling company owned by James Daunt, now also managing director of the chain Waterstone founded in 1982, these days owned by the Russian tycoon Alexander Mamut. The nearest Waterstones is a 10-minute walk away in Notting Hill, an outlet its former owner would occasionally visit when it was managed by HMV – and, as he saw it, going to the dogs, at speed.

In an imaginary movie of his life, you can picture the scene: the principal character stealing a look at his life's work and wondering what on earth had happened. "What I hated, to the point that I couldn't sleep at night, was that I thought it was being badly run, and going backwards," he tells me, while shooing off one of his cats. "It was just agony to me. I felt HMV were screwing it up, and I couldn't stand it. Every time I walked to the tube station, past that shop, I could hardly bear to look in the window." He felt it had drifted too far from the simple business of selling books.

Waterstone – a calm, candid presence, some distance from anyone's idea of a big retail player – will soon turn 74. After three unsuccessful attempts to buy back the chain that bears his name, he assisted in its latest change of hands, and though his involvement now extends to little more than the occasional lunch, he says he is confident that it's back "in proper ownership, with a very, very good business plan".

Mamut, with whom he has worked on a bookselling venture in Moscow, is "a very cultured, literary figure. Most unusually for a Russian oligarch, I must say." He laughs. "But genuinely so." Waterstone can now concentrate on his fiction writing: two short novels are on the way, following four already published. (Of these, In for a Penny, In for a Pound, which drew on his experiences in the corporate world, got the most attention.) Then there is his life as a venture capitalist, which has led him to invest in wholefood shops, magazine publishing and cosmetics.

He is also about to return to bookselling as non-executive chairman of a new venture called Read Petite. This will be launched to the trade at next week's London Book Fair, and to the public in the autumn. An online outlet for short-form ebooks (fiction and non-fiction), its users will pay a monthly subscription – "a few pounds" – and have unlimited access to texts of around 9,000 words or under.

But this is no literary Spotify, offering hundreds of thousands of items with little quality control: Waterstone is insistent the service will be "curated" to ensure a high standard. Authors will have appeared in traditional print, and have been brought to Read Petite by a publisher. "The individual short story, or whatever it is, may not have been published, but the author will be an established, published writer," he says, drumming his fingers on the table to emphasis those last three words. "The whole point is to avoid a slush-pile of material. What we'll guarantee is quality writing."

Read Petite's name was inspired by Reet Petite, Jackie Wilson's 1957 rhythm and blues classic. One of its key players, former Bookseller editor Neill Denny, has come along to further explain what it is all about. The pair are particularly excited about the chance to serialise new fiction à la Charles Dickens, reintroducing readers to the long-forgotten art of the cliffhanger. They enthuse about how e-readers seem to have increased people's appetite for short-form writing. In the US, the New York Times has reported on a resurgence of the short story, benefiting new and established writers. We talk about such short-story masters as Somerset Maugham, Stephen King and Annie Proulx, and why the publishing industry has never quite managed to market the form.

"A lot of the best short fiction has never been properly exposed, because publishers don't find it commercially comfortable," says Waterstone. His bookselling business did have success with Graham Greene's short stories, but such successes were rare. "Even with a collection, how do you package it? It's difficult in print: traditionally, money was used up on production and distribution, and not enough was left for promotion. In the digital world, production costs are virtually nil, and distribution costs don't exist, so you're left with a much cleaner sheet."

They plan to publish journalism, too. By the sound of it, they have not quite firmed up how deals with writers will work, but as Waterstone puts it, "if the site works, if the total subscriptions are high enough, it should leave a decent sum". Time, then, for a rude question. How much is Waterstone in for?

"Personally?"

Yes.

"That's too rude for me to answer," he says, smiling.

It comes as no great surprise that Waterstone owns a Kindle. The last book he read on it, recently, was David Mitchell's Cloud Atlas. When he first used one, though, he felt a sharp pang of fear. "I think I went through a crisis: [was it] the end of Waterstone's, and the end of the book trade? I was incredibly depressed. I pretended I wasn't, but inside I was churning: 'Maybe I should die now.'" He laughs.

He now thinks that, for the time being, ebooks and print can coexist. Nonetheless, the high streets on which so many shops still bear his name are in unprecedented crisis. For the moment, Waterstones (it lost its apostrophe in 2012, apparently to make online business easier) may be safe, but plenty of equally renowned names have gone under, and the future of the town and city centre is clouded in doubt.

Talking about this, Waterstone sounds by turn ambivalent, uneasy and open about the idea that no one knows where things are headed – but also somewhat optimistic. Town-centre rents, he explains, are finally coming down. His own chain is getting back to the idea that the shops "should be a theatre. It should be a lovely place to be on a Sunday afternoon. The physical browsing process is enormously pleasant. It's an important part of our national culture, those bookshops."

A pause. "But the arithmetic does get more and more difficult, and online retailing gets more and more seductive. And all of us get more and more used to it, from grocery supply to buying books off Amazon. Yet I go to the Westfield shopping centre down the road, and it's turned out to be an absolute goldmine, heaving with people all year round. Anyone who tells you they know the future is telling you the most grotesque lie, because none of us do."

Among the high street's casualties, of course, is HMV, which bought Waterstone's from WH Smith (who had acquired it in 1993), at the end of the 1990s. Waterstone himself was HMV's chairman from then until 2001, and it was during that period that his nightmare began. So how did he feel watching HMV go under?

"I brought Waterstone's into HMV in 1998," he reminds me. "HMV stores at that time were extraordinarily successful, and very well run. I used them a lot: I thought they were a tremendous public service. I think some terrible decisions were made by the HMV management in the following decade. They blinded themselves to what was happening. Too slow to react, too slow to face the truth. The issue of downloading – they were always reactive rather than proactive in trying to find a way through. They should have led. I'm sad, really sad, as a consumer. But I've got children of 18 and 19, and they've got no interest in HMV whatsoever. All their music is downloaded. The switch has been so precipitate in that market."

Bookselling remains more balanced. Amazon – about which Waterstone has mixed opinions, recognising their role in growing UK book sales, but decrying their "absolutely outrageous" tax manoeuvring – claims to be selling more ebooks than printed titles. As a whole, though, the market is still dominated by print: at the last count, ebooks made up 9% of the total. While the number of e-reader users grew by 150% through 2012, that rate of growth is predicted to slow. In other words, the digital reading revolution goes on – but more gradually than you might imagine.

"Robert McCrum, former literary editor of the Observer, rang me about a year ago," Waterstone recalls. "He said, 'Tim, I'm doing yet another piece on "Whither the book?" For God's sake give me something new.' I said, 'I've done this so often.' He said, 'Well, have a go.' While I was talking, I walked to the other side of the house, where my daughter's bedroom is. She's 19, at Oxford, reading English. I walked in, and I could hardly move for books. And she couldn't be more technically savvy … so I rang her and asked, 'Why have you got so many physical books?' She said, 'I like having a Biro in my hand, scribbling notes down the side.' So I see the two forms sitting side by side."

But what if people only have a finite book budget? If they spend x pounds on ebooks, won't that mean x pounds not spent at a traditional shop? And in that sense, might even new ventures such as his contribute to the eventual demise of a lot of what he holds dear?

"That's behaviourally too complex a question, because none of us really know what happens," reckons Waterstone. "I am certain that if more people acquire the habit of reading, the more they'll stick with it and the more they'll read. And if that's going be entirely digital in 50 years time, so be it.

"They'll be reading," he says, glancing at two shelves of novels behind him. "And that's a great thing."