A video game offers instant excitement and gratification. TV provides escapism without any effort. The internet is a fascinating source of tidbits of information and endless distractions without the need for in depth research. A book, on the other hand, requires time, effort and the ability to concentrate before you can sink into the story. No wonder publishers are struggling so much!
The only way I have found to compete with digital distraction is to regulate them strictly. Theoretically, my boys are only allowed 30 minutes of screen time a day: in practice this usually turns to 90 minutes, because I have two boys. When one plays his allotted video game time, the other watches... there goes an hour. Then, as a reward for particularly good behavior, my husband will give them 15 minutes of "extra" time. Though I don't particularly approve of this, it does make piano practice a bit less painful... Rules are necessary, but bending the rules once in a while is important too. The basic principle is they should never be allowed to have more screen time than reading time. They want to watch a show on TV? Fine. Read a book for thirty minutes, then watch your half hour show. You do need to be careful with this approach however, because you run the risk of turning reading into a chore. I find it easier just to say "no TV, you've already used up your time" but if they propose the reading exchange deal I will sometimes agree to it.
Another way of regulating digital consumption is through home design. Never put a TV in a kid's room. Don't put a computer in a kid's room or store the portable gaming devise in there either. All these devises should be in the shared space of the house where you can monitor their use. When you give the child a time out, send him (or her) to a space which contains only books or physical toys.