Does Rakuten Deal in Blood eCommerce?

Japanese retail giant Rakuten who own the likes of Play.com and ebook operator Kobo has been exposed by the Environmental Investigation Agency (EIA) as the world’s biggest online marketplace for elephant ivory and whale meat products. The EIA in conjunction with Humane Society International (HSI) have issued a joint report “Blood e-Commerce: Rakuten’s profits from the slaughter ofelephants and whales” which reveals that Rakuten’s Japanese website carries more than 28,000 ads for elephant ivory products and some 1,200 whale meat products ads. Japan's controls continue to fail to comply with requirements of the Convention on International Trade in Endangered Species (CITES) in the control of raw ivory tusks and worked ivory

Rakuten is a global retail operator which owns e-book reader Kobo, was formerly Buy.com in the US, owns Play.com in the UK, PriceMinister in France, and has shopping sites in Germany, Austria, Brazil and other countries, owns chat app Viber, and is a major shareholder in Pinterest. However, its Global sales are now being undermined by its Japanese trade in products which are outlawed in the majority of the countries it which operates and earns its revenues.

Up to 50,000 African elephants are poached each year and the EIA claim that Rakuten's actions are worsening the situation and are help drive the demand for ivory from Japan and China. EIA and HSI research identified that over 90% of the ivory products sold on Rakuten Japan as “hanko” which are the name seals used to sign official documents. Large amounts of ivory hanko are known to have been produced from illegal ivory in Japan.

“Blood e-Commerce: Rakuten’s profits from the slaughter of elephants and whales” also states that ‘Japanese hunters continue to slaughter internationally protected whale species, and the country imports the meat of endangered fin whales from Iceland. Large numbers of small whales and dolphins are hunted around the Japanese coast, which often contain high levels of toxic mercury; eight of nine products offered for sale on Rakuten were tested by an independent lab and found to contain dangerous levels of toxic mercury.’

EIA President Allan Thornton said: “Rakuten’s ads are effectively as deadly as giving bullets to elephant poachers and harpoons to whalers. Rakuten must act immediately to ban all ads selling elephant and whale products or its global brand will be irrevocably tainted with the ongoing mass slaughter of these species.”

Would you buy an ebook from someone who has so little regard for endangered species and the environment? Would it pass the ethics code of your or many US and UK companies? Are we all, in supporting the likes of Play.com., Kobo and Pinterest, now getting the blood on our hands?

The Digital Devil's In The Detail

One of the most disturbing rulings occurred this week in the court of US Judge Naomi Reice Buchwald and relates to a case of copyright infringement brought by HarperCollins in 2011 against Open Road in relation to the ebook publication of Jean Craighead George’s 1973 bestselling children’s book ‘Julie of the Wolves’.

The judge ruled that the original contract which was signed in 1971 differed to that of the 2001 ruling in Rosetta vs Random House and clearly granted HarperCollins exclusive right to licence electronic publications as then in 1973 and into the future. They still needed George’s permission to make any electronic rendition but they retained the exclusive licence right irrespective of whether George agreed or not. In this case George did not accept the terms and went to Open Road. George sadly passed away in 2012.

The actual wording difference between to Random House and HarperCollins contracts with respect to future technology and electronic rights appears to be clear to the judge and focuses on ‘in the future’. It has probably sent every trade house into a legal frenzy of activity on checking their digital clauses in their key and boilerplate contracts. As to whether this was the standard boilerplate contract term in the day, or a specific one honed for this contract, only the parties know. However, it would appear a very generous open ended clause for the agent to accept in those days and at a time when digital was clearly not even much more than a distant dream.

A contract is a contract and a ruling such as this brings both clarity for some and ambiguity to others. It however raises once again the question of the fairness and equity of contracts and whether they should be in perpetuity, tie both physical and digital to sales and inventory and can be so open as to cover anything and everything into the future. Some would suggest that you acquire as much rights as you can and use as little as is necessary. Today some would claim that excessive rights are demanded and that some subsidiary rights are not being fully exploited as a result. We have long argued that digital rights should be term based, not in perpetually and should apply on a back to back basis to both the agent and publisher contracts.  Also a pbook may not be the same as an ebook in the future, digital ‘sales’ are potentially going to become subscriptions and licences and therefore have different parameters of success and longevity. Digital may be published first with the physical having to justify print. On demand makes a mockery of inventory. It may be wise to contractually cleanly separate digital and physical and not muddy them under ‘published in any format’ catch all’s.

Whatever happens the backlist and orphan works position is probably going to get murkier before it gets clearer. Contracts that were once signed under the understanding of the day may now find themselves being dusted down to face a whole new brave world they were never really designed to cover. Governments may bring in regulated orphan ‘land grabs’ based on some due diligence, but again this doesn’t address the fundamental void of there being no rights authentication database. Books are not alone in this issue and our whole internet infrastructure would appear to be based not on validation and authentication, but on ‘catch me if you can’ and ‘safe harbour’ and take down notices.

iBookstore Sans Nipples

Some will say that a picture paints a thousand words, and that book jackets sell books.

The Deric Longden ebooks we have published which feature cute kittens on their covers have sold better than those without the cats and with just Deric on their jackets. This is despite these some of these catless books having won film and writing awards. We now actually fear that we have made the mistake on his latest jacket, ‘Radio Times: Take 1.’ in that we haven't put a cute kitten on the jacket.

Apple belief that a jacket image can also be offensive, inappropriate and they continue to impose their own moral code on publishers. As reported in Le Monde, the International Publishers Association has now expressed serious concern about Apple's decision to ban the sale of a French novel because of its cover art. ‘La Femme’, by Bénédicte Martin and published by Editions des Equateurs. As we don't see the jacket above inappropriate we have chosen to ignore Apple's moral code and display it. Apple, considers the image "inappropriate" and has withdrawn the book from its online store.

Apple’s has long held this moral high ground on content it feels inappropriate and rather than age range content, or issuing a warning, it takes the view it that it will ban both the jacket and the work.

The question is not whether the retailer has the right to act this way, they clearly have the right to do so, but whether their taste aligns to that of the market and why they take such a heavy handed and dictatorial approach to the way they enforce it?

Could they not have simply greyed out the jacket image, or offending parts? Effectively banning the book doesn’t diminish its appeal but actually increases its notoriety and appeal to people who would have never heard of it or seen the nipples in question. Do Apple ban books with non-sexual but disturbing jackets, or is it just sexual images that they deem inappropriate? What about the work itself and is their censorship over explicit words, acts or whatever they feel is inappropriate on the day? Some suggest that publishers such respect Apple's viewpoint and design their content and jackets appropriately.

However publishers may decide that it is better to ‘publish and be dammed’ and as a result be censored and potentially get the extra publicity. What is clear in a global market, which is controlled by such a few players (Amazon, Apple, Google, Kobo) is this sort of arbitrary censorship may not reflect all cultures, geographies or genre. It is a dangerous and somewhat a foolish pill to swallow and frankly it can simply act in the opposite manner to what was intended.

Meanwhile, we will make up for the omission of feline models in Deric’s new series when we release ‘Radio Times: Take 3’ later this year. The book jacket which will feature both a fully clothed  Deric and ‘Tigger’, a cat wearing a fur coat and no knickers!

Self Publishing Is Going to Just Get Bigger, Embrace It

Today we face the prospect of drowning in tidal wave self-published eBooks, YouTube videos, photos, independent music videos and tracks etc which are loaded onto sites alongside and often more frequently than traditionally produced works. Historically these self-published works have been regarded by many as substandard works, looked down upon by the traditional marketplace who referred to them by the term ‘vanity publishing’. Some would even still argue that if you can’t get a publisher, producer or third party to publish your work, then it must be of questionable quality and of little value.

Some claim that by 2020 50% of all eBooks will be self-published. We would question that and suggest that it is probably a huge understatement and the figure is more likely to be 75%. However, we have to acknowledge that establishing what is self-published and what isn’t is likely to become even harder as digital tools to create, promote and produce quality layouts become cheaper and easier to use. We also have to accept that there will be a number of new third parties who will assist the creator to be published and although these are not necessarily publishers as we knew them, they are effectively publishers.

Some will point to Anderson’s ‘Long Tail’ economics and say it doesn't work and the head is getting smaller in number and larger in slice of the pie and the tail is now just too long and they will be right MIDiA Consulting have published a new report on the music business titled‘The Death of the Long Tail: The Superstar Music Economy’.  The report states that the total global artist income from recorded music in 2013 was $2.8 billion, down from $3.8 billion in 2000 but up slightly on 2012 and that artists’ share of total income grew from 14% in 2000 to 17% in 2013. It claims that 1% of the total artists and works account for 77% of all artist recorded music income. This reinforced by the ‘Cowell factor’ of manufactured new stars and the charts, but is music just about charts and recorded music or should also not take in music publishing, performing rights and royalties and merchandising. We often just see music through the eyes of the record producers and not the industry and rarely the musicians.

Others will complain that in the book industry earnings for the mid and back list are being decimated by the introduction of masses of self-published material. The earnings will increasingly be different to those enjoyed yesterday and many will not match the author’s expectations. Michael Kozlowski’s recently advocated that in order to address this that ‘Indie eBooks Need to beSegregated’. We would strongly disagree with this reactive and somewhat naïve approach which is aimed at suppressing creativity. Segregation is a false economics move aimed not at segregating good and bad but at protecting yesterday’s financial model and its bets from the new offerings.

The world has changed and the true democratisation of creativity is upon us and this has been enabled by the internet and means that we can all write, make videos, take pictures, create games and make music. Forget the quality issue the fact is that this explosion of material is changing the way we now create, develop, market and value stuff. This genie is not going back in the lamp and we now have to realise that there will be more not less and that new consumer values will change all and that the creator rewards will be different.

Some state that the consumer demands quality and that this can only be achieved through the editorial development process. However there are now many consumer viewpoints and values and these often clash with these traditional binary beliefs. Who would have believed that some low quality YouTube videos would receive the number of viewings they have and gone on to spawn new stars of their own. Who would have expected the global sensation of ’50 Shades of Grey’ and it now being adapted to mainstream film? Would we have ever heard ‘Gangnam Style’ without YouTube? Would performers such as Lilly Allen or the Arctic Monkeys have made it if left to the traditional music business?

We accept that there are millions who don’t make it in both the traditional and self-publishing models but that is no reason to not move on and accept that we are now moving into an era of free expression, creativity and democratisation. 

How Do We Compete With Amazon?

The questions over what the industry can do, or not do about Amazon’s dominance, were raised yet again last week. It was first sparked first by Barnes and Noble's declining interest and funding of its Nook venture, then we had Sony shutting up it US store and handing the keys to Kobo as it battles with many greater corporate issues, then came Kobo itself filing objections to a Competition Bureau agreement impelling four of the biggest publishers operating in Canada to renegotiate their contracts with ebook retailers and finally by an article by Jane Friedman in which she raises the new Amazon policy to drop its escalating royalty rate of 50%-90% on ACX titles sold exclusively to a non-escalating 40% and audiobooks distributed non-exclusively to a non-escalating rate of 25%.

The Kobo filing claims that prior to the Canadian adoption of the agency model it had been ‘losing millions of dollars per year” under wholesale terms and also that when, ‘In the U.S., when Agency Lite was brought into existence, Kobo saw its net revenues steadily decline. Kobo has since stopped investing in marketing in the U.S., closed its office in Chicago and is focusing on other markets. Its market share and revenues are now negligible there.’

The result of these announcements was to further fuel the debate on Amazon and its dominance of the marketplace in both ebooks, audio and the huge US market. It would be wrong to believe that they can be beaten on discounts, as the only winner in a discount war is the consumer and the one with the strongest nerve and deepest pockets. Wishing for a white knight may have been feasible ten years ago, but today it isn’t going to happen and no start-up is going to suddenly change that. Apple is tied to its own Appleworld and will never venture out into Android land, Google, well they may have scanned everything that has been printed, but please be careful what you wish for. Amazon has effectively woven itself into the publishing DNA and is not just at the consumer end but right across the value chain.

We have harped on about books being different till the cows have come home, been milked and gone back to pasture. Yes, books are different, but interestingly ebooks aren’t that different and maybe that’s where we often loose the thread. We have now to accept that we don’t live in a book centric world and that the larger media and home entertainment umbrella has several component strands. Books is the baby among several stronger digital sectors and the networks today are the gorillas. 

We are fast becoming the one sector that still is DRM obsessed, sell through orientated and like King Cunute think we can stop the digital tide sweeping over us. Only last week it was widely reported that the majority of books on our shelves are unread and a recent US poll suggests that some 25% of US citizens didn't read a book in 2013. We continue to think ebooks are just books in a digital container and in doing so we kid ourselves, confuse many and potentially miss the opportunities.

Amazon watches, learns, then acts and changes consumer behaviour in ways that many in the book industry have failed to grasp. At a basic level they offer, used books, marketplace, KDP, Goodreads, Book Depository, publishing, audiobooks, self publishing, on-demand and that is without its other media and technology arms. Just think it was just a little old internet shop in 1995, which right up to the turn of the century many predicted it would not survive. This last week they started to roll out their fresh food delivery service in the US and it is widely predicted it will soon come to Europe and some are already trying to protect the giant supermarkets, who ironically, have been often demonised for their destruction of the High Street. 

The Amazon is a huge river that is fed by many large tributaries and supports many ecosystems and is very important to the ecology of the world. Amazon the business is now no different.  

We have to analyse and think differently just punching the biggest kid in the schoolyard is futile and you just get hurt. Amazon’s weakness and its strength maybe is that it acts as a lone wolf. Some would suggest that It often buys to take out the competitive threat, or like with its audio market purchases, sets out to quietly corner the market.

Yes publishers need to develop their own direct business,but apart from the few this isn’t going to be a major channel to market, is only aimed at the consumer end  and some would suggest is too little too late.  Niche players may carve out a healthy living but the minute they get on the radar they are themselves vulnerable.

So where is the answer? It is almost certainly not within the book market by itself. Amazon crosses other media sectors and is competing for a strong position in many but it is a lone wolf. It rarely hunts in packs. It may have a federal approach to those it owns, but it retains a tight strategy grip over them. Perhaps its strength is its weakness? Perhaps a joint ventures that cut across current boundaries and create something that is not easily replicated is the answer. Last week we wrote about Nubico and although that is not necessarily the answer it starts to point in the right direction. People belong to very large subscription bases who all face threats and an everchanging power struggle. Lining up the ducks may appear hard today but if they create something of real value then maybe, just maybe there is an alternative.

Getty Lifts Restrictions on 35 Million Images

When Getty Images, the world's largest photo agency, effectively opens its picture vaults to make them library free to use, you have to stand back and realise that access to use restricted stuff is radically changing.

Getty combating piracy not by locking up the images with restrictive watermarks or DRM but making 35 million images, including iconic images of Marilyn Monroe and famous ones of John F Kennedy and Barack Obama available without cost to blogs and social media sites. However Getty Images is not the most user friendly site and searching and establishing what is allowed is still often a mare.

The photos will be tagged through an embedding tool with a code that links back to Getty's website but they effectively have decided to combat abuse by bringing the offenders inside and encouraging the use of the images by all. Images cannot be resized and they will all incorporate a Getty Images logo, as well as a credit for the photographer.

There has been some backlash from photographers who are opposed to their images being given away but the reality is that they are all over the Internet anyway and currently there is no attribution or provenance. Trying to ascertain whether a picture is in the public domain or restricted and who owns its rights is like trying to chase down the rights to orphan work books – difficult.

Commercial users of Getty's library, which include TV, newspapers, publishers and advertisers will continue to be charged. Exactly how the Getty economic model now works remains unanswered today but this move is a significant one not just for images but for all media.

Mapping the Internet

we stumbled across a site Telegeography which hosts visual and interactive maps of the Global Internet and Network infrastructure.

The maps are not only pretty impressive they also show the areas that are 'connected' and our continued reliance on cables under the sea.

Why Was CourseSmart Offloaded?

This week’s news that the publishing educational joint venture CourseSmart has been acquired by Ingram’s Content Group should be not a surprise, but raises some interesting questions about publisher's joint ventures.

Some six years ago whilst speaking at the National Association of College Stores (NACS)  conference in Minneapolis, I was drawn to a cluster of delegates who were busy taking notes and sat apart from the delegates. I spoke to them afterwards and discovered that they were all from CourseSmart and they were obviously sent to press the delegates’ flesh. On being asked what the CourseSmart service was and what it wanted to be when it grew up I found I got different answers. Maybe that is where their problems lay. Later there were several rumours that some members of the joint venture want to go their own way. I also remember presenting to an industry group in the UK who were looking for an alternative to CourseSmart, but many were being reined in to supporting it by their larger brothers and sisters in the US. It is interesting that some members of the venture spread their bets and also backed competitive services as well as their own offers.

The big question is why publisher digital joint ventures either wither or get passed on? Maybe they feel that they are not core business, or that they don’t have the skill base, or maybe they bleed cash? Recently we have seen ventures such as Bookish and Anobii fail. Unlike others CourseSmart had the perfect parentage, access to the content, potential direct to market sales channel, yet it moves on.

CourseSmart was formed in 2007 by Pearson, Macmillan, Cengage Learning, John Wiley & Sons, McGraw-Hill Education and Pearson. It started off as a digital inspection service then quickly morphed into a providing digital textbooks in the higher education market and lately has offered its content and platform to a wider audience. It’s technology was driven be Pearson and some say that was probably the start of many of its internal challenges. Others will say that the base technology was restrictive and did not meet many of the market’s demands.  

In Ingram Content Group's Vital Source Technologies, Inc., it has probably found a good home and it clearly offers Ingram extended reach under the Vital Source platform as well as potential increased access to and opportunities with publisher digital distribution.

eBook Subscriptions Part 3: The Future Should Be Significant

In the last two articles we looked at today’s subscription market and some of the players, but what of the future? Do we really believe that the consumer will continue to want to ‘buy’ eBooks that they effectively don’t own, that they can’t easily share with others and that they are prohibited from reselling. Adobe may have backed down from their heavy handed approach to their initial ACS5 upgrade plans, but DRM remains a millstone around consumer’s necks and wedded to yesterday’s 'download to a device' ownership model. Today the media world is moving towards on demand, streamed and cloud based services whilst ebooks often appear to be still stuck in an eink device type offer.

Some would suggest that the eBook market is already a mature and well established, others would suggest that it is merely at first base and has some major changes and challenges on the horizon that will redefine it, in terms of its content, context and commerce.

Some will look at the other media consumer markets; music, film, TV, games, newsprint, magazines, etc and see clear and growing trends towards on-demand subscription services. Some of these sectors are further ahead of others and all may be moving at different speeds, but they do appear to be moving in the same direction. So should eBooks remain stuck in some pseudo digital world?

Imagine making one monthly payment and getting your network connection, together with media options on films, music, TV, games, news, and eBooks. You may get some services free, or others cross subsidised by others, but you potentially get your Home Entertainment under a ‘one shop’ federalised deal. Today the likes of Spotify are being rolled into network and Home Entertainment deals, so why not extend it to encompass all media? Today we see the likes of Nokia and others now realising that providing digital content services is maybe as important as selling the device. Enter the likes of Apple, Google, Samsung with their growing media content offers.

Home Entertainment propositions have huge appeal to advertisers who could also have both separate and collective deals. It will potentially attract new investment which in turn can either lower consumer subscriptions, or feed greater rewards to the creator. Many sports today benefit from Home Entertainment tie-ins and this route could raise the appeal of ebooks, reading as well as increase the revenue in the market.

Imagine a world in which consumers are encouraged to read, not by serving up free copies of the same stuff they don’t buy today, but by offering them digestible chunks of content that by themselves fit into their often time poor, multi-demand lifestyles. We don’t expect young children to be immersed in long textural works, so why do we expect adults who don’t read today and have shortening attention spans and time windows, to suddenly create 16 hours to read an eBook. We have written much on this subject, but the relevance to the potential subscription market is significant, as readers will consume short works faster and potentially more regularly than large ones. Also pricing short works today to sell through against the heavily discounted longer ones, is very difficult. Has anybody stood back and asked whether its wise to converted the physical book and merely just pour it into an ebook container?

If we look at how films and TV shows are now financed, produced, branded and even merchandised, we increasingly see cooperative ventures. These set out to maximise the investment and rights sold, not minimise them in a hope that they prove to be winners that may be exploited later. Amazon’s influence in making the BBC change its decision to cease production of the ‘Ripper Street’ series was a significant step and it is not alone in the shift of power that is happening in the Home Entertainment world. Harry Potter may be seen as an exception today, but can others now take a more holistic approach to rights and services and beg the questions as to whether subscription based models a more natural way to harness and maintain these new communities?

It is easy to envisage subscription services being a major driver of change to what is created, how it is developed, marketed, promoted, sold, paid for and consumed. However it is often harder to see an industry which is often slow to change and diverse in its structure making those changes. So are we to remain wedded to the digital base 1 or can we now move towards second or even envisage third base, or will we wake up one morning and find someone has done it to us?  

eBook Subscription Part 2: The Players

We have seen the demise of the traditional book club, but we have to ask, why? Was it a case that they held onto their old model and believed that change wasn’t required, or that that their demise happened too soon before the digital opportunities were possible, or did the new Internet retailers just blindside them, or did they simply just lack vision?

We are reminded of the Michael Porter quote, ‘The greatest danger in times of turbulence is to do act with yesterday’s logic.’

We can’t bring back the BCA or Readers Digest, but we can now see their potential digital replacements. It is too early to judge the new subscription service winners and losers, but it is fair to assume that this new genie isn’t going back in to the lamp and it will have implications across the publishing value chain. 

  

The ebook subscription service that first really raised the bar was Oyster, a US based service which offers some 100,000 titles. The service wasn’t the first subscription based trade ebook service, but it was the first to get the market profile, serious funding and industry recognition. Its ‘all you can eat for $10 a month’ model is to some a somewhat relatively high price point for a service offering such a low range. As a result they must now chase content growth as a high a priority just as much as acquiring and retaining members.

Will the new model’s rewards convince all publishers to join, or will many sit on the fence and watch and so be restricted to those who wish to take limited risks? Without the industry commitment on content subscription offers may fall short of consumer expectations, with it, they might force changes on the industry that it’s not prepared for. Will they be able to sustain potentially high churn rates as readers who don’t read? Will they it offer the full range demanded by readers or will they have to restrict themselves to limited genre where it can focus and specialise? Will it be able to remain when the big gorillas enter the market? These and many other questions are not just for Oyster but for all subscription services and the one lesson from the early streaming and subscription music market was the high failure rates in services that initially competed for that market.

The surprise new ebook subscription service was Scribd, who as an online information service often was at the centre of copyright infringement issues and operating under the protection of a ‘safe harbour’. Not only did they enter the ebook subscription market, but they did so claiming three times more titles than Oyster. Scribd now joins Amazon’s Kindle Owners’ Lending Library who have some 475,000 titles and have inbuilt the option to supply into their successful KDP self-publishing service and a service also aligned to their Prime subscription.

Others include Entitle who are basically a rebranding of eReatah and who have a tiered membership of 2 books a month for $9.99, 3 for $14.99 and 4 for $19.99. Entitle have closed on $5.3 million in Series A funding. They promote their recommendation engine and selection of their 125K titles, but their price model is both predictable and offers little for the reading commitment they seek.

In the U.S., it is claimed that some 25% of people are reading ebooks, but is this enough to support a subscription model, where it’s not that you read an ebook, but more dependent on how many and how often you read them.

We then have number national offers which are restricted by language or geography with some countries having established serious offers. Some claim Russia is a rapidly growing and significant ebook market and an ebook subscription service called has been launched by Bookmate who are its Scribd type operator. However Russia has a significant pirated ebook problem so to counter this Bookmate, charges some 10% of its customer base (around 50,000 customers) around $5.00 a month for unlimited access to some 220,000 titles in both Russian and English. Is it enough to convert today’s nonpayers to pay for a subscription - only time will tell? However, Bookmate are confident and have plans to expand the service to Turkey and then countries in Southeast and South Asia.

In Europe there are several subscription start-ups; 24Symbols in Spain, Riddo in Holland which teams up two Dutch publishers, WPG Uitgevers B.V. and Lannoo Meulenhoff B.V., Riidr in Denmark. In Germany Skoobe’s  9,99 €/month offer which enables members to borrow up to 5 titles for as long as they wish, has recently been joined by Readfy who offer three subscription plans; free access based on subscribers viewing ads, 4.99 €/month with fewer ads and 9.99 €/month for add free. All the national markets may be seen as limited, but all have the ability to also take English language content and together show market potential.

We also now have an interesting new model appearing in Spain with Nubico which again offers content from major Spanish publishing houses in Spanish, English and Catalán. However it is the joint venture approach of Nubico which joins Circulo de Lectores , a successful book club, publisher and music retailer with more than 50 years in the market, a 50/50 joint venture between Germany’s Bertelsmann and Spain’s Grupo Planeta together with Telefónica, the broadband and telecommunications provider. Telefonica was working on Movistar EBooks, Círculo de Lectores had Booquo, a subscription-based eBook platform and they decided it was better to join together than go their separate ways. Nubico is looking to take a 30% share of the Spanish ebook reading market by 2015 and have set a monthly charge €8.99 which is lower than others and also has given Circulo and Telefonica´s customers a 20% discount. Nubico is also planing to expand into Latin American interestingly backed by the regional presence of Random House and Telefonica.

Finally, we have the vertical subscription offers.

The STM (Scientific, Technical and Medical) and academic and professional segments have long enjoyed subscription services. Here it is more about essential access to authoritative content, information and references, abstract, citations etc. Scarcity lends itself to subscription both at an aggregated level as well as direct from publishers. The completion is often Open Access and finding the balance is a constant challenge but subscription prevails.

The new subscription segment would appear to be children and associated education. Here service providers want to capture and retain what is seen as a lucrative market. Amazon has its FreeTime which again built on their Prime service offers curated media on subscription and toed to parental control. Epic is a new US service designed by former game developers and publishing industry veterans aimed at children 12 and under and offering unlimited books for just $9.99 per month. The company has closed $1.4M in seed funding.

Some other niche offers will always come to market. Some will succeed and others fail and in many cases it’s down to target community, content authority and brand awareness.

Tomorrow we will look at the new opportunities for subscription services.

eBook Subscription Part 1: Will It Change Publishing?

Many new eBooks services are setting themselves up with claims to be the next Netflix or Spotify. They aim to be the subscription service for eBooks. But are they just dreaming and hoping that there is a market? Are they truly aligned, or are they adrift of consumer demand? The pundits and soothsayers all have their opinions, but does anyone really know, or are they merely playing to their respective audiences? The truth today is that no one knows and a gut feel is just that – a gut feel.

Today we look at the digital subscription marketplace and its potential impact on tradition publishing. Tomorrow, we shall look at some of the many new players, their segmentation and offers. We will finish by offering our thoughts on the potential opportunity, the potential winners and losers.

What we do know is that subscription, on-demand streaming services such as Spotify and Pandora are seriously challenging the traditional music market and raising many questions over creator rewards, the music value chain and business models. The music business’s challenges may have started with the P2P services such as Napster, but today’s streaming subscription cloud based services have the potential to challenge and change from inside the industry in a way Napster never could. The big music production players bought early into the likes of Spotify and are tending to control its impact on their businesses, whilst others outside the tent often remain not so well off. Artist often complain that they hear their music, but often can’t equate it to the reward received. Many of the economics of the music industry are slowly now being questioned by the emerging subscription models and as a result are starting to be rewritten.

Netflix is not alone in introducing change to the film and TV Home Entertainment market and has joined a number of other players who are now reshaping what was once a very predictable market. They are not only challenging the distribution channels, but also the content and its funding and creation. Netflix’s production of ‘House of Cards’, Amazon’s ability to convince the BBC to produce a third series of their ‘Ripper Street’ having previously publicly dropped it and Sky’s exclusive productions are some of the examples in a shift in content creation, funding and power.

Many today still can only see the consumer proposition, but as demonstrated, subscription models start to challenge what is produced, how it’s produced and funded and who is the driver within the value chain.

The reality is that we live within a publishing value chain where there are two constants; the author who creates the initial value and the Consumer who buys, validates and values the end product. All the rest are only there as long as they add, or are perceived to add, value. Anyone who doubts that, need only look at the self-publishing value chain and the amazing position Amazon has been allowed to create, or at the traditional bookseller and how their offer has to now be supplemented in order to compensate for their perceived lack of range and higher pricing.

So what makes subscription models potentially attractive to consumers?

If you consume lots of stuff, then the obvious subscription benefits are around convenience, price and range. This works well with music where folk have spent heavily on replacing vinyl with CD and are now starting to draw breath with MP3 and question a further reinvestment in virtual tracks. People tend to listen to a lot of music, a wider range of music, in lots of locations and in particular on the move and they are aware of the price points and are sensitive to price variation. The new digital tracks are no longer a physical object that you place on a shelf and that say who you are and what you like. You may still display them on a social network, but as more music is digital and even a video track can be streamed for free via YouTube, why do you need to own anything? 

Even though music tracks often are replayed, the vast majority of tracks sit on the virtual shelf forgotten. This may have worked when the album library was both a decorative and taste statement but becomes a wasted investment in a digital buy through environment. The range and diversity of music that is now demanded by many and makes an on-demand model more appealing especially if it is tied to a recommendation engine, reviews and sampling.  

Spotify, Pandora and others have effectively offered music on demand, anywhere, anytime, any device and in doing so have offered both discoverability and convenience at an affordable subscription. This concept changes ownership, rights, valuation and the business model that the relatively new music business has operated within from its conception. iTunes reintroduced the single track, but often at a cost that made little sense to the collector or for people who want to discover new artists and then immerse themselves in their work. 'All you can eat' subscription offers enable the consumer to experiment, take risk and enjoy a wider range of artists than the buy through model. So do the subscription members now listen to more or less music?

Film and TV Home Entertainment is different and here convenience is the real driver as consumers in today’s time hunger environment increasingly want to watch in their time, their chosen place and to break free from the antiquated scheduled slots. Today’s increased bandwidth, mobile technology and network connectivity makes even viewing live video streams a reality. Tying the previously separated subscription services together under one umbrella subscription makes sense as does the shift from the power from the network or device subscription to the content subscription. This can have a disruptive impact on advertising where live audiences are in decline and replay and on-demand audiences are growing. This can even change the funding and pay through models. Home entertainment is just that and producers are having to look at horizontal partnerships as well as cooperative deals to increase the odds of success.

Does the previously well honed staggered release model still work in an environment where the consumer wants it now?

Some would suggest that eBooks have had it easy to date. In the main the industry has merely poured the physical content into the digital container and cried ‘Hey Presto!’ But that could be seen as short-sighted and leaves the door wide open for others to do something different. Subscription models by themselves are different even if they merely offer the same content on a different payment model, but they also have the power to offer more for less. This is especially relevant in a marketplace where readers do not consumer books at the rate they consume other media and often results in a spiky demand profile. Does am easy payment subscription attract only the heavy reader or can it also appeal to those whose reading habit is less predictable? 

Can an eBook subscription offer recreate and feed that book consumption rate that enabled the old book clubs to thrive, or have consumer habits and social trends now changed that? Readers are often very eclectic in their reading habit and need a wide and deep range which is obviously suited to the digital repository but what is the difference between a digital library offer such as Amazon's Lending Library and the public library offers of the likes of Overdrive? Does range matter or is it down to convenience? 

Today's buy through and download model tells us very little about what happens post sale and whether the book was even read or merely languished on the buyer's virtual shelf. Will an elibrary subscription model offer more reading data and if so will it be shared or remain with the retail service provider?

There remains the often thorny issue of what's in it for the author? How will they get rewarded? Can a subscription market offer greater discoverability, reader loyalty and royalty? Will they get paid instantly on each click through, or do they have to wait months in what is a real time world? 

Tomorrow we will look at the emerging subscription players and their segmentation.