Tuesday, March 04, 2014

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.

1 comment:

Michael W. Perry said...

You might also want to mention Inkbok. It's been signing up authors and publishers for several months and, according to a Monday email, should go live with its ereaders in March.
I'm signed up to have my ebooks distributed through Oyster and Scribd as well as Inkbok, but the last has me most impressed. It may get the subscription model right. At $4.95, the price is probably closer to what the public is willing to pay. They also have what will probably prove a more solid and stable business model. Authors get 60% of the total income, with the dividing depending on how many books are read.

Inkbok will also have free area where no paid subscription is required. For authors, that's a great opportunity. Readers can sample the first book in their series to get a taste. Authors earn whether those readers buy or subscribe to read later books.

Uploading requires an ePub or PDF version of the ebook and is easier than for Apple or Amazon. Authors and readers can check it out at Inkbok.com.

--Michael W. Perry, Inkling Books