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.

Three Start-ups That Could Change The Market?

New services are appearing weekly and all offer to either, save publishing, or redefine it within the new digital world. This last week has been no different and has seen three new services gain visibility, drive interest and create a significant volume of debate amongst the industry thinkers, and advisors.

What is now interesting is that services are being launched with outside funding and these are not only different, but are potentially very disruptive in how they challenge the way we do business and interact within the market.

Are objective today is not to decide the winners and losers but to explore some of the challenges and their potential to disrupt tomorrow.

Humble Bundle

Humble Bundle create a package of ebooks from different authors and offer these at a consumer driven price. In other words the consumer chooses how much they want to pay. If they pay more than the average payment they can receive additional ebooks and they also get to choose how their money should be divided. The files themselves are DRM free.

We all remember the famous event when Radiohead did the same consumer driven pricing for their album release, ‘In Rainbows  ‘. Some gave a cent, others paid a responsible sum, others paid a fee aligned to the standard RRP. It caused a stir, gave Radiohead loads of publicity and as a one off promotional exercise and according to who you listened to, worked, or didn’t. 

Humble Bundle are doing the same in other media sectors with their ‘brew’ bundles and now have extended it to ebooks. The collection on offer featured books by the likes of Cory Doctorow, Neil Gaiman, John Scalzi, etc. The titles offered are mainly backlist with the exception of one new Tor title.

Some may be forgiven to thinking that the children had actually taken over the chocolate factory.

The ebook bundle certainly  gives new meaning to the term ‘net receipts’ and raises many questions on rights, other renditions and the model’s sustainability if it were widely adopted.

Cory Doctorow claims combined sales have exceeded $400k. However how many of the bundle have or will be read and what is the percentage that is merely there to pad out the bundle to make it look attractive? Are the receipts spread evenly or do they go to the better known authors and to the detriment of others?

It certainly is a great promotional way to sell backlist, and maybe mix in some front list to add spice. It would also work were there is a clear genre attraction, but is it just another Groupon in the increasingly ‘Voucherclouded’ world? We can only read one book at any point in time and a bundle would suggest a high percentage will be mere shelf fillers to aid a promotion.

When ebooks are being sold at 97% discount, you can’t blame Humble Bundle’s for asking , how much?

Oyster

No it’s not the latest swipe card for London Transport, but a new start up which offers a different sort of a potential ‘pearl’ to publishing.

It is not the first, nor will it be the last start up to offer ebooks under subscription. However, it’s well funded and determined to push the increasingly visible issue of ‘licence versus ownership’ . Oyster claim to be the new ‘Spotify for ebooks’ and we can’t argue that this make sense and is long overdue.

However, just as Spotify have found in changing the music culture, there are many questions  and challenges Oyster now face in its drive to change book culture.

Oyster offer a  ‘much as you can eat’ for a straight monthly subscription. This makes good sense but we are all constrained by time and they are highly unlikely to have the field to themselves.

 The subscription has to offer a true value statement and match or compete with the current high discount offers in the market. This is becoming increasingly difficult as some front sellers are being discounted at ridiculous levels such as 97%. The traditional retailers can easily undermine the Oyster offer by heavy discounting on the leading titles and Oyster’s ability to respond may be somewhat limited.

The next challenge is on range. If Oyster offer the full range, then how will they be seen as different and what compelling reason will the consumer have to tie themselves into a contract as opposed to playing the market? They could ‘twig’ content and feed vertical niches, but as readers are eclectic in their habit, they will fall into the hole the big book clubs did before them. 

They could align with vertical interest groups, but today they have not said this is a route they are planning to take.

Then we have the commercial model and rights whether these sales fall under business as usual, subsidiary sales, or whatever. Asking publishers to revisit contracts can be a big negative and roadblock to getting content. Therefore publishers need to be able to square the subscription model against their existing contracts.

The subscription model is logical in a licenced environment but changing culture is not easy and the digital market has a reputation in being somewhat fickle even if there may be a pearl in the oyster.

Bookshout

Finally we come to what may be the most contentious of the start-ups, Bookshout. The new operation is attempting to aggregate readers ebook libraries, by what some may described as the back door.

A member gives Bookshout their Amazon, Nook and whatever logon details and allows Bookshout  to use these to effectively log on and verify their purchased ebooks. Bookshout then sets up copies of these ebooks on their service, enabling the reader to be effectively device and retailer independent. The new copy is provided by the publisher on the basis that Bookshout has established proof of previous purchase. Bookshout can not only consolidate a reader’s library onto their platform, they can also consolidate reading information and activity information and feed this back to publishers.

Obviously, Bookshout retails ebooks in their own right too.

Questions remain as to what DRM they are using and how what is effectively therefore a fresh licence can square with the like of the lack of a first sale doctrine on media today. The publishers appear happy , BookShout are happy, but how long before Amazon and Nook shut the back door? It somewhat like making a business on stealing someone else’s sale and expecting them to roll over.

Who does the customer have a contract with?

Obviously, their unique proposition is based on the member being willing to give them their personal access credentials and that the publishers accept that they have established proof of purchase of the original licence. Most importantly it is also based on them being able to operate, within what some may say, is a loophole in Amazon’s and Nook’s terms both with publishers and their consumers.

So is Bookshout the reading platform for all? Will it be the place of choice or merely somewhere one goes to aggregate their library? It may depend on how many people have ebooks from both Amazon and Nook which no one today can really answer but is a big question on which to build a business.

The interesting thing is that all three if successful are disruptive, but how do we measure success and is it sustainable or merely a flash of first mover excitement?