Understanding The Subscription eBook Offer

Subscription services are today’s alternative solution to owning what may fast become yesterday’s technology.

Imagine buying eight track cassettes, cassettes, vinyl, betamax, VHS, mini discs etc, today. Yes, some still do but for the majority of us, these are yesterday’s technology both in terms of devices and media. During the last ten years we have achieved many things in the ebook arena and many old formats and devices have come and gone. Do we expect tomorrow to be any different? Do we expect to still be able to read and enjoy that ebook download in say 10 or 20 years? Do we even want to read the book again?

Subscription services coupled with deep and board repositories and on demand technology start to change consumer behaviour and values. Technology devices are becoming media agnostic, or should that be the other way around? Media is no longer confided to what your device can hold or a location but is now dependant on the network, or initially at least.

However as subscription serves and fail to grasp that ebooks are different to journals, film, music and even short form works.

So we have the question of ebook subscription and whether it can follow other media and be successful in the on demand world? The answer is yes and no.

First the yes would appear to be logical. A sort of return to the old book club but not restricted to a limited number of physical stocked titles but open to all titles. A club that cater for the eclectic tastes of readers. A place where readers can discover new authors, experiment with new genre and do so often within an ‘as much as you can read’ contract. A place where authors can show their wares and potentially engage with their readers. In addition it could offer a service where your library is virtual and the shelves never swag under the weight of old book s.

However, the reader has to get value for effectively licenced access as opposed to outright ownership. The challenge is that there is not an average rate of reads per month, per week or per year. To the person who reads a book a week or even more than this the offer may sound like ‘manna from heaven’, but to the person who struggles to read one book a month or is somewhat erratic in their habit, they offer may have little appeal. The point is that we are trying to get more people reading and not just appeal to the minority who are already hooked. This is a serious issue and one of the main reasons for the demise of the old book clubs who found themselves trying to feed a habit which was on the wane as their members became increasingly time poor.

The STM journal market has been built on subscription model but is very different in its creation and consumption model. The authors give their material for free, the articles are often peer reviewed for free and the journals are ‘sold’ back to the institutions on a title not firm commitment basis. In other words there is no guarantee that a said member of issues or articles will be published and there is no refund at the end of the year. The material itself is a ‘must have‘ for the institutions and the publishers offer review and authentication within their value proposition. This is far removed from the trade sector and today’s ebooks that it is somewhat irrelevant.

We must remember that there are two critical people in the value chain, the reader and the author and that any subscription model for any media must also work at both ends of the spectrum.

We have all read about the difference of opinion that has been aired over the royalties being received by artists from Pandora, Spotify and others. This itself does not mean that subscriptions are wrong or not rewarding for artists but says that the contracts and commercial arrangements made were not always in the interests of all parties. We must also remember that the music business entered into such contracts on a different basis than would publishers and the volumes involved are significantly larger.

The LoveFilm and Netflix market is also very different in and although it offers some interesting insights it is very different from the ebook trade and marketplace.

We have the practical or impractical sides of measuring a ‘read’. Irrespective of whether the overall model is based on ‘as much as you can eat’ or not, the royalty payments have to be based on discovery, access reading or some element that constitutes a ‘hit’. It is only right that the books which are read should be paid a royalty. After all we don’t have to pay to enter a bookshop or library and it is the selection that should trigger payment. However, what constitutes a read? If I select a book open it ead the first page and put it down does that count? If I get half way through it and tire and again put it down, does that constitute a read? If I select a book one month but don’t read it for six months or even over six months, when is the royalty due? These and many more interesting options have to be clear to all parties. Also there has to be measures that obviate counting abuse and provide transparent audit by interested parties.

Finally, there is that often thorny issue of whether the existing author’s contracts permit digital subscriptions, or whether it an assumed right? The transparency also needs t flow to the author’s royalty statement and not be buried in ‘net receipts.’

When we engage with a new business model, or channel, we have to assume that it may be a major source of income in the future and therefore ensure that unlike some other sectors the terms are sustainable and equitable  both today and potentially as the service grows.

So subscription services look attractive to many and should be rewarding for all, but they should be entered into with eyes wide open and not half shut. 

Spotify For Trade eBooks?

Many talk about creating a ‘Spotify for eBooks’, but all too often they fail to grasp the differences between the media, marketplace and cultures and once again see all as the same. There is no reason to doubt that a subscription service will work for some book sectors, but there is plenty to question whether it could prevail across all sectors.

Academic, professional and educational sectors have a captive audience and market and often also have ‘must have’ content. This makes subscription services potentially viable in these sectors. There are questions about who can aggregate the offer and whether the subscriber is the user or a secondary intermediary service, but the content is often mandatory either way. The challenge is establishing that one stop shop and recognising that multiple ‘must have’ offers don’t always work in the eyes of the buyer.

Music, newsprint, magazines, film, TV along with services such as broadband and mobile service provision are ideal for subscription. The nature of these services also can lead to collaborative offers which can exploit additional memberships and add additional value. Importantly with regards to the content it is less about individual files and more about access to databases and collections.

Trade ebooks however have several challenges. The market and consumer reading is still very mixed between ebooks and pbooks, The readers are likely to only read a mere handful of books a year and often in an inconsistent and unpredictable time manner. Heavy readers tend to be eclectic in their habit and therefore do not want to be restricted to one genre and whereas ‘Twigging’ works best in a ‘must have’ market it is often far less important in a trade market where depth and range can be easily provided and search and discovery become more important.

The emergence of MOOCs such as edX and Coursera have started to radically change the content and business model in academic and education sectors. Jimmy Wales, founder of Wikipedia reflects on his own experience, ‘I was taking an advanced calculus class and my instructor was reputed to be a fabulous researcher, but he barely spoke English. He was a very boring and bad teacher and I was absolutely lost and in despair.’

‘So I went to the campus tutoring centre and they had Betamax tapes of a professor who had won teaching awards. Basically I sat with those tapes and took classes there. But I still had to go to the other one and sat there and wanted to kill myself.’

We now have TED Ed, MOOCs, Khan etc all built around offering the best teachers, content to all irrespective of location. The emergence of the virtual and universal course is forcing institutions to rethink their models and here access to quality can be best achieved by a subscription model.

Even the software industry is ditching its perpetual licence model and starting to move to a subscription based one. This drive is being led by the likes of Microsoft with their Office 365 which is now offering subscribers full office mobile on the smartphone.

Streaming services and faster mobile bandwidth are changing media markets such as music, film, TV sports. We are now seeing a clear shift from download and buy, to own to subscribe to access on demand as much as you want. Large subscription based services such as Sky, Vodaphone, EE, BT are all now also having to offer complimentary and added value services to maintain their member bases and avoid churn. Vodaphone are offering new 4G contracts with either Sky mobile sports or Spotify bundled in the UK. In other words you can now subscribe to one umbrella service and get the others at discount or even free. It’s about community and lock-in based on a single subscription.  

So what about books?

Today we have a number of attempted subscription based services; Nuvem de Livros in Brazil and Argentina, 24Symbols in Spain, Oyster in US. We have the potential return of the subscribing library and offers such as Amazon’s lending library. However these have to compete with a market which is still in a heavy discount war and undergoing fundamental relationship and value chain changes. The subscription offers that have emerged are not doing anything new and it could be argued are appealing to students and so tapping into the ‘must have’ segment not the trade.

We also have the potential of our Read Petite venture and subscription model and we would argue that this is different content to trade ebooks and a different new marketplace.

Subscription models are appropriate where there is a high reliance on the access and ’must have’ content, the captive audience and the alignment with mobile and online streamed services. We would suggest trade ebooks are not there today and are unlikely to make that transition anytime soon. 

Subscription Is Coming

Subscription business often make good business sense to both the service provider and the consumer. For the service provider it enables them to build a sustainable and predictable revenue stream where the peaks and troughs of fads and the unpredictability of demand is cushioned by the width and depth of offer. They still have to manage down the exposure to churn, but have the opportunity to build customer loyalty and relationship. For the consumer it offers the obvious one stop shop and protection from change in what today is often dynamically changing markets.

Media, technology, software, communications are some of the sectors now either moving towards or heavily entrenched in subscription business models.

Today we have the new battles between BskyB and BT, where the latter threw a new gauntlet down with their ‘free’ new sport channel. BskyB have now responded with unlimited broadband for anyone signing up to its Sky Sports channels. This means that a new Sky customer can now pick up broadband for as little as £5 a month on top of their line rental. It is clear that this cross selling and subsidy offer is just starting and will not just effect these two but everyone else who offers any competing service.

We now have some clear adversaries in the various markets. In music we have Spotify locked with Pandora with Apple and Google trying to muscle in. In films we have Lovefilm vying with Netflix with the battle now spilling over into production and competing with Sky. The world of software which was built on selling perpetual licences is now rapidly repositioning itself to annual licences and is being driven by the likes of Microsoft’s Office 365 and Adobe’s Creative suite. 

But what about books, newsprint and magazines?

Learned and Academic journals have long successfully worked within an institutional subscription model, which is now under a different threat from the open access movement. Newsprint and magazines have had mixed success with subscriptions. Where the material can be sourced from an alternative free feed it has struggled, but where the material is highly valued, authoritative and is a 'must have' subscriptions have had success. 

Some have tried book subscriptions and the many failed book clubs are a warning to many, whilst others such as Oyster believe that subscriptions will work for ebooks. The challenge is that apart from heavy book readers, consumers don’t read enough books to justify subscriptions and those heavy book buyers aren’t the problem. We believe that our new Read Petite venture is different and that short form work is perfectly suited to a subscription model.

It’s interesting that some of the largest technology players are looking hard at subscription businesses. Intel is reported to be looking to create a US cable service that would sell a bundle of television channels to subscribers over the Internet. However the existing players are not for rolling over led by Time Warner Cable and other cable and satellite distributors. The distributors are pressuring the cable channels, with whom they have lucrative long-term contracts, not to sign new contracts, which in turn is threatening to bring in the DOJ antitrust investigators. It is certain that the likes of Apple, Microsoft and Sony are watching from the wings.

What is certain is that cross media consolidation will happen. You will be able to subscribe to a service and receive; broadband, tv, film, music, games, software, mobile and digital reading. Devices won’t matter as everything has to be device agnostic. It is not a case of if, but when and who will dominate the market with offers you can’t refuse. To prepare for this opportunity we have to understand how ‘stuff’ gets licenced and how creators get rewarded. 

We should not simply say ‘no’: we have to instead engage and make it work.

Shrinking Discretionary Spending

We are increasingly moving toward a subscription lifestyle which bodes well for some and could give others a few sleepless nights as consumers’ discretionary spending effectively shrinks.

Only last week we were discussing subscription models with a financial industry expert, who informed us that it is being predicted that some 10% of spending could be subscription based in the near future. That may sound a small percentage but when we remove the must buys on rent, utilities, food, clothing etc. it leaves little discretionary spending and that 10% suddenly becomes a much larger threat and leaves far less in the pocket.

So what does this mean to a media sector and who could be the winners and losers?

Film has increasingly embraced the subscription model with cinema clubs and mega download stores such as Netflix and Lovefilm.com. Television has also moved from its previous dependence on ad revenues to build significant subscription layered services which are aimed at reducing churn and locking members into a bigger package which invariably now includes broadband, phone and much more.

Software was once traded on a one off fee and a perpetual licence, but this makes little sense for the developers who have to maintain a growing and changing environment. We now have Microsoft Office 365 on an annual subscription and Adobe products such as their Creative Suite, Dreamweaver Illustrator and Photoshop going onto a monthly on demand fee model. Interestingly Adobe will still sell standalone versions but these will not be upgraded and today may date very quickly. Abobe are to offer the whole creative suite for a 12 month contract based on fees of £47 a month (£564 pa as opposed to today’s £1800). Software providers see this move as freeing them from the traditional 18 to 24-month upgrade cycle and enable them to release updates as they became available.

Music is still in flux but the likes of Spotify and Pandora have both established significant user bases based on a simple on demand subscription model.

Newspapers have all fallen in and out of love with paywalls for accessing their digital versions. The challenge is often the wealth of material outside of the service and often news is news and unless a specific source adds real value paywalls will continue to have mixed success.

STM, professional and academic publishing has generally been a subscription based environment.

So what about the book trade?

Some have introduced digital subscription models but unless there is a base of heavy readers and wealth of materials it often fails to hit the consumer button. The old book clubs had the opportunity to migrate their offer to digital but often failed to visualise the potential and execute the change. There are obvious potential opportunities for the likes of Amazon. They already have subscription based offers such as Audible, Lovefilm, Free time and that Trojan horse Prime. Being able to mix and match these with on demand offers would give them a substantial offer that very few would be able to match.

If you are able to get all you want, at the right price do you want to shop around? Does the subscription model enhance the consumer / provider relationship and effectively lock out others? We all would like to market and sell direct but for many this will not be practical and being inside the subscription tent may prove more rewarding than being outside it. 

The History That Gives us Read Petite

The digital era allows us to revisit what once worked but became inefficient and uneconomical in the physical world. It is not a case of repeating the old ways but understanding how digital technology and network connectivity can redefine the process and make what once work , work again.

We are working on a new venture Read Petite which reintroduces and redefines short form for today’s time poor readers.

Humans love short-form reading.  The recorded history of the short story goes back to the likes of Homer and collections such as Aesop’s Fables. Much later came Chaucer, Boccaccio and the early translation of collections such as The Arabian Nights. Then came Sir Walter Scott, Nathaniel Hawthorne, the Brothers Grimm and Edgar Allen Poe whose definition of the form still stands: a narrative that can be read at one sitting.

The age of mass literacy ushered in even more opportunities for short-form reading.   The widespread popularity of periodicals created a vast appetite for short-form reading of all types, creating opportunities for the likes of Dickens, Hardy, Kipling, Wells and Conan Doyle in the UK and Melville, Washington and Henry James in the US. Russian writers such as Tolstoy and Turgenev rose to fame on the back of the short story, and their fellow compatriot Chekov is widely credited as defining its structure for others to follow.

Today's publishers would be envious of the commercial successes of many of these pioneers of the form.  For example, in 1837, Dickens was selling some 50,000 copies of his Pickwick periodicals at a shilling a time.  By the time that Great Expectations was published in installments in 1861, he was selling 100,000 units a week.   Interestingly, installment-publishing didn’t cannibalise sales of the complete single-volume book - in fact, serialisation fuelled interest in the full-length work.

In the early 20^th century, periodicals such as The Atlantic Monthly, The New Yorker, Scribner’s, The Saturday Evening Post, Esquire and The Bookman in the US and  The Strand, The Sketch, Harper’s and Story-Teller in the UK continued to feed an apparently-insatiable market.  Many of today's "classic" authors were given their first platform and public recognition through short-form writing, including Somerset Maugham, Saki, P.G. Wodehouse, G.K. Chesterton and Agatha Christie. In the US, writers such as F Scott Fitzgerald, Parker, Hemmingway and Faulkner often earned high fees for their short stories.  In the 1920s, the Evening Post was paying Fitzgerald $4,000 for a single story, (the equivalent of $80K today).

The market broadened still further with the rise of mass-market weeklies and monthlies.  For example, in the UK, weekly magazines such as Woman, Woman’s Own and Women’s Weekly started to dominate the short-form market.  "Name" authors gave way to genre fiction, literary to mass-market. 

The Fall and Rise of Short-Form

In the latter half of the 20^th century short-form writing took a tumble.  Outlets for short fiction atrophied: for example, IPC Media who dominate the UK woman's magazine market have seen a 22.5% drop in year-on-year sales (2011 compared to 2010).

While readers were as keen as ever on the medium - and writers certainly wanted to write it - book publishers found it increasingly difficult to package it in a profitable way. Physical production costs for a short story are close to that of a full-length work ten times the size - yet consumers clearly would not pay the same price for a 2,500 word piece as they would for a 125,000 word tome.  Distribution costs are identical, too.  To put it simply, the short-form story became largely uneconomic for publishers to sell.

The golden, once-in-a-lifetime opportunity created by the ascent of digital publishing is revolutionising every aspect of the publishing business, but nowhere more than in the realm of short-form publishing.  Physical productions costs have vanished.  Distribution expenses, while not disappearing, are now simply one more minor amortisable cost - and physical distribution costs, such as warehousing have of course vanished completely.

All this makes the rise of short-form reading little short of inevitable and Read Petite both viable and exciting.

All Change At Tools of Change

Often knowing when to stop and move on is harder than continuing to plough the same old furrow.

Last week Tim O’Reilly decide to call it a day on his well respected ‘Tools of Change’ adventure. 

Many applauded him for the work he had done in moving the digital agenda forward, whilst others said he should continue and owed it to his follows to keep up the work. We are not able to say what tipped his thinking to flip his attention elsewhere, but will say that we should never expect any party to go on forever.

Tools of Change arrived at the right time. It fed the appetite of many to understand the emerging digital landscape and listen to those breaking new ground. It certainly pulled together the brightest and reshaped the Book Fair World. We attended one of the conferences and found ourselves wondering what all these folk attending would be doing, or adopting, if they didn’t have this focal point?

Does the shutting up of the Tools of Change mean we are fully conversant with digital and change? We would suggest not and change is all around us. But it does signal the end of the beginning and the question now is as what follows and how will that help shape our thinking. Perhaps it signals the end to the mega conference, which in our opinion is probably well overdue, but again we have thought that for a long time. Perhaps it signals an end to the ‘payola’ conference where money can buy the platinum sponsor a speaking slot, a booth, literature in the delegate pack and even if they have little to say. We refused to be drawn into this sham circuit with its often predictable group of speakers and luvvies.

Perhaps it draws an end to the constant barrage of conferences and pulls them together around major Book Fairs.

Others will step into the void and some are already doing so, but are they merely replicating the formula or adding new ingredients?

We remember Richard Charkin shutting up his blog, which was insightful but often more a mixture of social insights and executive travels than a commendatory on digital advancement. Then Evan Schnittman took off those Black Plastic Glasses and said we are now digital time to put this pen down. Now Tools of Change is moving on.

It’s ironic that this last month we have written nothing. Were we missed? Did the digital world stop spinning? Probably we were the ones most frustrated and itching to write about so many things, but we found ourselves not with writer’s block as much as a desire to get on with something different.

We have just announced our Read Petite venture with ex Chief Editor of the Bookseller, Neill Denny, Agent and broadcaster, Peter Cox and founder of Waterstone’s Tim Waterstone. We found ourselves wanting to write about Read Petite at the expense of all else. That would clearly be wrong but how do we balance the industry commentary with what we feel so passionately about?

After some 2,200 blogs, we have decided it’s not time to move on but it is time to start to rethink what we write and how we communicate it. It’s a bit like when Bibliophile started t do video reviews to supplement the text ones. We saw the power of the visual the passion of the reviewer and realised that text reviews are good but are only they because that was the only way we could effectively express them. Today music is about YouTube more than it’s about iTunes. Conferences are more about TED than packing a room full of delegates and collecting money of the speaker’s companies. Commenting on change is about effecting it and helping it happen than writing about it.