Thursday, July 17, 2014

Amazon Goes Unlimited

Today, the market is talking about the Amazon offer, Kindle Unlimited, which certainly is a smart name as it aims to do exactly what it says on the tin. It should come as no surprise and it was only a matter of time until Amazon entered the ‘all you can read’ ebook subscription arena that services such as Oyster and Scribd have started to open up.

We have long argued that the subscription model is coming and that it starts to change how we relate to books that now can be effectively ‘borrowed on demand’, without having to worry about collecting them on virtual shelves, kidding yourself that you own them when all you own is a limited licence, and also trying to work out how to pass them on to others, share them, or divide the family collection when a relationship splits up.

The greatest challenge to the subscription market is matching the economic model to the reading habits of the members. The book clubs of old used to force feed ‘book of the month’ and expect a regular purchase, but they were dealing with relatively more expensive books and accepted that many people didn’t read on a regular rate. Importantly publishers often had Book Club royalties written into their author contracts. We now have ‘all you can read ‘models which are based on a flat monthly rate with an open to read offer against a digital library. Book s only earn when they are read and ensuing the definition of ‘read’ is a relatively minor but interesting issue.

Unlike other media subscription offers in music and film and even audio the demand and usage patterns of ebooks are very different. An ‘all you can read’ model may appeal to high volume readers who actually don’t need an incentive to read, or buy books and probably read a high volume of what they buy. It doesn’t necessarily appeal to readers who have a more erratic habit, or who collect ebooks today and don’t get round to reading them. So churn rates will be very important both in the early days and within the subscription cycles and will be probably very high compared to other subscription services.

Amazon launched Free Time in the US some 18 months ago. The service was aligned to their Prime subscription model and offered access to several media forms and importantly was aimed at parents for their children. It is not clear how successful this offer is today, but it did have all the right ingredients and if it were extended to align with Unlimited would make commercial sense. Amazon will have learned a lot from this exercise and obviously have a huge volume of customer information and reading habit data to mine and exploit. Unlimited would potentially give ‘family’ offers which cross media, align with Amazon’s core Prime service and effectively lock in customers. Importantly they will be very difficult to compete with as others would appear one dimensional and limited in their potential. However the economics of such an unlimited cross sector offer would be complex and maybe a bridge too far with suppliers today, but Amazon will have learnt much from Free Time that others have yet to discover.

Amazon has aligned Unlimited to their Lending Library and those publishers and authors who opted for this service channel now are automatically lifted into Unlimited. A smart move by Amazon and one that gives them instant traction with both content and users.

So is there room for Amazon, Scribd, Oyster and will Kobo, Apple and the ailing Nook follow? What will Wattpad do now? Can Amazon extend the Unlimited offer to make it even more compelling with premium offers on audio, film, music and even cloud services?

We just can’t see sufficient market for all players as they are position today and it will be interesting to watch the strategy adopted by others. Amazon’s Achilles heel has often been their loner approach and there are many huge subscription services that could be seen as complimentary for others to align with and thereby protecting themselves from being seen a ‘trick pony’.

What’s in it for publishers? What’s in it for Authors? How do digital distributors such as Ingram respond? How does this impact the public library debate and services such as Overdrive? There are many unanswered questions and we are only at the start of a journey which will have many barriers to negotiate, but we now are starting to see a divide between physical and digital which may prove to be healthy. The books may unfortunately remain the same but the divide between ownership and licence, between buying to maybe read or as a gift and subscribing to consume, an incentive to read more as opposed to decorating physical and digital shelves is now potentially up for change.  

This is a good thing for consumers who read. It could be a good thing for digital media users. It may get more people reading. But there are others within the value chain for which this move has many uncertainties.

Related articles:
Subscription Is Coming                                  June 2013
eBook Subscriptions Part 3: The future should be significant        March 2014        


Inkling said...

Quote: "So is there room for Amazon, Scribd, Oyster..."

If Amazon displays its usual behavior, it'll do its best to make it hard for other subscription services to survive, including smaller niche services. It's already tried the classic would-be monopolist moves with print bestsellers and ebooks--sell below cost to destroy competitors.

It Amazon succeeds, watch out authors and small publishers. Amazon will be able to dictate terms and payments, almost certainly slashing them to the bone as it recently did with Audible payments.

It's not like Amazon is hiding what it intends. The company recently told German officials that ebook royalties should be in the 50% range rather than the current 70%, with Amazon pocketing the rest.

Martyn Daniels said...

Sorry but is not at a point where subscription services are one a given or the concluesion can be drawn.
Amazon has created Free Time which is now branded Unlimited. This is a substainul offer but still has not capture the market.
What Amz has is cross media offer which it has invested heavily in creating. We may not like it but we did little to stop it and many have failed to invest in the future and left it to new entrants to do so.
Forget the obsession with percentages what matters is who is best positioned and why and what are the triggers that make a difference.
The publishing industry has stood back and let Sony, Adobe, Apple, Amazon, Scribd, Wattpad, etc dictate the market. It can't now suddenly cry foul and point fingers without a great deal of soul searching and also has to remember AMZ isn't alone in its model or offer its just better at its exection and comitted to the marketspace.