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?  

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. 

Is The Online, OnDemand, Subscription Model The Way Forward For All?

Netflix launch in the UK at the beginning of 2012 and we thought that they would have a tough time establishing themselves, their brand and competing head to head with Amazon’s Love Film rival. We were wrong! Netflix in its first seven months has acquired 1 million subscribers in the UK. They have created a new business territory that is now worth £72 million and growing in just 7 months! Netflix took 10 months to achieve 1 million subscribers in Latin America and the Caribbean, and 10 months again in Canada. The catchment and infrastructure is different in the UK and Ireland with some 67 million consumers with good access to high-speed Internet services, whereas Canada is smaller population 34 million and Latin America and the Caribbean have 98 million but inferior infrastructure.

Some may say so what and point to LoveFilm’s 2 million customer base is wider and is across not just the UK, but also Germany, Sweden, Denmark and Norway and Sky. However, Netflix plan to launch in Norway, Denmark, Sweden and Finland by the end of the year. But the fact is that Netflix can to the UK and gave a simple message video on demand and as much as you can view for one price. The recent Harris Interactive ‘Screenlife’ report (July 2012) asked smartphone and tablet users to rate the appeal of an online music service on any connected device, with access to  practically any track available today even if you don’t own them, where you pay a monthly subscription of around £5 – 10? They also asked the same about watching as many films or TV programmes from a large library using any connected device, where you pay a monthly subscription of around £5 – 10? The response was significant

Appeal	Extremely	Very	Somewhat	Not Very	Not at all	Not sure
Smartphone
Music	14%	11%	24%	24%	25%	2%
Video	17%	16%	25%	17%	21%	2%
Tablet
Music	28%	17%	18%	16%	21%	1%
Video	32%	19%	19%	12%	17%	1%

Netflix claim that the top UK and Ireland genres are comedy and drama and users’ favourite time to stream is on a Sunday night, according to the service.

So will the same shift to an on demand subscription based service model impact other media markets? It is clear that the the  way we all consume and pay for media is changing radically and moving from, pay to own, to subscribe for on demand. This is no longer about music, film, games, TV,information and books , but about all digital media and how we find it, access it and pay for it.

Today’s book market is tearing itself apart with discounting, ebook pricing tactical games and a lowering of consumer price perception. Will now lead to a Spotify or Netflix for books or a continuation of the devaluation of the content? 

Related articles:

http://bookseller-association.blogspot.co.uk/2012/01/media-on-demand-takes-another-step.html

http://bookseller-association.blogspot.co.uk/2011/01/amazon-take-all-of-lovefilm.html

24Symbols: The Start of Books on Demand

Way back in January 2010 we wrote the following as part of our 2020 predictions:

‘This year will start to redefine ownership and see the entry of the streamed ‘read on demand’ model similar to what we have been raving about with the likes of Spotify. It will take the music model to open up consumers to its potential. The challenge will be the publishers and their obsession in supporting existing models that they understand and their reluctance to think outside the box on rights and royalties.’

Unlike others we have long seen digital as different, as a licence and not an outright purchase.

We believe that viewing digital as a mere substitution rendition is a dangerous route. This not only straightjackets creativity into yesterday’s economic models, it also ties royalties and rights to an inappropriate business model and further subjects the reader to ‘albums when they may find individual tracks more appropriate’.

Amazon are clearly lining themselves up to change the way we write, read and purchase material. What looks from the outside, as often disjointed steps, can be clearly seen as well thought through strides towards a new platform of writing and reading, that today others are struggling to comprehend.

We have recently seen the lending of ebooks enter the market, albeit under a social sharing umbrella. We have seen Amazon’s cloud offer continue to be developed. We have now seen Amazon start to advertise on the Kindle. Hello, can we add two and two and make four? Amazon is potentially one step away from a digital on demand service based on ads plus subscription. We could see it as a new global library, a new ‘book club’, a new way for ebooks to be read and if coupled with social networking, viral marketing, author buy in and also the wealth of tools Amazon has built, maybe a category killer that will be hard to emulate and compete against.

Yesterday we read that ‘24symbols’, a Spanish startup is planning to launch a subscription service with the aim to become the "Spotify for e-books." They will offer an ad-supported and a subscription-based access around 10€ per month for ebooks and the books will be streamed and cloud based. The challenges they face are the same as Spotify and others before them – grappling with a rights and royalty infrastructure not built for pricing not on demand licensing let alone ad supported revenues. They also have to accept that Amazon is about to set up in Spain.

Is it realistic to think that a new entrant can break the mould, or are we looking at the start of a process where the real winner has yet to enter the race. Remember Amazon wasn’t the first internet bookshop but the 14th and the first to get service right.

Book rental on demand certainly is the obvious opportunity for the industry. However, unlike music, and to a degree film, books do not have a consolidated source and supply and is highly fragmented so negotiating contracts could become a nightmare for anyone without true market clout and presence. Secondly, we have the current bookshop versus library mess, which would tend to indicate just how difficult it will be for the rights gatekeepers to see anything that is to them left field. Thirdly, we can’t even price ebooks today, let alone formulate a commercial rental model that is mutually rewarding, so moving to a lower pricing model based on term time licensing and reward could still prove a challenge. Finally, we still have to move to the cloud culture and on demand lifestyle. This may seem a natural evolution but challenges the very basics of a library and ownership that we have know for centuries.

We believe Books on demand via a cloud based services makes logical sense, but the question is less of if and who, and more when and how they can change book culture as we know it today.