Subscription: Is Amazon about to undercut another section of the publishing industry?

“We are not convinced it is what readers want; ‘Eat everything you can’ isn’t a reader’s mindset. In music or film you might want 10,000 songs or films, but I don’t think you want 10,000 books”.

That was Penguin Random House CEO Tom Weldon in conversation with the Bookseller in November 2014. He was speaking about a subscription model like Spotify or Netflix for the eBook publishing market – a topic that’s been met with scrutiny since 2007, the year Scribd officially launched.

Two of the ‘big five’ have shown a greater interest, however. Simon & Schuster added their backlist of more than 10,000 eBook titles to both Scribd and Oyster in 2014 , whilst HarperCollins agreed to share an undisclosed number of titles from their backlist with both subscription services as early as October 2013. Bloomsbury have also added over 2500 titles to Scribd, with both services now claiming to offer over 500,000 titles.

Weldon may yet rue his decision to ignore subscription models as Amazon begin to push for more market share with their latest service, Kindle Unlimited. Amazon are notorious for occupying as much of a given market as possible; in the run up to Christmas 2014, the Guardian reported that the company controlled 22.5% of UK entertainment market.

More disturbingly for their competitors, Amazon appear to be using their advantage to push sales of their own product. Now under CEO Jeff Bezos’ control, The Washington Post will come pre-installed on the latest Kindle Fire tablets, carrying a monthly subscription fee.

Oyster and Scribd: the upstart startups

Only two companies look set to provide Amazon with any degree of competition in the Anglophone world – the aforementioned Oyster and Scribd. Davids to Amazon’s Goliath.

Subscription libraries might be a small segment of the eBook industry at the moment, but there’s plenty of reason to suspect they’ll grow in the near future. Incubation from Y Combinator gives Scribd an excellent pedigree, while Khosla Ventures recently announced their decision to give the company $22m in funding. At the end of last year, Scribd’s CEO Trip Adler revealed the addition of 30,000 audiobooks to their catalogue, calling the move “a natural extension of Scribd’s existing content offering”.

Scribd, in fact, has been a profitable business since the creation of its document reader. Embedded more than 10 million times on websites ranging from the New York Times to publishers like Random House, the software helped Scribd become a business which has turned over $1-2.5 million for seven years.

Though Oyster have only operated since 2012, they can similarly boast confidence from investors, having acquired $14m from the Founder’s Fund and Highland Capital Partners to improve their service.

Despite lacking the 80 million monthly active users Scribd provide their services to, Oyster CEO Willem Van Lancker has described his company’s growth as “very consistent” since a public launch in September 2013.

The two services are in direct competition with each other – a situation which is surely preferable to a market where prices are dictated by a monolithic retailer. Oyster takes a serendipitous approach – cultivating a carefully curated human-led way to discover new books in the guise of the Oyster Review, a journal led by the company’s editorial staff. Reading lists are created algorithmically at the same time, in both instances enabling consumers to choose one or two books out of a list of half a million.

Scribd appear to be more focussed on playing Amazon at their own game; offering the most titles for the lowest price, without compromising quality. When Amazon launched Kindle Unlimited, one of their key selling points was that they had the greatest number of titles available. Scribd’s deal with Blackstone to provide 30,000 eBook titles, basically a direct rebuttal, led one commentator to note: “Scribd doesn’t take kindly to being cribbed“.

An Amazon Kindle - one of the devices used by ebook subscribers

Kindle Unlimited is being challenged by subscription services Scribd and Oyster.

Gaining ground

Scribd and Oyster are gaining traction both financially and in terms of credibility, but they both fit comfortably into the ‘startup’ category. The whole market is a fledgling one, where success can only reach a certain limit without the support of major publishers, who hold IP for the best-selling titles.

Luckily then, both services have been met with high regard from those publishers who have given the subscription channel a try. Speaking at Frankfurt Book Fair 2014, HarperCollins CEO Brian Murray said, “…subscription has turned out to be a model that is very successful in really merchandising and mining the backlist in the catalog. And that’s been a surprise to us, and how much churn there is in that deep catalog“.

After following Hachette and Simon & Schuster in agency pricing agreements with Amazon, Macmillan are also looking to diversify their routes to market. In a recently published open letter, CEO John Sargent announced a plan to “try subscription with backlist books, and mostly with titles that are not well represented at bricks and mortar retail stores“, while praising the “favorable economic terms” offered to publishers by Scribd and Oyster.

Despite large publishing houses showing a willingness to experiment, Scribd and Oyster are still mostly reliant on backlist titles. By neglecting newer, hotter books these services will be losing out on customers – after all, $8.99 and $9.95 a month respectively may well be a good price, but not if you’re paying for books you don’t want to read.

Amazon: the ebook goliath

Kindle Unlimited offers readers 700,000 books, a hefty 200,000 more than Scribd and Oyster. Except from some attention-grabbers like the Harry Potter and Hunger Games series, however, most of the content comes from self-publishing authors.

Caution should be taken from the response to Amazon’s new service. The BBC recently documented a backlash from customers who claimed the service didn’t offer enough books – one customer even said, “Morecambe Library has more stuff that I would want to read“.

Authors as well as readers have been voicing complaints since Kindle Unlimited launched in July 2014. One writer particularly influential in the debate on whether Unlimited is good for authors is Holly Ward; according to Digital Book World, her Damaged series reached no.1 on eBook sales charts in April 2013, with over 150,000 copies sold in a matter of weeks. Ward took to KBoards in November 2014 to announce that her income had dropped by 75%. The thread reached almost 700 replies from similarly disgruntled authors complaining about loss of incomes.

A thread from the KBooks forum, where author HM Ward first revealed her 75% income reduction

A disgruntled author takes to KBoards. Image credit: KBoards/HM Ward.

Since Kindle Unlimited is a part of KDP Select, authors who are part of the programme are denied the opportunity to sell elsewhere. As Smashwords CEO Mark Coker puts it: “Any time an author goes exclusive, they risk alienating fans who prefer shopping at other retailers, and they miss the opportunity for serendipitous discovery by new readers at other stores.” Authors who publish using Kindle Unlimited make themselves more dependent on the service,

As Mike Shatzkin notes, “ever-growing supply and stable demand is a toxic formula for the prospects of each successive ebook published for that market“. Low-priced indie authors who create the bulk of content available on Kindle Unlimited are crowding each other, leaving readers with an ever-growing choice of books that are often bought then neglected. Under the standard single sales method that wouldn’t be a problem for the author. Now, however, nobody gets paid until at least 10% of a book has been read.

The future for subscription models?

Amid the backlash against Kindle Unlimited from both authors and readers, Scribd and Oyster appear to have been given an early advantage in the subscription market. As Philip Jones notes, those contributing to Scribd and Oyster will leave Kindle Unlimited “starved of big publisher content“.

Embracing different sales channels only serves to strengthen a publisher’s interests. Subscription models for other media continue to turn over a profit for themselves and for the artists contributing to them, and there are few reasons to think eBooks should be any different. Publishers, it seems, would be wise to take advantage of the market’s current climate by co-operating with Kindle Unlimited’s rivals.

Who knows? With the continued success of subscription models, we might even see something of a paradigm shift. The word ‘publisher’ has taken on a more and more ambiguous meaning as books and the ways they can be distributed has changed alongside the rise of digital media. Is it too much to imagine a consolidated service providing video, music and books all at once? This writer thinks not, and publishers will only have a stake in this kind of market if they invest in it now.

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Josh Ryall is a writer covering issues in the publishing industry and tech in the South West. You can follow him on twitter @josh_ryall.

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