For a bunch of rapacious capitalists, the people who start technology companies are strikingly ambivalent about the concept of owning stuff. Silicon Valley would like to replace the practice of owning copies of, say, a song or a movie, with a world where everything’s kept on servers that people pay to access. Next up: books.
As startups have started offering services inevitably referred to as literary Netflixes (NFLX) or Spotifys, the idea has been gaining momentum. Still, it’s getting a mixed reaction at Digital Book World, a publishing industry conference about e-reading. Meanwhile Oyster, one of the young subscription companies, said Tuesday that it had raised $14 million to expand its four-month-old book service. Still, there’s plenty to be sorted out before a subscription model for e-books takes hold.
As ideas go, providing access to a large book collection is particularly un-novel. Even the notoriously Luddite publishing industry can acknowledge the appeal. Who among them didn’t spend his youth clutching a library card? But like any media industry staring down the barrel of the Internet, the publishing industry’s feeling gun shy. Carolyn Reidy, the chief executive officer of Simon & Schuster (CBS), said at a panel on Tuesday that the company has been discussing subscriptions, but there were unresolved questions about how to avoid devaluing books and cannibalizing sales. For now, it’s staying away.
Tim O’Reilly, the founder of O’Reilly Media and one of the industry’s noted early adopters, wants publishers to get over their qualms. “Anybody who is not looking at subscription models is foolish. First of all, recurring revenue models are great,” he said. “Also, there is evidence in many areas that it’s what people want.” Still, he said, publishers need to tread carefully to avoid becoming the serfs of the digital companies that distribute the subscriptions.
The most aggressive of the big publishers is probably HarperCollins (NWSA). Chantal Restivo-Alessi, the company’s chief digital officer, comes from the music industry, which began grappling with subscription services much earlier, for better or worse. She argues that books-by-subscription are an inevitable part of the future. Her company has signed deals to include the company’s titles in the services of both Oyster and Scribd, which also launched a subscription service last fall. Restivo-Alessi sees the issue largely in terms of price; the publishers can’t train people to expect books for free. “The only thing we didn’t want to have is a Spotify-like ‘all you can eat for free’ model, where then you get transferred over to the premium,” she says.
In the same way that Restivo-Alessi sees subscriptions as unavoidable, she also believes that publishers themselves will have to rely on someone else to run them. A full subscription model will have to include titles from multiple publishers. Also, she argues that a startup like Oyster has easier access to investment for this kind of thing than a division of a major publisher would, since it would have to justify the expense through the company’s own spending plans (see: Dilemma, Innovator’s).
Oyster acknowledges that some publishers have been wary, but says it’s signing them up at a rapid clip. The company’s library currently includes more than 100,000 titles. But while publishers may fear that subscriptions will undermine their traditional businesses, it’s probably too early to tell whether books-by-subscription even appeal to a wide range of readers. Streaming music services have had their own problems signing up paying users, and the economics of subscriptions arguably make a lot more sense for music than they do for books. Oyster’s service costs $9.95 a month, or about $120 a year. (Scribd’s service costs $8.99 per month.) According to a 2012 survey by the Pew Internet & American Life Project, only half of people who read at least one book in the previous year had read more than six books. Buying books individually is likely cheaper for most people.
Eric Stromberg, the founder of Oyster, says that the service offers more than just price. People who sign up, he says, tend to read more, while also using the service to browse many books before choosing which ones to read. “What we’ve found is when you pay once and never think about it again, not only do you read more books, but you read books you wouldn’t have picked up,” he says. He declined to discuss how many readers have signed up for the service, but says that their largest week of new subscribers was the last week of December.
Because this is the book industry, there’s also the outsize influence of a certain Seattle-based bookseller that isn’t particularly welcome at industry conferences. Amazon (AMZN) currently offers a 350,000-title Kindle lending library to Amazon Prime subscribers, which also confers a host of benefits totally unrelated to e-books, including free two-day delivery and a subscription to a streaming video service. Because its subscription service is bundled with other popular services, and at $79 a year costs less than its competitors, it seems possible that Amazon will just beat everyone on price, as is its wont. And while the organizers of Digital Book World acknowledge that startups offering subscription services can’t be ignored, they’re planning on spending most of their time worrying about Amazon. The company is the subject of five different panels on Wednesday.
