Home » Ebook Lending, Ebook Subscriptions, Passive Guy, Royalties » Publishing Hears Echoes of Netflix Business Model

Publishing Hears Echoes of Netflix Business Model

3 September 2013

From The Wall Street Journal:

Offering unlimited television shows and music for a flat monthly fee has worked forNetflix . . . and Spotify AB. Will it work in the book industry?

It is a question of intensifying debate in the publishing industry right now, as two digital startups plan launches of rival e-book subscription services this fall. If successful, the new services could pose fresh challenges for brick-and-mortar bookstores already struggling to cope with the growth of e-book sales and low prices of physical books offered online.

Still, both services face plenty of challenges, starting with persuading publishers to make their books available.

. . . .

Industry insiders express skepticism whether consumers, who tend to read only a few books a month, will embrace subscription plans that don’t offer all the hits—particularly given the discounts available on e-book sales. “Success comes when you solve a problem, and from a consumer point of view, I don’t see the problem,” said Amy Rhodes, a former publishing executive who is now a partner in consulting firm Market Partners International Inc. “You’ll need very attractive prices for people who read a lot of books, and even then you’ll need all the big titles.”

Resistance also reflects uncertainty about the impact of a new business model on the industry, including on bookstores that now sell lots of books. “There’s a general fear of the unknown,” said Matt MacInnis, chief executive of Inkling, a San Francisco developer of interactive e-books.

“Publishers have operated their economic model for 100 years,” he added. “They don’t know how to model this.”

. . . .

Some publishers and author representatives have embraced eReatah’s limited offering. Subscribers can choose among paying $16.99 a month for two new titles; $25.50 for three books; and $33.50 for four. Subscribers to eReatah will keep their books and authors will get regular royalties on each download.

. . . .

But eReatah’s pricing levels might not persuade many consumers, others say, given that it is effectively charging about $8.50 for a book. “The value of most subscription models, be it cable or magazine, is the perception of getting more than you paid for,” said Forrester Research Inc. analyst James McQuivey. Consumers might be less willing to embrace a model where they only get several books a month. “Going unlimited is the only way this will work for books.”

Bryan Batten, eReatah’s founder and CEO, said more than 75% of the site’s titles cost more than $8.50 at regular sales outlets. He said he never formally pitched an all-you-can-consume model to publishers because he expected complications with author contracts.

. . . .

“The problem with an all-you-can-eat model is that authors stand to make pennies, not dollars,” said Evan Schnittman, chief marketing and sales officer at Lagardère SCA’s Hachette Book Group. “I love the idea of different business models, but don’t forget the author.”

Link to the rest at The Wall Street Journal (Link may expire) and thanks to Joshua for the tip.

There’s no mention of whether indie authors will be included in these services. Of course, Amazon would be ideally placed to offer this type of service.

PG will second the concern about typical publishing contracts, which don’t provide a clear basis for calculating ebook royalties for an all-you-can eat style program like Netflix.

The subsidiary-rights licensing provisions of Big Publishing’s contracts with authors are generally written with licenses of only single ebooks in mind, not entire catalogs of ebooks. Since subsidiary rights licensing provisions often provide that the author receives 50% of licensing revenues instead of the industry-standard 25% of net revenues for individual ebook sales, publishers will definitely not want to go down that path.

Presumably, a publisher will be paid a portion of the monthly subscription fee regardless of whether any ebooks are downloaded or not.  Presumably, a publisher will not feel the need to pay royalties if a subscriber doesn’t download any ebooks during a month (or a year).

If a subscriber signs up for three ebooks per month and downloads only one, presumably a publisher will not feel any obligation to pay the author of the downloaded book a royalty based upon the total subscription fee instead of one-third of the subscription fee.

Ebook Lending, Ebook Subscriptions, Passive Guy, Royalties

22 Comments to “Publishing Hears Echoes of Netflix Business Model”

  1. To a certain extent, Amazon already has this service with the KLL (limited to books enrolled in Select) and Prime subscribers.

    • That was exactly what I was thinking.

      In a society wherein a lot of people read only one book per year (or fewer, even), I think Prime–which allows readers to download one book per month–pretty much is the book industry’s Netflix/Spotify business model.

      All Amazon would really have to do is pull corporate books into the Kindle Lending Library.

      • Sorry. I’m still waiting for a subscription model that works for me. Kindle Prime is so beyond a no-go.

        I read 5 books a week. I used to read 30+ before I got a full-time job. One book a month paying the same price as if I just picked a book and bought it isn’t going to inspire me to sign up for a subscription plan.

        Even if books had different weighted credits, so I could do my own picking of what would fit within what they allowed (e.g. two less expensive books) would be something. But yeah. This isn’t like a subscription plan where I get a lot of benefit.

        I want a subscription plan that works.

  2. It seems that when people try to create services like this they forget we already have something: libraries. And I don’t need to pay $17/month for 2 books.

    • It seems like when people argue libraries fulfill this function, they forget that libraries actually don’t. Corporations overcharge libraries for ebooks (I heard Random House charges $90 per book, while HarperCollins limits library lends to 26 per license).

      Plus, correct me if I’m wrong, but isn’t it somewhat complicated to get an ebook borrowed from a library onto a Kindle? Slightly less so for an iPad (no conversion from ePub necessary), but . . .

      Anyway. Libraries. Not the same thing as a Netflix/subscription business model for books.

      • Actually, it’s extremely simple to get library books on my Kindle–much easier than when I tried to help my mom get a library book onto her Nook! You just click “download for Kindle,” and it takes you to the Amazon page, where you click to send it to your Kindle. From there it seems to act like any other Kindle book, albeit time-limited; you can get it onto different devices and it always shows up in your account, even after it’s been returned.

        I doubt I would sign up for a subscription service as long as I have libraries, even if the ebook selection is limited.

  3. Just speaking from the consumer side, I read more than four books a month. $33.50 is ridiculous when for the same amount of money, I can buy 10-16 books to supply my entire month.

    • This. I’ve been considering getting Prime, but for the shipping and movies/TV (which I will probably use rarely, primarily for binging when ill). I’d probably use the lend sometimes, but books are my movies/TV shows. Most of the time, I can read a novel in the time it takes someone to watch a movie or two.

    • This. As I said above, subscription plans should actually offer benefit. If I can buy my own book without the commitment at the same price and that’s all I can get anyhow, one book, where is the benefit?

  4. I think indy authors could do better than themselves with a “Fan Club” business model. $10-30/year gets members access to everything an author releases in the given time frame. Maybe you sweeten the deal with some extras:
    – early access to the stories
    – fan-club only e-mail address for the author
    – occasional release of back catalog to members
    – scheduled video chats or Q/A sessions with members

  5. Services like Spotify pay major labels more than indies. When the major labels bought it, the indies got knocked off the main page. Now it’s the same ole same ole singers you see everywhere i.e. Gaga, Timberlake, Katy Perry, etc. And the rates are terrible, something like 0.008 per play. A British band complained because they got a 1000 streams and made £10. Not cool.

    Who can earn a living from that? At least musicians have tours, merchandise, endorsements, streaming, licensing on TV & movies, etc to add up to a living. All we have are books to pay the bills.

  6. Oh no, publishers would have to make changes to their standard contracts, that’ll never work.

  7. @PG

    Hmmm… Reading your analysis above, one might think you’re being very cynical, PG. I must confess I agree that Big Pub going for a subscription model as you describe opens the door for further screwing of writers. Which probably makes it very attractive to Big Pub. Plus, they’re desperate for ways to generate new cash cows, and this looks golden.

    Writers will need to be even more vigilant in scrutinizing terms and clauses in contracts with publishers. Caveat signator!

  8. “Success comes when you solve a problem…”

    Sometimes. But the larger successes come from creating a solution to what people don’t yet see as problems, and from making the solution seem indispensable once it’s been introduced.

    “What’s the problem?” should never be the question asked by those looking to improve–perhaps save–their business. “What would make our customers so happy, they’d tell everyone about our awesomeness?” produces results.

  9. This sounds like an attempt at a post-modern book-of-the-month club to me. Been there, done that. Instead of a flow of unwanted paper books arriving on my doorstep, I’d have a flow of unwanted ebooks arriving on my e-reader. No. Just no.

    • Hi J.M.
      I hope you will give us a chance. We actually allow you to search, browse, select and download whatever titles you would like and nothing is “forced” upon you. We do have a section titled “Picks of the Month” in which certain books are selected and highlighted to help with curation but you are under no obligation to download those titles.
      I can certainly understand our service will not be for everyone but we are working very hard to try and create a platform that brings additional value to all parties involved.
      Take care and have a great day
      Bryan

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