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.