The Subscription Model and the Book Publishing Industry is a Combination Best Avoided
In the publishing industry, the subscription model had only seen success in the newspaper and magazine sectors, and for many years, the model was restricted to those two outlets. However, after witnessing the success of companies in other industries, such as Spotify and Netflix, eBook retail conglomerates and entrepreneur businesses like Amazon and Oyster are attempting to secure their piece of the assemblage pie. These companies are collecting as many eBook licenses as they can, with plans to amalgamate eBooks from different publishers and different genres, in order to create their own one-stop-eBook shop. By offering an all-you-can-read for a monthly fee program, they hope to create an online community of book borrowers. Unfortunately, it is unrealistic to think that eBook license aggregators can apply the same process and procedures that have been used in other industries to the book publishing industry, and this model is sure to bring publishers more hardship than prosperity, which is why it is something that the major publishers are just not interested in.
There’s a Place for the Subscription Model in the Book Publishing Industry, and that Place is in Niche Publishing
In the subscription model, a consumer must pay a monthly or annual fee, and in return, either has access to an online database, or receives a product or service on a fixed basis. However, this model has advanced over the years, and aggregate companies have been created who collect licences from various sources and sell subscriptions, offering consumers access to these licenses. The music, film and television industries have adopted this model, and aggregators such as Spotify and Netflix have had sizeable success in their respective industries.
But to compare the aforementioned industries with the book publishing industry and to believe this model can work for book publishing would be a mistake. As Mike Shatzkin points out in his article, “the heaviest readers—people who read several books a month—are often in genres (romance, science fiction) that already have subscription offerings. They don’t need a more general one” (Shatzkin, “Explaining my Skepticism About the Likelihood of Success for a General Subscription Model for Ebooks”).
Niche publishing companies such as O’Reilly and Harlequin have both adopted the subscription model, and have proved this model can be successful when your niche is defined and your audience is known. In his presentation “Stories From 10 Years of Subscription Usage“, Andrew Savikas, the CEO of Safari Books Online by O’Reilly, describes Safari as a database of “professional technology books for technology professionals” that helps their customers “do their job effectively”(Savikas, “Stories From 10 Years of Subscription Usage”). Safari Books Online has become more than just a database that houses thousands of technology, digital media and professional development books from over 40 publishers. It has added an abundance of additional features, some of which includes the ability to copy and paste code, search for related material in different books, write notes, highlight, bookmark, and download exercise files. Subscribers are also able to use their mobile website to search and read material. Their program has become a one-stop shop for professionals who are looking to use their resources to expand their existing knowledge or learn something completely new, all of which will help them succeed in their professional life.
Harlequin is one of the world’s leading publishers of books for women, and has done a fantastic job segmenting themselves in the publishing industry, and as Rowland Lorimer explores in his book Ultra Libris, Harlequin is “reaching readers with appealing content, experimenting with genres and technologies, [and] marketing” (Lorimer 17). They have become known around the world, publishing nearly 110 titles a month in 27 languages. Harlequin gives their audience the choice to subscribe to up to six different series at once. The subscriber’s choice, or choices, then appears on their e-readers on the first day of every month. Harlequin also offers two free eBooks for signing up, and significant discounts on regular eBook prices. Their devoted following allows them the opportunity to take advantage of the subscription model, using their already loyal fan base to secure a monthly revenue stream.
Audible: A Cautionary Tale
Audible is an audiobook aggregator, housing the audiobooks of many publishers. Subscribers have the choice of either a monthly or yearly fee, depending on how many books they wish to receive. Subscribers also have access to the rest of the audiobook library, where each individual book can be purchased at a 30% discount. Consumers can choose to forgo the subscription and purchase their audiobooks at full price.
According to Peter Smith, who states in his article “Podiobooks, Audible, Audiobooks” that Audible has “the biggest digital audio book library out there with over 100,000 titles” (Smith, “Podiobooks, Audible, Audiobooks”), Audible has effectively monopolized the audiobook segment of the publishing industry. After becoming the sole distributor to Apple and Amazon, they have used their power and position in the marketplace to call the shots when it comes to Audiobooks. Audible has used their leverage to “flip the 70-30 model and pay publishers 30% of the attributable revenue for digital downloads of their audiobooks” (Shatzkin, “Explaining my Skepticism About the Likelihood of Success for a General Subscription Model for Ebooks”). Any publisher who disagrees with those terms is essentially cannibalizing any potential profits (however dismal those profits may be) from their audiobooks. Audible has so much power in the audiobook marketplace, publishers have no choice but to agree to Audible’s demands, so they can at least have access to consumers.
When an aggregator like Audible controls the market, and consumers become committed to a subscription service, publishers have no other choice but to follow the consumers. The leverage shifts, and when a highly anticipated book comes out, the publishers who have spent the time and effort to develop a great book no longer have the control to create their own demands with retailers, and instead, the power transfers over to the subscription company, who owns the consumers, and effectively owns any potential profits. In this case, publishers and authors have two options: concede to the demands of the subscription model, or lose out on any potential profits from that outlet. With this is in mind, it is doubtful that publishers will make the same mistake twice and forfeit to the proposals of eBook aggregators.
Amazon’s KOLL: A Problem for Publishers
Amazon’s Kindle Owners’ Lending Library (KOLL) is one of the first programs available on the market where consumers have the ability to choose from a variety of eBooks in a range of genres. Here, Kindle owners with a Prime Membership can choose from over 180,000 books to borrow for free with no due dates. However, the available books currently only include self-published books and books from smaller publishers, as larger publishers such as HarperCollins, Random House, Simon & Schuster and Hachette have not yet agreed to allow their eBooks into the program.
In a press release, Amazon stated that they will pay self-published authors $2.18 every time their book is borrowed, while publishers will receive a flat fee (Amazon, Press Release). However, the flat fee method could pose a problem to some publishers. If a publishing house has two books in the lending program, and they are receiving one hundred dollars per title enrolled in the program, the publishing house would receive two hundred dollars. If there were a fifty-fifty split between the publisher and the authors, each author would receive fifty dollars. But if one book was borrowed one hundred times, and the other book was never borrowed, the first author would assume that because the other book was not read, she should receive all the money available to authors. However, from the point of view of the other author, the publisher received money because he allowed his book to be included into the program, so according to him he deserves half of the share available to the authors. No matter how the publisher decides to resolve the issue, at least one of the authors will feel cheated.
Since the publisher is receiving a flat, guaranteed fee for involvement in the subscription program, the model turns from a sale into a license. However, it cannot be compared to the old-fashioned book club licences, which paid authors fifty percent, because the inclusion of more than one author changes the game. When a publisher begins entering multiple books into a program, they are using the other books to increase their flat fee, and the money they receive grows, while the money the authors receives remains the same.
In this scenario, publishers may be more than happy to include all of their titles into the right subscription program, as the prospect of a guaranteed revenue stream would be hard to pass up. However, publishers know that they need authors in order for their firms to survive, and without acquiring new authors and keeping old authors, their business will simply fizzle and die away. Both authors and agents will see that even though the publisher’s profits are increasing, the author’s share does not. They will soon realize that this practice is unjust and one-sided, which will cause these authors to either seek out other publishers who aren’t relying on the guaranteed revenue stream of the subscription program and are instead still motivated to find unique, innovative ways to promote their books and authors. Alternatively, authors may stray away from publishers altogether and may decide to self-publish, so they can decide the fate of their books.
In order to appease all parties involved, publishers are going to have to develop a new method on how profits are divided amongst publishers and authors. In his article “Author Contracts and Subscription Models”, literary agent Simon Lipskar states:
Publishers simply do not have the right to make Solomonic decisions about how to pay authors. That’s what contracts are for, and there’s simply nothing in any of the contracts my authors have signed with their publishers that permits publishers to make these decisions without an amendment and the author’s agreement. And since different authors and agents may have different ideas about how to split the pot — and since by definition, each publisher can only have one methodology — it’s almost impossible to imagine, absent the creation of an ASCAP-like business to administer these things, that publishers can get all their authors to agree to the same definitions (Lipskar, “Author Contracts and Subscription Models”)
For these reasons, its is clear that major publishers will do whatever needs to be done to avoid jeopardizing their relationships with agents and major authors, and at the moment, this means staying as far away as possible from subscription services.
Oyster: An Aggravation for Authors
Although it has not yet been released, Oyster is being called the Spotify for books, an all-you-can-eat (or read) service charging consumers a monthly fee for access to a wide variety of books in virtually any genre. Oysters’ mission “is about helping its users discover new titles, it’s naturally looking to offer as wide a range of genres, publishers, and authors as possible” (Chaey “Oyster: A Spotify for Books”).
Subscribers of Oyster will consume considerably less eBooks than subscribers of Spotify will listen to music or subscribers of Netflix will watch movies, because it takes much longer to read a book than it does to listen to a song or watch a movie. For this reason alone, consumers will expect a lower subscription price than what they pay for their movies, music and daily newspapers. In their minds, they are using less, and should therefore pay less. In order for Oyster to have a subscription fee that subscribers are comfortable with, it will have to charge significantly less than Spotify or Netflix.
That being said, even if the subscription price was eight dollars per month and the big six publishers submitted their eBooks into the program, after subtracting a 30% cut (at least) for the subscription service, there is $5.60 left, which means each large publisher would receive $0.93 per subscriber. If the publishing house split the profits with the authors fifty-fifty, $0.46 would have to be divided by every author included into the program. So if a publisher includes 10,000 books into the program, each author would receive $0.00004 per book (Rhomberg, “The Sobering Economics of Ebook Subscription Services”).
In addition, readers search for books from their favourite authors, and Oyster can only work if it has the right authors to attract its consumers. However, there is no reason for well-known authors to enrol their books into subscription programs, and having access to these well-known authors would be a strong selling point for most consumers. The books of well-known authors are being read, they have an audience and there are consumers who continue to purchase and read the books they release. Enrolling their books into a subscription program only transfers the brand value from the author to the subscription service, which is not something authors are willing to do, and they are especially not willing to do it for a subscription fee that undervalues and cheapens their books.
Also, the difference between Spotify and Netflix is that in order to use the services, the person needs to somehow be connected to the Internet to stream the music of films. If they want to watch or listen to something offline, they still have to make a purchase. However, when dealing with eBooks, the eBook is downloaded onto a device and can be read anywhere and at any time, negating any reason to buy an eBook ever again.
The Future of Subscriptions in Book Publishing
It’s clear that the subscription model will actually hurt the publishing industry rather than help it. Publishers will be very wary of these programs to ensure their eBooks do not fall the way of their audiobooks, and they will be sure to do their best to keep both authors and agents happy. Therefore, instead of creating a program where the profits of both publishers and authors are marginalized and the value of the book itself is diminished, a program should be created that celebrates authors and books. It is clear that authors, agents and publishers would prefer a subscription model that mimics the Book-of-the-Month-Club, in which a consumer’s fee provides them with a discount on books and the service helps them discover new titles by taking their tastes and previously read books to create a well-crafted and personalized reading list.
Chaey, Christina. “Oyster: A Spotify for Books.” Fast Company, 11 Oct 2012. Web. 11 Jan 2013.
Liskar, Simon. “Author Contracts and Subscription Models.” AARdvark, 4 Nov. 2011. Web. 11 Jan 2013.
Lorimer, Rowland. Ultra Libris. Toronto: ECW Press, 2012. Print.
“Press Release.” Amazon.com, 4 Apr 2012. Web. 11 Jan. 2013.
Rhomber, Andrew. “The Sobering Economics of Ebook Subscription Service.” dbw, 13 Nov 2012. Web. 11 Jan 2013.
Savikas, Andrew. “Stories from 10 Years of Subscription Usage.” O’Reilly Media Tools of Change for Publishing. 16 Feb 2012. Web. 11 Jan 2013.
Shatzkin, Mike. “Explaining my Skepticism About the Likelihood of Success for a General Subscription Model for Ebooks.” The Idea Logical Company, 22 Jul 2012. Web. 11 Jan 2013.
Smith, Peter. “Podiobooks, Audible, Audiobooks: We Look at 3 Audio Book Business Models.” IT World, 25 Jan 2012. Web. 11 Jan 2013.