ebooks & oysters

questions & answers on the slump of ebooks and the demise of Oyster

Back in September the New York Times reported quite dramatically “The Plot Twist: E-Book Sales Slip, and Print Is Far From Dead,” an ode to publishers and indie bookstores, proclaiming that the much feared “digital apocalypse” hadn’t happened to books. The previous day, a highly publicized venture capital funded startup called Oyster — touted by its founders as “the Netflix for books” — abruptly announced that it was shutting down, waxing in a final blog post that they’d be “taking steps to sunset their service.”

As I work for a startup in the book industry, I got a slew of emails asking me what was going on. With publishers proclaiming in the Wall Street Journal that “the future of digital reading is on the phone,” and market penetration of smartphones at over 80% in the U.S., how could anything related to ebooks be faltering?

I’ve answered a couple of those questions here and hope to clarify some of the (at times wildly inaccurate) speculation that came out in both the tech blogs and traditional press.

Are people reading fewer ebooks?

When we talk about book sales, it’s important to distinguish between unit sales and revenue. Units tell us how many individual books people are buying, while revenue evidently is the amount of money being made on those books. What was reported in the New York Times was a decline in sales (i.e. revenue) and that was inaccurately conflated with fewer ebooks being read. There are a few reasons why this is misguided, the most prominent of which is that the New York Times based their piece on monthly sales stats from the Association of American Publishers (AAP), who represent less than half of the industry’s total ebook revenues. Sales from Amazon’s indie book offering are not captured by the AAP and, as reported in the Wall Street Journal, Amazon was up in both units and revenue during the time period in question. To compound things, Big Five publishers, who represent the bulk of bestselling titles on the New York Times Bestsellers list, recently returned to ‘classic agency’ pricing, causing a general increase in retail prices of all of their ebooks. This price increase is fueling speculation that readers are instead reading less expensive alternatives put out by indie authors in Amazon’s Kindle Direct Publishing program and Barnes & Noble’s NOOK Press, among others.

In effect, ebook reading continues to expand, just with fewer ebook dollars going to the AAP members. The real plot twist is that data is hinting at a shift in the ebook market, something that the New York Times did acknowledge in their caveat:

“The declining e-book sales reported by publishers do not account for the millions of readers who have migrated to cheap and plentiful self-published e-books, which often cost less than a dollar.”

So, are people reading dramatically fewer ebooks and instead returning to print in droves? No, not at all. Michael Cader, founder of the essential publishing daily Publisher’s Lunch, perhaps put it best when he wrote, “So ‘Print books not dead’ now officially joins the pantheon of comic tropes, somewhere between the Monty Python sketch and Generalissimo Francisco Franco.”

The other questions I received focused on the demise of Oyster.

Slate speculated that Oyster had tried to “take on Amazon” and lost to the industry giant. But in this case the truth doesn’t have a lot to do with Amazon. The two services are fundamentally different, as Amazon’s Kindle Unlimited ebook subscription program does NOT include books from the “Big Five” publishers — Hachette, HarperCollins, Simon & Schuster, Macmillan, and Penguin Random House. Oyster, on the other hand, launched well ahead of Kindle Unlimited, and offered books from three of the Big Five publishers, including phenomenally successful household titles like American Sniper, The Perks of Being a Wallflower and Beautiful Ruins amongst an impressive catalog. Oyster had gone through the possibly herculean effort of negotiating a huge selection of ebooks from established names and big publishers.

So why did Oyster fail?

Wired lamented that “it’s not immediately clear exactly why the company is shuttering its operations” but that the founders will continue to pursue “their vision for ebooks” by going to work at Google. However, for Publishers Weekly, the Bookseller or most people in trade publishing, it was crystal clear why Oyster didn’t work out. And — counter to what the NY Times article might have you believe — it has more to do with readers having voracious appetites for ebooks, than the opposite being true.

The crux of the matter is that Oyster paid publishers a unit price for an ebook as soon as a certain portion of that ebook was read. That meant that Oyster was ‘buying’ each individual book being read on its service, despite the fact that the readers saw their subscriptions as unlimited. If for example an Oyster subscriber read five ebooks per month, then Oyster was paying a publisher for five ebooks. The problem is that five ebooks cost vastly more than the $9.95 per month that Oyster was collecting from their readers. You can see where this is headed.

Ironically, Oyster may have worked out fine if its users had consumed fewer ebooks, i.e. if the majority of its subscribers were reading one book per month. However, the service was — unsurprisingly — most appealing to high volume genre readers, who were apparently reading far more than expected. Soon, Oyster’s model just became unsustainable, so, while Amazon-bashing seems de rigeur, let’s not blame Amazon here.

Finally, let’s not blame the book publishers.

The Financial Times scolded “Ebook service Oyster to close after resistance from publishers.” Hold on, three of the Big Five publishers participated and even lauded Oyster as a positive new distribution channel and great environment for discovery. But, publishers get broadly blamed for the unit sales relationship they maintain with subscription services. The reality is that trade publishers generally don’t own the rights to distribute ebooks under any terms other than per unit. That model is based on their contracts with agents and authors. So, at least in book publishing, the compensation of the creator is still intact. But, this is nothing new and was certainly a ‘limitation’ in place when Oyster was founded.

So, what’s the real news with ebooks?

From the Wall Street Journal, “In a Nielsen survey of 2,000 people this past December, about 54% of e-book buyers said they used smartphones to read their books at least some of the time. That’s up from 24% in 2012, according to a separate study commissioned by Nielsen.” Or, aptly put by Judith Curr, a publisher at Simon & Schuster, when asked about the future of reading:

“It’s going to be on the phone and it’s going to be on paper.”

When I’m not answering questions about the idiosyncrasies of the book industry, I’m helping people find and read amazing books using Riffle. It doesn’t matter to us if you’re reading ebooks or pbooks. Get Inspired. Read more.