eBook Subscription Services — Does the Netflix model work?

This post is an article I wrote about a month back, and was originally published on the ePubDirect website.

It seems like the entire world is talking about eBook subscription services right now. Since news of Amazon’s Kindle Unlimited service, there has been much discussion about the subscription model, how it affects publishers and authors, and that price point — just $9.99 per month. In this blog post, we’ll dig into how the subscription model works, and what it means for readers, authors, publishers and the competitive landscape in general.

Taking cues from Netflix and Spotify

Online subscription services aren’t exactly new. We’ve had Netflix and other video content services for several years now, offering vast back catalogues of content for consumption at any time, on any device. What makes Netflix (and similar offerings like LoveFilm Instant — an Amazon product) so compelling is that unlike Hulu and network-driven channels, it includes content from a wide range of movie studios and TV networks, and is completely free of adverts.

One of the major criticisms of Netflix has always been that its content is not fresh enough. The counter-argument here is that Netflix’ pricing point doesn’t position it as a complete replacement for cable and satellite TV. The major networks are, for obvious reasons, slow to push out their latest content to Netflix — as it would likely significantly drive viewing numbers down for their latest shows through traditional channels. It is also likely that the revenue networks receive from live TV broadcasts is still considerably higher than what they receive from Netflix. They are also happier to distribute the latest content through their own sites and players, as it offers them greater control over their revenue streams through advertising and subscriptions.

In the last few years, Spotify (and other services like Rdio and Beats Audio) have offered a similar service, but for music content. Unlike Netflix, these services thrive on providing access to the latest tracks from the most popular artists. In addition, rather than only offering services for a subscription fee, Spotify allows users to listen to tracks for free using their desktop app, making money from these users via advertising. If you want to listen to tracks using their mobile app or download tracks to your device, you need to use the premium service, which also gets rid of those pesky ads.

There is a significant difference in the freshness of content available on Netflix and Spotify. This is likely due to the nature of the content. When you consume music, you are typically listening to a 4-minute track at a time. Although some people like to listen to an entire album by a single artist, others enjoy mixing tracks into playlists and curating their own song queues. This is a far cry from a typical TV show — which is about 20 minutes for a sitcom, or 40–60 minutes for a drama or serial. Movies usually run between 90 and 120 minutes length. People listen to music while multitasking — in the car, on the train, while they work and in the gym. This is very different to how people consume video content — they typically sit down to watch video content and typically don’t multitask while they do so (although these days it seems that more and more people are tweeting while they watch TV and movies — that’s for another blog post!).

eBooks-as-a-Service

So what does this mean for eBooks-as-a-Service (eBaaS)? When Amazon announced Kindle Unlimited, it said that over 600,000 titles would be available at launch. While this is an impressive number, when you dig into the catalogue you’ll notice that some of the largest publishers are absent. It is early days, and it would be naive to think that Amazon won’t come to an agreement with these publishers in due course. What will be interesting to watch, however, is what titles these publishers will make available through a subscription service.

When you consider that it can take several hours to read a book, it’s likely that an eBook subscription service will follow a model closer to Netflix than Spotify. Like with TV shows and movies, people generally sit down and focus on reading a book. As a result, they generally select one book and stick with it until they’ve finished it, before moving on to the next book. This means that a significantly less number of books will be consumed by the service than songs would be consumed via Spotify. The average Spotify user may listen to a dozen or more tracks every day, but even an avid Kindle Unlimited reader will probably only read a handful of books every week.

As a result, Kindle Unlimited is not likely to offer access to every single eBook title available from every major publisher, at least not anytime soon. It’s far more likely that it will offer access to a significant back catalogue that will eventually include titles from all publishers. Although this may sound disappointing to consumers, I think it will still mean the service hits a sweet spot for most customers. Avid readers will love that they can access a large backlist of older titles at any time, and will likely get most value from that low price point. Casual and holiday readers will be attracted by the service’s price, and even though they may only use the service occasionally, the sense of access to such a large collection will remain attractive to them.

It’s not just Amazon

From the way it has been reported, you’d be forgiven for believing that Amazon’s subscription offering is something new to the eBook landscape. The fact is that it’s not — Oyster and Scribd have had provided eBook subscription services for quite a while now. There’s a reason why Amazon are shouting about the fact that they have over 600,000 titles available in Kindle Unlimited — Scribd claim to offer over 400,000 and Oyster over 500,000. Once the dust settles, however, I believe content consumers will become more sensitive to the publishers, imprints and titles that each individual service offers, and will choose on that basis. This presents a unique opportunity for publishers to re-enforce their brand and to attract a following, much how major TV networks like HBO, AMC and Showtime have done in recent years.

The other angle that we could see unfold is a potential publisher-driven direct to consumer model that mirrors services like Hulu. The main differentiator here would be that publishers could offer the latest titles through this type of service, providing a compelling reason to use it over backlist driven services like Kindle Unlimited. For many years, Safari Books Online has offered readers access to a vast library of technology eBooks for a monthly subscription fee. This service includes access to the latest titles, which is of particular importance in a rapidly changing market like technology books. This service, run by O’Reilly, a leading technology publisher, offers access not just to O’Reilly’s own catalog, but also to entire catalogues from other publishers. Will we see a similar service launch in the near future that mirrors Safari Books Online, but for titles with more mass-market appeal?

Impact on the device landscape

One strong argument for using Kindle Unlimited over rival services will be that it works on Kindle e-ink devices. This is one of the major drawbacks of Oyster and Scribd — right now you can read their titles on a computer, tablet or smartphone — but notably not on an e-ink device. One could argue that for these services to compete with Amazon, they are going to need to partner with rival device manufacturers like Kobo to produce apps for e-ink devices that allow access to these services. Take Netflix as an example of this — you can access Netflix not just on computers, tablets and smartphones — but on devices such as the Apple TV, Xbox and PlayStation — and even on Smart TVs themselves. Netflix invested heavily into partnering with as many hardware manufacturers as they could to ensure that their service could be accessed virtually anywhere. If an eBook subscription service can succeed in getting their reading apps onto as many reader devices as possible, they will have a very strong selling point over the competition.

Another scenario that we could see emerge, however, is that the world starts to move on from e-ink devices altogether. Personally, I love e-ink devices, but as we start to consume all other types of content on smartphones and tablets, we become more likely to want to do everything on a single device. On my last holiday I packed both my iPad and my Kindle, but I strongly considered leaving the Kindle at home this time and just using my iPad for reading instead. In Asia, people read everything on their smartphones, favoring devices with larger screens that almost work like a hybrid of tablet and smartphone. It’s hard not to imagine the West following suit at some point and e-ink devices falling out of favor altogether. This is not going to happen overnight, of course. Right now, issues with tablets such as glare when using outdoors and poor battery life are keeping the market for e-ink devices alive.

How will this affect demand for eBooks?

Unless Amazon can secure rights to make available the latest titles from the largest publishers, the biggest impact that a service like Kindle Unlimited can have on eBooks is on the demand for sales of back list titles. If these services prove as popular as the likes of Netflix and Spotify, you may find that people will consume content in two ways:

1. For the latest content, they will continue to purchase eBooks through traditional retail channels.
2. For back list content, they will search their eBook subscription service first to see if it’s available, and if not they may consider buying it or choosing a different title.

If publishers can agree favorable terms with subscription services, they may find that these services will increase the discoverability of their backlist catalogue, and lead to increased revenue. In many ways, services like this can lead to a significant increase in consumption, as readers will feel more compelled to read given that they have access to a large catalogue without having to make a purchase. To see proof of this, just look at how services like Netflix and Spotify have impacted the consumption of video and music content.

Perhaps in the future we will see these services offer access to much larger libraries that include the latest content, but in exchange they will demand a much higher, premium monthly fee. Until then, people are still going to buy the latest titles from the same channels they have done so over the past number of years.

Summary

Once the dust settles, I think the general consensus will be that there is a place for subscription services like Kindle Unlimited, Oyster and Scribd in the eBook ecosystem. People will realize that this type of service is not going to kill the market for purchasing eBooks, but rather offer a new service channel and revenue stream for publishers to monetize their content, particularly poor-performing back list titles. For consumers, it provides them with more choice on how to consume eBooks, and may just convert casual readers into avid readers over time.