The Sobering Economics of Ebook Subscription Services
I am always a bit skeptical about consumer surveys, because they paint too rosy a picture. Consumers are more likely to state that they might buy something at a certain price when asked versus when they have to part with cold, hard cash.
Thus given that such surveys are overly optimistic, a recent UK survey pours bucket loads of ice-cold water on the economic attractiveness of ebook subscription services for publishers.
Consultancy Olivery & Ohlbaum surveyed 1,461 readers in the UK and found:
— 61% were prepared to pay up to £5 for such a service
— 33% were prepared to pay up to £10 for such a service
— 5% were prepared to spend between £10 and £15 for such a service
— 1% were prepared to pay £15-10 per month for such a service
— And zero, absolutely zero were prepared to pay more than $20 per month
Now it’s $1.6 to the pound, but for all intents and purposes (VAT, etc.) one could just substitute $ for £ in the above to get an approximate picture for the U.S.
In short, consumers love the idea of a “Spotify for ebooks” (29% of readers surveyed said they were VERY interested in such a service), but they are not willing to pay more than what they pay for Spotify (£5 with ads and £10 per month without ads). See also Netflix pricing.
Lets do the math for a publisher:
— £5.00 per month paid by the consumer is
–> £4.58 after VAT has been deducted, leading to
–> £3.21 assuming the service operator gets a 30% cut, of which
–> £0.48 would go to a BIG 6 publisher with 15% market share (assuming revenues are split roughly proportional to market share)
That’s it, less than 50 pence per month goes to a BIG 6 publisher for a reader that gets all you can eat access (by comparison an ebook priced at $9.99 nets the publishers £5.83 after VAT and 30% retail margin, so if they sell that same reader one book per year through retail, they come out ahead by £0.07).
If you are small publisher with 0.1% market share it would be 3 pence per month per user, so 1 million users of the service would net this small publisher £3,000 per month for all their titles, so if that was say 200 authors and 50% author royalty, then that would be £7.50 per month per author for a 1-million user service.
CORRECTION: The paragraph above had said “If you are a small publisher with 1% market share….” It has now been corrected to say 0.1%.
Related: Spotify for Ebooks