For Subscription Ebooks, Great Expectations But Few Guarantees

Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.

A report released today by the Book Industry Study Group (BISG) finds that 80% of publishers believe subscription ebooks becoming a major part of the publishing business is “inevitable.” The launch last week of Amazon’s subscription service, Kindle Unlimited, would appear to corroborate that finding — but are they?

Professionals within the trade, scholarly, professional and higher education sectors interviewed for the BISG report had differing views on the various subscription-based models most likely to take hold in their respective categories. Among all those interviewed, however, there is a widespread belief that subscriptions are already playing expanding roles in each of those sectors, and that that trend will continue dramatically upward. Among trade publishers, only 7% of respondents said subscription services contribute significantly to their overall revenue today, but 59% expected that to change within the next five years. This is a case where the majority could be mistaken.

Why? Because the most crucial questions for how — and how dramatically — ebook subscription services will reshape the industry are ones that no report can answer: Just how many authors and publishers will jump on? How deep will their participation be? And, ultimately, will readers buy?

“One major concern surrounding the increase of ebook subscriptions,” the BISG report concedes, “is the potential degradation of high-value markets.” Yet the report indicates a prevailing belief among the various stakeholders in the publishing ecosystem that the benefits more often outweigh the costs: “New revenue from the emerging markets reached by subscription ebook options promises to offer some relief to publishers as they struggle with diminishing print sales.”

But while price degradation, on the one hand, and upticking revenues from new subscription models, on the other, are possibilities, neither should be considered “inevitable.”

It’s instructive to look for patterns in other forms of media where subscription services have taken hold, as the BISG report does, but publishing folks are often quick — and right — to point out that books are unique because, among other reasons, they’re consumed in a fundamentally different way than music, TV and movies. According the Bureau of Labor Statistics, the amount of time Americans spend watching television and movies far dwarfs the amount of time they spend reading. It makes sense to have a service that lets you choose what you want to watch and watch as much of it as you want. The same doesn’t necessarily go for reading.

Besides, book publishers and authors have largely succeeded at continuing to get readers to pay for each time they consume content, even as the business models for newspapers, magazines and music have been upended and TV and movies continue to suffer from widespread piracy. As some of the latest figures from the U.S. and UK markets suggest, revenues from both print and ebooks are more than just holding steady; they’re increasing.

This growth is being seen in a market dramatically shaped by Amazon’s deep discounting and the transition to cheaper ebooks from more expensive print books. If readers were fleeing in droves from existing retail channels or being converted en masse to the notion that paying anything more than a couple of dollars for a book (or anything at all, for that matter) is highway robbery, then authors and publishers would have far greater incentive to pursue subscription ebooks aggressively.

But to all appearances, they don’t really have that incentive — at least not yet. Readers are still showing a willingness to spend on individual books.

Furthermore, in order for publishers, authors and the service providers themselves to each cash out favorably, subscription models must perform a difficult balancing act that relies heavily on user behavior. On the one hand, they need to encourage many people to sign up; on the other, they need to make sure they stay signed up and reading, but not reading so much as to cost the services more than they make from having them as subscribers. One analyst writes that even Kindle Unlimited may be doomed right out of the gates as a consequence of that challenge.

Publishers and authors, having watched ebook subscription services like Oyster and Scribd gain footholds in the reading market, are now familiar with that difficulty. On balance, publishers have shown considerable caution adding their titles to those catalogs. And authors have already stepped forward to criticize the way Kindle Unlimited proposes to compensate some of them.

In light of all this, the scope and nature of ebook subscription services’ impending impact on the industry looks if not more limited, then at least less “inevitable” than respondents to the BISG study anticipate. In a live debate Digital Book World hosted in June, in which executives from Scribd and Smashwords faced off with a business journalist and the head of a global ebook distributor on this very question, the skeptics carried the day, convincing a greater share of the audience that the potential costs to publishers, authors and readers outweighed the potential benefits. Even though the majority of attendees continued to feel optimistically about the place of ebook subscription services in the world of publishing — as do the publishers BISG surveyed — the fact that such caution remains in ample supply suggests that an industry-wide embrace of subscription ebooks is still far from certain.

While it may not have impacted the results, it’s important to mention that the BISG survey was sponsored by ebook subscription providers Safari and Scribd, among others. Learn more about the report and purchase it here.

7 thoughts on “For Subscription Ebooks, Great Expectations But Few Guarantees

  1. Bill Gleason

    Although I signed up for the 30 day free trial of Kindle Unlimited (but do not participate in Kindle Prime) I hope the entire eSub initiative fails, including Amazon’s.

    When you can’t get consumers to buy good books for a reasonable amount of money, you have a host of problems – very few of which are addressed by eSubs.

    — the books themselves are not enticing
    — the number of readers is diminishing (literacy)
    — the number of readers is diminishing due to external competition (TV, movies, video games, etc.)

    The simple fact is that after an initial flurry of interest – eSubs do not deliver much value – and certainly don’t address any of the substantive issues above.

    The premise is flawed. Most readers simply can’t buy 4-6 quality books a month for $ 9.99. There aren’t enough books they like, and with the exception of younger readers who have not extensively read an author’s backlist, no compelling reason to subscribe.

    If readers COULD buy 4-6 books a month that they liked – either the authors will get screwed (translating to fewer authors) or the subscription price would have to be increased.

    I’d like the book industry to stop copying the entertainment industry (Netflix in particular) and devote energy to:

    — increasing the number of quality (stress quality) products that are available to consumers
    — determining an accurate price for ebooks that is equitable for authors and publishers and abandon the stupid \Hard Ebook\ and \Soft Ebook\ pricing it currently flounders around with
    — do the necessary research to find the readers, products, and markets of tomorrow

    And most importantly, integrate ebooks into the mortar bookstore experience. As book stores are forced to stock less titles, they become less interesting places to visit… With today’s technology, it should be child’s play to have a role for retailers in the ecommerce of books.

    Book discovery is what drives the market. But, like our government trying to create jobs, more is said by book publishers than actually done in helping readers find new books and authors. That job is not done by publishers, but by retailers, and one Amazon does not replace 11,000 bookstores.

    Someone needs to stop following and lead —— and eSubs are not the answer — but merely a \flavor of the week\ that will probably not be around next year.

    The persistent problems will be…

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  2. Michael W. Perry

    Great article, particularly for the stress on ‘nobody knows.’

    Long ago G. K. Chesterton joked about how society honored self-appointed prophets like H. G. Wells and then went of and did something completely different. The same is likely to be true here. What the public wants is likely to be different from what most in the industry thinks they want. My hunches:

    * Prices in the $9-10 range are too high. They’ll only attract busy, hard-core readers whose insatiable demands will be expensive to service. The little known startup Inkbok is probably closer to the sweet spot for most readers at $4.95.

    * Benefits and risks should be shared. Again, Inkbok is probably closer to good business practice by splitting the income from subscriptions 60% for authors, 30% for the service and 10% for charities. As an author, I’m very suspicious about Amazon’s subscription pot-filling. What share of the revenue will I be getting?

    * To retain good authors, the system needs to be fair. Paying full price (as Kindle Unlimited does) when the first 10% is read only encourages some authors to pay little attention to the latter 90%. Author payments should be based on how much is read all the way to the end. Paying the same for short and long works is also grossly unfair. The author of a short novel whose last 90% is dreadful gets the same as the author of a long and interesting novel that almost everyone finishes. That’ll mean that lousy authors will sign up and good ones stay away, killing the scheme.

    * I suspect speciality subscriptions such as romance and scifi will do better than broad categories. People don’t like the appearance of paying for something they won’t use.

    Were I a major publisher, I’d be dipping my toes in a host of areas, taking great care to see which works. In fact, to overcome the usual corporate inertia, I’d set up an entire department to do just that and fill it with adventurous people.

    –Michael W. Perry, Inkling Books

    Reply
  3. Daniel Ford

    I am a Netflix subscriber, and for $7.99 a month I watch an embarrassing number of movies and mini-series, perhaps averaging 25 a month. I’m not proud of that, but heck, my eyes are too old to do much reading after dark.

    Will I subscribe to Kindle Unlimited (beyond the 30-day free trial, which does intrigue me)? Not a chance. I read perhaps five books a month, both print and digital, and most of the digital ones I get free from my state library consortium.

    This is especially true, given that the Big 5 publishers have yet to sign up. I’d rather budget that $10 toward the must-read book from Penguin or HarperCollins.

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  4. Theresa M. Moore

    I agree with Perry. There are less and less readers out there on the internet to begin with, thanks to their return to the local book store. I have read about many authors and readers putting their reading devices in the drawer, never to return. I have also read many articles about how hard it is to get readers to embrace technology in the first place. The real readers are not interested in e-subs. They are interested in better books, and they are becoming extremely selective in their choices. E-book tech supports fiction, while many of the real best sellers are nonfiction, usually with graphs and pictures. Textbooks find a difficult holding because their sheer file size makes it prohibitive to publish in e format, since the devices cannot support them. In the face of these difficulties, the eSub services appear to be a brief fad and nothing more. But what is more important is that the distinct lack of incentive to read is due to failed school systems which are not supported by government, in that the funding is largely dependent on a failed Congress. Raise the literacy rate by encouraging more reading among the young, and the book publishing system will survive this.

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  5. Senghal Powell

    This article and the comments don’t really make sense, and don’t actually reflect facts. In the first comment, it’s stated that there are fewer readers and that they’re diminishing due to multimedia competition. Those are both demonstrably false. Pew’s independent research shows that book consumption has INCREASED with the advent of ebooks.

    The second comment states that ebook prices of $9-$10 per book is too high, and $4.95 is the sweet spot. Since when? No hardcover since 1930 or so has sold for $4.95. And ebooks have been taking over print books at lower prices, but generally in the $9-$15 range. Will publishers sell more at $4.95? Yes. Will they sell more at $0.95? Yes. The sweet spot for buyers does not mean profit for publishers. And that comment claims subscriptions need to be \fair\ to authors. How will a $4.95 price point ever be fair to authors for a la carte purchases?

    What’s missing is why subscriptions DO make sense. For publishers, what do you think is more economical: marketing every single book you publish or 1 single program that carries with it all those books? What’s more profitable: selling print books in bookstores (which are demonstrably contracting, another fact completely missated above) and having no idea who bought your book or capturing the e-mail address, reading habits, and credit card of a subscriber and being able to target e-mails to him/her for free? All of a sudden, subscriptions make a whole lot of sense. Plus, subscription is a set-it-and-forget-it proposition for subscription providers: People aspire to read tons of books, sign up, then forget about the recurring payment as the renewal comes up (\I’ll cancel next year.\).

    I’ve personally conducted market research on this, spoken with executives who’ve implemented similar subscription programs, and know for a fact, this has nothing to do with customer desire and everything to do with consumer psychology and efficient economics for businesses.

    Reply
    1. jo

      All excellent points, Senghal Powell . Thank you! And it is far easier to search for a title online than in a bookstore. With the sub model, they do not need to worry about pricing or shipping and handling. They do not have to worry if the book is crap. If they do not like it, there are many more to choose from. Avid readers will be delighted at such a reasonable price. Booksfree has been a success for years via mail, so why not ebooks there is no need to wait for. And Amazon has included some audiobooks too. Libraries have used a subscriber model for years for ebooks. They would not waste their money if no one was using the service. People want to consume their content of choice easily and economically. End of story. The only real issue is authors getting paid fairly, but since the average author gets only 35 cents for every mass market paperback sold by most traditional publishers, anything more than that will be gravy for them. And yes, there is a lot of money to be made in a backlist when someone discovers a new author they like. If it encourages people to read more, I am all for it.

      Reply
  6. John @ Flash to HTML5 Conversion

    Well I liked the overall experience with my Overdrive and I’m willing for more subscriptions. The question lies as to how many books you read per month or what type of reader you are. Just as you’ve said, people are more comfortable buying their own e-book than borrowing which explained that there is a clear potential market for the subscriptions. Keep in mind though, that subscription might not give you the exact book you want whenever you want it.

    Reply

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