Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.
The U.S. is the biggest ebook market in the world and three of the most prominent ebook subscription start-ups are based here, but it may not be the most promising launch pad for such a business. Countries where digitization of books have hurt publishers the most might be the best places for subscription services to take root.
There’s been a lot of buzz over the past few months about ebook subscription services. The buzz crescendoed at Digital Book World in January, as executives from some of the leading subscription start-ups in the U.S. and around the world gathered for several panel discussions.
Everyone in publishing seems to have an opinion on whether companies like Oyster and Entitle will thrive in the marketplace. Whether they do or not, they’re up against a model that does seem to be thriving in the biggest and most mature ebook markets: Pay-per-download.
In the U.S., somewhere around a quarter of people are reading ebooks. My guess is that the proportion of those who read them through a subscription service like Oyster, Scribd, Safari or the Kindle Owners’ Lending Library is vanishingly small at this point. Buying ebooks from retailers like Amazon, Barnes & Noble, Apple and others has really taken off as a business here. The same is true in the UK, Canada and other developed ebook markets — and, as a result, ebook retailers, publishers, agents and authors are making hundreds of millions of dollars selling ebooks as one-off downloads in these countries.
But there are dozens of book markets in the world where people are in fact reading digitally, but the money hasn’t followed.
Russia is a great example. The country of 140 million has a vibrant literary and reading culture and a growing middle class. According to recent (completely erroneous) reports, Russia now has the third-largest ebook market in the world. While this is patently untrue at this point, many more people are reading ebooks than the fledgling sales numbers suggest, according to James Appell, head of global development for Bookmate, a Moscow-based Scribd-like business (started off as document sharing and now pivoting to ebook subscription model). They’re just reading pirated ebooks.
Appell estimates that 90% of the ebooks that Russians read are pirated.
“Publishers here have been harmed by digitization,” said Appell, referring to a glut of ebook copies of popular titles available for free on pirate sites in Russia. “The problem with pay-per-download in a place like Russia is that there’s an obvious alternative to throwing down $5.00 to $10.00 for an ebook — to pay nothing.”
Appell believes that services like Bookmate, which charges roughly 50,000 customers in Russia and former Soviet satellites like Belarus about $5.00 a month for access to some 220,000 ebook titles in both Russian and English, have a chance to turn non-paying ebook readers into paying ones, unlocking potential value in big book markets like Russia.
The idea is that once a user pays the $5.00 (it’s actually 150 rubles, which is five rides on the Moscow subway, at least when I was there a few years ago), the friction of purchasing a book disappears and they are freer to sample things and less likely to pirate things.
The revenue model for publishers is a share. Appell wouldn’t tell me what proportion the publishers get and what proportion the company gets, but they split the $5.00/per user charge. The publishers get paid based on how many users out of all the users read their books.
According to Appell, this actually works out similarly to how publishers are paid in a pay-per-download model. Apparently, about 80% of Bookmate’s readers just immerse themselves in one book a month and so publishers generally get the entire share of the the revenue that reader creates. If the split between Bookmate and publishers was 40/60, for instance, that would be about $3.00.
Bookmate has 600,000 users, 85% of which are in Russia. The remainder are in nearby countries. About 50,000 of them are part of Bookmates “subscriber base,” which would give the company about $250,000 a month in subscription revenue at this point. The company will be expanding soon, according to Appell. Bookmate will be available in Turkey within the next several months and in countries in Southeast and South Asia by the end of the year.
Publishers in the U.S. and other more developed markets may blanch at the idea of getting paid $3.00 per ebook sold or find subscription models threatening to the lucrative pay-per-download model. Bookmate wants to go where pay-per-download hasn’t worked as well: “Where people aren’t buying ebooks in the pay-per-download model we can envisage a situation in emerging markets where people read in the subscription model and publishers being fine with that. It will increase the amount of time people are reading and ultimately that’s better for everyone involved in the business.”