Why Netflix for eBooks won’t work. Today.

 

It seems that not a week goes by recently when we hear about a company that is “Netflix for eBooks” or “Spotify for publishing”. While I think that the industry desperately needs innovation and fresh thinking, I have my doubts about this type of model ported from other media areas. It may very well be where the industry ends up in time, but I think for the next 2-3 years these start-ups will find it tough.

So here are some questions that we should maybe consider when discussing Spotflix for books;

 

1.       Will investors back these companies? I think the answer to that one is very much yes – Oyster gets $3m to become the Spotify of books. From the outside looking in it makes total sense for a content industry – it worked in music and video – why not books?

 

2.       But, it changes the publishing business model fundamentally.  When you think about it, eBooks didn’t change the industry’s business model – it simply changes its distribution model. The financials behind eBooks are still based on the print principle of a wholesale price per title or book. You can argue about margins and costs and so on, but the principle remained the same.

 

Subscription models alter this model completely. Instead of receiving full (or discounted) revenue per title, the publisher will receive a portion of a subscription fee instead. For an industry revolving around units this is difficult to comprehend. And with no visibility on volumes or revenues it’s a tough one for publishers to gamble on.

 

3.       Buy-in is crucial. For the reasons above it will be very difficult to get full buy in from the major publishing houses. It’s equally remarkable and understandable that in an industry experiencing rapid change that the major powers to be are so reluctant to gamble on new business models. Why would a publisher gamble established sales v guesstimated subscription revenue? Backlist access is fine, but what really drives a commercial model like this is frontlist.

 

 

4.       Will readers want this? On the whole, you would have to say probably. Readers will love the convenience and most importantly the pricing. However, if full buy-in from major houses is not present then you will have an early Netflix like issue where the selection didn’t match customer expectations.

Interestingly enough, recent surveys indicate that the average reader reads (across digital & print) approximately 15 books per year or 1.2 per month. So for the average reader, does a subscription make sense in a world of daily deals and heavy discounts? It’s not a compelling argument.

It does leave that group of super-readers as a target market. The key question there is are there enough of them to sustain a scalable business?

 

So, in summary I think that buy in from major and minor publishers alike for front list titles will be difficult to get. Like many innovations and early-stage concepts it will take a few brave publishers to go all-in and accept the consequences.

Only through demonstrating clear revenue gains and minimal impact on traditional sales, both digital and physical will the industry as a whole begin to move.

 

 

These are my thoughts – what do you think?

Comments

Fascinating article

Very interesting - I hadn't heard about this before. The subscription model certainly makes sense in the digital world. I took part in a debate organised by BIC earlier this year and the idea came up a lot. But you're right that it's hard for publishers to commit to a complete change of business model without at least some idea of the financials. Will probably be the smaller ones that take the plunge first, while the big names wait to see what happens.

What if not everything stays the same?

Hi Gareth,

I am interested in your thoughts about the influence of the subscription model on piracy and the average number of Ebooks read. If there is an influence the subscription model might very well both attract a group of new customers and increase reading instead of (partly) decrease sales.

Anyway I am convinced the model is here to stay but the potential market share and growth will be difficult to predict.

Controversially, I like this idea...

As a consumer, I welcome this. I am an avid reader (hence working with books) and I often find my Kindle more interesting than a human. I do, however, despair at the price of buying a Kindle format book - it is often the RRP of a paperback, a price you rarely find paperbacks at on Amazon.co.uk. And I often wonder why - yes I agree the words are worth it, but do I not get a discount for saving the environment and not racking up printing costs??? So, as a consumer I would love this - as long as the book I was enjoying and half way through wasn't suddenly removed from the service.

This actually has more impact on the digital book market than the physical book market - people who currently buy paperbacks won't stop because of this, but Amazon won't be able to count on my monthly book spending spree!

Pubflix or Publify?

susanmarywarren's picture

Great discussion: who says "won't" in any sector in change. Market forces will decide on a Netflix or Spotify etc for books, not publishers. 

Publishers finally must meet the demands / satisfy their customers and authors. Digital publication in whatever format is here to stay and quality content creation, distribution and price competitiveness will be at the heart of the growth and change.

As Gareth Cuddy says one thing for sure is that the key functions of quality and curation while leveraging this new low-cost digital market is key. That's what our publishing platform achieves. We can can make quality digital books in an affordable and scaleable way - at one end of the spectrum ebooks and the other beautiful interactive book apps. It's an exciting time even if being a market leader is tough.

Inconsistency

John Pettigrew's picture

Unfortunately, your primary argument against subscriptions (that publishing is based on unit sales) applied just as much to music and film before the advent of Netflix, Spotify etc.

Also, I strongly suspect that looking at the average (i.e. mean) reader's figures is misleading. The sort of person likely to buy a book subscription is surely the heavy reader, for whom having instant access to any book (and that point would be crucial) would be worth paying for.

Which just makes your point about requiring publisher buy-in even more important. Without the range, services won't prosper. The same was true for film and music, and the existing ebook services are struggling with the issue already.

Inconsistency

gcuddy@epubdirect.com's picture

Hi John.

Thanks for commenting.

I think you're right - it is those heavy readers that will benefit most. I also suspect that they are mostly interested in front list titles.

Interestingly enough, many of the genres that heavy readers are most interested in - romance, sci-fi etc are often the most innovative of publishers - sometimes small, always nimble. So perhaps there are certain genres that might prosper with this model - genres that are already keenly priced and have avid followings.

G

I think you have covered all

I think you have covered all the important issues. The thing that worries me with a netflix for books, is that if someone gets a compelling proposition together - with, as you mentioned, most if not all major houses on board and low prices - this will be so succesful it will undermine the whole business. Because if the heavy readers and most of the new readers make the step to this service, the sale of print books will suffer badly - a good streaming service will most likely cover all needs for most readers. And becaue of the low prices necessary for a good streaming proposition, this will mean huge income loss for publishers. People will read more, but publishers will earn much less. So my question: do we want a Netflix for books?

Reply

gcuddy@epubdirect.com's picture

Hi Jurgen.

A well made point.There has always been the threat of larger publishers undermining the market for other publishers through market share and efficiencies of costs etc.

However, I do think that Digital in many ways tilts the odds back in the general markets favour as all publishers can take advantage of the relatively low-cost of digital distribution and growth. Many of my company's new customers are publishing start-ups - still providng the key functions of quality and curation while leveraging this new low-cost digital market. That's exciting for publishing I think.

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