I wrote earlier about what I don't like about Amazon's Kindle Owners' Lending Library program (think pay-for-performance) and a recent interview I did with Logos CEO Bob Pritchett helped crystalize where this model is (hopefully) heading.
First of all, I now figure Amazon could just leave the flat fee mode in place for those publishers who are OK with it. Obviously there are some smaller publishers who feel they don't need pay-for-performance and they're happy with the flat fees Amazon offered. But since the service is missing content from so many other publishers Amazon needs to start thinking about other options for this program.
As Bob Pritchett mentioned in that interview, the cable TV model is a good one to follow here. Think of the existing Lending Library program as basic cable. It's part of the Amazon Prime subscription package and doesn't cost the customer any more to access the current library of books. But just as there are sports packages and movie packages for cable TV, Amazon should offer verticals content packages and charge add-on fees.
I read a lot of sports books and I'd gladly pay $10/month for unlimited access to baseball, hockey, etc., books from all the publishers missing from Amazon's current Library program. I also like to read books on U.S. history and would be willing to pay an additional $10/month for unlimited access to this list as well. So that's $20/month, or $240/year I'd pay for this sort of program. Btw, that's actually more than what I pay every year for sports and history ebooks. So why would I pay more for this than I do today?
Two reasons: selection and what I'll call "dud avoidance." Both of those reasons are somewhat related. Even though I never buy an ebook till I've read the free sample I still find books I lose interest in beyond the sample end point. Sometimes I feel guilty about the purchase and force myself to finish. Other times I just delete the book from my device and try to forget about it. In an all-you-can-eat, monthly subscription model though I'd be more willing to try (and potentially abandon) books that don't disappoint me till I get past the sample material. And since there would be so many more choices available that don't cost any more to explore (because of the monthly flat fee) I'm likely to expand my reading and discovery horizons.
Pay for performance is key here. As a publisher I'd want to make sure my authors are getting compensated based on how popular their books are. That's how it works in the print world and that's how it works with the better ebook subscription programs (e.g., Safari Books Online). And since Amazon would be charging more for these verticals (as opposed to just stretching that $79 Prime subscription even further) they should be willing to pass that revenue along to publishers using a pay-for-performance rev share model. If they don't, I hope B&N, Apple, Google or some other ebook publisher will step up to the plate and offer this type of package.