Why Oyster now sells ebooks too

Oyster started as an all-you-can-read ebook subscription service but they recently decided to expand their reach by selling individual ebooks as well. There’s been plenty of speculation on why they made this move, including catching up to competitors like Scribd and Amazon. While the competitive point is valid, I think there are two more important reasons for this move: sustainability and customer loyalty.

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Regarding sustainability, Oyster’s business model is a tricky one. Even though Oyster only earns $9.95/month from a subscriber they’re undoubtedly paying publishers more than $9.95 each month for certain subscribers. It all depends on how many books that subscriber reads in the month.

A subscriber doesn’t have to read the entire book for a publisher payout to occur, by the way. Each publisher has negotiated a percentage threshold, so once a subscriber reads past that agreed-to point in the book Oyster pays the publisher as if the entire book was read. In short, some (and perhaps many) subscribers are triggering full publisher payouts for partially read books.

That sounds like a great way to build a large subscriber base but if you’re losing money on many of them it’s hard to make it up in volume. This is precisely why Oyster needed to diversify their business model. They already have the platform, the reading application and they’re building a nice brand. All they had to do was add the option to buy rather than subscribe. It’s also a smart way to add more recent and popular publications to their offering, which tends to be pretty shallow in many subject areas.

The other enormous challenge I see for these all-you-can-read subscriptions is customer loyalty. Since I never own the content I’m reading, and one service’s library starts to look same as all the others, there’s no reason for me to stick with any one provider. The service with the lowest price and other gimmicks eventually becomes the winner. That’s not exactly an attractive long-term strategy.

But if I’ve built a library of books I actually own on that platform it starts to look more like the walled garden Amazon built. Once you’ve bought a lot of Kindle editions it’s hard to think about moving to another ebook platform. That’s undoubtedly what Oyster hopes to do by adding the purchase option to their service.

Will it make a difference? Perhaps, but the biggest threat to Oyster and Scribd is, of course, Amazon. Fortunately for Oyster and Scribd, Amazon is now much more focused on drones all the other non-book consumer product areas. That’s enabled Oyster and Scribd to build some buzz and momentum. The problem is that if someone at Amazon decides to make subscriptions more of a priority both of these little guys are extremely vulnerable. It’s just too easy for consumers to switch to Amazon and gain all the other benefits an ebook-only service simply can’t offer.


What’s the biggest obstacle facing Oyster, Next Issue, Spotify, et al?

I used to buy ebooks from Amazon but now I read almost exclusively on Oyster Books. Years ago I subscribed to a bunch of magazines and now I read all but one of them through Next Issue (The Week is the only exception). It wasn’t that long ago that I bought CDs and music tracks but now I’m mostly streaming through Spotify.

Since I’ve wholeheartedly embraced the content rental model, what’s preventing me from dumping Oyster for Scribd, Next Issue for Zinio or Spotify for Rdio?

The answer is “almost nothing.” All of these rental services face the enormous challenge of building customer loyalty. Since I don’t own the content and I’m on a month-to-month agreement with them, I can easily leave at any time. And when I switch, I leave almost nothing behind.

Contrast that with the likes of Amazon, where they focus on walled gardens and making it hard to leave. If you’ve built a large Kindle ebook library you probably don’t want to abandon it for another retailer and another reading app, particularly since you can’t bring your old books with you.

You might figure this is no big deal as customers who leave for a similar service will be offset by ones who go the other direction and switch from the competition. As with pretty much any business today though, it’s generally far more profitable to maintain an existing customer than it is to acquire a new one.

So how will these rental services deal with this? The most obvious answer is to expand their catalogs. But they’re all doing that and we’ll eventually reach a point of equilibrium where catalogs are almost identical between the services. Publisher exclusives could impact this, of course, but I’d like to think publishers learned their lessons from walled gardens and won’t make a similar mistake with exclusive distribution deals.

Another way rental services can distinguish themselves is to create more unique features in their apps. The competition will likely copy those features though, so any gains here will be short-lived.

Lower pricing isn’t an option either as that can be quickly copied and is nothing more than a dangerous race to the bottom.

How will this all play out? As much as I hate to admit it, I think all of this only further strengthens Amazon’s position. Amazon specializes in customer loyalty. That’s why so many of us first look to Amazon when buying almost everything these days. They’re also terrific at linking services together. Look at how Amazon Prime has evolved from free two-day shipping to now include Prime Photos, Prime Music and the Kindle Owners’ Lending Library. Critics will argue that none of these add-ons are as good as what consumers can find through other competitors; the difference is Amazon offers them for free, as part of Prime, and you can bet these add-ons will continue to improve over time. Lastly, when it comes to low prices and losing money, well, Amazon is the king.

The lesson here is that while consumers will continue flocking to the rental model, the lack of customer loyalty means the leaders today may not even be relevant tomorrow.


Disney shows how to tear down walled gardens

Tired of dealing with the fragmented mobile marketplace that iOS and Android represent? The imagineers at Disney have come up with a terrific way to address that problem. It’s both a much-needed solution for consumers and also a clever way for Disney to maintain a direct relationship with consumers who buy indirectly.

I’m referring to the Disney Movies Anywhere initiative, which lets you buy a movie on one platform and watch it on either platform. Imagine a world where all those ebooks you bought on the Kindle platform could also be read now on the Nook platform, and vice versa. You’d be free to choose the lowest price, no longer worrying about ebook library lock-in, where you’ve bought so many titles you can’t imagine abandoning that retailer.

Sounds like a nightmare for the big retailers but a huge win for consumers and publishers.

Of course, how many publishers have the Disney muscle to force retailers into such a model? Very few.

But wouldn’t it be cool if one or more of the Big Five book publishers pushed for something just like this? The first thing a reader would see when they open that ebook from Amazon, B&N, or anywhere else is a message from the publisher thanking them for their purchase and showing the steps necessary to register the purchase with the publisher so the book can be read on any ebook platform.

The publisher not only does the reader a service, they also establish a direct link to all their customers. That leads to a better understanding of customer interests and trends as well as the opportunity to upsell other products directly.

Every retailer except the largest should support this concept as well. If you’re the distant #2 or #3 ebook retailer, you should totally embrace the opportunity to level the playing field with this; you’ll suddenly gain more relevance as all those books bought on the #1 retailer’s platform could now be read on yours.

Here’s another interesting byproduct: How long would the #1 retailer continue selling ebooks at a loss when every sale no longer reinforces consumer lock-in and, in fact, becomes yet another ebook the consumer can read on competitor platforms?


How to convert indirect customers into direct customers

Every digital newspaper, magazine and book I’ve ever purchased from an e-retailer share something in common: None of them included a pitch from the publisher to lure me away from the e-retailer and go direct. Not a single one.

This, despite the fact that it’s never been easier, or more important, for publishers to diversify their channel strategy and focus on their D2C business. Pretty remarkable. It’s even more amazing when you consider that more and more publishers are finally starting to wake up to the importance of either building a D2C channel or fortifying it.

Here’s the easiest solution possible for publishers to remedy this situation: Make sure a compelling message from you is the first thing consumers see when they open the indirectly-distributed version of your product. What does that look like?

In general, it’s something like this: “Thanks for buying this e-paper/e-mag/ebook. Are you aware of the benefits of buying your next edition/product directly from us? Click here to learn more.”

Again, that’s the very first thing a reader should see when they open your product. When you do this you’ll be using the enormous power and reach of the retailer network to build your own D2C network.

Why doesn’t this happen today? The first reason is that most publishers probably haven’t even thought of this tactic. The second reason is that publishers are worried about retailer retaliation if they implement it. If that has you worried, consider this: Can a retailer actually dictate what content is and isn’t acceptable in your product? Although Amazon, for example, tends to be extremely bold I think even they would realize this would be overreach on their part.

Would that prevent them from making the publisher feel the pain? Probably not, but it could create a very interesting situation, both legally and in the court of public opinion. 

Simply inserting this D2C messaging is only step one, of course. Publishers need to deliver and provide a compelling reason for consumers to buy direct. Here’s a hint on how to solve that problem: Make sure the most valuable, feature-rich version of your product is only available direct from you, the publisher. That’s not too hard to do, btw. If you’ve ever subscribed to an e-newspaper through a digital retailer you know what I mean; the user experience is awful, particularly when compared to the full digital replica edition. Ebooks represent a similar opportunity; publishers should make sure the richest, most compelling edition is only available from them, not third-party retailers.

When will publishers wake up and leverage this approach? Some will, but most won’t, largely because of the fear factor noted earlier. The most successful, vibrant publishers of the future will make this a standard practice though and fear of retailer retaliation will disappear.


A business model I’m sorry we’ll never see

We’re all intimately familiar with the cell phone business model. Buy the phone today at a reduced price that’s subsidized by what’s typically a two-year commitment with that carrier. Other options have emerged in the cell phone arena but this low-price-plus-lock-in model remains extremely popular.

There was a time when I thought we’d see the same model applied to e-readers and tablets. I wasn’t the only one speculating that eventually the Kindle’s price would go to zero for consumers willing to commit to purchasing some minimum level of content over a period of time. One example is this sort of offer: “Get a free Kindle when you agree to purchase at least 15 ebooks over the next two years.” The same model can work with any digital content, of course, not just ebooks. So newspapers, magazines and music could have been used to attract consumers.

That never happened and I’m not optimistic it ever will now. Why? Because Amazon doesn’t need this option to grow their business. Amazon is now so powerful it not only influences but also determines the business models for everyone in the ecosystem including publishers and other retailers.

A few years ago it would have made sense for another retailer to try and gain some momentum with a free device that’s subsidized by a content purchase commitment. Fence-sitting consumers might have been more inclined to acquire a free e-reader or tablet even if it meant committing to future content purchases. The ebook retailer market share numbers we see today might be somewhat different if someone not named Amazon would have tested this model a few years ago.

So why is it too late for another retailer to give it a shot? First of all, it would now come across as a Hail Mary, a futile, last-ditch effort to remain relevant.

Second, I don’t think consumers would respond as well as they might have before Amazon added so many elements to Prime membership. Prime not only means free two-day shipping these days. It’s also an alternative to Netflix and Spotify, for example. And even though Amazon’s video and music catalogs aren’t as broad as Netflix or Spotify, most consumers perceive those services as throw-ins to the free two-day shipping that’s still the heart of Prime.

Third, and perhaps more importantly, I think other retailers now know that any model they offer will quickly be copied and likely squashed by Amazon. That may have always been the case but it feels like there’s no less room for retailers to innovate and compete than ever before. Besides, Amazon is (and should be) more focused on making Prime as broad and irresistible as possible and less interested in the more limited goal of free devices to secure future content purchase commitments. Even though Amazon started with books they’re now making more money from people like me because I’m ordering so many other things. They don’t want to be the next Barnes & Noble when they’re on their way to becoming the next Walmart instead.


Unlimited subscriptions: Five things you need to know

One of the worst kept secrets in recent history was finally unveiled last Friday when Amazon announced their Kindle Unlimited program. It has the potential to become yet another terrific service for consumers but many publishers and authors are less than enthusiastic about it.

Here are five important points everyone in publishing should keep in mind when analyzing Kindle Unlimited and the other all-you-can-read subscription services:

  1. Amazon just legitimized the model – I signed up for Oyster several months ago and I love it. When I mention Oyster and the all-you-can-read model to publishing industry friends they treat it like it’s a fad that will soon disappear. Now that Amazon is in the game it’s time for everyone to realize that the model is here to stay, regardless of what the naysayers think.
  2. It’s not for everyone – The industry’s 800-pound gorilla just showed up but I don’t expect a major impact in the short term. Amazon’s title assortment is pretty limited, particularly with no Big Five participation. That’s why I have no plans to ditch my Oyster subscription for Kindle Unlimited. The other important fact here is that a large percentage of book buyers will prefer to own their content, not rent it. Everyone didn’t stop buying tracks on iTunes when Spotify took off, so don’t look for any seismic shifts here either.
  3. The pioneering startups are now on borrowed time – Even though others are probably also sticking with Oyster (for now) I do worry about the long-term prospects for them as well as Scribd. Neither of those startups has been able to create a household brand name yet and now they face competition from one of the most well known brands on the planet. I figure both of them have about 18 months to either come up with a unique value proposition or fade away. Anyone could have predicted Amazon’s entrance in this space and since competition is always a good thing I’m hoping both Oyster and Scribd have something special up their sleeves.
  4. Publisher financial models will evolve – This is the most interesting aspect of all. The business models vary among the providers and some publishers are undoubtedly getting better terms than others. In general, a publisher gets paid when the consumer reaches an agreed-to reading threshold in a book. Those percentages are as low as 10% and 20% in some cases. In some models the amount paid to the publisher is the same they would have received if the ebook were purchased, not rented, so it’s a function of the title’s digital list price. In other models a percentage of total revenue is placed in a pool and paid out to publishers based on consumer reading frequencies and thresholds. I have no doubt Amazon will sweeten the pot to lure more publishers into Kindle Unlimited. Publishers need to remember that that once the Kindle Unlimited platform gains traction Amazon will do what they always do, renegotiating so publishers receive less and Amazon keeps a bigger piece of the revenue pie. Sound familiar?
  5. Publishers can control their own destinies – Many of the bigger publishers who aren’t participating in Kindle Unlimited already realize the point I made in item #4. But what they might not realize is that they have other options. Just because they’re concerned about Amazon doesn’t mean they should avoid the all-you-can-read subscription model. In order to ensure future competition in this space I hope these publishers will sign up immediately with Oyster and/or Scribd. In order to keep Amazon honest we need at least one of these startups to survive.

Why Amazon Firefly is important

At any given point in time it’s easy to assume that search engines have evolved as much as they’re ever going to. Sometimes it’s hard to avoid falling into the logic that was allegedly uttered long ago by Charles Duell: “Everything that can be invented has been invented.”

Putting the gimmicky eye candy called “Dynamic Perspective” aside for a moment, there’s another element to Amazon’s recently-announced Fire phone that everyone in the content industry needs to focus on: Firefly.

On the surface, Firefly also feels like a Fire phone gimmick. In reality, it’s a next generation search platform and likely to be the first significant Google challenger. I’m not suggesting Google will disappear or feel the pain anytime soon, but Firefly will force them to evolve.

Firefly lets you snap pictures of objects so you can buy them from Amazon. It’s the next step in showrooming, the process brick-and-mortar retailers loathe. Publishers need to look beyond Firefly’s ability to enable one-click purchase of a physical book sitting on a table. Rather, publishers need to consider how Firefly will eventually enable the discovery and consumption of all types of digital content as well.

Let’s say you’re at the ballpark watching the Pittsburgh Pirates play. You snap a picture of the beautiful city skyline, looking out from behind home plate in PNC Park. You’re curious to learn more about the park, the team or maybe even the city itself.

Instead of clicking the camera button, click the Firefly button on your Fire phone. Rather than just getting a photo you might not ever look at again, your screen is filled with search results. These aren’t just the website links you get from Google though. You’re looking at all sorts of free and paid content you can consume now or later.

All the usual suspects are included here. You’ll see links to books about the team, park and city. But you’ll also have an opportunity to buy the program, print or digital, from today’s game. And maybe there’s a link to purchase a digital edition of today’s local paper or just portions of it (e.g., the sports section, just those articles covering today’s game, etc.) The results could also include articles about the team/park/city, accessible via either a trial subscription or maybe they’ll ultimately be free thanks to the ever-expanding reach of Amazon Prime. 

Don’t forget that all these results won’t just appear in random order. Amazon will develop a search algorithm as sophisticated as Google’s, but with the benefit of all Amazon’s “customers who viewed x also viewed y” data and capabilities.

Most importantly, don’t forget the power of paid placement in these results. Amazon has generated plenty of revenue from publishers for placement and promotional campaigns. Firefly will open the door to an enormous number of new ways Amazon can charge publishers for premium placement in those Firefly search results.

I haven’t forgotten that you’re sitting at a baseball game and the last thing you want to do is flip through search results and spend time reading content on your phone. That leads me to another model I suspect we’ll see from the Firefly search platform: save for later.

Web searches today focus exclusively on the here and now. You search, find what you need and you move on. Firefly opens the door to a lengthier relationship between user and search results.  You can’t be bothered with all the Firefly details when you’re trying to watch the baseball game. That’s why you’ve configured Firefly to save those results for later retrieval. They could sit in a holding area in your Amazon account, similar to your Amazon Wish List, or maybe they’ll be delivered to you via email. The more likely scenario is that Amazon will do both, of course. Amazon knows the value of data and reminding customers of what they like, so expect to see plenty of notifications about these potential one-click purchase opportunities.

None of this functionality exists today, of course. And most of it won’t be available when the Fire phone ships in July. But rest assured that these and plenty of other innovations will eventually be available through the Firefly feature. Amazon’s #1 goal is to get consumers to buy things and Firefly is a huge step forward in making those transactions happen more frequently and conveniently.  


Your personal index of everything

Google is terrific but it doesn’t help me answer the question, “where did I read about that?”. I’m running into that question more frequently these days, partly because I’m reading so many short bursts of content from so many sources.

It’s not just website content. I’m talking about emails, e-magazines, e-newspapers, ebooks, etc. In short, I need help indexing all the digital content streams I’m consuming every day.

Over the past few years I used a service called Findings that did some of this, but it was an approach that required me to actively curate the articles and excerpts I wanted to preserve and share. I need something that automatically ingests and indexes everything I see, not just what I’ve highlighted. And it has to happen with no clicks, copying or curation required by me. Just index everything I see.

I want a tool that watches all the emails I read every day, keeps track of the content of the webpages I visit, has access to the magazines I read in Next Issue, sees all the content I consume in the Kindle app, the Byliner app, etc. When privacy advocates read that sentence their heads will explode. That’s OK. They can choose to live without this service but I’ll be more efficient because of it.

It’s obviously a concept that requires opt-in from the user. It also requires the ability to tap into content streams from proprietary apps, not just browsers. And it needs to follow me across all my devices. Whoever develops it will help solve a problem that’s only going to get worse in the years ahead. I hope they do so soon because I’d love to start using it today to build my index of everything for tomorrow.


Another way for publishers to control their own destiny

Habits are hard to break, especially for book publishers. How else can you explain the industry's insistence on sticking with rigid, tightly synchronized release dates for new publications? It made sense in the old days when print ruled and the big brick-and-mortars dominated retail. But even back then I used to think it was silly to delay a book's release date for months just so we could get a slot in one of those brick-and-mortar promotional campaigns.

Amazon makes this less of an issue and I always appreciated their willingness to allow for drop-in titles, even when those titles required a lot of promotional support. Amazon is able to turn on a dime since they don't have to coordinate a title's roll-out across hundreds of physical stores. Nevertheless, I haven't seen publishers evolve and embrace the new promotional opportunities, and release date options, that are available with ebooks.

Kindle First

Once again, Amazon leads the way. Their recently-launched Kindle First service is brilliant. They're giving customers the opportunity to buy new books on their platform one month before they're available everywhere else. It looks like the big publishers haven't opted into this; perhaps they're finally waking up to the fact that Amazon is eating their lunch.

Kindle First offers the earliest access to these new books and you can buy one each month for $0 with your Amazon Prime membership. That's a free purchase, not a loaner. So Kindle First becomes yet another reason to sign up for Amazon Prime.

Meanwhile, publishers who haven't opted in to Kindle First probably think they're showing Amazon who's boss. Yeah, right. Rather than staying out of the program, publishers should launch something new and exciting of their own.

Publisher First

Publishers, how about making your ebooks available exclusively on your own site 30 days before you release them everywhere else? This, of course, means you've got to have a robust direct ebook channel established on your website. We know that's not the case for most publishers, but hopefully this is another reminder of why they should make a direct ebook sales channel a priority.

Imagine the volume you could drive if your frontlist was available only on your site for the first month. Who says you have to treat retailers equally? Yes, there will be backlash from the big ebook retailers, but let's face it...those retailers want to carry your bestsellers too, so I doubt they'd give you too much grief.

Speaking of which, this model isn't optimal for all books. Titles from unknown authors on nichey topics aren't likely to benefit from it. But what about your bestsellers? What about the titles from your proven authors, the ones with the platforms?

It's not just that you'll keep 100% of the revenue in these direct sales. This is also about building a direct relationship with your readers and being able to market to them in the future. And yes, most publisher websites are not a consumer destination today. But what happens when that website is the exclusive outlet for the first 30 days of each publication? I think consumers will find a reason to go there.

Pre-release samples

On a related note, I'd like to make a plea for every publisher to rethink their ebook samples strategy. Why in the world are these also tied to the book's official release date? Publishers, get your samples out there before the book publishes. What is the benefit to holding the samples till the book's release date? Amazon now lets consumers backorder an ebook before it's released, so point your customers there if you have to. But please don't let me read some review or tweet about a book that's coming out next month and then not give me a way to get access to the sample before the book publishes. I guarantee I'll forget about this book and you'll lose the sale.

Also, why are these samples under lock and key, DRM'd like they contain the country's nuclear launch codes? Here's a thought: Why not make those samples completely DRM-free and actually encourage readers to pass them along? Maybe you should consider putting these exclusively on your site before they go to retailers. It's another way to establish that direct relationship with your readers, and if you remove the DRM element it should be extremely easy to implement.


Byliner and the art of curation

Last week I wrote about how Kindle Singles are likely to influence the future of ebooks. This week I'd like to share some thoughts on another service for short-form content: Byliner. Unlike Singles, where you purchase titles individually, the Byliner service is an all-you-can-read subscription model.

Following authors and subscribing to content streams

My favorite Byliner feature is the fact that I can follow specific authors. I thoroughly enjoyed Mary Roach's Stiff: The Curious Life of Human Cadavers. I know I need to read her other books but time just doesn't permit right now. Thanks to Byliner I'm able to discover several short-form works by Mary and read one or two of them in a matter of minutes.

This is an important glimpse of the future, btw. I firmly believe that books, magazines, and other print content containers will become far less important in the future. Those vessels were simply a convenient delivery format in the physical world. What we really want though are great stories by authors we love to read. I don't need this content as a "book" or part of a "magazine", regardless of whether it's print or digital. Instead, I'd prefer to pay for a Mary Roach content stream subscription. The same goes for Steve Rushin. Byliner offers all their authors in the same broad subscription but in the not too distant future I'm convinced we'll have access to more granular subscription options too (e.g., by author, by genre, etc.)

Curation and discovery

What makes Byliner different from simply surfing the web and reading interesting articles you find? It's all about curation. The authors and articles featured in Byliner are among the best. I have yet to find one that didn't fascinate me. Good luck saying that about most online articles you stumble upon.

Then there's the fact that your favorite authors are discovering and recommending content from other authors. What a terrific solution to the discovery issue everyone in publishing complains about. I'm seeing that recommendations by my favorite authors are much more likely to lead to great reads than recommendations from my Facebook friends. Think about that for a moment. Does your social graph really overlap with your reading interests? Mine certainly doesn't.

Pricing and length

With Kindle Singles you're making a (small) financial investment in every piece of content. In Byliner's all-you-can-read model there is no such investment or guilt factor. If I don't like a piece I'll just move on to the next one. It still costs the same amount every month, so I'm inclined to explore even more. (Another discovery plus!)

Byliner articles are even shorter than Kindle Singles, or at least that's the case most of the time. I love it that they even give you a reading time estimate with each Byliner article. That's a much better gauge of whether I really have time to read this piece than telling me the number of pages, especially when the ability to increase/decrease font size makes "page" a hard word to define.

Terrific iPad app

Lastly, Byliner has a wonderful iPad app that lets me download and save articles for offline reading. That's a great feature for those times when you're out of wifi range. I know I've always got a great selection of short-form content ready to read, regardless of where I am. Given how short these pieces are though, I wish they had an option to automatically download articles from my favorite authors, topics I always read, etc.

If you haven't given Byliner a test drive you need to do so now. It's both a great content service as well as a leading indicator for how publishing and content consumption is rapidly evolving.