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 econtent prices will erode even further

If you think econtent prices are too low today, well, in the immortal words of Bachman Turner Overdrive, you ain’t seen nothing yet. In fact, “nothing” is precisely where more and more econtent prices are heading. Here are a few reasons why:

eInk dies while tablets reign – It’s no secret that sales of dedicated e-reading devices, mostly featuring the eInk display technology, are fading. eInk was terrific in the pre-tablet days, particularly since it was so lightweight, you could go weeks between charges and the price was right. More consumers are opting for multi-function tablets these days though and that means publishers are no longer simply competing with each other; on a tablet you’re also competing with games and other addictive time-wasting apps. As publishers struggle to maintain relevance and eyeballs many will undoubtedly become desperate and experiment with lower and lower prices.

More and better free content competition every year – Look around and consider all the terrific free content options out there. Whether it’s long-form like Wattpad or breaking news like countless websites, every year consumers seem to have less and less reason to open their wallets for econtent. Today you have more free options than you did a year ago and a year from now that number will only go up further. 

New, lower pricing models driven largely by startups – Even if your competitor’s content isn’t free it’s still often much lower-priced than traditional publishers are comfortable with. Startups don’t have all the infrastructure and fixed costs of a traditional publisher so it’s easy for them to experiment with lower pricing models. Look at what Oyster and Scribd are doing in the ebook marketplace. These two startups are bringing the music subscription model into book publishing Consumers (like me) love it because they’re spending far less and able to read so much more for one low monthly price.

Digital first, print never – Most traditional publishers are still operating with a print first mentality. They view e-version sales as incremental, a way to drive a bit more ROI for their print product. The market is already starting to favor digital first publishers though and that trend isn’t going to change. Digital first publishers tend to be younger, more aggressive organizations, ones that are looking for volume, not necessarily top-line revenue or even profitability (in the short term).

Kids and freeAs this recent survey notes, the younger generation thinks your content should be free. Content sharing is their way of life. Good luck changing their thinking as they gradually become a larger part of your target audience.

Are you discouraged yet? Don’t be. There are plenty of ways to combat this trend and even turn it to your advantage. Stay tuned…that’s the topic of next week’s article.

Will digital content subscriptions follow the cable model?

According to a quick Google search, the typical U.S. household now pays between $80 and $90 per month for the TV component of their cable bill (excluding broadband and phone service). Now compare that to the price of an all-you-can-read digital content subscription service like Next Issue for magazines or Oyster for books. The former is $10-$15/month and the latter is $10/month.

The average person spends a lot more time watching TV than they do reading, so that’s one obvious reason for the significant price difference between cable and e-zines/ebooks. Even though services like Next Issue and Oyster are trying to build large subscriber bases by offering the lowest price possible, I expect those rates will increase significantly in the next few years, especially Oyster’s.

A recent Nielsen report indicates that the typical American household watches the same number of channels today (17) as they watched back in 2008; this, despite the fact that those same households now have access to almost 50% more channels than they did back in 2008. So we’re not really taking advantage of this increased breadth of channels and yet our cable bills are increasing at roughly four times the rate of inflation. Yes, it’s one of the main reasons we all hate our cable providers, but it also proves we’re suckers for the boob tube.

The cable companies say they’re just passing along the higher programming costs from the networks. They also note that networks force them to carry their unpopular channels as part of the package. That drives the price up even higher and, despite the added exposure, the unpopular channels remain unpopular.

Now switch gears and think about Oyster. Today they have one of the Big Five book publishers in their catalog. The other four are presumably waiting on the sidelines for a richer deal. And despite their recent announcement of now having more than 500,000 titles in the service, most consumers will find a lot of holes when only one of the Big Five is available.

How would the model change if they suddenly had all the titles Amazon sells for the Kindle? How much would a consumer be willing to pay for that added breadth? More importantly, would the price have to go up in order for Oyster to offer that added breadth?

Most all-you-can-read ebook services use a pay-for-performance business model: the more a book is read by subscribers, the more revenue that title earns for its publisher/author. What if, like in the cable industry, publishers insisted on getting a portion of the subscriber’s monthly payment regardless of whether any of their books are read?

This drives up the price of subscription, but it also increases the value of the service, especially if it ends up bringing the other Big Five to the table. And to steal another page out of the cable playbook, why couldn’t Oyster offer multiple tiers of pricing based on the content offered? So today’s 500,000 title list remains at $9.95/month, but if the other Big Five titles are included, maybe that subscription option is priced at $19.95/month. 

The little guys might complain that they too should get a fixed minimum amount from each subscriber but I’d argue they’re benefiting from all the additional visibility the larger list creates. After all, unlike the cable TV model, I believe that a broader all-you-can-read model leads to more discovery and consumption of content that wouldn’t otherwise have been read. As an Oyster subscriber I can confirm that this is consistent with my experience; I’m currently reading an Oyster ebook I never would have considered buying from Amazon, for example.

I hope Oyster considers this sort of model to dramatically expand their catalog. And if they do, I’ll be the first to upgrade to the $19.95/month premium subscription.

The value of a dry run

Stephen R. PolandIn the early days of flight, airmail pilots conducted dry runs or “pathfinder” flights to test the flying schedule, survey landing strips and facilities at intermediate airfields, and acquaint themselves with the full length of the route. Flying new airmail routes without the pressure of delivering actual mail enabled the postal service to work out the kinks before the stakes were raised.

While not as critical as challenging the bonds of gravity and delivering the mail on time, conducting a dry run in your digital content development process helps you “get it right” before publishing and marketing front line titles or content.

As one of the co-founders of a small publishing startup, 1x1 Media, I look for opportunities that help us build our processes and release better products. Our startup provides how-to content for startup founders and entrepreneurs. We’ve launched the first title in our Startup Crash Course ebook series, Startup Crash Course: Angel Funding. We are on track to publish our next Startup Crash Course ebook within the month, with our next series also in development.

Rather than learning the ropes of delivering ebook content to the various digital platforms while publishing our new series, we first conducted two dry runs using content we already had available. My co-founder, Lisa, rescued the rights for one title back from a large publishing house, and for the other, we enhanced a public domain title first published in 1914. We converted these pieces of content into two ebooks published on four platforms—Amazon’s Kindle, B&N’s NOOK Press, Apple’s iBooks, and Google Play.

Publishing a few “dry run” titles enabled us to address many decision points, including:

Software tools. Choosing which software to use for writing and editing, formatting, image creation, cover creation, and final ebook formatting and layout can be daunting. But a little trial and error with free or low-cost solutions and help from power tools such as InDesign can speed the process along.

Production processes. Our dry run titles enabled us to establish file naming conventions, experiment with image dimensions and resolutions, and learn how text formatting and styles flow through to the finished ebook file on each platform.

Platform specs and requirements. Each ebook distribution platform follows a variety of technical specs and requirements. We ironed out details such as file formats, file size limitations, ISBN usage, screen shot formats, and sample chapter formats while creating our dry run titles.

Financial calculations. Test titles gave us a chance to calculate the financial impact of content length and pricing decisions. For example, Amazon (US) charges a delivery fee of $0.15 per megabyte for titles enrolled in its 70% royalty option. With pricing, royalties, and costs understood, we can build a simple P&L and make decisions about marketing budgets and promotion activities.

Timelines. While our schedule for editing and proofreading the dry run titles fell within a typical timeline, the time it took to tweak the formatting for each ebook platform was an unexpected hurdle. The time it took for a new title to get approved and go live in each particular store also cropped up as an issue. For example, we learned that Apple’s iBooks approval timeline is rather lengthy, taking several weeks for a title to get approved and go live. After our dry runs, we can plan around these schedule issues for future titles.

Build or buy. While we decided to slog it out, learning the details of formatting our titles for several ebook platforms, the toughest moments of preparing our dry run content caused us to consider using one of the numerous services available to help prepare content for online publishing. Depending on the scope of content in your online publishing or archiving plans, consider evaluating and partnering with an experienced digital content service provider to help maximize your content.

Like the early airmail pilots making pathfinder flights to ferret out swampy landing strips and calculate flight times, our dry run ebook titles gave us the opportunity to make mistakes, build internal processes, and learn to use design and production software tools before we launched the first series titles.

If you are new to digital content publishing, consider conducting a dry run or two. The lessons learned by running the full cycle will pay off big when you’re ready for the real deal. And, yes, even low profile dry run titles can make you a little money while you sleep—ours do.

This article was written by Steve Poland. Steve is an advisor to startups and the co-founder of 1x1 Media, a publisher of how-to content for startup founders and aspiring entrepreneurs. Steve and his co-founder, Lisa Bucki, are the developers of the Startup Crash Course series. This summer, look for their new Founder’s Pocket Guide series. Steve and Lisa live in Western North Carolina, where Steve flies a 1946 Aeronca Champ over the Blue Ridge mountains, occasionally landing on grass strips and often tormenting Lisa with his obsessive use of checklists.

Oyster Books: Disrupting the disruptor

Remember how disruptive the $9.99 ebook pricing model was when the Kindle launched in 2007? It set the standard for how much consumers expected to pay for an ebook. It was also a price far less than consumers were accustomed to paying for the same book in print format.

Amazon has evolved a bit since then and now also offers the Kindle Owners’ Lending Library (KOLL) program, where Amazon Prime members can borrow one book a month from a catalog of more than 500,000 titles. Since KOLL is free with your Prime membership the perceived value of KOLL-eligible ebooks drops even further.

I recently signed up for a similar model from Oyster: $9.95 per month provides unlimited access to Oyster’s 100,000+ ebook catalog. I’m sure some of these books are part of KOLL, so why would I pay an additional $9.95/month for Oyster?

One (hyphenated) word: All-you-can-read. 

Oyster definitely has a no-frills feel to it. It’s currently only available on iOS and you won’t find a lot of bells and whistles with their reader app.

But Oyster also has a lot of great books I’m interested in, including several I hadn’t discovered before. In fact, I’m finding there are so many to read that I can’t possibly get to all of them anytime soon. 

Here’s the problem traditional ebook retailers should worry about: A model like Oyster’s starts to squeeze out the other books I thought about reading. Ebooks you absolutely want to read will still be bought if they’re not part of an all-you-can-read subscription, but all others become irrelevant.

Why would I spend $10 for an ebook that’s not a “must read” for me when I can find plenty of others I want to read that are part of my $10/month, unlimited subscription? I had more than a dozen samples queued up in my Kindle account to read and now I don’t care about any of them.

How can Amazon compete with this? Their KOLL program is hamstrung by their existing deals with publishers. Publisher resistance is undoubtedly the reason KOLL only lets you read one book per month. Oyster, on the other hand, had no existing model or agreement with publishers and can therefore build their model and publisher relationship from scratch.

That sounds like a chapter from The Innovator’s Dilemma, doesn’t it? And how ironic that this disruption is happening to arguably the biggest disruptor of the Internet era?

Oyster’s catalog only has 100,000 titles so it’s clear many publishers aren’t participating. That’s OK though. I checked out a couple of my favorite genres and quickly found more than 10 titles I can’t wait to read.

The Oyster model further tilts the market towards the risk-takers as well as the self-publishing houses. The naysayers and other publishers who sit on the sidelines will need a compelling reason for consumers to pay full price for their ebooks and they’ll risk giving further ground to other, lesser-known titles and authors.

What a great time to be a reader…but what a challenging time to be a publisher or author. It doesn’t take a mathematician to see how an all-you-can-read model chokes the revenue stream for publishers and authors. This model may be new to written content but it’s been around awhile in the music sector thanks to Pandora and Spotify.

What sort of pain can book publishers and authors expect if Oyster and other all-you-can-read models take off? Check out this musician’s story. Her music was streamed 2.8 million times but generated only $5,022, or less than two-tenths of a penny per stream. What we don’t know is how many of those streams led to someone buying one of her tracks or albums. That type of upside potential is more likely in the music market than it is in the ebook market though.

Will Oyster cause the existing ebook model to implode? No, of course not. Amazon will probably use Oyster as leverage with publishers to create something even more compelling than KOLL. That, or they’ll just buy Oyster with Jeff Bezos pocket change. I hope the latter doesn’t happen though since it will be interesting to see how much of an impact Oyster can have on the current market.