The launch of eBook subscription service Oyster has set the proverbial cat among the pigeons in the publishing world. Publishers and authors are frantically trying to work out just what on-demand subscriptions will mean for their business and whether Spotify or Netflix provides the best analogue for them to benchmark against. It is an intriguing turn of events. Five years ago book publishers looked to the music industry for lessons to learn about digital and they studied voraciously. More recently many book publishers have been of the opinion that are making digital work in a way the music industry has not, and that the roles of student and teacher should be reversed. Now we’ve turned a full 360 degrees. Regardless, this is a fantastic opportunity for the book publishing industry to get subscriptions right at first attempt and to skip many of the painful mistakes the music industry made.
Book Subscriptions Offer a Much Clearer Path to Additive Revenue than Music
There are obviously many, many differences between books and music, but some of these differences actually build a more compelling business case for books:
- Books take longer to read: as with any form of media consumption, there are multiple different types of consumer, and if your content does too good a job of attracting the binge eater then your all you can eat buffet will start loosing money. But if, for argument’s sake, we assume that the average book subscription service user reads a title a week then this means that the approximately $2.30 of a month’s $9.99 subscription is allocated to each title (before all deductions and revenue shares etc.). This might not sound a lot but compare that to music: if an average subscriber listens to around 2,000 songs a month and, for argument’s sake, we consider those to all be album listens, the per-title value is just $0.06. (The share is actually even lower because so much of streaming is single track and playlist based). So because books take longer to read than a CD does to listen, authors and publishers will see the $9.99 split into much larger chunks than for music.
- Increasing readership: $2.30 per title is obviously far below a standard eBook list price, but the business case for subscriptions is based upon growing the overall pie, not slicing it. Ideally subscriptions should both increase the number of people paying and increase the amount people consume. Let’s call the combination of these two metrics the ‘Consumption Quotient’*. The current average price of the Top 10 best selling eBooks is $5.41, so the book service Consumption Quotient only has to be a factor of 2.3 to be delivering just as much industry gross revenue as eBook sales.
- Per-reader value versus per-title value: in theory book subscriptions should encourage readers to read more regularly which could push the $2.30 per-title value down. But the key question publishers and authors need to be able to answer is whether subscriptions will make more readers spend more on books per month. If an average engaged reader only buys 1 top ten title a month then a subscription is already double that value. So the per reader value has doubled while the per-title have more than halved. Thus ARPU (Average Revenue Per User) has gone up while ARPT (Average Revenue Per Title) has declined. This is where the oft-mooted scale argument comes into play. If an author or publisher is simply think in terms of 1 sale becoming 1 rental then it is a net-loss scenario. But if just over twice as many people read the book then it is a net-gain scenario. The more people that subscribe and the more that read more books – the Consumption Quotient -the more likely that subscriptions will become additive rather than substitutive.
Simply because books take longer to read, it is possible to see a much clearer route to a net-positive outcome for book subscriptions than for music. This is a great asset that the book industry should embrace and cherish.
Starting With a Blank Slate
The book industry also has another great advantage in that it can learn from the travails of music subscriptions and start with a blank slate:
- Be transparent: instead of getting skewered on the transparency and fairness debate, publishers should work with the services to provide self-serve author analytics right away. It is a case of when, not if, that this will happen with music, so this is a chance to get ahead of the game and to get authors onside in a way record labels have not yet managed to with artists.
- Don’t talk discovery and curation, do it: if book subscriptions are built form the ground up to drive immersive discovery journeys, then they can avoid the current music service trap of struggling how to guide users through unfeasibly large catalogues. Build these services around discovery narratives that create journeys around authors, genres, periods, countries etc and they will thrive.
- Don’t price out the mass market: $9.99 is a great price for book aficionados, much less so for passive readers. Lower price points are needed for those readers who simply do not want to commit to paying that amount a month (obviously usage caps will be needed). And for those who don’t like the idea of being tied into monthly spending (because most people don’t like to spend a set monthly fee on any media other than TV) get Pay As You Go (PAYG) packages into the market as quickly as possible. Beat the music industry to it!
- Don’t ignore product strategy: music subscription services are an e-commerce mechanism, a billing paradigm. If you get curation right they can be a programming mechanism too. But they are not a product, they are simply a means of getting the core digital product to consumers in a frictionless manner. Which is why the books industry should heed the music industry’s lesson and work with subscription services to ensure that the product itself is innovated too. This means that any video and other multimedia e-book functionality is supported native and that publishers prioritize building such content for these services, where they will become a natural extension of the subscription experience, rather than an under-used novelty in an e-book title.
Subscriptions are clearly the best product set media companies currently have for monetizing the consumption era. For the music industry they continue to raise as many questions as they answer, but for books they might just be the ticket to genuine digital prosperity.
*’Quotient’ in the figurative sense, not the mathematical sense