In a previous post, I postulated that forces in technology and consumer behavior, as evidenced by the popularity of the music streaming service Spotify could be seen a signs of things to come for books. I then took some guesses as to which companies might try to offer this “access model” (paid or ad-supported) for books. I am going to stay with this topic for one more post and drive a bit toward how such a beast might work.
Two things caught my eye yesterday:
- A report that sales of eReaders are dramatically slowing — decreasing 60% over the comparable quarter last year
- Mike Shatzkin’s typically well-reasoned piece entitled “Explaining my skepticism about the likelihood of success for a general subscription model for ebooks“
The first piece struck me as entirely predictable in a world of Kindle/Nook saturation and the increasingly attractive tablet/phone options. I read this as further evidence of the shift toward access. As consumers move from single-use, storage-oriented devices to multi-use, small memory devices with apps for accessing cloud-based content (owned or “rented”), the buy and download files model will shrink proportionally and, eventually, cease to exist. That, plus Spotify’s eclipsing Apple as the preferred means for listening to music, leads me to believe that consumers will want to move to access for books. However, any shift will entail a lot of work on the supply side, among authors, publishers, and the access/subscription provider(s), which is where Mike’s piece comes into play.
Mike makes a lot of great points. I took four to heart:
- That it will be impossible for any aggregator to secure enough rights to compelling content to offer consumers an enticing set of titles to be accessed
- That a general subscription offers less value to a book consumer than it does to consumers of other media via Netflix, Spotify, or Audible.
- That the business dynamics of access models offer a myriad of challenges including value-based pricing coinciding with equitable creator compensation (a point Mike attributes to the very sharp agent, Simon Lipskar of Writer’s House).
- That curation might be the key to making offerings more compelling — and may even necessitate staying to the niches, which are filled with heavy readers looking for the next genre offering to read.
Point 1. I agree that it will be extraordinarily difficult for anyone seeking to offer this model to consumers to secure the underlying rights to do so at any scale. Publishers are not known for saying yes and are always seeking to protect existing revenue streams. However, the rights do exist, which leads my mind to the money. If a fair consumer price and an equitable author royalty flow can be found, there is no reason this can’t work.
Point 2: I believe a general book subscription model does add a great value and can command $9.99 per month. If the average price paid for an eBook today is somewhere in the $7.99 range, a $9.99 subscription should seem a bargain to even a moderate reader. This hypothesis will require testing.
Point 3: Complexity will reign. Regardless of the price for access to the library, we’re left with a massive system that must track page-level accesses by end consumers and account for those at a negotiated rate. That negotiated rate is the key to the whole model. It is estimated that one Spotify stream results in label and artist revenue of $.003 or so. This is extremely low and has caused much grousing. However, as Spotify has taken the early position that label/artist pay-outs will represent 70% of what Spotify earns. Is it enough enough yet? On an agreegate label basis, yes — Spotify is of or just behind iTunes. On an individual artist basis, not yet. That is my understanding. I expect the model to continue to become more equitable as it grows. The critical thing: there is a model and it can be negotiated. In other words, as the paid subscriber base grows, and the streaming activity increases, labels and artists stand to do nicely and be in the position to renegotiate rates according to the data; it is the massively-scaled micro-payment model, which works nicely for the web’s massively connected businesses (Google, Facebook, etc.) and their partners. YouTube is an excellent example.
It is true that the brand value may transfer somewhat from authors/artists to the Spotify-like services but I don’t buy this entirely. The stars are the stars and the content is the content, even in the access world.
Point 4: Curation is, indeed, key. Spotify launched their app platform to solve just this issue. From “mood-based” recommendations to Rolling Stone reviews both current and historical, Spotify offers many ways into the massive library. I see curation as a feature of a general service, not as a service unto itself.
So, how do I see it playing out…
I see a committed, well-funded, and well-networked entity (Amazon, Apple, Google, B&N, a start-up, or a consortium) starting by identifying palatable consumer pricing for a simply-defined product. Then I’d see the numbers being crunched to identify the equitable revenue share of consumer access, tracked on a per-page basis then rolling up to the “work” level. Then the waterfall from consumer price down through each percentage taken and on what basis forms the underlying business agreement between the entity and publishers. Arriving at that rate is one hard part. The next is publishers figuring out how to compensate authors. So, three Xs need to be solved: Consumer Price, Cut to Publishers, Cut to Authors. I am deliberately simplifying this — there may be all sorts of wrinkle that enter into the model. However, at base, this is what needs addressing; what is access worth to consumers and does that valuation provide for a sustainable model?
My concern is that no one will want to take this on because of complacency, complexity, and fear. Complacency stemming from eBooks in their current incarnation still doing so well; complexity stemming from the carve-outs and payments involved; and fear that this new model will “devalue” books, “cannibalize” existing eBook sales, or “not compensate authors” adequately. Certainly there are enormous risks inherent in new models but I see the risk of the new as less than sticking with the old as it begins to shrink. The access model might not be the model to address changing consumer behavior in books but I feel strongly that a new model will be required. Perhaps books require more or different innovation.
Regardless, in my opinion, access needs to be looked at very, very carefully and strategically to ensure publishers don’t wake up one day to an access world, find they have no offering, and begin the fighting.
Previous posts on this topic:
- Who Can Pull Off Spotify for Books?
- Spotify is Revolutionizing Music Consumption — Why Books will go the Same Route