In a previous post, I offered music-streaming service Spotify’s ascendence as a signifier of a sea change in consumer media consumption habits. Millions of consumers — especially the 30-and-under demographic — are opting to access their media via ad-supported free services or paid subscriptions, as opposed to buying and downloading files to own.
I suspect the same will happen to books within two years. To me, the first question is who will try to offer an access model to consumers. Here are some likely candidates, my take on how well-positioned they are to pull it off, and the likelihood of them trying.
The online retailer is a book- and eBook consumer’s delight, especially their Kindle platform and very nifty Whispernet cross-device synching. Amazon may be publishers’ “frenemy” — at once an enormous revenue-producing account and competitor — but they have the largest book-buying customer database in the world, access to the reading habits of Kindle buyers, the consumer-orientation and tech-savvy to pull it off, world-leading cloud infrastructure, and…well, they have basically everything required. In fact, they’re a stone’s toss away from offering an access model today. All they need is — drum roll — publisher buy-in. That will be darned tricky to get. Then again, when you control as much of the revenue flow as Amazon does, you tend to get an audience. Whether the audience is with them or not will, I’d say, hinge on the royalty Amazon is willing to pay on a per-view basis. Amazon can certainly afford to pay a premium royalty to get publishers on board and have proven themselves willing to sell at a loss to gain consumers and protect market share. I’d see a book-access model playing nicely into Amazon’s overall strategic direction.
That said, with the exception of the Kindle hardware/retail loop, Amazon has been less than stellar with its digital offerings. An access model would also require an Apple-like willingness to eat its own young — an access model would likely cut deep into Kindle edition sales.
All in, I’d say Amazon is highly likely to try this. And, soon.
Feeling the bite of Spotify, the failure of its Ping social network and Mobile Me cloud offering, Apple must be at the drawing board. As they push smaller hard-drive devices such as the iPhone, iPad 2, and rumored 7” iPad, Apple’s download-to-own media offerings seem to be operating at cross-purposes to their hardware direction. I suspect strongly that Apple will be looking to strengthen their nascent iCloud with features beyond storage of and access to owned-products. As one of the world’s richest corporations, they can certainly afford to fund the access business model as it is being formed. But, given their relatively small market share in digital books, this may not make the priority list in Cupertino. More likely that we’d see one for music or movies. The sting of the anti-trust investigation may also play with the priorities.
I’d say it’s 50/50 for Apple to move in.
For all their savvy, engineering prowess, attention to books, and hiring a slew of smart New York publishing folks 5 years ago, Google has just never seemed to “get” books. In fact, with the exception of YouTube, Google doesn’t get content. But I’m unwilling to write them off completely. With their unwavering commitment to their social network Google+, it might make sense for Google to wrap their Google Play media offerings right in as a social content layer, as Facebook has with music. It would certainly help alleviate the ghost-town feeling many report when using Google+. Also, Google does know how to pay royalties for access as they do so in a major way with YouTube. Same model would apply here, they have data to inform the right splits, and can can afford to pay a premium.
75/25 against that Google does this. Though they could and, in my opinion, should.
Barnes and Noble
B&N has surprised me with the performance of the Nook platform and devices. I don’t know the specific market share figures but I do recall Nook holding a healthy, if somewhat distant, second to the folks in Seattle. Having gotten that right, does the legacy retailer, which still has one (big) foot in brick and mortar, have the willingness to continue to cannibalize its own business. B&N is increasingly seen by publishers as offering a sort of antidote to Amazon so it has that going for it. However, even with its new deal with Microsoft (who really don’t get content), B&N simply may not have the cash to support this model as it gets off the ground.
Unlikely that B&N will enter the access space, though they — and others — will want them to.
Last year at this time, Spanish company 24Symbols launched a “Spotify for books.” They did it the way you’d expect, with a modest selection of mostly public domain works, and look to have signed about 45 or so European publishers since. None of the majors are participating. What 24 Symbols and their iPad product demonstrate is that the technology build is very doable for a startup — indeed they’ve done it very well — but that without scaled product offering and massive reach, it’s tough to make a compelling enough proposition to enough consumers. “All you can eat” requires a robust menu. Startups can position themselves well to pull off many aspects of the access model, but they’ll likely lack cash, relationships, and reach. As such, they will be building for the niches, I’d expect. Then again, Spotify was a startup.
My bet: 10% chance that this is done successfully and sustainably by a start-up.
The notion of a consortium of publishers is probably not music to the DOJ’s ears. But the access model is one area where publishers coming together to offer a service directly to end-consumers might make a lot of sense. Instead of competing directly with their channel partners like Amazon and B&N, publishers could leap-frog them and begin to offer the next digital consumption model. Perhaps they federate with an intermediary to provide technology infrastructure and logistics. Perhaps they launch a “Newco” to handle that. I’m not sure exactly how to structure such a beast, nor do I think it is at all simple. But I do know that the number-one item on most publishers’ to-do lists is to get closer to consumers. Offering an access model directly to them would be one heck of a way to do that. Unfortunately, risk-taking, self-cannibalization, new business models, and intra-industry cooperation are probably too much to ask for right now.
Likelihood: Low. Maybe within the niches. And it’s a shame.
Those are my best guesses as to who will take a shot at offering consumers a freemium/paid subscription access model for books. Obviously, there is a lot of business complexity underlying each scenario (for example, is access a “sale” or a “permission” or something else entirely) and the revenue splits must be nailed down very well and equitably. But I don’t see the challenges as overwhelming and do see the consumer as wanting and paying for this very soon.
In a future post, I will take a stab at how I think the model might work. For now, who do you think can offer consumer access to books? Who should? Who will?
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