Why Amazon Will Likely Dominate the Books-by-Subscription Market

Photograph by Christian Beirle Gonzalez
Photograph by Christian Beirle Gonzalez

For a bunch of rapacious capitalists, the people who start technology companies are strikingly ambivalent about the concept of owning stuff. Silicon Valley would like to replace the practice of owning copies of, say, a song or a movie, with a world where everything’s kept on servers that people pay to access. Next up: books.

As startups have started offering services inevitably referred to as literary Netflixes (NFLX) or Spotifys, the idea has been gaining momentum. Still, it’s getting a mixed reaction at Digital Book World, a publishing industry conference about e-reading. Meanwhile Oyster, one of the young subscription companies, said Tuesday that it had raised $14 million to expand its four-month-old book service. Still, there’s plenty to be sorted out before a subscription model for e-books takes hold.

As ideas go, providing access to a large book collection is particularly un-novel. Even the notoriously Luddite publishing industry can acknowledge the appeal. Who among them didn’t spend his youth clutching a library card? But like any media industry staring down the barrel of the Internet, the publishing industry’s feeling gun shy. Carolyn Reidy, the chief executive officer of Simon & Schuster (CBS), said at a panel on Tuesday that the company has been discussing subscriptions, but there were unresolved questions about how to avoid devaluing books and cannibalizing sales. For now, it’s staying away.

Tim O’Reilly, the founder of O’Reilly Media and one of the industry’s noted early adopters, wants publishers to get over their qualms. “Anybody who is not looking at subscription models is foolish. First of all, recurring revenue models are great,” he said. “Also, there is evidence in many areas that it’s what people want.” Still, he said, publishers need to tread carefully to avoid becoming the serfs of the digital companies that distribute the subscriptions.

The most aggressive of the big publishers is probably HarperCollins (NWSA). Chantal Restivo-Alessi, the company’s chief digital officer, comes from the music industry, which began grappling with subscription services much earlier, for better or worse. She argues that books-by-subscription are an inevitable part of the future. Her company has signed deals to include the company’s titles in the services of both Oyster and Scribd, which also launched a subscription service last fall. Restivo-Alessi sees the issue largely in terms of price; the publishers can’t train people to expect books for free. “The only thing we didn’t want to have is a Spotify-like ‘all you can eat for free’ model, where then you get transferred over to the premium,” she says.

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