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Why Ebook Subscription Services Will Finally Succeed In The Coming Decade

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Subscription services for digital music, movies, and TV shows are all very popular nowadays, but for ebooks, they aren’t. Although ebook subscription services have existed for several years, they have yet to take off. That’s going to change in the coming decade: by the end of the 2020s, we’ll see subscription ebooks become as ubiquitous as Spotify and Netflix.

Ebook subscription services have lagged behind music and video subscription services from the beginning. Subscription music services first appeared in 2002 with Rhapsody (now Napster). Netflix launched its streaming service in 2007 to its already huge base of DVD rental customers. Though ebooks first appeared in the 1990s, subscription ebook services didn’t start in the U.S. until 2013, when Oyster launched and the document-sharing site Scribd started a subscription ebook service. Amazon launched its Kindle Unlimited subscription service the following year.

Scribd has achieved only a modest level of success: one million paying subscribers. Amazon doesn’t release Kindle Unlimited subscriber numbers, but one recent estimate put the number at just three million. That’s compared to 113 million for Spotify and 158 million for Netflix. Oyster, meanwhile, shut down in 2015.

There’s a simple reason why ebook subscription services haven’t taken hold: the major trade book publishers haven’t really supported them. There are currently five major trade book publishers (“trade books” means books you can buy at a bookstore), known as the Big 5: Hachette, HarperCollins, Macmillan, Penguin Random House (PRH), and Simon & Schuster. Collectively they account for about 60% of total U.S. book sales. That’s less than the 70% combined market share of the major record labels, but it’s still significant.

The point of subscription services is to give users access to huge, deep catalogs of content at a fixed monthly price. That’s what music services like Spotify and Apple Music do: they have catalogs of 40 or 50 million tracks, a number that is roughly equivalent to the number of books available on Amazon.com. The major record labels license almost their entire catalogs to the big streaming music services, and it makes news when an artist tries to hold her catalog back from them. It’s clear that subscription ebook services will only go mainstream if and when the Big 5 decide to license substantially all of their catalogs to them.

But currently the Big 5 only license their catalogs to subscription ebook services in very limited ways. HarperCollins, typically the most aggressive of the Big 5 in embracing new digital distribution models, only makes some of their “backlist” (older) titles available on Scribd and Kindle Unlimited. Simon & Schuster only licenses a few thousand backlist titles. The other three Big 5 publishers don’t license titles to any U.S. subscription services, except that Macmillan licenses some backlist titles to Scribd.

Why haven’t the Big 5 stepped up? Mainly because the decision to license is not really theirs to make. Publishers typically don’t own copyrights on trade books, authors do. That means that publishers only get limited rights to do things other than publish books in print and (more recently) in ebook form through standard channels like Amazon, Barnes & Noble, and Kobo. In contrast, record labels usually own copyrights to sound recordings and can license them to new types of digital services as they choose. Some book contracts with authors make it possible for publishers to license into ebook subscription services, but financially untenable. For example, they can force each ebook read on a subscription service to be treated as a sale of an entire book.

In addition, publishers need to be convinced that there’s enough opportunity in subscription services—enough to offset the resulting loss in sales. This is a classic chicken-and-egg problem.

My belief is that this logjam will finally be broken sometime in the coming decade. First, publishers need to be convinced of the opportunity. Although many publishing people love to insist that book publishing is different from the music industry, publishers will not fail to notice that the majority of music industry revenue now comes from paid subscription services, and that the industry has returned to solid growth after years of decline and stagnation.

The next step is for publishers to be comfortable that there’s a big enough audience for subscription ebook services. While Amazon can certainly (and already does) deliver an enormous audience to publishers, publishers don’t want to increase their already high dependence on Amazon. And publishers aren’t satisfied with the reach of small companies like Scribd.

Furthermore, publishers are highly unlikely to launch their own subscription ebook services. Each publisher knows that its own catalog isn’t big enough to sustain a subscription service by itself, not even PRH, the largest. Antitrust concerns constrain actions that the Big 5 can take together, and their last attempt at launching their own jointly-run ebook service, Bookish, was a notable failure.

No, to get publishers interested, a large tech or retail player with global reach—as large as Amazon—has to appear with a solution that’s ready to go. Once again, publishers can learn from the experience of the music industry here, and in an ironic way: In the late 2000s, the major record labels were not thrilled with Apple’s domination of digital music downloads; so they made deals with Amazon to sell MP3s online. Several other online retailers sold music downloads, but none of them had anything approaching Amazon’s customer base. As a result, Amazon became a viable competitor to Apple in digital music. To attract users, Amazon was able to negotiate features for users that Apple didn't offer, notably downloads that were DRM-free. (This happened before Apple dropped DRM from iTunes, even though Steve Jobs famously claimed credit for getting the major labels to go DRM-free.)

Analogously, a major company could be interested in entering the ebook market with features that Amazon doesn't have. The most obvious such feature is a subscription service with Big 5 catalogs.

Here are some large entities that could decide they are interested in doing this:

  • Spotify. Spotify is locked in brutal competition against Apple, Google, and Amazon, which all have far more diverse offerings. Its reliance on music alone leaves it exposed. Currently Spotify is becoming a major player in podcasting—its audience is second only to Apple—in order to diversify the content it offers to subscribers. It’s not a great leap to add ebooks to the mix.
  • Walmart. Walmart made a deal in 2018 with Kobo to re-introduce the Canadian company’s ebook platform—one of the world’s biggest—to the U.S. market in direct competition with Amazon. It acquired and operates the moderately successful Vudu streaming video subscription service. An ebook subscription service would be a natural next step. Kobo just launched a subscription service (Kobo Plus) in a couple of European countries last year; it would be easy for Walmart to launch and promote this service.
  • Apple. Apple has operated an ebook retail service since 2010, but it’s only available on Apple platforms. This has limited Apple’s ebook market share to single digits. Apple was late to the streaming music subscription service market but has been catching up to Spotify at a healthy pace. In general, Apple hasn’t been as serious about ebooks as it is about music, but it could decide to change that—starting with an Apple Books app for Android.
  • Tencent. The Chinese tech giant has been expanding beyond China recently with consumer services such as its gaming and WeChat Pay mobile payment platforms. It already runs streaming music services in China and owns the majority of the Chinese ebook giant China Literature.

One of the above—or some new tech or retail giant that emerges in the coming years—could start approaching Big 5 publishers about licensing into a subscription service with a potential audience in the hundreds of millions. That would get them interested.

What remains is the problem with author contract terms. Yet a potential solution to this problem emerged recently from a close neighbor to trade publishing. Cengage Learning, one of the major textbook publishers, launched a subscription service for college students called Cengage Unlimited a couple of years ago. It had the same problem with author contracts as trade publishers do, but it decided to deal with the problem by adopting the tech industry principle of “it is better to beg for forgiveness later than ask for permission first.” Cengage launched the service without full cooperation from authors. The inevitable lawsuits followed, but Cengage appears to have managed through the process and gotten by relatively unscathed. The success of Cengage Unlimited amid a rapidly evolving textbook publishing landscape remains to be seen, but the point is that Cengage took a risk and it paid off.

In other words, the question of taking on authors’ contracts is a question of risk; and the Big 5 are not a risk-tolerant bunch. But that also could change. The Big 5 have been stuck with revenue growth in the low single digits, at best on par with inflation. This is not likely to satisfy their owners and investors (three out of the Big 5 are divisions of publicly traded companies) for much longer. There are signs that growth will slow down further in the coming years, such as the Big 5’s continuing loss of market share relative to indie publishers and self-published authors. As companies’ growth prospects deteriorate, their risk tolerance increases.

Cengage took a risk because it needed a way to recover from bankruptcy. No one is expecting any of the Big 5 to go bankrupt anytime soon, nor even to suffer the same heavy losses as the record labels did through the mid-late 2000s. But Cengage’s relative success should lower the perception of risk in launching subscription services without renegotiating all author contracts first.

Therefore Big 5 publishers should be amenable to overtures from one of the above companies and see a way through the author contract morass. By the middle of the coming decade, one of the Big 5 (or whatever the number of major publishers is by then) will have done a full-catalog deal with a subscription ebook service. The other major publishers will follow at a safe enough distance to avoid antitrust scrutiny. By the latter half of the coming decade, we’ll finally be accessing ebooks as we do digital music and video.

By the way, there are actually many ebook services that offer large catalogs of Big 5 titles today, and for free, though relatively few people know about them: public libraries. One major investor, the private equity behemoth KKR (Kohlberg Kravis Roberts), is excited about this opportunity: it just acquired OverDrive, the leading library ebook lending platform, from the Japanese e-commerce company Rakuten last month for an undisclosed price.


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