On Publishing Perspectives last week, Porter Anderson wrote about a conversation he had with Shelfie’s CEO Peter Hudson. Shelfie, you’ll recall, is the print-and-ebook bundling service that prompts users to take “shelfies,” or photographs of their bookshelves, for the purpose of image-recognizing the spines of their books and offering to sell them ebooks of selected titles at a publisher discount. I had the chance to meet and talk with Hudson myself during BookExpo America.
In his discussion with Anderson, Hudson said that the data Shelfie has gathered from those user shelfies convinces him that “Mainstream ebook subscription services will not succeed until substantially all trade publishers are on board.”
Hudson points to various articles discussing how streaming music services have taken off but subscription ebook services largely haven’t.
“So if consumers are comfortable with the idea of paying for access to content” in musical form, Hudson asked, “why haven’t we seen ebook subscription services take off?” In his view, the success of subscription services depends on two things:
All, or substantially all, content must be available under the subscription model, and
Content must be licensed under terms that allow the subscription platform to survive financially.”
Hudson holds that the only successful ebook subscription services to date have been specialized services like Safari Books Online that work in highly vertical markets. Such services can satisfy the content needs of an entire niche community with just a few publishers. But broader services, such as Scribd, need to get all the publishers on board to attract all the readers.
To support this contention, Hudson offers up a scatter graph showing that as the number of books per user libraries increases, so does the number of publishers. He notes that Big Five publishers represent 55% of all books Shelfie has indexed from users’ shelves, and Penguin Random House alone represents 22% of such books. Hence, hitting a hypothetical target of 75% of title availability would require either all five of the Big Five, or the other four plus “every one of the next 2,000 largest publishers.” (Streaming music services offer 90% of title availability to their users.)
He also notes that the books need to be licensed in such a way that streaming services don’t go broke due to the tragedy-of-the-commons issue I’ve referred to as “big eaters.” Current licensing terms for most such services require a full agency payment for each book read—so that services have to hope customers don’t read as many books as their subscription fees would pay for.
As I observed about Scribd, such terms can lead to a very small number of voracious readers eating up all the service’s profits. In cutting its subscription service back to only three titles a month, Scribd discommoded only 3% of its users.
On the other hand, with music subscription services, the take from subscription fees is split proportionately between the rights holders of the music in question, after the subscription service has taken its cut. This is the model Amazon uses for its Kindle Unlimited service.
Hudson’s bottom line, based on his Shelfie team’s observations, finally rests on the startup-chief’s insight after surviving with his own company for three years: “Without a sustainable financial model,” Peter Hudson said, “ebook subscription services will fail. Oyster books folded after raising nearly $17 million in venture capital. Scribd is still operating, but raised nearly $50 million in funding.”
Also, as I have said before, Scribd has had to cut back its subscription offerings several times to stay afloat—most recently dropping comic books and graphic novels altogether.
It’s interesting to note, though, that Hudson only compares book subscription services to music subscription services. On the other hand, video subscription services are flourishing despite none offering users anything like a complete catalog of all available video titles. Indeed, Netflix in particular is known for cycling titles in and out of availability every month or so. What’s more, the tendency lately has been for such services to fragment even further, with The CW moving its popular DC shows from Hulu to its own service and CBS planning to stream the new Star Trek TV series on a service of its own.
Why is that? Part of it might be the ability to offer viewers shows they can’t get anywhere else, such as Netflix’s Marvel series. It’s tempting to use the amount of time it takes to consume the media as a metric—listening to music takes very little time, and you can do it while you’re doing something else, while on the other hand you have to pay attention to videos and they’re usually at least a half hour long—but then again, books take a lot of time to read, too.
Amazon’s Kindle Unlimited service offers no major publishers, and it’s fashionable to complain about that lack of selection. But given how successful Kindle Unlimited has been—to the point where Mark Coker of Smashwords deems it a significant threat to publishing in general and some indie authors agree—it seems unclear that such services have to offer a high percentage of all available content in order to thrive. Perhaps the sort of super-voracious readers driving KU’s success aren’t as worried about being able to read specific titles as they are about having lots of material of any kind available to keep their eyeballs busy?
It’s also worth noting that, in suggesting ebook subscription services should emulate the payment model of music subscription services, Hudson doesn’t mention that many music labels, trade organizations, songwriters, and musicians are rather unhappy about those music services paying what they see as a pittance—even if those services are giving up the majority of their revenues to musicians. I have a hard time imagining the major book publishers would be any more willing to take that kind of a potential pay cut, especially if they see subscription services as eating into the more lucrative market for book and ebook sales.
In any event, it’s certainly interesting to see the sorts of data Shelfie’s been turning up. As far as I know, the service represents the most exhaustive survey data anyone has been able to get of readers’ actual bookshelves. And if that survey is self-selected, it is at least self-selected from the sort of readers who are voracious enough to want to be able to buy cheap digital copies of the print titles they already own. I’ll look forward to seeing what else Peter Hudson and Shelfie have to say.