Category Archives: Publishing Business Models

Quality vs. Quantity

Do the Top Five Publishers Increase Quality?

In my last post, I raised some questions about the financial repercussions of a partnership between publishers and the subscription sites, Oyster and Scribd. As an avid reader and an Oyster subscriber, Joe Wikerts offers some thoughts on how publishers and subscription services should operate. For him, and I imagine many others, Oyster and Scribd’s limited catalogues and lack of recent bestsellers act as a deterrent to readers and low membership does little to entice the bigger publishers from partnering with these sites. With fewer consumers, books have a lower chance of being discovered. Fewer consumers means less revenue.

It’s not that Oyster and Scribd lack titles; it’s the selection of their titles. Wikerts tries to compare Oyster with cable subscriptions, veering away from the popular Netflix analogy, to suggest why publishers might be reluctant to collaborate with subscription services and offer their backlists. He argues that the average American household now has access to 50% more channels than six years ago, yet they still watch the same number of channels as they did in 2008. Meanwhile, cable bills have risen exponentially. Cable packages today force the consumer to buy an expensive subscription that includes hundreds of channels they’ll never watch, just so they have access to the premium content that they want.

Apparently, this leads back to the networks, who force cable companies “to carry their unpopular channels” which “drive the price up even higher.” Wikerts considers what would happen if Oyster used this tactic: instead of paying wholesale fees for a percentage of each ebook that is read, Oyster could follow in the vein of the cable model and offer a flat rate for all the books in a publisher’s catalogue. Publishers, then, could charge a much higher price, and more money might attract the larger houses to join Oyster.

Although a more “premium” catalogue of books would attract more consumers — perhaps even those light readers — Oyster would likely have to raise their subscription fee. (Thinking back to Jane Tappuni, a higher monthly fee is even less cost effective for the consumer.) While Wikerts is willing to pay upwards of $19.99/month for a premium book subscription that includes the top five publishers, he does recognize that others may not be prepared to fork out that much for a book subscription. Instead, he suggests tiered pricing with the basic $9.99/month for the initial catalogue sans the Top Five.

Although Wikerts argues that discoverability increases with more content “and consumption of content that wouldn’t otherwise have been read,” I wonder if that holds true. In the very least, it depends on how Oyster and Scribd display their titles, which is in the Netflix style. There are about 12 subcategories to choose from, mostly organized by genre and them (also categories such as “Simon & Schuster favourites”), and within each row, there are 25 books. I’m assuming the algorithms for organizing the displayed books are based on publication date, popularity, and recommendations based on reader preference. How then, does healthy competition work for titles? Right now, Oyster and Scribd receive backlist titles, roughly a year old, but according to Oyster co-founder and CEO Eric Stormberg, the focus is on recent releases, books “about three months after their initial publication.” Unless Oyster and Scribd are offering the same royalty rate for a hardcover sale of a newly released book, the author and the publisher would lose enormous sales on allowing such books to be included in subscription catalogues.

At the time that Wikerts was writing, only HarperCollins had signed up with subscription services, so I understand his concern that the top publishers need enticing to also join. Since his article, Simon & Schuster has partnered with Oyster and Scribd (read more).

In the case of HarperCollins, their chief digital officer, Chantal Restivo-Alessi, saw “an overall increase in ‘discoverability’ for Harper titles” and found that “subscription services are a complementary channel that helps expose deep backlist titles.” Like Wikerts argued, consumption of content that otherwise wouldn’t be read is a selling feature for publishers, and reading ebooks for the price of a subscription fee might encourage print sales of those books as well. Oyster CEO Stromberg and Restivo-Alessi agree that the subscription service provides “significant revenue for its publisher partners.”

In Simon & Schuster’s press release, Carolyn Reidy, President and CEO, said that Oyster and Scribd “will encourage discovery of our books, grow the audience and expand our retail reach for our authors, and create new revenue streams under an author-friendly, advantageous business model for both author and publisher.” Some of these advantages include access to reading data and purchasing activity, which has become increasingly invaluable.

Although Wikert’s concern that publishers are dissuaded from partnering with Oyster and Scribd seems to be unfounded for now — with Simon & Schuster’s recent decision — his argument for discoverability still leaves me unconvinced. Even HarperCollins and Simon & Schuster’s success stories don’t dispel my lingering doubts. Yes, they have both signed up with Oyster and Scribd, but let’s not forget that both subscription services have a large percentage of self-published books that could bombard and disorient the consumer. Subscription services will continue to innovate and gain popularity, I have no doubt, but a smorgasbord isn’t always appealing. It isn’t a premium channel.

Update: Since writing this post, Mike Shatzkin has written about the possibility that Oyster and Scribd could be offering publishers 70% of the retail price for each book read. Additionally, Nate Hoffelder addressed talk that the CEO of Scribd, Trip Adler, is canvassing for funding to pay hesitant publishers upfront advances, which is an “untried business model,” that could prove lucrative to publishers who never earn out their advances.

Exploitation of Reading Data

The Author Is Watching You Read

Esubscriptions Reading Data

While the subscription model is quite popular with consumers, there is also a very unique kickback for publishers and their authors who sign on with Oyster and Scribd: consumer analytics, or more explicitly, the exploitation of reading data. Of course, iTunes, Kobo, and Amazon can track what readers buy, and as a bonus for the reader, can recommend books based on purchase history or what similar readers’ purchased. Subscription lists, however, take these results to the next level. Let’s just say, those books are reading the reader.

Although David Streitfeld’s New York Times article dates from the end of 2013, his insights are still pertinent to the discussion of subscription lists. Unlike Amazon and Barnes & Noble who collect data from their ereaders and keep their findings in-house, startups like Oyster and Scribd hope to partner with publishers and share their research, allowing authors and publishers to produce better books that cater to what readers want. Scribd found that “the longer a mystery novel is, the more likely readers are to jump to the end to see who done it.” Biographies are often read completely through, whereas business titles are not, and a chapter of yoga book is sufficient. Perhaps not surprisingly, the fastest consumed genre is romance books.

Oyster’s results indicated that chapter and book length play a huge role in reading habits. “Readers are 25 percent more likely to finish books that are broken up into shorter chapters. That is an inevitable consequence of people reading in short sessions during the day on an iPhone.” A more recent article by Calvin Reid showed that “during the day about 50% of Oyster subscribers access the service by mobile phone.” Again, this trend towards short form reading resurfaces. I have a habit of discounting the importance of the iPhone as an ereader with the explosion of ereading specific devices and the functionality of the iPad. However, I’m intrigued that consumer analytics can be potentially harnessed and used in the creation and marketing of fiction, specifically short fiction, which is a hard sell in the print world. We very well could see the iPhone become an avenue for serial novels and short stories to make a comeback.

The author’s access to these consumer analytics is available only through the publisher’s partnership with Oyster and Scribd — their backlists in exchange for reading data. Of the big publishing houses, only HarperCollins and the recently added Simon & Schuster are participating in this venture. Why the delay? On the author’s side, there could be various concerns about how reading data will impact the creative process and the quality of books. Streitfeld’s article shows us the rationale behind publishers like HarperCollins and their authors. The chief digital officer for HarperCollins, Chantal Restivo-Alessi says that they would absolutely provide their authors with the data, “but it is up to him how to write the book. The creative process is a mysterious process.” For the young adult novelist Mr. Loftis, negotiating with the creative work and what the reader wants is a matter of risk. She believes that “the bigger risk is not giving the reader what she wants.” Would this insider information limit an author’s creativity or spur it on? Would it provide new challenges and techniques of writing?

How would this move impact the quality of the books that publishers produce or the quality of the Oyster and Scribd catalogues? Streitfeld echoes the doubt that these subscription sites are sustainable projects with his analogy of “the sizzler problem.” An all-you-can-eat buffet only works if the customers vary in how much they consume. Too many voracious eaters will drive down the quality of buffet and subsequently turn patrons away. Perhaps authors and publishers, and by extent Oyster and Scribd, run the risk of catering to the consumer’s reading habits to the degree that it compromises the literature. Will subscriptions attract more mainstream readers who love genre fiction? Will they drive away those readers who prefer literary fiction or nonfiction and are invested in reading across genres? What kind of service would Oyster and Scribd then offer? Laura Hazard Owen reminds us that “both are expanding, though neither has shared user numbers — Scribd now has over 300,000 titles and Oyster has over 500,000. A lot of these titles are self-published books (via a deal with Smashwords), but an increasing number of traditional publishers are also participating.” Would Margaret Atwood or a début novelist be lost in a sea of self-published titles?

Another concern is revenue. Do subscription services increase competition between books, authors, and publishers? Is discoverability even more difficult to overcome? Oyster and Scribd offer slightly different deals to publishers who collaborate with them. While Oyster pays a wholesale fee to the publisher once 10% of the book is read, Scribd regards that as 10% of a sale and pays 10% of the fee. Once 50% of the book is reader, Scribd pays out the full amount. (The danger in this, Streitfeld notes, is the amount of readers that read 10% of books and the fees Oyster must then pay. Again, we’re back to sustainability.) For the author and the publisher, the potential revenue from this business model may rival the traditional online revenue generators like iTunes, Kobo, and Amazon. For example, iTunes offers a sample (likely less than 10% of the book) for free after which the reader, if hooked, can buy the book. Only then does the publisher get paid. In both Oyster and Scribd’s case, the publisher and the author receive compensation regardless of if the reader finishes the book.

Depending on the discount that other eretailers have with these publishers, the subscription model might fail the publisher where it concerns heavy genre readers. Typically, a publisher will sell books to Amazon for a deep discount like 50% (possibly higher) and the publisher collects money and the author collects royalties on the net price. If this deal is more profitable than the standard fee that Oyster and Scribd pay out on each book read, then the publisher, and subsequently, the author, are losing sales on readers who are willing to pay the full eprice for their books on an online retailer’s site, especially those quickly consumed romance or mystery mass market paperbacks.

In light of the perks of subscription sites — the use of reading data and payment on half-read books — publishers are now beginning to experiment with Oyster and Scribd as new avenues for reaching readers. Although there should be concerns over creativity, quality, and revenue, ultimately publishers and subscription services see potential — having a variety of books easily accessible will bring in more readers who enjoy sampling different categories of books. The reader’s preferences, even more than sales projections, will influence what is published, and I estimate that Oyster and Scribd, alongside publishers, will harness the algorithms for recommended reads to push certain books to trending status.