BISG study: A buffet of digital book subscriptions

BISG study: A buffet of digital book subscriptions

The shape-shifting factor in publishing: Subscriptions

With almost the kind of timing that Amazon Prime promises its members, the Book Industry Study Group (BISG) has arrived to deepen the debate about subscriptions and their potential in publishing.

Only days after Seattle launched its Kindle Unlimited subscription program -- quickly pulling up alongside Oyster and Scribd (pronounced "Scribbed") as one of the most-debated elements of the topic -- BISG's Digital Books and the New Subscription Economy with a message that sounds a bit like the voice of the digital disruption, itself.

While we are still in the early days, our findings suggest that most book publishers will accept that subscription businesses are an inevitable part of the transformation from print to digital book publishing.

If anything, three forces seem to converge in the pages of this 86-page report, culminating in a deep sea both of potential and concern for publishing:

  • Inevitability
  • Change
  • Consumer preference
Ted Hill
Ted Hill

"The big point in the study," says Ted Hill, "is that these models -- whether you call them subscriptions or not -- have been around in various parts of the publishing industry for a while. And they're growing. And they're not going anywhere."

Hill of THA Consulting and Kate Lara of Publishers Communication Group were the main writers on the study for BISG. In an interview with The Bookseller's The FutureBook, Hill points to a kind of effort at rationalization that can distract from what he sees as the real prevalence of subscriptions -- already -- in the industry.

"No one is going to consume just one form of digital media"

"Subscriptions are sort of a straw man" in much of publishing's debate," he says. "People say, 'Well subscriptions are  just Netflix'...but when you get down to the components of digital-distribution purchasing, there are a lot of flavors of subscriptions and we have to acknowledge that there's a reason they continue to be around."

As long as Netflix has been mentioned, nowhere is there likely to have been as much effort to compare -- or deny comparisons of -- ebooks and other entertainment media. "A 'Netflix of books' is an almost interchangeable term for many when it comes to discussions of subscriptions in publishing.

And (more sharp timing), we have from InfoDocket's Gary Price Monday's report to shareholders from Netflix's Reed Hastings: "Fifteen years after launching our subscription service, we have over fifty million members enjoying Netflix in over 40 countries." With such a large subscription-creature on the landscape, seemingly so near as film to publishing's storytelling character, it's easy to see why, straw men or not, such phrases as "Netflix of books" continue to dog the debate.

q 1The way Hill sees this playing in the popular mind has a lot to do with the "free"  concept arrayed on the platters and in the chafing dishes of an infinite buffet. "All you can eat" may not be a new phrase, but it's a newly beloved one, as the digital dynamic heaps the temptations of content abundance high before the delighted eyes of a screen-happy public.

In fact, attempts to counter the "Netflix of books" idea on the basis that literature knows no "binge" tendencies like binge-viewing of TV shows or binge-listening to music are hopeless, too, Hill says. Some readers of genres including romance, mystery, and science fiction may be prone to "binge-reading" of a kind that really does correlate to the binge-viewer or -listener.

"You fall into the trap that everyone does in publishing, in talking about it 'in general.'" Hill says. "There are many sub-sets and types of readers. Who is the 'general reader'? Is it an 8-year-old reading Dr. Seuss? Is it someone reading literary fiction? Somebody in Book-of-the-Month? Somebody who reads those two romances a day?

"Once you get into a more granular view of it, there are many more exceptions. The question becomes whether the markets are large enough to pursue" as the specificity of various sub-sets of the readership come into view. And even in the relatively small size of a niche interest, he concedes, avid interest may support some sort of subscription context.

Hill points, for example, to George Gene Gustines' report in the New York Times on Sunday, examining the rise of comics sales in North American markets and the introduction in April of Thrillbent's $3.99 monthly subscription plan.

"And one of the distinctions I've tried to offer in the study," Hill says, "is that some subscriptions offer all-you-can-eat, but not all subscriptions do. You don't have to have it."

Of course, there's the question, the dilemma, the scare point for many about subscriptions: what do you have to have to make them fly? And, maybe just as pertinent for publishing, what might make a subscription keenly attractive to one company but anathema to another?

When our Porter Anderson Meets interview (#PorterMeets) runs in this weekend's The Bookseller with Smashwords' founding CEO Mark Coker, readers will find him expressing sharp concern about Amazon's Kindle Unlimited subscription program because it requires participating authors to be enrolled in Kindle Direct Publishing (KDP) Select -- which demands exclusivity of those authors, thus curtailing their ability to place their work with other retailers.

In his blog post, Is Kindle Unlimited Bad for Authors? Coker goes to the mat to profess his high regard for Amazon's accomplishments, but warns that in the exclusivity element of its new subscription model -- as opposed to those of Oyster and Scribd -- lies a new potential crisis for the industry:

Exclusivity is great for Amazon, but it's not necessarily great for authors and readers.  Exclusivity starves competing retailers of books readers want to read, which motivates readers to move their reading to the Kindle platform. This is why Amazon has made exclusivity central to their ebook strategy. They're playing a long term game of attrition.

q 2"If I were to try to be fair to Amazon," however, Hill says, "if you want to invest in customer acquisition, then you want to get the highest return on  your investment."

And the logic that can be perfectly understandable when seen from any business' perspective can seem to flip into something "evil" when viewed from another perspective looking back at that logic.

"You know, we've had the big-publishers-are-evil and the little-publishers-are-good" phases, "and the Barnes & Noble is evil and the mom-and-pop bookstore is good" phases in the When Harry Met Sally days, and now that's flipped around, of course, and it's just hard to use terms like 'good' and 'evil' when you're talking about business entities."

And nowhere may such terms be more bandied about than in the realm of subscriptions, not least because they just won't hold still. They're just not the same.

"There are a variety of components to the thing we call 'digital subscriptions.' The real goal of this is to say, 'Don't get trapped in the way you're interpreting the term.'"

"Whoever is very successful is likely to be bought"

The best long-term chance for one or another subscription model, in Hill's opinion after making this study? -- aggregation.

"No one is going to consume just one form of digital media. The idea that the biggest winners will stay completely 'pure'" as standalone ebook-based subscriptions? "I think that's a false notion. Look at Amazon and Google Play today. People are going to want to get their movies where they get their books where they get other video where they get music.

q 3"Look at F+W Media," the publisher behind the verticals Writer's Digest and Digital Book World, "for example.  They have a lot of [handicraft] books and they sell a lot of craft materials. But they also have a lot of craft video. And they just mix it all together. So the experience isn't 'How do I subscribe to a big library of books about craft?' -- the experience is "How do I pursue my passion for craft?'"

Hill, then, is describing successful subscription development as being based not in a given digital medium, per se, but in the consumer's choice, desire, preference.

"It's 'What do I want to do now? What do I want to discover now? Do I want to see a new movie or find a new book?' The blending of media is something I can feel in my bones because it's so easy to mix digital media. All this stuff can be together."

"My hunch is that in the book space, whoever is very successful is likely to be bought by Amazon or one of their competitors."

And should we see such buy(s) ahead, Hill is saying, it will be because the consumer may not come to publishing for the "purity" of the reading experience but for books as part of the biggest buffet of all, the vast panoply of entertainment and cultural offerings that can all be served up in the same digital space.

On Safari for success: So many issues

Digital Books and the New Subscription Economy uses data from a survey of nearly 4,000 industry professionals that BISG's press material says comprised "publishers, retailers, aggregators, and other service providers." Part of its perspective is also derived from the results of more than 50 one-on-one interviews.

Harkening back to an 18th-century custom among printers to engage customers as subscribers to a work or collection ahead of publication, the study also touches on the 19th-century popularity of serials as subscriptions, before moving to the late 20th century when "libraries and businesses began to subscribe to digital journals, databases, and collections of works."

q 5"Most recently," the study clarifies, "the term [subscription] has come to refer to streaming media models that provide temporary access to libraries of content."

And that is probably -- as Hill is pointing out -- as succinct a definition of subscriptions in the most general (and thus inexact) terms you might get.

To many in today's debates, the issue of subscriptions "arrived" in 2013 with the launch of the consumer-targeted subscriptions Oyster and Scribd. But one of the key players in the digital book subscription arena is older by 12 years than those and has an industry leading track record: Safari.

A joint venture between O'Reilly Media and Pearson Technology Group, Safari Books Online was created in 2001 and has succeeded not least because -- unlike the Oyster/Scribd model, it does not pay the publisher of a book a full-price fee once a reader consumes a certain percentage of the text.

That Scribd/Oyster model, clarified by BISG's study as the "net sales model," might determine, for example -- as Amazon's new Kindle Unlimited does -- that once a reader has read 10 percent or more of a book, the book is counted as a full sale.

Instead, Safari uses what BISG's study designates as a "shared pool model." With a vast library of computer-technology and other nonfiction work, a customer may want only two pages of a book. Safari then pays for those two pages. The payment for those two pages is pooled and publishers then get a split of the aggregate, the "shared pool."

Andrew Savikas, Safari chief, is quoted in the study saying, "Very few of our customers read a book cover to cover. They're looking for just the right chapter, just the right section, just the right insight to help them get their job done -- right from within their work flow."

Here, then, is, yes, a highly successful subscription model. But just as quickly on display is the specificity of its service to a precisely defined user of largely technical information and guidance. Can that success be translated to users of narrative fiction?

Hill, in interview, points out that publishers likely get less in the shared-pool model of a Safari-style subscription than they might in the net-sales model of a Scribd or Oyster model. But logic dictates that the Safari model works well in the arena of technical manuals and other nonfiction material, and with far less certainty when it comes to fiction read as entertainment.

And what about authors' compensation?

Even Hugh Howey, the author corps' most visible proponent of writers' rights and needs, has welcomed Amazon's Kindle Unlimited with caution. In his article on the launch, he writes:

Subscription services have been rough on musicians. Will they be rough on authors? It’s too soon to tell, but there are a couple ways that books are fundamentally different than music, and perhaps reasons to be cautiously optimistic. The biggest difference between books and tunes is the time investment. You spend hours, days, even weeks with a good book. You can stream hundreds of tunes in the same amount of time. So hopefully the revenue stream to authors won’t be as diluted as it is for musicians.

Authors are watching indeed cautiously, however, because the Kindle Unlimited model combines net-sales and shared-pool: When a user reads 10-percent of an ebook, a payment for that book is triggered. Payment then is made from the share-pool called the KDP Select Global Fund, which also pays authors when their books are borrowed by Amazon Prime members from the Kindle Owners Lending Library. So authors receive a split  from a variable fund amount, which is announced to them on a monthly basis by Seattle.

Howey concludes:

While I’ll be keeping a very close eye on what this does for author income, my main reaction to this is that reading is the best thing you can do with your free time, and it just got easier and more affordable. Will we be subsisting on crumbs in the future? Or will we see the entire pie just get bigger? Right now, I would bet on the latter.

q 4And BISG's study also goes into great detail in various issues of subscription in the scholarly and academic sectors -- both in terms of scholarly monographs and higher-education textbooks.

Even there, the "free" element is a key, the report, for example, writing that:

By the turn of the millennium, most textbook publishers were pursuing a strategy in which digital materials were given away as supplementary materials to support an associated pr int textbook. While technically free, these materials primarily served as value-added items that encouraged professors and adoption committees to select a given textbook over its less-well provided competitors. In some cases, access was restricted to students who had purchased new textbooks, as an incentive to choose them over used textbooks. In time, digital materials were seen as something that should be free, and many of these supplements were undervalued or
not used at all.

In this instance, then, the study is recommending that observers watch developments and trends including, in part:

  • How deep and far will the integration of learning management systems and digital course materials go?

  • Are we at the tipping point in student and faculty preferences for print over digital materials?

Final analysis: There is no final analysis

Like so much in publishing's digital evolution, we just don't have all we need to see clearly until...we see it.

Getting back to the "free" element, for example, even there, as Hill points out, we don't know yet what that may mean in various subscription models.

q 6"There's a question of whether the free stuff is going to be the bait that gets people to pay for premium services," Hill says, "or whether free stuff is going to drag down the price of quality content. That's the thing that publishers and many others are terrified about, that people will see digital content as something that should be free."

And the BISG study, then, fits into the whole issue how?

"The audience we wrote the study for," Hill says, "is mid- to upper-level executives, both in decision-making capacities but also in marketing, who have seen all this stuff, heard all these arguments, and gotten this fragmented view" of the subscription debate, "and they don't have time to go read 30 blog posts.

"These are executives who are saying, 'I want someone to lay out the terrain so I have a framework to use to make decisions. Should I do something now? Should I wait? Should I be anxious about subscriptions? Or relaxed about it?"

Not always, perhaps, trending toward the relaxed in times of digital disruption, many in publishing may find BISG's comprehensive overview of the subscription issue enlightening. But the chances are they'll still be facing the kind of uncertainty that has wracked so many elements of publishing in recent years.

"We tried to take this big huge heap of discussion," Hill says, "and put it into a few rational buckets to allow people to say, 'Ah, this is relevant, this is not relevant. It's better than freezing up."

Yes, it is.

Join us Friday, 25th July, when our #FutureChat with The Bookseller's FutureBook community will focus on subscriptions and their place in publishing. We'll be live on Twitter at 4 p.m. London time, 11 a.m. New York time, 8 a.m. Los Angeles, 5 p.m. Berlin, 3 p.m. GMT.

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