Diving for pearls: is it all over for bookflix?

Diving for pearls: is it all over for bookflix?

It is a measure of how strange the e-book market is that in death Oyster may create more ripples in the digital market than it ever achieved while it lived. It will be missed by publishers more than by writers, and its passing will be pored over by pundits eager to have their say about the “Netflix for e-books”.

Oyster was — for a while — one of those new breed of digital start-ups publishers hoped would disrupt Amazon. We have seen them come and go, and come and go they will again, but for a brief period Oyster was in the vanguard. As the FT notes, it raised $17m in venture financing since 2012, and said it wanted to be the “Amazon of the next 10 years”. Three years later it is taking steps to “sunset the existing Oyster service”, in a move that is, at least, mercifully decisive. No zombie start-up this. Instead, its executives and tech have moved to Google.

The narrative that Oyster was chasing a market that didn’t exist, with an offer that was too thin, and based on a business model that was fundamentally flawed is now well established, and in burning through millions of dollars of investor cash in search of digital nirvana, the company hardly helped itself.

Yet the reasons behind the shuttering are complex, and, as ever with the book business, contradictory.

As if we didn’t know already, the book start-up market is brutal. As Canelo’s Michael Bhaskar put it: “Quite a few well funded start-ups have folded now. The book world is tough. Markets are saturated; margins wafer thin; competition intense.” For e-book sellers this is doubly so. As companies as diverse and well-funded as Blinkbox books and Sony can testify, going into competition against Amazon is not for the faint-hearted. Or to put it as the respected tech journalist Laura Hazard did in her post Oyster analysis “it looks pretty stupid to launch any kind of startup around ebooks”.

There are, of course, attributes to the subscription model for e-books that make it peculiarly uncertain. At last year’s FutureBook Conference, Tom Weldon, chief executive of Penguin Random House, said he did not believe it was what readers wanted, and he was unconvinced by the business model. He has since moderated his views, but nevertheless the Oyster news will leave him feeling vindicated. But did publishers really give Oyster a chance?

Oyster cut deals with some publishers that meant it paid them the wholesale price of the e-book each time one was read (beyond a certain percentage). It was the only kind of deal publishers would sign (for lots of good reasons, and some less less good reasons), but that did not make the economics stack up any better: the writing was on the wall back in July when rival subscription company Scribd culled a range of romance and erotica titles from its service because they were costing the company too much money. Under this model, if heavy readers transition to subscription then the model breaks: as Morten Strunge, c.e.o of the Copenhagen-based subscriptions business Mofibo, told The Bookseller back in March, the key to success is to get enough customers who read occasionally or very seldomly. “Three per cent of our clients account for 20% of our costs. That was also the case in Onfone’s business. There were mobile users who used their mobile subscriptions so much that they in fact represented a loss [to the business]. But they were outweighed by the mass of clients who did not use their plans as much.”

Beyond Mofibo, there are also other versions of the subs model that look more sustainable, though they do not necessarily look like Netflix. Audible, for example, charges a monthly subscription of £7.99 for access to one new audio title a month. Its store-front is well curated, and at £7.99 it is maintaining a high price that other e-booksellers must look enviously at. It is not an all-you-eat model, of course, and its dominance of the sector clearly allows it to cut deals that would be unavailable to most start-ups, but I would not discount its approach

In professional field there is Safari, which pays publishers a fee based on usage, the so-called pool approach, that has so far proved unattractive to trade publishers. And the grandaddy of these services 24 Symbols remains defiantly alive.

On this basis, Amazon’s Kindle Unlimited is perhaps the purest subscription model around: it now pays authors a fee based on the number of pages read from a pool of money it alone decides, representing an economically viable if ultimately unpalatable future. As Smashword’s Mark Coker notes in his post Oyster analysis: “The Kindle Unlimited pay rate is entirely decided by Amazon. The book's list price is irrelevant to Amazon's calculation. This means Kindle Unlimited books cost Amazon less money than what Oyster and Scribd want to pay authors and publishers, which means Kindle Unlimited can provide readers more reading at less cost to Amazon and to the reader. How can Oyster, Scribd or any bookseller compete when Amazon can pick the pockets of authors and give the savings to readers?” Coker calls “KDP Select and its Kindle Unlimited” an out of control train. That may be so, but it is a reality for authors and publishers and one we should not pretend does not exist. Amazon is making it work for Amazon. Less a Netfix for e-books, more an Amazon for e-books.

Of course, the biggest challenge faced by Oyster may not even have been around the economic viability of the model, but how readers currently read digitally. While most e-book buyers read on e-ink devices Oyster's search for customers who think they want to read on mobile but don’t read enough to break the bank was always likely to be troublesome. When Bardowl folded, its founders, said that by the time they realised their original model wasn’t viable and that publishers would not come on board while they continued down that route, the investors had lost too much patience to fund a pivot.

Oyster’s investors may have faced a similar dilemma, with Google seemingly a better way out.

If so, then this shuttering looks more like a pivot—albeit a grand one and still a risky one. According to Owen, as well as other commentators, Google had made an “acquihire” of Oyster in order to build a mobile reading business. “Google is interested in bringing Oyster’s really nice mobile reading experience, plus book-related editorial content, to Google Play.” Or as the Oyster blog hints: “As we continue on, we couldn’t be more excited about the future of ebooks and mobile reading. We believe more than ever that the phone will be the primary reading device globally over the next decade—enabling access to knowledge and stories for billions of people worldwide. Looking forward, we feel this is best seized by taking on new opportunities to fully realize our vision for ebooks.”

If so, the ripple created by Oyster's demise may end up as a tsunami of hope.

Mobile is the great uncharted territory for publishers, booksellers, authors and (of course most crucially) readers. Pottermore, which relaunched this week, shows that mobile reading is now upon us, and that represents a world of opportunity for all parts of the trade. It is no coincidence that at the FutureBook Conference later this year Pottermore chief executive Susan Jurevics is headlining: if the book business cannot map out a territory for reading on mobile devices then Oyster won’t be the only company walking off into that sunset.