Oyster's business model was 'deeply flawed'

Oyster's business model was 'deeply flawed'

The chief executive of e-book subscription service Bookmate has said Oyster was "killed" by publishers who feared the challenge it posed to their existing e-book business models.

Following the announcement earlier this week that rival e-book subscription service Oyster is to close next year, Simon Dunlop, c.e.o of Bookmate, added that its business model was "deeply flawed".

He said: “Oyster was a great purist reading experience for its customers but it was a deeply flawed both as a product and a business model. There was never much interest in seeing it succeed as it challenged [publishers'] existing and highly profitable e-book business model in their home market. Many publishers in the US live in fear of the commoditisation of e-books and view subscription as the catalyst in a price race to the bottom for their titles."

Dunlop said that not having "all the major publishers on board" with the subscription model "was always going to be an issue" and argued that Oyster's move to include a retail pay-per title offering alongside its subscription earlier this year "sounded the death knell" as Oyster "struggled to increase its catalogue by any means possible."

Meanwhile Nathan Hull, chief business development officer of fellow e-book subscription service Mofibo has stressed the need to acknowledge the differences in subscription models and argued Oyster's demise is not indicative of the e-book subscription market as a whole.

Hull said Oyster made a "mistake" in launching in America and going "head-to-head" with Amazon. He said as Mofibo launched first in Denmark and then grew territory by territory, the company was able to grow its audience and market its platform more effectively.

"Oyster’s closure is just the end of chapter one for subscription model but the future is very bright from Mofibo’s perspective," he said. "We add 15,000 new readers per month just in Denmark and they all pay for their books.

"Unforunately subscription models are often lumped into one bucket, regardless of their business models, launch strategies, partnership and marketing strategies, are they e-book or audiobook (or both), are they local or international, their sustainability and track record."

He added: "This story is no surprise, it’s been a long time coming. I just hope publishers don’t short-sightedly see this as an easy 'told you so' moment, simply because one service - with some fundamental issues - has closed. It’s time for the publishers to look at this as a lesson learned and then make educated decisions on who to back from now on to grow their business. It’s not the time to regress."

Dunlop added that Oyster lacked the "social and viral features" which "in Bookmate's experience are an essential part of the mobile reading experience."

He argued that a subscription service should not be not a "replacement" for existing reading options, but an "incremental channel that attracts primarily a younger and mobile audience."

"The value proposition for the reader is different and requires a different approach and business model from publishers to really reap the benefits," Dunlop said. "In particular as e-book sales stagnate in the US, subscription is the optimal way of reaching english language readers in non-US markets."

He added: "Given more time and data, I expect publishers will better understand where subscription fits in the overall landscape of reading options and to agree a different and more sustainable commercial model. Bookmate has seen its subscriber base grow 7x from 2014 to 2015 as we have added new markets and distribution partners, and the active subscriber base will surpass 300,000 this year so there is a big healthy market out there to address given the right product and partnerships.

"Oyster’s demise is a pointer to both publishers and new e-reading startups to get incentives aligned and make sure you are building something actually innovative and not just beautiful."

Last month the Bookseller reported that Bookmate has expanded into Indonesia, partnering with telecommunications network Indosat to bring mobile reading to Indonesian customers.