Why Netflix Or Spotify For Ebooks Will Work

by: Jeremy Greenfield

Many publishing industry observers don’t think that Oyster or Scribd or any other “Netflix or Spotify for ebooks” will work in the consumer marketplace.

Why?

The rights issues are very complicated. Agents and authors may not go for it. Publishers may not go for it. Consumers may realize that it’s not worth their money. The list goes on.

Yet, companies like these keep on popping up and there is considerable investment in the space. Scribd CEO Trip Adler believes that his company alone could turn the idea into a billion-dollar business. And he thinks there’s room for competition, too.
At least one publishing industry analyst agrees with him. I talked with James McQuivey, Ph.D., an analyst at Forrester who covers the book publishing industry, about why it’s time for this idea to work and why the naysayers are wrong.

Jeremy Greenfield: So, why will this work?
James McQuivey: All the evidence suggests that consumers love subscription content models — it’s the original model of magazines and newspapers and cable, and now it’s the power behind Netflix. I believe it would work with books, but like the ebook model in the early days, it won’t work until the publishers are ready to embrace it, which they won’t for a whole host of reasons.

JG: Well, HarperCollins, which is the only major publisher to have signed on with both Oyster and Scribd, seems to have embraced it.
JM: Scribd had to offer Harper Collins unprecedented access to the customer in order to get it into the model. If it doesn’t work, HarperCollins loses nothing, but if it does, HarperCollins finally has a customer relationship it can build on.

JG: What about people who say that readers, when they think about it, won’t really want it?
JM: I don’t have survey data about whether people want a subscription model and, frankly, I think the survey data wouldn’t be very promising — asking people in 2008 whether they wanted to stream Netflix content would have also resulted in low numbers. You have to see it to know if you want it.

JG: Amazon has the Kindle Owners’ Lending Library. It seems to say that it’s popular and being used. Is that a clue?
JM: I wish we could get any indication from Amazon on how many Prime customers use the lending library, which is the closest thing we have to a mass market subscription model.
Amazon’s Prime customer relationship, because it includes all this free stuff (video included) that nobody knows how to compete against or measure, is hard to see coming.

JG: Perhaps Amazon understands something with offering this “all you can eat”-style service but only allowing one book to be read per month.
JM: “All you can eat” is not the way to look at subscription models. That’s not how Netflix built a business with nearly 10 million DVD subscribers. It’s not how cable subscriptions work and it’s not how buffets work. You can’t pocket food for later, for example. Subscription models are designed to reduce the friction of transacting, pure and simple. It removes a mental barrier to sampling content and it reduces the perceived loss associated with making a poor choice. Digital subscriptions let you bail out of any download. That’s the essence of subscription: The feeling of having everything you want without the risk of making a bad choice, all pre-paid.

The more people fail to understand why subscription is powerful, the less they’ll be able to exploit its opportunities. I have played a role in helping some very large companies embrace subscription and it has been with this message: Consumer psychology prefers and eventually dictates subscription access to content experiences.

JG: Is it worth it to publishers to play?
JM: Only if the subscription manager — Scribd or Oyster or whoever — gives up the customer — not just the data, but direct access — which was my original point about why HarperCollins is doing this and why everyone else should, too. Trip [Adler, Scribd CEO] is smart about this. It’s his last shot and giving up the customer was the only way to go. Publishers who refuse to join just aren’t paying attention to the importance of having a direct customer relationship.

from: Forbes