Why the Subscription Model for Ebooks Doesn't Work (at Least Not Yet) Keep the faith, though: Entrepreneurs are out there are working to solve the problems.
By Jason Illian Edited by Dan Bova
Opinions expressed by Entrepreneur contributors are their own.
Media and tech companies have been quick to pronounce the "Netflix of eBooks" -- a.k.a. the subscription model -- the future of digital content. And, in theory, that makes sense. Who doesn't want access to nearly any book in the world at any time for one flat, monthly fee?
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Unfortunately, the model is not working out so well. At least not yet.
The reason is a combination of market forces, user behavior and the basic way in which the publishing world works. Start with the most minor issue: market forces. Even though the Kindle is almost eight years old and mobile devices are expanding exponentially, ebook adoption is still only 25 percent to 30 percent of the market, which is small. And growth has been slow.
However, eventually (and soon), this will all change. President Barack Obama recently announced a monumental push in the battle for better education to distribute free ebooks to low-income families, increasing their access to resources promoting literacy.
Such massive government backing is proof that even the slowest of giants sees the potential in ebooks. We're nearing the tipping point of actual, widespread adoption. The result is that, eventually, that 30 percent market share will grow to 75 percent.
What makes ebooks different
A second issue is that users consume ebooks differently than they do other subscription products. Unlike music subscription services, like Spotify, where a user can consume hundreds of songs a day, the average ereader is lucky to get through one book a week or even a month.
So, the clock just runs slower for ebooks. Music and movies can be measured in minutes and hours, but ebooks have to be measured in weeks or months. Therefore, it takes a lot more time -- and money -- to build a viable service. Additionally, subscription services have to compete with other short forms of reading, such as Buzzfeed, Medium and more, which are all (technically) free for the user to consume.
Conclusion? It's hard to throw a game-changing party when people show up only sporadically and don't want to pay a cover charge.
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The biggest issue
Issue three, the most important one, is that many of the world's top publishers don't currently support the subscription model and won't contribute their content to it. The two leading subscription services, Oyster and Scribd, only have a few (if any) bestsellers in their subscription buckets.
The result is the many frustrated people who have signed up for a service only to find out that none of the ebooks they want are available. And the few big publishers that do contribute content to these services have learned from the music subscription services' experience and are protecting themselves. They don't want their content undervalued, which many artists and labels argue is happening with Spotify -- where artists make less than $0.01 a play.
Interestingly, Digital Book World recently published findings from a study that evaluated authors' current feelings about ebook subscription services based on the self-benefits they perceive.The publication noted that established authors felt more undervalued listing their works on subscription services than did indie authors.
Ebook publishers, for their part, have agreed only to lucrative pay-per-read contracts, where they can get 60 percent or more of the digital list price when a reader opens more than 10 percent to 20 percent of a book. Under this scenario, if ebooks have, say, a digital list price of $9.99 and one user reads portions of two ebooks a month, the service will owe the publisher $11.99, even though the service is making only $9.99/month from the reader.
This scenario obviously does not look promising: The service is bound to go underwater quickly and sink even faster if a user opens a handful of books. Needless to say, none of the subscription sites are making any profit and won't anytime soon.
But things will change. For all the current challenges in building a subscription service, there is still tremendous opportunity. The consumer upside here is that subscription services, even in the ebook industry, still provide access to more content than any reader could ever hope to read in a single lifetime.
Arguably, Netflix lists few blockbuster movies until years after they peak; however Netflix growth continues at astounding rates. Moreover, publishers are desperately looking for other viable sales channels to wean themselves off their dependence on Amazon. And, should one service gain momentum here, publishers will pile on faster than clowns in a circus car.
The future
As an avid reader myself and an executive in the publishing space, I want as much as anyone for subscription services to thrive. But I'm realistic that users aren't currently begging for subscriptions, and that contracts with publishers are costly. This model will continue to evolve, and I do believe it will thrive one day. But companies will need to make a serious monetary commitment, and/or ebook adoption will need to start surging again soon.
Instead of bearing down and just white-knuckling the square subscription model into the round market hole, these sites should continue to iterate and explore the big blue ocean between traditional ebook sales and the subscription model. I highly doubt that a subscription ebook service will look exactly like a subscription movie or music service. There are still numerous virgin grounds to tread where subscriptions are just part of the overall strategy.
I see the leading ebook service of the future as being a combination of lucrative subscription verticals, advertising in and around the book; new sales channels, where ebooks are bundled with physical content; comprehensive music/movie/ebook programs; and services that include digital ebooks and other content.
Someday soon, you'll be able to get a new ebook on how to train at the same place where you buy your Nikes. And you'll be able to scan the barcode on your kid's Happy Meal for her children's book and pull down a dozen of your favorite titles to read from your favorite subscription site. . . all while listening to Justin Timberlake jam, and ordering new candles to make your apartment feel a bit more feng shui. That day is coming. Have faith.
Related: To Make Your eBook a Success, Focus on These 4 Things
