October 27, 2013 12:39 pm

Big publishers take fresh look at digital book services

Amazon workers pack goods ready for shipping at the Amazon distribution centre, Swansea, Wales©PA

Netflix has surpassed 40m global subscribers. Spotify has more than 6m paying users. Digital film and music streaming services are bursting into the mainstream.

The same cannot be said for digital book subscription platforms. From Oyster Books of the US and Madrid-based 24symbols to child literature-focused Bookboard, there are more than a dozen digital book subscription services globally, giving users the opportunity to read often unlimited titles for a set monthly fee.

But, with a reluctance from the largest publishers to sign up, the success of these platforms to date has been at best mixed. Could this be about to change?

News Corp-owned HarperCollins this month became the first of the “big five” publishers to sign up to a digital books library service, agreeing a deal with San Francisco-based Scribd. Some books analysts see this as a milestone for the sector, bringing valuable content to these platforms and with it the likelihood of renewed interest from consumers.

It is also a sign, say some, that revenue models can be found that do not alienate the big publishers. Some of the biggest ones are concerned that these services will merely shift many of their more voracious book buyers on to library-style platforms, further denting sales during a period of global decline.

“Cannibalisation is probably one of their biggest fears”, says Alice Enders, analyst at Enders Analysis, as “80 per cent of their revenue comes from 20 per cent of the most avid readers.”

So why does HarperCollins appear to have changed its mind?

One reason is that Scribd will not have access to its latest best-sellers – crucial drivers of physical and digital book sales. Scribd will only make available HarperCollins’ back library up to July last year.

But Charlie Redmayne, UK chief executive of the publishing house, says it was also the nature of its deal agreed with Scribd which, he says, “should protect the interests of authors and publishers”.

Under the deal, whether users “rent” one of its books on Scribd or buy it via an ebook platform such as Barnes & Noble’s Nook or Amazon’s Kindle, this is understood to be revenue neutral for HarperCollins. Where users read beyond a certain portion of a book, the platform pays HarperCollins a sum similar to what it would have received had the book been sold via an ebook platform.

For Scribd’s most avid readers – say the top 2 per cent who go through more than 10 books a month – this means its service is unprofitable. But Trip Adler, co-founder and chief executive of Scribd, says the service is profitable overall, generating revenues in the “tens of millions of dollars” annually. It charges a monthly subscription fee of $8.99.

Key to the platform’s future growth will be getting “publishers on board with a model they are happy with,” he says, adding that Scribd is in discussions with all the leading publishers.

Any publisher who tells you that piracy does not keep them awake at night is mad

- Charlie Redmayne

Justo Hidalgo, co-founder at 24symbols, also points to changes in attitudes among the big publishing houses. “There’s been a clear advance in the last year [with] some starting to see possibilities, if restricted, to subscription services,” he says.

Certain genres will do better than others, analysts say, with romance fiction and erotica, exemplified by the successful 50 Shades of Grey trilogy, likely to prove strong pulls for some readers.

Having the leading publishers on board will be vital in driving wider adoption of these services. But, even with their support, some have doubts how mainstream digital book subscription services can become, citing significant differences with film and music streaming.

According to a survey of 5,000 regular book buyers conducted by book audience research firm Codex Group, a third already pay for a video subscription service. But only 10 per cent expressed interest in paying for a digital book subscription.

Part of the problem, according to Peter Hildick-Smith, president of Codex Group, is that even avid book readers are not used to paying for most of what they read. Typically two-thirds of the books read by frequent book buyers over any month has been free, he says, with literature often borrowed from friends or libraries.

But digital book subscription platforms could be a good way of combating piracy, which is still small in the book world compared with films and music, but growing.

“Any publisher who tells you that piracy does not keep them awake at night is mad,” says Mr Redmayne at HarperCollins. “If you don’t do [things like] this, you lay yourself open to piracy.”

Copyright The Financial Times Limited 2015. You may share using our article tools.
Please don't cut articles from FT.com and redistribute by email or post to the web.


Sign up for email briefings to stay up to date on topics you are interested in