Could Spotify's business model work for ebooks?

22nd Feb 2010 | 10:45

Could Spotify's business model work for ebooks?

Free services and social networking could boost take-up

Is the 'free' model working?

If the record industry had come up with Spotify a decade ago, it might not be in the mess it's in today.

The free, ad-supported version could have kept people away from the pirate networks, and while the paid-for numbers aren't huge (250,000 paying subscribers at the beginning of 2010, compared to 7 million users in total) Spotify is still persuading them to pay for music - something that's eluded plenty of other legal services.

So could the same kind of service work for books, bringing novels to the massed ranks of Kindle, Nook, Reader and iPad owners?

It's not as bizarre as it sounds, because we have real-world equivalents for both its free and subscriber services. Libraries give books away for nothing - or seem to; in reality authors get a little bit of money in the form of Public Lending Right (PLR) royalties, a gap that online ad revenues could easily plug - while book clubs have offered heavily discounted prices to subscribers for decades.

Could similar ideas work online? Sara Lloyd is Digital Director at Pan Macmillan, one of the world's biggest publishers. "I think both could work for consumers and the trick will be in developing a commercial model that works for authors and publishers, too," she says.

Digital list

PRINT TO SCREEN:Traditional publishers certainly aren't ignoring the internet. Blogs such as Macmillan's Digitalist attempt to make sense of publishing's future

The commercial model may be the hard bit. Earlier this month Warner Music Group announced that it would no longer licence its music to free streaming services because, from its perspective, there simply isn't enough money in it.

"The 'get all your music you want for free, and then maybe with a few bells and whistles we can move you to a premium price' strategy is not the kind of approach to business that we will be supporting in the future," CEO Edgar Bronfman told the BBC. "Free streaming services are clearly not net positive for the industry."

Similar noises are coming from the print industry, particularly in newspapers and magazines. Rupert Murdoch closed his free newspaperThe London Paper late last year and intends to put his newspapers behind paywalls.

The reality is that there's only so much advertising money to go round, and for every Metro - an enormous global operation that manages to make money from free content - there's a London Paper bleeding red ink.

Backers need patience

No matter what business model ebook services adopt, the backers will need to be patient. As digital media expert Mark Mulligan of Forrester Research points out, the music and book markets are different - so it'll take much longer for any book-related service to take off.

"The diversity of experience between the digital and analogue experiences of books and recorded music are highly different," he says.

"For music the physical component is the delivery vehicle, not the content itself - artwork aside. For books the physical media is the experience itself. Added to this, music aficionados skew younger than book aficionados. So the audience less geared towards digital than music. With that caveat considered, a book subscription could absolutely make sense. We have the proven success of libraries and to a lesser degree, book clubs, to demonstrate the interest."

There's one area where subscriptions may be essential. "Subscription offerings are a must for the academic sector," Mulligan says. "Without them a P2P sector will flourish." Persuading students to pay for subscriptions could be a problem, though. "It makes sense [that] the cost of a subscription [is] bundled into tuition fees."

Bringing social networking to book lovers

Spotify isn't just about streaming music: it's a social service, too, enabling people to publish playlists or collaborate on group playlists.

That's a powerful sales tool, so of course publishers are paying attention. "I think there has been some excitement amongst the bigger publishers about what potential there might be in social networks based around books," Lloyd says.

"There have been various experiments in that area, such as HarperCollins' Book Army or Random House's Readers' Place. My own view is that generic, 'book lover'-based social network sites are strategically uninteresting, because 'book readers' are not part of a self-defined niche who are itching to interact and share with each other online just within the 'box' of reading and books."

Spotify

SHARED TASTES:One of Spotify's best features is its collaborative playlists, which enable you to enjoy or mess with other people's musical ideas

So a Facebook for books probably won't work - but that doesn't mean book-focused social networking is a bad idea. "What can work, though, is online communities around particular genre-based niches," Lloyd says. "For example, Macmillan's Tor.com is a SFF [Sci-Fi/Fantasy] category site. It's publisher neutral and features original content created specifically for the site as well as blog content from authors. It's been a huge success."

The combination of such a network and a subscription service could be amazing. Your favourite authors could create book 'playlists' of their influences or recommendations, enabling you to download the books immediately - and helping publishers to sell older titles.

The trick is to keep computers out of it as much as possible. "I think that person to person recommendation is powerful and more interesting than automated recommendation engines, which ultimately tend to offer you more stuff like the stuff you've already tried rather than challenging you to try something new, so a streaming service that is primarily about accessing/purchasing the content but [that] has social networking features built in is attractive from that perspective."

Back to serialisation?

It's been suggested that ebooks could also herald the return of serialisation, with books published in regular instalments just as they were in Dickens' day.

However, as horror master Stephen King has found out the hard way, online audiences don't seem too keen. Perhaps the problem was simply one of payment: when King wrote The Plant in 2000, he vowed to stop if fewer than 75% of readers paid for it. Fewer than 75% paid for it. He stopped.

Stephen kings plant

BIT BY BIT:Stephen King's 2000 attempt at ebook serialisation wasn't a success - but a subscription service might give authors a way to make money in instalments

"I'm still not convinced by the serial idea, and I think maybe it is more a cultural than a technical issue… maybe around certain niches this would work," Lloyd says.

"It's like the way everyone says digital will bring back the short story. I don't agree with that either because I think short stories - in our markets at least - are generally not satisfying enough for the majority of consumers. But if you asked Harlequin, who are romance publishers whose business has moved online massively, their digital shorts at a really low price sell very well.

"That's because in the case of that market, generally female romance readers, the ease and convenience of a short online story appeals to them, either as something to read at their desk in their lunch break or on their mobile or PDA while they sit at the kid's soccer match, for example."

"This is a really good example of using digital to deliver to a particular market in a way that fits in with their lifestyle. But it wouldn't work for every market; it's a case of ensuring you don't do things just because digital enables it -- you need to customise the delivery and the experience to suit the market."

Mark Mulligan believes that the move to digital will split the book market in two. "Uptake will polarize book audiences," he predicts. "Aficionados with densely stacked booked shelves will cling onto the physical form factor longer than music aficionados have clung onto the CD (though perhaps equal to vinyl fans). Those who skew more towards best sellers will be low hanging fruit for a subscription offering."

Lloyd agrees that in ebook publishing, one size definitely does not fit all. "I think like all interesting and emerging digital media markets it'll be a mixture," she says.

"People will test out different ways of accessing and consuming ebooks and then either settle on their preferred method or go for different modes for different aspects of their book reading. For example, with music, some people use Spotify like the radio, to test out new stuff, but download from iTunes the stuff they're really interested in 'owning' or keeping long term."

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Liked this? Then check out Will piracy rip the spine out of ebooks?

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