Amazon's announcement last week that it was launching an eBook subscription service Kindle Unlimited has sent shockwaves through the book business. Of course eBook subscription isn't a new thing - we've covered it time and again on this blog. The fact the dominant player in the market, Amazon, is now involved in eBook 'streaming' is a strong signal that this is a business model with a future.
Why Amazon has chosen to launch Kindle Unlimited isn't yet known. One theory is that it's a way to nip nascent eBook subscription services like Oyster and Scribd in the bud. Both Oyster and Scribd are essentially start-ups using venture capital money to buy content rights in the hope they can gain a foothold in a market before it runs out. Amazon, however, is a proven industry player with a substantial catalogue and deep pockets. It launched Kindle Unlimited with 400,000+ titles by exploiting grey areas in its contracts with authors and publishers. There would be no more effective way for Amazon to kill its eBook subscription competitors by launching another, better service and strangling them. Then, if it decided that the economics of subscription didn't stack up, it could quietly shutter the business.
The other way of looking at it is that Amazon has taken a look at what streaming has done with both music (with Spotify, Deezer etc) and film and TV (Netflix) and come to the conclusion that it has sufficient potential to be worth focusing on. With its relentless focus on consumer value, and increasing reliance on subscription revenues from Prime and Amazon Free Time, Kindle Unlimited is just another way of building out this strategy.
What was perhaps most surprising about Kindle Unlimited is the apparently cavalier way in which it treats the stakeholders that until now Amazon has been most careful to court - self-published authors. Before last week, Amazon lavished love and money on the self-published authors that signed away their right to sell their content on more than one platform and published eBooks exclusively through Kindle as part of the Kindle Select Programme. These authors benefited from higher royalty rates than authors who retained the right to sell through competing book stores. Advocates like the best-selling hybrid author Hugh Howey have loudly extolled the benefits of publishing through Amazon.
Kindle Unlimited makes exclusivity look like much more of a mixed blessing. It now emerges that the terms of Amazon's contract with Kindle Select authors allowed it to enrol these books into the Unlimited program without first seeking permission. It was certainly one way of ensuring the service launched with a substantial catalogue. The more interesting point here, however, is the vagueness of what Kindle Select authors will be paid if a customer 'streams' one of their books. Instead of receiving a royalty (as will happen for books published by traditional publishers streamed via the service) these authors will be paid from a pool of money. This makes it much more like the payments that authors in the UK get from libraries, where authors' earnings go up on a sliding scale according to how many times their books are borrowed. Amazon has set the size of this pool at $2million, but the pool system will mean that the way Amazon decides on and makes payments to many authors much less transparent than the current 70% royalty for exclusive titles.
Howey, whose eBooks were included in the scheme has admitted he feels conflicted about it and is monitoring how it affects his sales "warily". Commenting in The Bookseller he said: “Some indies, myself included, are in the program without being exclusive to Amazon. But this isn’t a permanent exemption. We didn’t even know what we were signing up for; we just knew it was a time-limited trial. We are going to have to make a decision with our books, on a case-by-case level, to leave KU or go all-in. My guess is that Amazon was forced to invite as many bestselling authors as they could get because of the difficulty in getting major publishing houses to sign on (none have). Their goal was to get top-selling books into KU, and their side hope must be that they can convince us to stay. I’m not sure how many will.”
The other side of the story that has received less coverage is that Amazon's Kindle Direct Publishing platform and Kindle Select programme aren't just used by self-published authors. A great many small publishers make use of Amazon's infrastructure to publish and distribute eBooks as it represents the most cost-effective way of getting their content on to the dominant sales platform. While many of these publishers have avoided putting all their eggs in the Amazon basket by publishing across other platforms, some others have stayed exclusive. When writing this blog we spoke to several small publishers in the UK and discovered that opinions were divided.
One UK publisher who didn't want to be named, said that it was too early to say whether the model Kindle Unlimited proposed was interesting, but as a publisher with a small, very select list it didn't make sense for them to engage. They pointed to a lack of content from large publishers in the catalogue as being a big limitation of the service and said that without certain 'tentpole' titles and authors included they couldn't see the service gaining ground.
Another publisher, Adam Bromley of Piqwiq, which is a new 'start-up' publisher also based in the UK was more interested. Piqwiq had recently made the decision to forego Amazon exclusivity on a number of titles and distribute on Kobo as well, but saw Kindle Unlimited as an inducement to return to publishing exclusively on Kindle. He commented: "As a small publisher our biggest challenge is visibility. With over a million book to choose from on Kindle, it's hard to get cut-through. If, by participating in Kindle Unlimited, it means our books get more chance of being seen and read by consumers I think it might be good thing for us. The danger, however, is that instead of increasing the share of sales of books from smaller authors and publishers it just concentrates the best-sellers' domination over the rest of the market."
As with other book 'streaming' services the big question is how attractive a $9.99 a month service is in a world where the average US customer spends less than $50 a year on eBooks. It's clear that making an eBook streaming service work will be a challenge for the long haul, but Amazon is one business with the patience, funds and above all defiance to make it work in the teeth of industry opposition.