Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.
Since 2005, multiple business models have been flourishing in the Scandinavian ebook market. With Storytel’s acquisition of its Danish rival subscription service provider Mofibo earlier this year, the large Northern European player is leading the way for the next generation of subscription services in the book industry.
However, as seen in the music industry, streaming subscription services equal lower margins per consumed product. So the question becomes, are lower margins per sold book inevitable?
Luckily for book publishing, we tend to move more slowly than other players in the entertainment industry when it comes to new technologies and business models. And thankfully, this slow adoption has given us the chance to learn from other sectors, like music and film. Even though the consumption patterns of products, and the products themselves, are very different, there are still many similarities in the digital transformation that the businesses have undergone.
Everyone is familiar with Spotify and its business model, which leaves very little to the record labels and the artists themselves. If the book publishing industry were to adopt this as a standard for selling content, the revenue stream would shrink significantly. On the other hand, the film industry has not suffered as much through the digital transformation. So what can we learn from film?
Generally, the first step in the industry’s revenue stream is the movie theater. Here, movies run at a premium per person for a period ranging from a week to many months relative to general customer interest. When movies finish their theater run, they are made available for purchase, and a month later made available for rental. At this point, some movies tend to make it onto subscription services like Netflix. This flow might not be optimal for consumers, as they prefer to receive content right away, but it ensures a potential revenue stream for the value chain of movie production.
The book industry could learn from this and do the same. Prior to the advent of subscription services, we had not had a natural structure that allowed the industry to formalize multiple price points. With the introduction of subscription services, however, this has changed, opening up new ways of structuring the revenue streams in ways similar to the film industry.
It’s important to keep the customers hungry at every price point. Adding to that, it does not make sense to give away titles to subscription services if customers would have purchased the product at a premium.
I have seen publishers across northern Europe throwing in brand new books to subscription services. Publisher representatives are happy, since it gives them a relatively high volume of readers, trading off potentially higher revenue for this higher volume of readers. Unfortunately, there is a lot of game theory involved in choosing the right place to make your titles available: if everybody else is doing it, you miss out.
This is what a future premium revenue structure of a book’s lifetime should look like:
Initial offering: Sell at a high initial price and only at premium locations.
Discounted offering: After three months, books can be sold as paperbacks and the publisher can introduce discount promotions. The books can now be sold at low premium venues like supermarkets.
Long tail: After six months, books can be added to subscription and rental services, as well as made available to libraries.
If the book industry were to learn from our related entertainment products, we would set up a revenue structure that fits the new reality we live in, helping to ensure the industry’s overall long-term health.
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