The success of companies like Spotify, Netflix, Amazon Prime, Hulu and Birchbox show that the subscription business model is booming. It hasn’t proved easy to adapt for publishing though as the eBook service Oyster demonstrated when it closed in 2015. Scribd ran into trouble in the same year scaling back the number of titles on offer in its romance and erotica categories as voracious readers cut into the company’s profits. Penguin Random House’s c.e.o. Tom Weldon said in 2014 that ‘Book readers don’t want subscription’ but in the past 5 years Tien Tzuo (the founder and c.e.o. of subscription management software company Zuora) has identified the rise of the ‘subscription economy’ (according to their research almost 9 in 10 people in the UK now have at least one subscription service). So why should publishers not be present in this space?
There are two major reasons why publishers might turn towards the subscription business model:
Subscription gives publishers a direct relationship with their customers. Captured user data leads to a more sophisticated marketing strategy and better business decisions. Managing the relationship with the end customer allows publishers to be more responsive to trends and gives them freedom to specialise and pursue niche audiences.
Recurring payment models bring guaranteed revenue. With customers tied-in to a platform and a payment schedule the publisher can be much more confident in making financial projections. Particularly for smaller publishers improved cash flow means better profitability. It seems unlikely that publishers will enjoy the same customer loyalty as brands like Spotify however as readers will continue to buy print and digital from a range of sources.
Subscription models can also have a positive impact on how content is produced. Netflix and Amazon Prime originals are some of the commercially successful and critically acclaimed movies and TV of recent years. Could the same ‘downstream effect’ breathe new life into publishing? Below I explore three subscription services that are disrupting the publishing business model.
Blinkist is an app that offers access to condensed versions of non-fiction bestsellers in audio and text format. Subscribers listen in short bursts to key titles that exploit the current trend for personal development. The appeal to commuters is obvious with estimated reading times listed on every title and if some books prove too lengthy there is always the option of listening on 1.5x speed! The number of titles available at 3000 is not that great compared to the average bookshop but most listeners will likely never approach that number. Blinkist reports that 8 million people are reading every day on the app and they promote the ‘real people’ that choose their lists claiming not to rely on algorithms.
Willoughby is the UK’s leading book subscription service offering a ‘range of book subscription box gifts for a variety of ages and interests.’ Customers select their genre and subscription duration and each month the recipient will receive one hand selected book by post. Chosen themes range from classic and contemporary fiction and non-fiction titles in cookery, gardening and natural history. Parents and grandparents can choose from baby book collections all the way up to Young Adult. Willoughby have received wide press coverage and in a competitive market their subscriber base is growing by 70% each year. The company was established in 2012 so it has managed to ride the subscription wave.
Perlego is a textbook subscription service for students and professionals that provides subscribers unlimited access to 200,000 academic and professional eBooks from £12 a month. According to TechCrunch in order to be able to make the subscription model work Perlego‘ works with 650 publishers, including big names like Oxford University Press, Princeton University Press, Pearson Plc, and Cengage Learning. Publishers receive 65 percent of each subscription on a consumption basis.’ In 2018 the company raised $4.8 million in investment funding. Areas for future growth are negotiating worldwide rights for titles(currently the service is only available within the EU) and Android and iOS apps that are in development.
It is notable that none of the case studies cited thus far have been from traditional publishers. The exception to this is Puffin who recently launched a picture book subscription service through the Penguin Shop. The Puffin scheme benefits from the consumer brand recognition possibly unique to Penguin. Picture books and children’s books in general tend to be a special case with most purchases being made as gifts and the print market holding up against digital and growing year on year. Subscription will likely not replace retail for the big 5 publishers, but it is relevant to their imprints publishing in niche areas. Indies should consider it alongside their direct to consumer marketing. There is a lot to figure out including how to make the revenue and profit-sharing work to make sure authors and illustrators get paid fairly and how to set pricing so as not to threaten existing commercial partnerships. The subscription model offers a way to get to know our customers better and to ensure publishers have the commercial backing to take creative risks. It is time for publishers to take another look.