Amazon’s war on publishers reached a crescendo yesterday with the leak of Kindle Unlimited, a subscription plan that would allow readers to pay $9.99 per month for unlimited access to the Kindle ebook library. No longer content with simply demanding steeper discounts from publishers like Hachette — which is locked in a bitter fight with the e-commerce giant over book prices — Amazon is finally reaching its end goal: the complete dissolution of the traditional book business model through a vertically integrated publishing platform, from writer to Kindle.
The idea of a “Netflix for Books” has been a popular startup theme for a while, and Kindle Unlimited certainly enters a crowded field. Oyster raised $17 million of venture capital over its two rounds of financing, and Scribd recently pivoted from hosting documents to a book subscription service. Yet, only Amazon currently has the scale to see such a plan become an industry standard, where it dominates ebook sales with an estimated 65 percent market share.
As a writer, I am supposed to feel wary of this turn of events. By capping the total price paid per month for books, Amazon is theoretically limiting its upside revenue from book sales. Adults in America either read a lot of books, or not that many at all, which you can interpret in the statistics from the Pew Research Internet Project.
An unlimited plan is expected to put a ceiling on a reader’s total expenses for books, therefore capping the costs of the most lucrative customers. Readers will spend less, writers will be paid less, books will disappear, and the Earth will hurtle toward the sun due to an increase in fiber from the decrease in paper pulping.
Or so I am supposed to believe. The truth is, we are witnessing a bad Hollywood remake of a bad Hollywood remake of the Content Wars of the 1990s and 2000s. First it was music around Napster and later Apple; then video with YouTube and Netflix; and now, books with Amazon (in 2D!). The plot remains the same: The traditional publishers of content defend their business models against the assault of the Internet. There’s some suspense, and then the Internet wins.
But there is one crucial difference — a plot twist that makes this third installment a bit of a thriller.
Readers will spend less, writers will be paid less, books will disappear, and the Earth will hurtle toward the sun due to an increase in fiber from the decrease in paper pulping.
Just yesterday, 21st Century Fox offered to buy out Time Warner for $80 billion, one of the largest deals in the media industry in years. Both companies face competitive pressure from streaming companies like Netflix that are developing original programming as well as multi-channel networks like Maker Studios, which was bought by Disney earlier this year for a reported $500 million.
Part of this consolidation trend is the revenue that can come from scale. In video, there are tremendous opportunities for companies to build value from derivative products in other channels. Hollywood loves its movie “platforms,” the franchises that can form the basis for new content across mediums. A single hit film can result in the creation of film sequels, television shows, books, magazines, comics, toys, and video games. The film is just an entrée to that wider, more-profitable universe of products.
This loss leader approach in the video market also applies to artists in the music industry. Spotify’s streaming numbers and royalty payments show that even the top artists at peak popularity may receive only half a million dollars a month for their music streamed on the service, which must be split with producers, distributers, marketers, and others. But the real money for these pop artists comes from their concert tours. Lady Gaga, for instance, had gross revenues of $227.4 million across the 201 shows in her tour.
These business models do apply to a very small handful of writers, who can option their weird vampire dramas or pubescent magic dramas to make a fortune. But unlike up-and-coming artists in video or audio, the plot twist for books is that there are almost no alternative revenue sources for writers.
Nearly all the work a writer does in marketing and external relations is to sell actual copies of books. Book talks and lectures are generally unpaid, and contributed articles to magazines and newspapers to market a book often pay a low fee if they pay one at all, and rarely if ever share in advertising revenue. The only alternative publishing model is around consulting, using a book as a customer acquisition strategy. That only works in the business and psychology section of the bookstore, and isn’t that useful for the rest of the aisles.
And that ultimately is the part of Kindle Unlimited that is perhaps most ominous, and why authors have been so passionate about the issue of ebook prices. Driving the prices lower isn’t likely to expand the market of readers, since book prices don’t seem to be the deciding factor on whether someone reads a book (time is). But those lower prices directly shrink the incomes of authors, who lack any other means of translating their sales into additional revenue.
That’s why I don’t think the big revolution for writers and other content producers will come from Amazon, but rather from startups like Patreon, which allow producers to build audiences directly and develop their own direct subscription model with their most fervent fans. That would be a surprise dénouement in this final episode of the Content Wars, but a welcome one for creators around the world.