For the last eighteen months or so, there’s been a lot of discussion in indie publishing over the subscription services. A number of authors have been stringent proponents of Oyster and Scribd. The main reason some backed these services was because both paid full purchase price to the author upon any borrow. I, and a few others, kept pointing out how there was no way that was sustainable.
Events are bearing that view out, in spades. Scribd already retracted their service significantly – effectively cutting out the heart of its catalog offerings that would appeal to romance enthusiasts, who tend to be very voracious readers – and now Oyster is closing entirely.
Here was the issue, which is no longer foresight but is how things have actually worked out. These two independent services had no other revenue streams. Their businesses were being built entirely on subscription plans; enticing readers to pay a monthly fee in exchange for unlimited borrows from the catalog in question. Both Scribd and Oyster paid authors (and publishers) handsomely for these borrows; to suppliers it was no different, fiscally, than a sale. Obviously a very attractive prospect for a publisher or author.
What seemed clear to those of us who lived through the dot com boom (and bust), and is now playing out, is neither model is really sustainable. The model relies on convincing consumers that they should sign up for a monthly subscription they’re not going to use. Because of the back end payment scheme, subscribers who actually used the service and made borrows cost the companies money. Only subscribers who joined and read very lightly were profitable. Unsurprisingly, both services tended to attract avid readers; who else would be interested in paying a monthly fee that added up to more than $120 a year for the right to read for no additional fees?
Both Oyster and Scribd, just like the plethora of now defunct dot com companies before them, seemed to be betting on the classic dot com model of losing money while simultaneously growing fast enough to make it up in volume. That strategy only works if you can actually grow fast enough, or have enough investors with deep pockets who can continue to float your bills. I’ve yet to find anyone would could explain, logically and from a purely business perspective, how either company expected to somehow convince casual readers (the only kind who could be counted on to be profitable) to sign up.
As we’re now seeing, both companies have called a halt to the hemorrhaging. Well, Scribd is still operating, but they’ve scaled back drastically. Last I heard, they’ve begun trading the bleeding of money for the bleeding of subscribers, as the slashing of their catalog to make it undesirable to romance readers has caused those customers to abandon the service.
There’s talk that Oyster is strategically closing, that their key employees are moving over to Google Play. We’ll see if anything develops there. There are two companies with the fiscal weight and market position, and the technical clout, to challenge Amazon successfully; Google and Apple. Until now, both have done little to move into the book market. Apple chose to pursue a price fixing strategy that’s seen them convicted of it in federal court, and Google has been following the same schizophrenic scatter approach as they’ve done for the last twelve or so years (namely, never really committing to anything other than their core search business). Oyster hasn’t made any waves as being experts in publishing or book lending, but they still qualify as ‘positive’ additions to Google Play’s book service.
Time will tell. But in the mean time, we have the other last-company-standing from the dot com boom still dominating the book space. Google and Amazon are the successful children of the 90s era of internet business, and both continue to grow. My money’s on Amazon continuing to dominate until Google, or perhaps Apple, decide to get serious about books.