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Summary:

For all its growth, the e-book market has been stillborn in one major way: methods in which to monetize. But recent news that a Spanish company called 24Symbols went into beta on a an e-book service shows that digital publishing could finally be evolving.

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For all its growth, the e-book market has been stillborn in one major way: monetizing itself. But recent news that a Spanish company called 24Symbols went into beta on a an e-book service, which includes both ad-supported and subscription options, shows that maybe digital publishing could truly be evolving from a one-trick pony into a showhorse.

Unlike online video, music and video games, e-books only really put money into the publisher’s pocket through sell-through. The other content types offer many payment methods for consumers: rental, subscription, ad-supported and sales. Add in windowing, and the sophistication (and overall revenue opportunities) are much more ample in markets like video.

For the last year, however, some have started to think maybe e-books could start to emulate other content models. There’s been talk of ad-supported e-books, while others have looked at subscription-based e-book plans, or what some have called Netflix for e-books.

Some have called 24Symbols the arrival of Spotify for e-books, since it embraces a freemium model of both ad-support for the casual user and subscription plans for those willing to pay for all-you-can-eat access. That makes sense. Looking at both Netflix and Spotify as models for e-book monetization is a great idea because, as I’ve written before, the more ways you package your content, the more customers you’ll have.

But instead of a Spotify, or Netflix, for e-books, I think what the e-book industry really needs is a Hulu.

What does Hulu for e-books mean? Book publishers themselves should get together like NBCU, Fox and Disney did and begin to offer their content — or at least some of their content — in both ad-supported and subscription offerings.

OK, you ask, why should they do that and not just let, say, Google or Amazon do it instead? Unless I’m wrong, publishers are the only ones with big enough rights libraries of both new and catalog titles to package up in a variety of ways to make this idea interesting. And in an agency-model world, booksellers like Amazon can’t adjust pricing as they see fit, only the publisher can (which is why I have my doubts about startups like 24Symbols).

Some publishers, like Disney, have offered subscriptions for their own e-book library, but to reach the million-subscriber level you need true scale, particularly in title count. And only a collective of big publishers could do that.

And why shouldn’t they? Digital publishing is fast becoming the wild west where, as Barry Eisler showed a few weeks ago, it’s every man for himself. When you’re flanked on one side by Amazon and on the other by mutinous authors, maybe it’s time to take your destiny into your own hands.

For more analysis on the new methods of monetization in the e-book market, see my Weekly Update at GigaOM Pro.

Image courtesy of: flickr user priittammets

  1. It’s too bad Google is not even thinking of making Google Books ad-based. I really think that’s the only way they can become competitive with Amazon, otherwise I doubt they’ll even take 5% of the market. Amazon Kindle is everywhere today, including Android devices. If they think they can beat Amazon by offering half the ebook titles Amazon offers and for the same prices, they’ll terribly wrong.

    They should be *disrupting* Amazon, not taking them head-on. Amazon took iTunes head-on and what did that give them? A measly 10% of the market or so. If Google wants market leadership in e-books they need to disrupt Amazon, and making ebooks show with Admob ads on Android phones and tablets, just like in regular apps, is probably the best way to do this. They could jumpstart this by allowing self-publishing authors to do it. That’s how you become the most popular platform, by allowing long-tail content on it. Amazon is way ahead of them here as well.

    The sad part is, now that Amazon is going to have an ad-network as well, it may end up doing the ad-based books even before Google, and I think they will do that because Amazon is also a pretty innovative company and likes to think ahead.

    Hopefully, Google won’t let this opportunity slip through their fingers if they are taking ebooks seriously, and I also hope they’ll take a similar approach in music as well, because becoming yet another company that sells songs for $1 a piece would lead them nowhere.

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    1. @Lucian – I’m not so sure Google isn’t going to offer an ad-supported e-book offering. In fact, if I were to bet on the first of the big-three to do so (Amazon, Apple, Google), it will likely be them.

      The challenge for any e-book marketplace vendor here will be licensing – the current relationship for e-book vendors is through the agency model, where the publisher determines the price. I think that Google could get some publishers to offer portions of the book through ad-support, but getting big titles to put into an ad-supported model will be challenging (this is, in my opinion, probably what’s holding up ad-supported e-book rollouts in general).

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      1. Yes, I’m sure that would be the biggest hold-up. Also, the publishers have absolutely no incentive to make their own Hulu for e-books either. Unlike in videos, where NBC and the others started feeling disruption from Youtube, there’s no such thing in the ebook industry, at least not yet. From their point of viw, they have no reason to disrupt themselves right now when they’re making even bigger profits from ebooks than from real books, by selling them at the same price.

        However, I think they should disrupt themselves, because usually disruption doesn’t mean cannibalizing your own products from the very beginning. That happens over a decade or so, but by that time the new disruptive industry should already be bigger than the old one, and the ones leading the industry have nothing but to gain from it.

        The disruptive businesses usually address “non-consumption”, and in this case I would guess the first “customers” of such ebooks, that are either ad-based and free, or under a subscription membership, would not be most of the people that buy books right now, but most of the people that don’t, because they don’t want to spend $10-$15 for each book. This would probably take off the most in countries where people don’t buy many books or pirate them. So the industry’s revenues will actually grow from all of this, not shrink. The same would happen for music, especially in countries that don’t have iTunes and music piracy is very popular. The problem is the publishers think this will lead to a price drop or business model switching in their core countries as well, and that’s true, it will happen *eventually*, but they should see the bigger picture. The ones embracing disruption have a lot more space to grow and increase revenues, so the benefits outweigh the disadvantages. The only companies that will “die” from this process are, as usual, companies that fall behind and don’t embrace the change.

        As for Google, I know it must be very hard to convince the publishers, but they should convince them to at least try some “experiments” and see how a book would do from ads alone. If this proves impossible, they should still start the movement towards this from the bottom-up, with self-publishing authors that are already bypassing the publishers, so even if the “revenues” from ads are not that great, the total profits may still end up bigger for the authors. I don’t understand why Google doesn’t want to at least try this option. What do they have to lose from it? They could also put ads on all those 2 million free books they have and split the money with whoever owns the copyright. Oh, and the reason I said Google may not do this is because of a quote in one of the articles you linked to, where the Google Books Product Manager said they have no plans for it.

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  2. How about something like Audible for ebooks? I’m not a user of it, but that seems like a decent model that already revolves around books, and I don’t think they serve up ads with the books.

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  3. Isn’t this EXACTLY what Google offered the publishers and copyright holders? Google offered to do all the technical hard work, keep the ebook technology improving through the years, offer multiple channels for distribution, offer multiple payback schemes, etc. But they spit in Google’s face. Now they should form a Hulu-like consortium of their own? Before publishers do that, they should ask themselves the following questions: How successful is Hulu compared to Youtube in terms of audience reach? How much more money could the video producers have made if they chose Youtube to distribute their content instead of trying to rebuild the wheel with Hulu?

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    1. @A S – one major difference: Google owned the platform.

      Anyone whose watched what Google is doing now with Android knows they eventually assert more control then initially promised. The whole reason I suggest book publishers do this is so they control the platform.

      The trick to a bundled offering like the one I talk about knows the friction isn’t from technology -that’s fairly easy to do. It’s going to be licensing, and the publishers still have their large rights libraries as their major competitive weapon. I just think they need to start using it.

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  4. I beg to differ with you. Many authors are making more money than ever with ebooks. They are cheap to produce and they can market them themselves. What you are referring to is a model for publishers only who want to make money with ebooks.

    Publishers need to come up a way to monetize ebooks that make sense, so authors will still want to work with them instead of doing it on their own (which is easier than ever) or working with companies where they are in control or an equal partner with publishers.

    With these new models, publishers are the ones who will never make money with ebooks, but that doesn’t mean ebooks won’t continue to be monetized. It’s just the the balance of power has shifted with the new technologies available to authors.

    Unfortuntely, too many authors don’t realize how lucrative ebooks can be if they shift their mindset and start looking at new ways of getting their message to their potential audience. Articles like this might perpetuate that myth if people fail to realize that what you are referring to only applies to publishers.

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    1. @Ellen – I think you missed the meaning of the post. I never said e-books weren’t a great way for authors to make money. Clearly they are (hence the Barry Eisler’s of the world). This post was a suggestion about a new way for established print publishers to monetize their core asset: their library of content. Authors can’t effectively, on their own, create a subscription service. A publisher (or better, a collective of publishers) can.

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  5. Be that all as it may: I will never ever read a book with ads in it, and I wouldn’t even consider buying one. Not ever, under any circumstances. Never. That is where I draw the line.

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