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Apple, Amazon and the uncertain future of the book startup

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Over the past few years, I’ve encountered countless startups that claim they are going to disrupt or revolutionize book publishing.

I once thought we might see one of those take off. Today, I’m not so sure. Book-related startups face a particularly tough path forward. Here are a few reasons why.

When Amazon is the chief disruptor, the odds are stacked against you

Any company that comes along trying to reinvent book publishing is competing not only with traditional book publishers but also with Amazon(s AMZN), which is almost 20 years old but keeps finding new ways to shake things up. Print book buying continues to move online and Amazon, which is now delivering on Sundays and offering same-day delivery in a growing number of cities, has a lock on that business. Kindle, launched in 2007, is the dominant ebook reading platform and Amazon is continually rolling out improvements to the Kindle e-reader and Kindle apps — sharing, search and so on — that rival what many startups have tried to do.

amazon box, amazon prime

A couple of exceptions are two companies that Amazon has acquired: reading-based social network Goodreads in 2012 and digital comic book retailer comiXology this past April. Yet those companies, both founded in 2007, were already several years old by the time Amazon bought them. They were able to grow at the same time as Amazon’s digital book business grew. An ebook startup that launches today must grow in Kindle’s shadow.

Companies that attempt to make improvements on the actual process of reading books on a screen are hindered by the fact that if they’re not supported by Kindle, they won’t be able to gain a wide audience. One company that didn’t support Kindle but still seemed to be gaining traction was the Berlin-based Readmill, but it was acquired by Dropbox earlier this year and its technology will be absorbed into that company.

Book publishers aren’t obsolete, self-publishing isn’t going away

Unlike newspaper publishers, the large traditional book publishers are doing pretty well, thanks in part to increased profits from ebooks. This week, for instance, we saw profits rise at Simon & Schuster and HarperCollins. Titles from traditional book publishers dominate bestseller lists. A lot of self-published authors are doing well, too, but quite a bit of their success is tied to Kindle and it’s unclear that startups can do much to assist. It’s going be tough for them to draw authors away from either traditional publishers or Amazon. That’s why I’m skeptical of companies that aim to crowdsource publishing

book, open book, book pages, bookshelf

Book-related startups aren’t going to gain much traction by starting with the premise that “book publishers are dinosaurs.” As publishing consultant Mike Shatzkin wrote earlier this year:

“An incumbent’s job is to continue to maintain economic viability. A start-up’s objective, often, is to ‘change the paradigm.’ If the paradigm does change, the incumbent needs to roll with that, but they don’t need to be an instrument of change. A start-up often does. That is an inherent difference in perspective that a start-up can’t afford to ignore.”

Witness Inkling, which started out as an iPad textbook publisher in 2010, expanded with a number of digital titles that it sold through its website and apps and indexed via Google — and then shut down its consumer-facing business this week. It’s going to focus on delivering enterprise products and services to publishers. That’s not a very sexy proposition but, as Inkling CEO Matt MacInniss told Fast Company earlier this year:

“The reality is that [these publishers] actually did know their business better than we did, even if they weren’t as tech savvy as we were. We had to listen to the vision they had for themselves and find ways to support that vision with our technology.”

Text is text, social is social

Startups that focus on delivering original ebook content or on helping readers find new books begin from the premise that readers have trouble finding enough things to read. This notion seems absurd: Anybody on the internet these days is overwhelmed with an infinite list of free things to read and a zillion services trying to curate reading material for them. There is not room here for a new recommendation service that is focused specifically on books: Readers don’t have time for it. They have too much other stuff they’ve been meaning to read already, whether it’s a book or a blog post.

Similarly, I don’t think there’s room for a new service that tries to make reading more social. Goodreads, imperfect though it is — and it’s due for a major design overhaul as well — has accumulated a critical mass of readers and authors and is now incorporated into most Kindle e-readers, bringing it to a larger audience. And there’s plenty of book discussion on existing “general” social networks Facebook (s FB) and Twitter (s TWTR), where authors are engaging directly with readers. Recently, I’ve noticed a mini-trend: When people want to share a passage from something they are reading on their mobile device, they simply screenshot it and share the screenshot (hint: You can do this on the Kindle Paperwhite too). No separate app necessary.

Discoverability is more of a publisher problem than a reader problem: Witness the failure of book publishers’ joint venture Bookish, which was sold to another social reading startup and ebook retailer, Zola Books, earlier this year. Zola, too, has failed to gain traction; while I admire the company’s mission to sell ebooks, I’m skeptical that it can succeed due to all the factors listed in this story.


Apple + “Netflix for ebooks”

Two ebook subscription services, Scribd and Oyster, launched last fall. (Scribd already existed as a document-sharing site but changed its focus.) They both offer users access to an unlimited library of ebooks for under $10 a month. I don’t think both of these services will survive, but one of them might. Both are expanding, though neither has shared user numbers — Scribd now has over 300,000 titles and Oyster has over 500,000. A lot of these titles are self-published books (via a deal with Smashwords), but an increasing number of traditional publishers are also participating. HarperCollins is the only big-five publisher making its titles available to either service thus far, but that company has commented publicly on its success with the model, and either Scribd or Oyster or both will likely sign another big-five publisher soon.

Oyster children's

So here’s an idea: What if Apple bought one of these companies, as it is rumored to be buying hardware and streaming music service Beats? It would be a bargain — far, far less than the rumored $3.2 billion Beats is going for — but Apple would be acquiring the work that these services have already done in terms of securing rights to the books included through them. Amazon is reportedly considering launching its own ebook subscription service as well (separate, apparently, from the Kindle Owners’ Lending Library, which is essentially a marketing tool for self-published authors at this point) and this would allow Apple to get ahead. (Since Apple was found guilty of conspiring with publishers to fix ebook prices last year, it’s highly unlikely to launch a service like this from scratch; even such an acquisition might come under scrutiny.)

An ebook subscription service, fueled with content from traditional book publishers and backed by and distributed through Apple: Now, that could be revolutionary. But the revolution wouldn’t be coming from one company alone. It would come from a combination of forces, new and old. That’s the kind of disruption that readers might actually be able to use.

41 Responses to “Apple, Amazon and the uncertain future of the book startup”

  1. ecw0647

    I have been a devoted Kindle user, but I tried out Scribd (mostly since it has both Android and Apple apps whereas the Oyster is Apple only.) Much to my surprise, I really like it and it’s a heck of a deal. As they add titles it can only get better, but I intend to keep my subscription active after the trial period.

    • John Wilhite

      Profound, penetrating, informative comment. Learned so much from “Interesting overview of the present state of the traditional and ebook market (sic).” For all that hard work you’ve earned a link to your thing.

  2. “There is not room here for a new recommendation service that is focused specifically on books: Readers don’t have time for it.”

    So Bookbub is going bankrupt any second now? Or do you even know what that is? Frankly, I am not at all sure that you have a clue. For example Amazon’s OLL is not a ‘marketing tool’. The suggestion that Apple somehow should dive in makes you look more like an Apple fanboy than someone interested in books, writing and publishing. And you bet anything Apple does will about books come under scrutiny since that is mandated by the federal courts.

    • Thanks for the comment! Someone else asked above what I thought of Bookbub. Thinking of it as a recommendation service for highly price-sensitive readers is interesting. I think that Kindle Owners’ Lending Library might fall into the same category: People who read a lot and are highly price-sensitive. The ability for these services to gain traction with large groups is limited, in my opinion. We’ll see!

    • Thanks for the comment! Someone else asked above what I thought of Bookbub. Thinking of it as a recommendation service for highly price-sensitive readers is interesting. I think that Kindle Owners’ Lending Library might fall into the same category: People who read a lot and are highly price-sensitive. But it’s not a subscription service for a large audience. The ability for these services to gain traction with large groups is limited, in my opinion. We’ll see!

  3. Carmen Webster Buxton

    The hard part is getting the merchandise somewhere where people already go to buy books. Smashwords is a wonderful platform in many ways, but its direct sales are small compared to its sales via retail outlets like iBooks, Kobo, and B&N. Most of their customers are indirect, so they don’t get any chance to mine data from them. I really thought Google Books would be able to compete (talk about deep pockets!) but they don’t seem to know how to sell books, only advertising.

    The popularity of tablets may make start-ups more viable, as those folks aren’t tied to a specific platform, but new ebook retailers will need to concentrate more on making the buying experience easy and quick and less on locking down their ebooks with DRM.

  4. John F. Harnish

    Informative and insightful post, Laura.

    Amazon is like the amazing fifty foot woman in the room and she’s in glorious color—not the blandness of fifty shades of grey!!! Unlike the dull grey elephant everyone is talking around, everyone is talking about the nearly twenty year old Amazonian clad in a Victoria Secret creation guaranteed to lustfully attract attention. She’s strikingly beautiful, strong of muscles with an iron will, selectively aggressive, and damn protective of her turf. Some folks come to court her to hopefully share in the profitable flows, others come to do battle with her to take away a piece of the pie—forgetting the wisdom in: “don’t pick a fight you don’t have a snowball’s chance in hell of winning.”

    In the beginning, Jeff Bezos announced his noble intentions to create the world’s largest bookstore. There’s no doubt he’s accomplished that achievement. Folks looking for a book or the latest offering by a favorite author will most likely do a quick search on Amazon—if the book is for sale it’s usually available from Amazon and the one click “Buy Button” is right there. Ebooks instantly download and printed books will be delivered to your door in a day or so. Their customer service for dealing will troublesome issues is world class. Amazon’s lofty platform for direct sales to consumers is omnipotent.

    Amazon’s massive selection of content for customers who enjoy the ease of their online shopping experience is a most challenging combination to disrupt.

    Unfortunately Amazon’s excellent customer service doesn’t always extend to maintaining goodwill with author/publishers publishing ebooks through the Kindle Direct Publishing program. This could be the Amazonian’s Achilles’ heel. Although there are benefits for authors such as: Amazon promptly paying approximately 30 to 70% in monthly royalties for all downloads sold via direct deposits; assigning unique identifiers to ebook to save authors the cost of pricey ISBNs; the almost real time sales reports presents an accurate tally of ebook sales; the spacious product pages contain an abundance of information about the content and the author help to level the marketplace; even the most obscure title can be retrieved by powerful internal search engines; readers are gently reminded to review ebooks they’ve purchased; and the KDP program is easy to use, making changes and updating info and content is a breeze.

    Best of all, the KDP program is free—except for the author’s royalty assessment fee paid on each purchased download. Although it’s said to be a “token fee” based on book file size, these small transactions that are producing an income flow for Amazon, and the fees were most likely implemented to fund the creation of the massive computer power needed to make KDP work as promised. Most digital publishers and printers have dropped charging an annual maintenance for titles in their digital book publishing systems; Amazon could do the same and stop nickel-and-diming authors for download charges.

    A welcomed disruptive change would be for those publishers engaged in digital publishing, to rework their business model to earn a fair profit in the long-established way of publishing from selling books. “Publishing services” selling authors overpriced bundled services of questionable value usually don’t benefit book sales. Authors don’t need more pricey input from “publishing experts.” They need affordable avenues of exposure to generate awareness of their content with potential customers. Exposure sells books!!!

    Without authors creating content there won’t be any books to profit and benefit from. Authors need to be treated fairly by the publishing and distribution elements of industry.

    Enjoy often… John

    • Thanks for the comment, John. I do also think there is a danger of KDP authors — particularly KDP Select authors who make their work exclusive to Amazon for a period — getting some nasty surprises re: terms or royalty changes down the road.

  5. Maureen Scott

    Where does Wattpad (recent $46 million Series C round) fit into this picture? I don’t see them mentioned and I would call them a VERY SUCCESSFUL start-up in this space if they just raised $46 Million.

    • I agree with you, Maureen. I was thinking about Wattpad and I don’t know if I’d classify them as a book startup — I think they’ve pretty wisely avoided that label by instead focusing on mobile writing and international expansion. I think they are a really good example of going beyond the book and focusing on text.

  6. All of these startups–and many new small-presses who shrug off the “startup” mantle–must confront the sheer dominance of Amazon. The Kindle ecosystem has no real challenger; Sony is in full retreat, Kobo cut 10% of its workforce, and iBooks are a small percentage of sales. We all pretend that EPUB is the big “rival” format to Kindle, but as Brian O’Leary blogged over at Magellan Media last week, “EPUB is a producer’s standard. It’s…meaningless to people who read digital books.”

    Amazon’s dominance in digital reading almost models Apple’s dominance in digital music a few years ago, but with one key difference: Even at the height of iPod mania, nobody thought Apple had invented compressed audio files. Napster and .mp3 were well-known in the marketplace before Apple convinced 80% of us to switch to iTunes and .aac . Nooks and Sony Ereaders never got out of the starting gate before “Kindle” and “E-reader” became synonymous in the minds of most US consumers.

    But it goes beyond Kindle; startups and small presses who compete in the physical book space find CreateSpace (Amazon), Advantage (Amazon), and Goodreads (Amazon) as the dominant “option” in self-publishing, physical distribution, and discovery, respectively.

    • Thanks for the comment. I agree and would love to see a viable challenger (in part because it would be very interesting to report on!) but it is hard to envision how that would work. I like the quote from Brian O’Leary, who has very smart ways of thinking about this stuff.

      • In that sense, Laura, events as they unfold are unlikely to contradict your article’s main thesis. The alternative/challenge to Amazon, when it comes, isn’t even going to be recognized as playing in the book/publishing space. The main threats to Timex and Swatch in 1995 were…Apple and Samsung, since lots of people now use their cell phones to tell time. I’d love to kid myself that Kobo or iBooks was going to compete with Amazon in a recognizable, Time vs. Newsweek battle, and somehow win on Amazon’s terms. But it’s far more likely that somebody wholly under the radar will slowly change “publishing” into something Amazon’s not as good at.

        (The Time vs. Newsweek battle, for example, was won by Twitter.)

  7. Jeff McNeill

    Interesting ideas, and it certainly is true that any startup needs to bring something new to the table. The key is to focus on what Amazon/Apple cannot or will not, that is compelling to the customer, and for which they will pay. I think Qpeka is interesting, on a pay-per-page model. Also, anyone who focuses on authors and helping them connect with their community of readers (for example, how Goodreads does that (as social), and Leanpub (as text).

  8. Albin

    Amazon hasn’t even launched Kindle’s “killer app”, which is going to be a resale market for “used” ebooks. Folks who paid $20 for a (DRM protected) popular title in the Kindle format will be able to sell it within the Kindle ecosystem (with a cut of sale price going to Amazon) for a fixed discount or by auction. Of course, current fave titles (like old Harry Potter books) will not be eligible for sale as “used”. Nobody else will be able to touch it.

  9. Joe Regal

    Good piece, Laura. One comment, though: Zola hasn’t failed to gain traction; we haven’t yet launched. We are still in beta, still working to complete the platform (and to integrate various pieces of Bookish). With luck that’ll be later this year, though one lesson I can share from startup land is that a tremendous amount of technology is required to do something seemingly very simple – because of DRM, walked gardens, and the like – and giving exact dates isn’t always wise.

    But you are right: coming into a thriving business as a startup means arriving with a transformative offer for ‘users.’ It isn’t easy to do. We think we will, but it takes time, money, and vision. With Zola and Bookish, we won’t really know until we launch.

    Joe Regal
    Zola Books

  10. Thank you, Laura, for this very thoughtful post. As a former bookseller and book publisher, I’ve mused over these topics for a while now. I’d add a couple of nuances to you otherwise great observations. Retailers compete for consumers based on value proposition. Amazon’s strength in bookselling is low price, breadth of selection, and ease of ordering. It is possible to sell books online and not necessarily compete with Amazon’s value proposition. Lots of specialty retailers do just that. See for example,,,

    The question of whether discovery is a problem for consumers is inherently speculative. No doubt readers can find tons of books online in myriad avenues but is what they’re discovering of relevance and value to them. The growth of online book publishing is likely to be degrading these outcomes.

    • Thanks for the comment, Peter. I would love to see more experiments in retail but I think that they will be niche by necessity and that will dissuade a lot of people from entering the space. I think that this is similar to the independent bookstore argument and we have indeed seen anecdotal evidence of these stores holding their own.

      • Thanks, Laura, for your reply to my comment. I think the issue is how to scale niche with bookstore-as-service and leverage user data across niche ecosystems. I agree with your point about the indie bookstores. The question to ask is why anyone buys from them when you can get what you want cheaper and next day via Amazon. That question is also an opportunity it seems to me.

  11. Christopher Moon

    If Apple were to purchase either Scribd and Oyster, it would likely negate the agreements that both services have in place for content (if it mirrors the types of agreements for content that happen in the music sector).

  12. Ankit

    Good overview.

    But I believe that startups who are into book publishing can still beat Amazon’s KDP. Startups should focus on improving the overall experience of reading and showcasing the authors book.

    There many authors who hate KDP Select program and kindle countdown deals.

    KDP sucks! when it comes to book pricing, sakes overview,support…
    But many authors still publish with KDP due to amazons market share.

    The faith of amazon KDP would change, if the startup in book publishing would focus on providing value to authors and readers.

      • It would (could) differentiate itself from Smashwords by sending me fewer E-mails and respecting my opt-out preferences… but seriously, folks.

        Smashwords is dominant, but hardly impregnable. Its great strength–just give us a Word file!–is also its great limitation–JUST give us a Word file! I don’t know what a comic book, math textbook, or art history book looks like as a .docx file; but I’m quite sure I don’t want to.

        One trick would be to aim the “Phase I” product at publishers (such as us) instead of at consumers. I hear publishers griping all the time about Amazon/KDP. But customers? Customers love Amazon, and they don’t really care about publishers’ jeremiads. (Anyone who thinks large swaths of the book-reading public takes the long view should consider what Borders/Barnes &Noble did to small bookstores, and what Amazon did to Borders/Barnes &Noble.) Look at Hachette today to see how eagerly publishers would embrace an alternative.

        Somebody who came up with a software suite that allowed small presses to ditch Adobe CS at $50/month and create iBooks/KF8/EPUB3/PDF/POD would make great inroads with publishers large, small, and self. Amazon would be unlikely to notice or care; they’re not in the consumer or B2B software game. But Phase 2 could be a platform for discovery and side-loaded sales.

        • Re: aiming the Phase 1 product at publishers: I think that is smart. It kind of reflects what Inkling’s Matt MacInnis said, too. I think that a lot of these startups have aimed at readers trying to get them to change their behavior, and I don’t think it’s worked. In addition, the primary way that a lot of startups until now have wanted to work with publishers is “give us your content,” whereas I think a better model for the publishers might be “here is a tool for you.” Certainly not as sexy a model, though.

        • John Wilhite

          Bicyclecomics, yes, indeed, what you said, especially the last paragraph. As the writer of children’s nonfiction illustrated books I have been extremely frustrated by the proliferation of ebook devices (Kindle, Nook, iPad) and their proprietary software (publishing) formats (mobi, EPUB) because the whole scenario is solely for novels. It’s obvious that when you say “books” to the nitwits involved in the current chaos and fiasco of ebook publishing and distribution they only think in terms of romance, mystery, sci fi–just lots and lots of words. They disregard what is necessary to publish comics, manga, children’s books, travel books, textbooks, etc. The devices and the formats can’t handle anything but narrative so a simple task like keeping the text on the same page as an illustration (fixed format rather than reflowable) is a near impossibility. And let’s not even get into enhanced ebooks with their tremendous educational potential for children. That potential will never be realized thanks to Amazon’s and Apple’s “lock” on ebooks. I’ve wished for the same software suite you describe but I’ve changed my mind about wanting it to create iBooks/KF8/EPUB. I want to boycott Amazon and Apple. Consumers, libraries, schools shouldn’t be forced to buy their devices when they already own desktops, laptops, and notebooks (I realize they have “apps” so that their books can be read on these) and, again, their offerings are limited to novels. I think the best solution would be a software suite that would afford the user WYSIWYG operability to produce HTML5/CSS/JAVA that could be read on the web or downloaded and read on any computer.

  13. Derrick Schultz

    One possibility is that these startups, rather than starting up, go work for publishers. It’s certainly a lot less sexy, but as Matt MacInnis points out: publishers, in fact, do know their businesses, but don’t always have the technical resources to compete with bigger players like Amazon or Apple.

    • Good point. If that becomes a trend, I think that we will see fewer outsiders founding (or funding) these startups; rather, they’d come from people who already worked in digital publishing in some way, and funding might come from publishing houses and not outside VCs.

      • Rufus Weston

        The point being that most publishers are actually pretty bad at technology, and these start-ups give them the capability to short cut the solution rather than distracting from their core competancies