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[Guest Post] Why the New York Times article ‘E-Book Sales Slip’ is wrong and why Oyster “the Netflix for books” closed its doors.

November 24, 2015 by marquina iliev Leave a Comment

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In a guest post by Neil Baptista, CEO of Riffle, he tells us why the New York Times article “E-Book Sales Slip” is wrong. He also discusses why Oyster, “the Netflix for books” closed its doors.

Riffle Guest Post: New York Times article E-Book Sales Slip

 

Back in September the New York Times reported quite dramatically “The Plot Twist: E-Book Sales Slip, and Print Is Far From Dead,” a sort of ode to publishers and indie bookstores who also proclaimed that the much feared “digital apocalypse” hadn’t happened to books. The day before the article broke, a highly publicized venture capital funded startup called Oyster— touted by its founders as “the Netflix for books”—abruptly announced that it was shutting down, waxing in a blog post that they would be “taking steps to sunset” their service.

 

As I work for a startup in the book industry, I got a bunch of emails asking me why these counterintuitive events were happening. With market penetration of smartphones over 80% in the U.S., and publishers proclaiming in the Wall Street Journal that “the future of digital reading is on the phone,” how would anything related to ebooks be faltering?

 

I’ve answered a couple of those questions here and hope to clarify some of the (at times wildly inaccurate) speculation that came out in the tech blogs.

 

Are people reading fewer ebooks?

When we talk about book sales, it’s important to distinguish between unit sales and revenue. Units tell us how many individual books people are buying, while revenue evidently is the amount of money being made on those books. What was reported in the New York Times was a decline in sales (i.e. revenue) and that was inaccurately conflated with fewer ebooks being read. There are a few reasons why this is misguided, the most prominent of which is that the New York Times based their piece on monthly sales stats from the Association of American Publishers (AAP), some 1,200 publishers that represent less than half of the industry’s total ebook revenues. Revenue from Amazon’s indie book sales is not captured by the AAP and as reported in the Wall Street Journal, those were up in both units and revenue in the same time period. In effect this suggests there are more ebooks being read, but with less of the overall ebook revenue going to the AAP members. To compound things, Big 5 publishers, who represent the bulk of bestselling titles on the New York Times recently returned to ‘classic agency’, causing a general increase in retail pricing of all of their ebooks. This price change is fueling speculation that readers are instead reading less expensive alternatives put out by indie authors in Amazon’s Kindle Direct Publishing program.

 

So, the real plot twist may be that the data is hinting at a shift in the ebook market, which the New York Times did acknowledge in their caveat “The declining e-book sales reported by publishers do not account for the millions of readers who have migrated to cheap and plentiful self-published e-books, which often cost less than a dollar.”

 

So, are people reading dramatically fewer ebooks and returning to print in droves? No. Michael Cader, founder of the essential publishing daily Publisher’s Lunch, perhaps put it best when he wrote, “So ‘Print books not dead’ now officially joins the pantheon of comic tropes, somewhere between the Monty Python sketch and Generalissimo Francisco Franco.”

 

The other questions I received focused on what happened to Oyster?

Slate speculated that Oyster had tried to “take on Amazon” and lost to the industry giant. But in this case the truth doesn’t have a lot to do with Amazon. The two services are fundamentally different, as Amazon’s Kindle Unlimited does NOT include books from the “Big Five” publishers – Hachette, HarperCollins, Simon & Schuster, Macmillan, and Penguin Random House. Oyster, on the other hand, launched well ahead of Kindle Unlimited, and offered books from three of the Big Five publishers, including phenomenally successful household titles like American Sniper, The Perks of Being a Wallflower and Beautiful Ruins as part of its catalog. It had gone through the possibly herculean effort of negotiating a huge selection of ebooks from established names and big publishers.

 

So why did Oyster fail?

Wired lamented that “it’s not immediately clear exactly why the company is shuttering its operations” but that the founders will continue to pursue “their vision for ebooks” by going to work at Google. However, for Publisher’s Weekly, the Bookseller or most people in trade publishing, it was crystal clear why Oyster didn’t work out. And—counter to what the NY Times article might have you believe—it has more to do with readers having voracious appetites for ebooks, than the opposite being true.

 

Put simply, Oyster paid publishers a unit price for books as soon as a certain portion of an ebook was read. That meant that Oyster was ‘buying’ each individual book being read on its service, despite the fact that the readers saw their subscription as unlimited. So, if for example an Oyster subscriber read five books per month, then Oyster was paying a publisher for five books. The problem was that five ebooks cost vastly more than the $9.95 per month that Oyster was collecting from their readers. You can see where this is headed.

 

Ironically, Oyster may have worked out fine if its users had consumed fewer ebooks, i.e. if the majority of its subscribers were reading one book per month. However, the service was—unsurprisingly—most appealing to high volume genre readers, who were apparently reading far more than expected. There shouldn’t be much mystery as to why Oyster’s model wasn’t sustainable, so while Amazon-bashing seems de rigeur, let’s not blame Amazon here.

 

Finally, let’s not blame the publishers. The Financial Times scolded “Ebook service Oyster to close after resistance from publishers.” Hold on, three of the Big 5 participated and even lauded Oyster as a positive new distribution channel and great environment for discovery. The reality is, generally, the trade publishers don’t actually own the rights to sell ebooks under any terms other than per unit. That model is based on their contracts and compensation to agents and authors. So, at least in book publishing, the compensation of the creator is still intact, hence the ‘limitation’ of Oyster’s approach. But, this is nothing new and was certainly the case when the subscription service was established.

 

When I’m not answering questions about the idiosyncrasies of the book industry I’m trying to help people find and read amazing books at Riffle. Get Inspired. Read more.

 

This article was originally posted on Medium.

New York Times Fallacies and Oyster With No Pearl. https://t.co/BOdg297qRS via @Marquina

— Marquina (@Marquina) November 24, 2015

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Filed Under: Ebook Sales, Kindle, Oyster

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