“Netflix for E-Books” Approaches Reality

Back in 2002, a startup company called listen.com had just concluded licensing deals with all of the (then five) major labels.  The result was Rhapsody: the “celestial jukebox” finally brought to life, the first successful subscription on-demand music service.  Rhapsody — whose original focus on classical music must have made it seem like a low-impact experiment to the majors — didn’t get on the map until they closed those deals.*

Eleven years later, something analogous is happening in the world of book publishing.  Last week, the popular document sharing site Scribd obtained licenses to all backlist titles from HarperCollins, one of the Big Five trade book publishers (along with Penguin Random House, Simon & Schuster, Macmillan, and Hachette), for an $8.99/month all-you-can-read subscription service.  It should only be a matter of time before the other four trickle in.  The service had been in “soft launch” mode since January with catalogs from smaller publishers such as RosettaBooks and SourceBooks.

Why Scribd and not Oyster or any of the others?  Because Scribd already has a huge user base — 80 million monthly visitors — making it an attractive existing audience instead of a speculative one.

Scribd started in 2006 as sort of a “YouTube for documents.”  The vast majority of the documents on the site were free; many were individual authors’ writings, corporate whitepapers, court filings, and so on.  Scribd also enabled authors to sell their documents as paid downloads (DRM optional).  Eventually some publishers put e-books up for individual sale on the site, including major publishers in the higher ed and scholarly segments.

The publishing industry has been buzzing about the possibility of a “Netflix for books” for a couple of years now.  A few startups, such as Oyster, have built out the infrastructure but have only gotten licenses from smaller publishers and independent authors.  At least for now, only Scribd has a major publisher deal; that will make all the difference in taking the subscription model for e-books to the mainstream.  Like it or not, major content providers are key to the success of a content retail site.

From a technical standpoint, Scribd’s subscription service has more in common with music apps like Rhapsody and Spotify than with video services like Netflix.  Like those music services, Scribd is mainly a “streaming” service, a/k/a “cloud reading,” in that it retrieves content in small chunks instead of downloading entire e-books but also gives users the option of downloading content to their mobile devices.  (Thereby enabling me to use it on the subways in NYC.)  Files stored on mobile devices are obfuscated or encrypted, so that users will not have access to them anymore if they cancel their subscriptions.  And also analogously to the interactive streaming music services, Scribd uses a simple proprietary “good enough” encryption scheme instead of a heavyweight name-brand DRM technology such as the Adobe DRM used with the Nook, Kobo, Sony Reader, and Bookish systems.

Although Scribd is the first paid subscription service with major-publisher licensing, it’s actually not the first way to read major-publisher trade e-books on a time-limited basis: OverDrive introduced OverDrive Read, an HTML5-based cloud reading app for its public library e-lending service, a year ago.

In fact, OverDrive Read is currently the only (legal) way to read frontlist e-book titles from major publishers through a browser app on a time-limited basis.  And that leads to an important difference between Scribd’s service and interactive streaming music services: HarperCollins is only licensing backlist titles, not frontlist (latest bestsellers).  From the publishers’ point of view, this is a smart move that other Big Five publishers will most likely follow.

In that respect, Scribd could become more like Netflix than Rhapsody or Spotify, in that Netflix only offers movies in the home entertainment window — Hollywood’s rough equivalent of “backlist.”  In contrast, the major music labels licensed virtually their entire catalogs to interactive streaming services from the start, save only for some high-profile artist holdouts such as the Beatles and Led Zeppelin.  Instead, the record labels have had to settle for (hard-won) price differentiation between top new releases and back catalog for paid downloads.  Just as readers who want the latest frontlist titles in print have to pay for hardback, those who want them as e-books will have to buy them.  (Or borrow them from the library.)

*The story of Rhapsody is somewhat sad.  For music geeks like myself, the service was a revelation — a truly new way to listen to and explore music.  But Rhapsody slogged through years of difficulty communicating the value of subscription services to users amid numerous ownership changes.  Subscribership grew gradually and plateaued at about a million paying users; then it suffered unfairly from the tsunami of hype around Spotify’s US launch in 2011.  It didn’t help that Rhapsody took too long to release a halfway decent mobile client; but otherwise Spotify’s functionality was virtually identical to Rhapsody at that time.  Now Rhapsody is struggling yet again as it attempts to expand to markets where Spotify is already established, training its 24 million users to expect free on-demand streaming with ads while losing money hand over fist.  And in the latest insult to its pioneering history, a 6,000-word feature on Spotify in Mashable — a tome by online journalism standards — mentions Rhapsody not once.

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