Unlimited Subscriptions: Five Things You Need to Know

One of the worst kept secrets in recent history was finally unveiled last Friday when Amazon announced their Kindle Unlimited program. It has the potential to become yet another terrific service for consumers but many publishers and authors are less than enthusiastic about it.

Here are five important points everyone in publishing should keep in mind when analyzing Kindle Unlimited and the other all-you-can-read subscription services:

1. Amazon just legitimized the model - I signed up for Oyster several months ago and I love it. When I mention Oyster and the all-you-can-read model to publishing industry friends they treat it like it's a fad that will soon disappear. Now that Amazon is in the game it's time for everyone to realize that the model is here to stay, regardless of what the naysayers think.
2. It's not for everyone - The industry's 800-pound gorilla just showed up but I don't expect a major impact in the short term. Amazon's title assortment is pretty limited, particularly with no Big Five participation. That's why I have no plans to ditch my Oyster subscription for Kindle Unlimited. The other important fact here is that a large percentage of book buyers will prefer to own their content, not rent it. Everyone didn't stop buying tracks on iTunes when Spotify took off, so don't look for any seismic shifts here either.
3. The pioneering startups are now on borrowed time - Even though others are probably also sticking with Oyster (for now) I do worry about the long-term prospects for them as well as Scribd. Neither of those startups has been able to create a household brand name yet and now they face competition from one of the most well known brands on the planet. I figure both of them have about 18 months to either come up with a unique value proposition or fade away. Anyone could have predicted Amazon's entrance in this space and since competition is always a good thing I'm hoping both Oyster and Scribd have something special up their sleeves.
4. Publisher financial models will evolve - This is the most interesting aspect of all. The business models vary among the providers and some publishers are undoubtedly getting better terms than others. In general, a publisher gets paid when the consumer reaches an agreed-to reading threshold in a book. Those percentages are as low as 10% and 20% in some cases. In some models the amount paid to the publisher is the same they would have received if the ebook were purchased, not rented, so it's a function of the title's digital list price. In other models a percentage of total revenue is placed in a pool and paid out to publishers based on consumer reading frequencies and thresholds. I have no doubt Amazon will sweeten the pot to lure more publishers into Kindle Unlimited. Publishers need to remember that that once the Kindle Unlimited platform gains traction Amazon will do what they always do, renegotiating so publishers receive less and Amazon keeps a bigger piece of the revenue pie. Sound familiar?
5. Publishers can control their own destinies - Many of the bigger publishers who aren't participating in Kindle Unlimited already realize the point I made in item #4. But what they might not realize is that they have other options. Just because they're concerned about Amazon doesn't mean they should avoid the all-you-can-read subscription model. In order to ensure future competition in this space I hope these publishers will sign up immediately with Oyster and/or Scribd. In order to keep Amazon honest we need at least one of these startups to survive.