Subscription Model Extends to Book Industry

March 12, 2014

BY:

Eric Brown and Michael Ruddell

Publishers follow the path of music and television.

The book industry is following in the path of the television and music industries by enabling consumers to “binge” on its products.  Several years ago, in order to mitigate financial losses caused by the widespread piracy of its product, the music industry began offering subscription services in which consumers are given access to unlimited music (downloading and streaming) for a flat monthly fee.  Since their inception, the number and popularity of these services continue to grow.  Similarly, Netflix, Hulu Plus, Amazon Prime and others offer the ability to watch unlimited motion pictures and television programs (some originally produced, others licensed) to subscribers who pay a subscription fee.  In book publishing, companies such as Oyster and Scribd allow their customers, in return for a flat monthly fee, to read an unlimited number of ebooks licensed by these companies from publishers.  Not all publishers have made their books available to these services and the success of the subscription services may depend in large part on the number and quality of ebooks they are able to license from publishers and make available to subscribers.  Further, it remains to be seen how authors will fare if their works are licensed by their publishers to the subscription services.  If the music industry is predictive, many authors may find that the income they receive from having their works included in a subscription service does not offset losses suffered from the cannibalization of sales of individual books (whether physical books or ebooks).  However, given the fledgling state of the subscription services, hard data is limited.  In order to assess the financial impact on an author, one would need to consider the financial arrangement between the subscription services and the publisher, and the applicable provisions in the author’s agreement with the publisher.  Some agreements do not specifically mention subscription services, but operable language might reside in provisions that deal with combined works or the manner in which revenues are divided.  Also relevant is the manner in which the publisher allocates the revenue it receives among all of the authors whose works are licensed to the subscription service (e.g., an allocation based on the number of times each book is “read” during a designated period).  Whether or not a given author benefits from the subscription model likely will depend on factors such as the stage of the author’s career, the author’s desire to have greater exposure to the public and the author’s financial circumstances.  A relatively new author with a sparse sales history may benefit greatly from inclusion in a subscription program, while a popular author may find herself sharing in only an allocated portion of an $8.99 monthly subscription fee, after the subscriber has read her entire backlist of books.  Much is to be learned as the subscription model develops and matures.  Please contact Michael Rudell mrudell@fwrv.com or Eric Browneric.brown@fwrv.com  for more information.