Amazon breaking new ground again

Amazon have disrupted the book market again through their service called "Kindle Unlimited". The service gives you access to more than 600 000 books to read for a fee of $9.99 a month. This is great if you do a big amount of reading as the monthly subscription fee is about the cost of one book. The downside is that you won't find any recent titles or titles from the top 5 publishing houses.


There are two other major sites that offer similar services, Oyster and Scribd. These sites have a smaller book selection but they have deals with some of the major publishing houses, meaning that they have lower quantity but higher quality compared to Amazon. According to the Scribd website they have 80 million active readers every month. Oyster only started in September last year, so it is still very young compared to Scribd who started in 2007.


The theory behind the model is that these subscription services will get more readers and higher profits through a library of books as compared to selling individual books. The key to the business model is a large numbers of readers, enough readers for authors to be willing to receive less per book reader on a subscription service as compared to a reader buying the book. As it stands publishers are only willing to allow older books to be available on the platforms.


For Amazon their service has the advantage in that they have a large customer base already which makes it easier to market the new offering. Another advantage Amazon has is that they offer audiobooks with the package, which could be a big plus. According to some rough stats and assumptions, the average American will only read 4 books a month (if that), which makes an unlimited access to books not very appealing. Audio books make it easier to consume content on the go, all you need to do is put your headphones in.


The big hurdle for Amazon will be getting the big publishers on board. Currently there is a mini war going on for how books will be priced going forward, where Amazon and the publishers are at a standoff. My personal view is that publishing houses have limited time until they become largely irrelevant in the industry. Authors will just go straight to the retails, cutting out the middle man and allowing book prices to drop, and hopefully more sales for the author. The internet is eliminating middlemen in other industries and I think it is a matter of time until it happens in the book industry.


Given the selling power of Amazon and their willingness to suck up losses in the short term, I think that they will be able to get the big titles sooner than their competitors, which should lead to the largest subscriber base which will lead to a stronger standing when it comes to getting new titles; which is where the cycle starts again. Amazon aim to be the biggest and this new "industry" is an example why they need to be.