Oyster shutting in ebook subscription shakeout as staff go to Play for Google

Ebook subscription service Oyster Books is shutting down in a mysterious deal with Google which will see Oyster staff moving to work on Google Play Books.

It isn’t clear whether Google really has any intentions to move into the vexed ebook subscription sector but the Oyster boss’s goodbye message points specifically towards a future focus on reading ebooks on mobile phones.

The message on the Oyster Tumblr blog claims the firm launched two years ago with ‘a simple idea — to build a better way to read on mobile’.

I can’t say I had noticed this particular emphasis on mobile phones, I always thought the whole idea was that it was a wide-ranging library service which let you read on any device — which is what it still says on its website: ‘Download your books to Oyster’s award-winning apps for iPhone, iPad, Android, Kindle Fire, Nook HD, and the web.’

The farewell message goes on to say the vast majority of reading on Oyster happens on a mobile phone and they ‘believe more than ever that the phone will be the primary reading device globally over the next decade. Looking forward, we feel this is best seized by taking on new opportunities to fully realize our vision for ebooks.’

It adds (shockingly using sunset as a verb): ‘With that, we will be taking steps to sunset the existing Oyster service over the next several months. If you are an Oyster reader you will receive an email personally regarding your account in the next few weeks. We look forward to sharing more details soon, but rest assured, your account will continue to operate normally in the meantime. If you’d like to request a refund, please contact us at refunds@oysterbooks.com.’

Oyster has made no mention of what happens to payments to self-published authors who have their ebooks on Oyster through distribution deals with Smashwords and Draft2digital. However, Smashwords is on the case and has revealed that Oyster has told them it will continue operating as normal until ‘some time in early 2016’ when it will shut down. Until then, Smashwords says it will continue to deliver new books and updates to Oyster, so it looks like business as usual for the next few months.

Oyster has a million ebooks available for loan, with many from the Big 5 traditional publishers which have shunned Amazon’s Kindle Unlimited subscription service. In April this year, Oyster added an online shop selling ebooks and changed the name of the subscription service to Oyster Unlimited but many of the ebooks on sale at Oyster were double the price of the titles at the Kindle store.

At the time, Oyster claimed its members read a million pages a month, which can be compared with the estimated figure of 2.3 billion pages for Kindle Unlimited in August.

That would see the Oyster total at about 0.04% of the KU figure, although it’s difficult to make an accurate comparison as KU operates on KENP pages (Kindle Edition Normalized Pages) and I don’t know what model Oyster uses but even if you doubled it, it wouldn’t make 0.1%.

The ebook subscription service business looks to be a sector where it’s virtually impossible to make a decent profit, even where you dominate the market.

On my calculations, Kindle Unlimited must now have over a million members, which means it should be netting over $10 million a month in subscriptions ($9.99 a month) but it’s also shelling out nearly $12 million a month to authors and publishers ($11.8 million in August).

Now this, of course, is Amazon and Amazon isn’t your typical profit and loss company, Amazon doesn’t really care so much about making a profit as owning the market and it’s succeeded in doing that pretty emphatically since it launched Kindle Unlimited just over a year ago.

The firm might be making a profit of sorts if, for example, it’s actually got 1.5 million members (unlikely), then it might be pulling in $15 million a month and making a profit of $2 million to $3 million a month, which would still be small change to a business like Amazon.

It’s much more likely that this is a break-even business for Amazon in a sector it felt it had to enter to defend its core Kindle business and which still offers it the chance to cross-sell other products and services.

It’s probably impossible to make much of a profit in ebook subscriptions unless payments to authors and publishers are cut so low that eventually writers will withdraw their books, or subscription prices are increased considerably which would reduce the number of members.

Oyster had a particularly perilous payment model in that it paid a standard royalty for each book borrowed of around 60% of list price once 20% of a book was read. This is obviously not a sustainable method of payment, particularly for popular books.

This was illustrated by rival ebook subscription service Scribd when it dumped lots of romance and erotica titles from its line-up in July because they were too popular with readers and cost the company too much.

Kindle Unlimited, which comprises mainly of self-published ebooks, operates largely on a different basis in that Amazon sets a KDP Global fund each month and then pays out from that fund to authors according to the number of pages read for their books. This payment can be adjusted, generally downwards, according to the various economic factors. The latest figure for August showed a 10% fall from the payment per page rate for July.

Most of the traditional publishers, including all the Big 5, do not take part in Kindle Unlimited, although it is understood that, for such publishers, Amazon offers a KU payment at the same rate as the royalty on an outright sale.

It might be fortunate for Amazon that the Big 5 aren’t in KU as the trad publishers have reverted to high pricing under the agency model and the cash strain of paying out, for example, $7 per borrow on a best-seller could be crippling even for a giant company such as Amazon. In fact, if the Big 5 really wanted to put pressure on Amazon they should sign up for KU.

The Oyster shutdown leaves Scribd as the sole main ebook subscription service other than Kindle Unlimited. Entitle shut down recently, although this was a different sort of subscription service as it offered deals including two books a month at $14.99 which included downloading and permanent ownership. Oyster, Scribd and Kindle Unlimited all offer only borrows and, presumably, Oyster members will lose all their borrowed books when the service shuts down.

A Spanish company called 24symbols has been growing steadily worldwide in the last few years and now claims to offer around 300,000 titles. It has an interesting freemium model in that Premium membership costs €8.99 a month (about $10) but it also offers free books available to users who are registered but not paying subscribers.

The company’s FAQs state it doesn’t accept self-published books but the site does include books published through Lulu so it should be possible for self-publishers to distribute via Lulu. I’ll be taking a closer look at 24symbols in a post shortly.

There are also a couple of Scandinavian-based subscription services, including Storytel, which offers a range of audiobooks, but does not cover the US or UK at present. The Storytel subscription fee is 169 Norwegian kroner a month, which works out at around $20 or £13. Mofibo is an ebook subscription service for the Danish and Swedish markets at present with expansion plans to cover the Netherlands. It has only about 10,000 ebooks available at 99 Danish kroner a month (nearly $15 or $9.60).

Oyster and Scribd have been bankrolled by venture capital, with Oyster getting $14 million in funding in January 2014 while Scribd has raised around $25 million from VC firms.

There aren’t any details on just why Google has stepped in to take on the Oyster staff, although speculation is rife. Google Play Books has, by comparison, with Kindle, Kobo and Nook, been something of a backwater at best and regarded by many self-publishers as an irrelevant fiasco.

However, there have been stirrings in this area in Googleland recently, notably with the introduction of the specially designed Literata font as the default typeface on its Google Play Books app.

It could be that Google is aiming to use the Oyster staff’s undoubted expertise to finally make the company’s ebook business a serious player, but whether that’s in ebook subscriptions or straightforward sales remains to be seen.

Oyster opens online shop and goes Unlimited

Roses are dead for Scribd as it dumps popular romance novels that cost it too much

Kindle Unlimited KENP payput for August falls by 10%