Venture cash firms shell out $14 million to open up Oyster ebook subscription service

Ebook subscription service Oyster Books has picked up a stunning $14 million in venture capital funding to back its bid to scale up its operation.

The new cash injection represents well over $1 million per employee as Oyster has only 10 staff at present. The company, which is based in New York, was set up two years ago after raising an initial $3 million. It only went live with its service last year, launching an iPhone app in September and adding an iPad app a month later. It plans to release an app for Android devices this year.

The company offers an unlimited subscription service for books at $9.95 a month, with over 100,000 titles from more than 800 publishers, including some of the biggest firms. The service is only available in the US at present as book rights are granted on a regional basis.

Oyster doesn’t feature brand new releases but aims to provide access to titles about 90 days after their initial release. Users have no permanent access to books when they stop subscribing and DRM (digital rights management) is applied to the books.

The new funding round features Highland Capital Partners, which is based in Cambridge, Mass, which joins initial investor Founders Fund.

Rival ebook subscription service Scribd has raised a total of around $25 million in venture capital.

Oyster’s app operates using reflowable epub books files and jpeg images for covers. The company doesn’t deal direct with authors but they can get access to the service through Smashwords which has deals with both Oyster and Scribd.

There are questions over the long-term viability of ebook subscription services. The terms offered to authors through Smashwords partnership deals are attractive, with a general rate of 60% of the ebook price being paid once at least 20% of a book has been read but some publishers are sceptical that an unlimited book offering can be profitable for the subscription service firms in the long term.

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