New E-book Monetization Models Set to Finally Grow

While there’s been explosive growth in e-books, e-readers and pretty much anything to do with digital publishing this year, the entire category still falls significantly short of other forms of content when it comes to making money.

However, news last week that a Spanish company called 24Symbols went into beta on an ad-supported and subscription-based e-book offering shows that digital books may be evolving, emulating other content businesses in finding new ways to monetize.

Let’s take a quick look at how companies monetize various content types:

Table 1: Monetization Models by Content Type

chart1

The chart above shows that the video market is the most evolved, offering digital sell-through, rental, subscription and ad-supported content in a variety of windows.

Music offers some variety, though not as much as video, since there’s no real “rental” market for music. A subscription-based service like Rhapsody’s is the closest analog.

Video games have been dominated by sales, but there’s a growing rental and subscription market, and the casual game market (which has effectively become the social-gaming market) has a vibrant ad-supported business. Zynga is the posterchild here.

But when it comes to e-books, sales have largely been the only game in town. Sure, you can lend e-books, and there’s been strong growth in that capability from both the platforms themselves as well as third-party services like Booklending.com. But e-book lending is not a strategy with which authors, publishers or e-book marketplaces are going to make any money.

So what about e-book subscriptions, which would effectively be a Netflix, Hulu or Spotify for e-books? While some have tried to apply the term to lending services, and some individual publishers have done essentially what would be an equivalent for their books (such as Disney’s e-book club), no one’s really done an all-you-can-eat e-book subscription plan for multiple publishers.

Until now, at least. 24symbols’s beta service would effectively resemble the freemium to subscription model that is popular across other digital content types. If it sticks for e-books, the market for digital reading could expand and provide new ways to access content, which in essence creates new channels to additional consumers:

Table 2: E-Book Monetization Options Outlook by Consumer Type

chart2

To be sure, small companies like 24symbols may find big publishers playing hardball with licensing, so the outlook for new subscription models could be murky in the near term. But I fully expect that bigger players will eventually offer new business models for e-books, with first movers being Google in ad-supported e-books and Amazon or Barnes & Noble launching subscriptions.

But I also expect that in digital e-book subscriptions, we could see the big publishers follow Hulu’s lead and launch their own subscription service collective, where they control access to an all-you-can-eat offering.

Question of the week

Do you think big e-book publishers could launch their own “Hulu for e-books?”
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Michael Wolf

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9 Comments Subscribers to comment
  1. Ben Watson (Microsoft) Saturday, April 9, 2011

    E-Book ‘all you can eat’ subscription plans have been around for a while, at least in the computer books segment. O’Reilly Safari and Skillsoft’s Books24x7 both offer “e-reference library” subscription models. Each include thousands of books from dozens of publishers with authors getting paid, usually, based on the number of pages read of each book that month.

    Ad-supported business models are tricky as most e-readers don’t have the abiltiy to click.

    O’Reilly has also recently launched subscription plans at the individual book level, in part driven by the fact that computer books now need more constant updating as the related technologies are more rapidly updating themselves, especially the cloud versions. ‘Continuous publishing’ goes hand-in-hand with these individual book subscriptions as the old way of releasing new ‘editions’ of a book in order to drive new upgrade purchases is falling out of favour.

    Another interesting trend is building a brand around the author and then adding related online services/products on top of the author’s book. Microsoft Press is experimenting with add on videos, online ‘extras’ (a la ‘DVD extras’ model), online hosted labs exercises, online seminars by the author, author speaking at conferences, author delivering an online course that uses his book etc. as ways to extend the book.

    Sincerely,
    Ben

    Ben Watson
    bwatson@microsoft.com
    Director, Training Products
    Microsoft Learning

    disclaimer: Microsoft Press, one of the groups I manage, has a partnership with O’Reilly.

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