Oyster adds e-book store to subscription book model: Watch out, Amazon?

The “Netflix for Books” Has Started Selling Books You Might Actually Want to Read

The “Netflix for Books” Has Started Selling Books You Might Actually Want to Read

Moneybox
A blog about business and economics.
April 8 2015 2:33 PM

The “Netflix for Books” Has Started Selling Books You Might Actually Want to Read

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Look at all that newly available popular fiction!

Oyster

In what’s either great news or terrible news depending on your personal tastes, Paula Hawkins’ The Girl on the Train is now available for purchase on Oyster, an e-book startup, for $12.99. So are several hundred thousand other titles, but Oyster is really playing up The Girl on the Train among its new offerings. “You’ll never have to go anywhere else to get a books [sic], because everything you’re looking for is on Oyster,” the company writes on its blog. “The Girl on the Train? Absolutely.”

Before Wednesday, Oyster existed only as a subscription e-book platform, or “Netflix for books,” as just about everyone likes to call it. Users paid Oyster $9.95 a month and in exchange got unlimited access to the company’s library of roughly 1 million online books. Oyster says that service has grown about 20 percent month-over-month over the past year and currently generates more than 100 million pages read a month. “What we’re doing with this launch is bringing every book in the world into that system,” says Willem Van Lancker, the company’s co-founder and chief product officer.* “We see this as a natural extension of our existing business.”

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Of course, another way to put “natural extension” would be smart decision to start offering on Oyster the popular books that people used to have to purchase somewhere other than Oyster. Previously, Oyster’s library included titles from HarperCollins, Simon & Schuster, and Macmillan, but not other big publishers—like Hachette and Penguin Random House. One common critique of Oyster, as well as comparable subscription book services such as Kindle Unlimited and Scribd, was that the million-odd books in its library didn’t actually include a lot of the books people actually wanted to read. Oyster’s new e-book store, on the other hand, will work with the 10 biggest publishers to carry “virtually any book you can think of.”

Looking to the broader e-book market, having contracts with all five big publishers bodes well for Oyster, especially after the bitter Amazon-Hachette feud that dragged on for months last year (and a new Amazon battle with HarperCollins that could be right around the corner). Oyster declined to say how it makes money or compensates publishers on deals from its e-book store. The industry standard is for the online retailer to take 30 percent of sales and the publisher to get 70 percent, of which a quarter is usually paid out to the author. Publishers and aggregators on Oyster’s subscription platform are paid each time a book is read, with the amount based roughly on the e-book list price.

Van Lancker didn’t want to talk about how much Oyster’s users had been clamoring for new titles, but he did volunteer that about 80 percent of books read by subscribers are found through Oyster’s discovery features (think Netflix-style algorithmic recommendations). Numbers like that would suggest the two-pronged subscription and retail strategy has a lot of potential, especially if Oyster’s algorithms start recommending e-books in its store to the most dedicated readers. Then again, Oyster’s book prices—which Van Lancker described as “competitive”—from a cursory search aren’t all that great. The Girl on the Train is selling for $12.99 on Oyster versus $6.99 on Amazon. Gone Girl on Oyster is $9.99; on Amazon it’s $4.20. Other Oyster-Amazon price comparisons that I searched at random: The Lowland ($11.99 vs. $9.65), The Big Short ($11.99 vs. $9.73), Gods Without Men ($11.99 vs. $9.99).

Anyway, you get the idea. Amazon has long maintained that e-books are highly price elastic—i.e., something that consumers will buy a lot more of as the price drops. Where publishers have asked to set higher prices, Amazon has insisted that keeping the cost low will actually make more money for everyone involved because “the pie is simply bigger.” For now, it looks like Oyster wants to test that proposition.

*Correction, April 8, 2015: This post originally misspelled the last name of Oyster co-founder Willem Van Lancker.

Alison Griswold is a Slate staff writer covering business and economics.