Bookmate & Scribd: Two very Different Business Models for Subscription eBooks
Both Scribd and Bookmate are in the news this past week, raising funds for expansion. While these two companies ostensibly offer similar services in the ebook subscription market, they have very different business models.
It’s widely known that Scribd uses a pay-per-read model, but less is know about Bookmate. I spent a few minutes talking to the folks from this Russian startup earlier this week at BEA 2014, and it is clear that the company has several advantages over Scribd.
Scribd’s deal with publishers was revealed by Smashwords back in December:
For Scribd’s subscription ebook service, authors will earn 60% of the list price on all qualifying reads, and here they’ve added a cool twist. With subscription services, the author or publisher earns credit for a full read when the reader reaches a certain trigger point, measured by the percentage of the book that is read. The first 10% of the book is a free sample, similar to a retailer. Excluding the sample, once the reader reads an additional 20% of the book, a full sale is triggered and the Smashwords author earns 60% of the list price, up to a maximum of about $12.50 per read.
Edit: Those are what authors are paid; Smashwords’s cut of about 10% isn’t included.
The exact terms offered to publishers likely vary somewhat based on the quality of each publisher’s negotiator, so it is unlikely that all 400,000 titles in the Scribd catalog are limited to $12.50 per read. (On the other hand, that $12.50 ceiling might apply to all of Scribd’s catalog; it would explain why Wiley only offers a limited section of titles.) Scribd’s catalog is likely also limited by the size of the advance which they are rumored to be paying to larger publishers; this too may have affected Wiley’s offering.
Scribd charges $8.99 a month for their service, and it doesn’t take an accountant to realize that the numbers don’t add up. All it takes is for the average reader to finish a fifth of an expensive ebook, and Scribd is in the red for a given month.
Is Scribd doomed? Maybe not, but I do think the terms they offered to Smashwords were generous to the point of being financially nonviable.
Bookmate, on the other hand, has a couple advantages that Scribd lacks. It started in a market where piracy was so rampant that publishers had nothing to lose by signing with Bookmate, and it pays publishers from a pool that consists of 50% of its revenues. Safari Online has used a similar model for over a decade, and it does okay.
(Now that I mention it, I would have thought that Scribd could have gained a similar benefit from focusing on markets where Amazon is so rampant that publishers have nothing to lose, but Scribd does not seem to have turned that to their advantage.)
With 300,000 titles from publishers around the globe, Bookmate now has around 1.5 million subscribers, about 7% of which pay around $5 a month for the service. The fee is collected by Bookmate’s partner telecoms,which brings us to another unique advantage Bookmate has over Scribd.
In addition to apps on smartphones and tablets, Bookmate has also developed reading apps for feature phones. This has let them partner with MVNOs including pay-as-you go companies similar to Tracfone here in the US. In some cases, Bookmate’s partners charge on an incremental day-by-day model, not a monthly fee.
While it is almost a truism that everyone has a cellphone, feature phones still outnumber smartphones in a lot of markets, and not everyone in the world has a credit card. Bookmate’s partnerships enable it to access market segments which Scribd cannot touch.
On the face of it, Bookmate is the more viable business model, but to be honest it is too early to tell. Bookmate’s focus on smaller payments and lower income brackets might give it an advantage in building up a subscriber base, but the smaller payments might not equal what Scribd earns from its monthly fee.
Frankly it is too early to tell.