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Hachette CEO Arnaud Nourry Raises Questionable Arguments Against Subscription eBooks

8385443316_2bb287099b_bPaid monthly subscriptions may be an established part of the music and video markets but the book publishing industry is still less than enthused with the business model.

The Bookseller published an interview yesterday where Arnaud Nourry, the CEO of Hachette Livre, where he discusses ebooks, the publishing industry, and other topics.

One part in particular caught my eye. Nourry shared his justification for keeping Hachette Livre out of the subscription ebook market:

We now have an ecosystem that works. This is why I have resisted the subscription system, which is a flawed idea even though it proliferates in the music business. Offering subscriptions at a monthly fee that is lower than the price of one book is absurd. For the consumer, it makes no sense. People who read two or three books a month represent an infinitesimal minority.

That doesn’t really make any sense, not when you think about it from Hachette’s perspective.

Nourry  is avoiding the subscription ebook market because (as he sees it) most people don’t read more than a single book a month. I think he meant buy, not read, but in either case I would think that the non-reader or non-buyer is exactly the type of person which makes the ideal customer for subscription ebook services.

The non-reader or non-buyer is not a customer right now, so there is nothing to lose by recruiting them into a subscription ebook service. IMO, they would make the ideal subscriber.  They’ll pay $10 a month for a subscription which they won’t use.

That money will end up in the pockets of the subscription service, but some of it can be diverted into Hachette’s pocket via upfront fees. That’s exactly what the movie studios do, and in this case it makes good business sense.

This isn’t the first time the CEO of a major publisher used consumers as an excuse for avoiding this market. Penguin Random House UK Tom Weldon made a similar argument last November which made as little sense then as Nourry’s argument does now.

We have two problems with subscription. We are not convinced it is what readers want. 'Eat everything you can' isn’t a reader’s mindset. In music or film you might want 10,000 songs or films, but I don’t think you want 10,000 books

Neither argument really makes any sense, not when you think about it from publisher’s perspective. If consumers don’t want it then there’s no risk that it will cannibalize sales. This makes it safe to experiment, wouldn’t you agree?

images by docoverachiever


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fjtorres April 3, 2015 um 1:07 pm

He’s not totally wrong…

The distinction between buyer and reader is real, especially when it comes to comparing sales vs rentals. And it is most noticeable when it comes to avid readers.

Casual buyers are typically bestseller bandwagon buyers. They are the most likely to buy books they never finish. But they usually at least start them. There is some revenue loss when they don’t hit the payoff mark but it’s not too bad.

More problematic: avid readers are typically *hoarders* with big TBR lists, books purchased and paid for to be read… someday.

And *that* is his problem: Subscriptions are a just-in-time delivery system. A typical 3 book-a-month reader might buy 4,5, or more books a month but if they switch to sales the publisher only gets paid for the ones they actually read, regardless of where the money comes from. They are trading 5 sales for 3 reads. That is going to hurt his quarterly financials and his bosses in Paris aren’t going to be happy.

The ratio of reads to sales varies from person but regardless of the variation, the total number and value of checkouts *will* be lower than the number and value of sales without subscriptions in the mix.

In a world of subscriptions there is no need for stockpiling, not even for rereading.
There *will* be a net loss of revenue in the total system.

fjtorres April 3, 2015 um 1:09 pm

Whoops, I meant "if they switch from sales to subscriptions".

Maria (BearMountainBooks) April 3, 2015 um 1:28 pm

There is some truth to what he says. When I first started selling books, I largely went after those who actually read–thinking to increase visibility and generate even more sales from fans. But one of the problems with this is you miss those who buy and buy and buy and rarely read. They are the types who probably spend MORE on books than avid readers. Their habit is more of a shopping one. To target those readers you need sales, visibility and a catchy/eye-catching product. I am not sure a publisher or author can make it without the impulse/hoarder buyer.

That said, that type of buyer isn’t likely to buy a subscription and if they do, he’s right. The subscription service makes the money, not the authors or the publisher (by and large). I’ve talked to a few people who do the subscription but don’t continue with it. Most of them drop the sub because they find they read from multiple sources–they have books on hold at the library that have to be read this month, they have a shipment coming in they want to get to and of course, there is always a gem waiting.

The model is valid, but I am one who thinks she has to be everywhere possible to attract the low-lying reader and the high flyer. :>)

fjtorres April 3, 2015 um 1:51 pm

Most of the testimonials I see from people who really like Scribd, Oyster, etc is "I’m reading more and buying/spending less."

BPHs base all their decisions on reader spend so anything that reduces spending by the biggest buyers is officially A Bad Thing. Hence the Amazon Wars.

Maria (BearMountainBooks) April 3, 2015 um 1:55 pm

I’ve seen that too from those who go on to buy a subscription. One of the ladies in my cozy group bought into the KU. She feels she has to read from there to get her monies worth. Some of it is what you like to read. I had a year long sub at SCRIBD. Selection is good, interface isn’t so great. After reading through my top five or six "finds" I started doing a lot of sampling and not finding the books I wanted to read. I didn’t want to just shop there, I wanted to read what I wanted to read and more often than not, they didn’t have that book. A subscription price for me would have to be down around 3 dollars a month to make sense because there would be months when I simply didn’t find what I wanted on that particular venue.

Nate Hoffelder April 3, 2015 um 1:58 pm

Are they actually buying less? My experience with Netflix was that it filled a want that I couldn’t otherwise afford to pay. I was borrowing videos which I would never have bought, just like before Netflix I rented videos I would never have bought. Similarly, I would use Scribd to read books I never bought.

P.S. Hmmm. Maybe book publishing is balking at subscriptions because it never went through the rental phase (and because it’s still pissed about libraries)?

Maria (BearMountainBooks) April 3, 2015 um 2:06 pm

Reading probably takes more time than videos, for one. But I did read a few things at SCRIBD I wouldn’t have read otherwise–they were there and I had the subscription so I shopped there. But that only lasted a couple of months. Reading on my laptop via their app wasn’t all that great and I kept coming across a book I wanted to read that wasn’t on SCRIBD. I’m really not the target audience.

A friend of mine won 3 months, plus an extra 3. She is an AVID reader–two or more books a week. She has audio going in the car and a separate book going in ereader or paperback. She just couldn’t be bothered with figuring out where to run the app (her ereader is just eink not a tablet). Then to have to sort and find out if they had the audio or book she wanted to read just never worked for her.

So some of the issues are going to be Selection and Readability. If a reader is already reading on a tablet or supported device, it will obviously work better. But I can’t download to my kindle and that’s a pretty big non-starter right there. I’m not buying a tablet to support a subscription. If more publishers join such that most books can be found on these subscription sites AND the apps become more usable, they’ll do better.

In any case, I don’t think they will go away either. There is a convenience factor to them and some possible cost savings.

Juli Monroe April 3, 2015 um 4:09 pm

I’ve run my numbers several times, and after more than a year with Scribd, I’m not buying less. In fact, I’m buying slightly more. However, I am more price conscious, and I’m more likely to wait for a sale price since I’ve always got something to read. There’s no scarcity now, which is different than pre-Scribd.

I read enough in Scribd each month to more than justify the cost. I love it when I can find a non-fiction book I need to read for my business because often just one of those will pay for my subscription for the month.

fjtorres April 3, 2015 um 4:35 pm

When it comes to media consumption, the primary metric is attention-hours. Even with infinite money, you can’t consume more than your available time allows for. And that includes all forms of media; an hour spent watching the Flash is an hour you’re not reading, or vice versa.

Digital media has already changed TV and music consumption from appointment viewing or listening to on-demand consumption and books are in transition. The first phase is the end of out-of-print and the compulsion to "buy before it goes away" which is still with us to an extent but it is slowly giving way to wishlists and just-in-time buying (buy, download, start reading).
That is bad enough for publishers, both traditional and indie, because once people reduce stockpiling total sales will go down. If you figure 20% of 2014 sales went unread and half those buyers cut back buying until they dent the TBR pile, you could see a 10% drop in sales without any drop in reading time. Or without shifting to subscriptions.
Now add in subscriptions…
Subscriptions are great for exploring, even better than permafree or $0.99 ebooks. Not only do people get to read as much as they have time for, they can try out new genres, new authors… risk free. But reading time is still finite. Unlimited exploration reading means less time for the familiar. It means a shift in behavior. It means less buying because there is less pressure to "buy now!" or "buy for later" but also if the reader is trolling the subscription catalog they aren’t scanning the for sale catalogs. Triple whammy on new releases; less urgency to buy at launch, less visibility overall, less inclination to buy anything. At a minimum, yet more pressure on pricing. At worse, a moratorium on purchases.

Video is different because video sales developed in parallel with rentals and digital has mostly cannibalized rental. Collectors still buy, mostly because the physical media formats provide some added value.

Books never developed a rental arm and the value add favors digital. Collectors will still buy but on books as in video, collecting is a small fraction of the market.

I think it’s pretty clear that if the subscription services don’t collapse from defection of casual readers they will cannibalize at least a portion of the book sales business. And if you’re a BPH exec, *any* decline in sales is going to annoy the HQ overlords.

Now S&S thinks they can use subscriptions to monetize the midlist catalog and keep indies at bay but anything that reduces indie sales is also going to reduce the sales of the other BPHs so they’ll be under pressure to stop it from the rest of the Cartel.

Hachette’s comments might just be the first signs of such a campaign.

For now, few

Maria (BearMountainBooks) April 3, 2015 um 4:44 pm

Nicely put. And it’s already happening and has been for some time (via free books, which cannibalized 99 cent sales, etc). But just because it is happening isn’t a reason to ignore it or not have a strategy. The pie may be shrinking, but it’s important to stay in the game. You aren’t going to get lucky if you don’t play at all.

Eric April 3, 2015 um 6:21 pm

My understanding is that once a book on a subscription site has been read up to about 20-40% (varies depending on who you talk to) the publisher then gets the full price for the book. It seems to me that under the subscription model, Amazon (unless you buy into KU) and booksellers lose, not the publishers.

Maria (BearMountainBooks) April 3, 2015 um 6:31 pm

That’s assuming the books get sampled/read that far. Ask most of the indies in KU (amazon’s sub model) and they’ll tell you it isn’t working out too great. Several have been breaking up non-fiction titles into more books to get paid better (because on Amazon each author makes the same amount per book read, regardless of genre/size/etc). Even if that book is 9.99 in the store, the author gets whatever Amazon is paying that month.

SCRIBD is better because you get the commission based on the price of the book, however, remember that the author and publisher lose out on all those people who are buyers and not readers. They only get paid for actual reads–not those who stop and get the best sellers, flip a few pages and go shopping and pick up another book. That segment of buyers is large enough (non-readers, but buyers) that trying to make it without them is probably an unpleasant thought for a CEO.

Kobobooks put out an article detailing sales versus reads (ereader reads). That’s not to say they were able to count every single read accurately (and some may go back and finish the books) but it was still quite telling–there are plenty of buyers who don’t do a ton of reading.

Loïc April 4, 2015 um 11:14 am

The subscription model is not original for books: it already exists and works perfectly in libraries. And in some cities, public libraries are free, paid by taxes. I do not understand how it could not work as it has been working perfectly for centuries. Making the whole thing electronic, virtual, cyber or whatever is just creating an extension of the library model.
What does not work in the current iterations of the online subscription model is that the legal offer is still of lesser quantity than illegal copies. You get less choice of books for more money. While it is hard to find a good pirate copy of a paper book, it is damn easy to find perfect illegal copies of so many books. It’s the Netflix syndrome. While Netflix contains much stuff, it does not contains everything and as long as movies and series rights are negotiated the way they are, it will not change.

fjtorres April 5, 2015 um 1:24 pm

The question isn’t whether subscriptions are good for consumers; what Nourry is saying is they aren’t good for *publishers*. He’s long made it clear consumer interests are the furthest thing from his mind. And considefing how the BPHs have long been opposed to library ebooks comparing subscriptions to libraries (a barely necessary evil in their eyes) isn’t going to earn you props with them.
Here, try this:

Greg Stranberg April 6, 2015 um 12:06 am

One of the issues with libraries is new releases and the limited supply. A wait of a couple months might turn you off and cause you to buy. With KU, there’s no limit in the supply – the book is there and you can get it. Now you get a borrow instead of a sale. Unless you’re in the top 10%, the visibility boost isn’t going to make up for the lost earnings.

Some people might be doing KU because they have limited budgets or just want that vast supply. Maybe 'quality' isn’t important or isn’t affordable. I think most can agree that subscription models are hurting more than helping, at least that’s the consensus I get from the blogosphere. I’ve been lucky to offset those eBook losses with POD sales, but I don’t think that’s sustainable long-term as did a lot of those eBook to print conversions this year.

Tough times.

Three Stats for Book Publishers on the Mobile Future | Digital Book World April 6, 2015 um 8:20 am

[…] Hachette Still Leery of Subscription Ebooks (Ink, Bits & Pixels) According to Hachette Livre CEO Arnaud Nourry, “offering subscriptions at a monthly fee that is lower than the price of one book is absurd” because, as he sees it, “people who read two or three books a month represent an infinitesimal minority.” Ebook subscription services might beg to differ, and there’s a case to be made that there’s nothing lost in trying to foster that behavior among readers. […]

Marilyn April 6, 2015 um 11:55 am

I haven’t read all of these comments, but I’ve read a lot. They all seem to assume moving to a subscription model involves a third party. Why? Most publishers already offer journal subscriptions so why can’t publishers offer digital book subscriptions? And who says the price has to be so low? Granted, most of these comments are from the Trade side and I’m working with Professional books, but does anyone see my point?

fjtorres April 6, 2015 um 12:36 pm

Visit the website and try to use it.
The BPHs are, maybe, a decade away from being able to field an ecommerce website that works. 😉

fjtorres April 6, 2015 um 12:46 pm

More seriously, check this:

The BPHs definition of marketing is front table payola and making authors pay their way on book signing tours.
Customer service? Not in their dictionary.

Right now, Publishing industry pundits are trying (and failing) to convince publishing to SEO features in their websites.

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