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Kobo Plus Does Not Require Exclusivity, Pays Out Shares of a Limited Funding Pool

Kobo still hasn’t announced its ebook subscription service, but that is okay because I have another scoop for you.

Kobo Plus is now listed as a distribution option in Kobo Writing Life, Kobo’s publishing portal, and I have a copy of the Kobo Plus contract addendum T&C.

You’ll find the text at the end of this post, but the tl;dr version is that Kobo is going to pay authors out of a pool funded by subscriber payments.

The math determining the payment is rather complicated, but I can report that the payment will be triggered when a Kobo Plus subscriber has read 20% of the book.

Also, a book has to be in Kobo Plus for at least six months but there is no mention of an exclusivity requirement.

The payment terms are similar to the terms offered by Amazon for Kindle Unlimited (since July 2015), which pays based on the number of pages read and is funded by a finite pool.

And that is good news for the long-term health of Kobo Plus.

As we learned from Oyster and Scribd, companies need to keep their expenses in line with their income.

Oyster failed, sold out to Google, and then shut down. And Scribd had to gut its ebook service. Both companies learned the hard way that charging a flat subscription rate and paying wholesale was a great way to lose a lot of money.

Kobo has apparently learned that lesson from others' mistakes and has crafted a program that has operating expenses which will scale with its income.

The service is going to launch at midnight (I don’t yet know which day) and is described as being live in the Netherlands and Belgium.


Addendum to the Kobo Writing Life Terms and Conditions

This is an addendum to, and forms part of, the Kobo Writing Life Terms and Conditions as agreed to by You upon registering for the Kobo Writing Life service. Both the Kobo Writing Life Terms and Conditions and this Addendum may be amended by Kobo from time to time.

Subscription Service

1. Definitions

List Price” means Publisher’s provided price for the purchase of a Subscription eBook in the Service Territory, as established in accordance with the Agreement, minus Sales Tax.

Price Factor” means the result, in respect of any month, of (A) the aggregate monthly Subscription Service fees collected by Kobo from Users in the Service Territory in respect of that month, minus Sales Tax, divided by (B) the Reading Activity Value.

Read” means the determination by Kobo using its customary technology that a User has read for the first time at least 20% of a Subscription eBook, excluding its front matter, or such other percentage as may be otherwise agreed in writing on a title-by-title basis.

Service Territory” means the territories where Kobo may include the Subscription eBooks within the Subscription Service (identified in the check-boxes below).

Subscription eBook” means those eBooks designated by Publisher for inclusion within the Subscription Service pursuant to Section 2(b) below, which may include eBooks that are not eligible for purchase by Users under the Agreement.

Subscription Service” means the eBook subscription service offered by Kobo in the Service Territory pursuant to which Users will have the ability to have access to read an unlimited number of eligible eBooks for a monthly subscription fee.

Reading Activity Value” means the aggregate, for each Subscription eBook that has been Read during the month (other than during permitted introductory trial periods), of the number of times the Subscription eBook was Read multiplied by the List Price of the Subscription eBook.

2. Subscription Service – Publisher Rights and Obligations

  1. Grant of Rights. Publisher hereby grants the right to Kobo to include certain eBooks in the Subscription Service in the Service Territory.
  2. Adding and Removing eBooks. Publisher shall designate eBooks as Subscription eBooks by indicating as such within the relevant eBook Metadata. Any book made available in this manner shall remain available for a period of not less than six (6) months. Following such minimum time period, Publisher may, on no less than thirty (30) days advance written notice to Kobo, remove Subscription eBooks from the Subscription Service by modifying the eBook Metadata accordingly. Following removal of a Subscription eBook from the Subscription Service, Kobo shall cease to make available the Subscription eBook for Users to check-out; provided, however, that Users who have already checked out the Subscription eBook will remain entitled to access it.

3. Subscription Service – Kobo Rights and Obligations

  1. Operation of Subscription Service. Kobo shall have the right to include the Subscription eBooks within the Subscription Service offered to Users in the Service Territory. Kobo may offer the Subscription Service either directly to Users or indirectly through third parties. Nothing herein shall oblige Kobo to offer or to continue to offer the Subscription Service or include any or all of the Subscription eBooks as part thereof. Kobo shall be solely responsible for administering all aspects of the Subscription Service, including technology operations, reporting, and billing and collections. Kobo shall be solely responsible for all business relationships with Retailers, Users and other third parties in relation to the Subscription Service, including fees and charges applicable thereto.
  2. Security System. Kobo shall maintain the Security System in respect of Subscription eBooks made available to Users pursuant to the Subscription Service as described in the Agreement. Notwithstanding the foregoing, Kobo will encrypt all Subscription eBooks using Kobo’s proprietary digital rights management technology and no other method.
  3. Trial Period. Kobo may offer potential new Users of the Subscription Service an introductory trial period of not more than thirty (30) days, during which limited time the Users may use the Subscription Service in the same manner as subscribing Users. No amounts will be payable to Publisher in respect of Subscription eBooks Read by a User during a trial period, and all data pertaining to such activity shall be omitted from the fee calculations described below.
  4. Monthly Reporting. Following the end of each month of operation of the Subscription Service, Kobo shall deliver to Publisher a report in respect of the preceding month describing:
    1. the number of times each Subscription eBook was reported as Read,
    2. the Price Factor,
    3. the corresponding amounts payable to Publisher by Kobo.

4. Fees and Payments

Kobo shall pay Publisher within 90 days following the end of each month of operation of the Subscription Service an amount equal to, in respect of each Subscription eBook that has been Read during the month, excluding during permitted trial periods, the product of: (A) the List Price multiplied by (B) the number of times each Subscription eBook was reported as Read, multiplied by (C) the Price Factor, multiplied by 60%.

5. Term and Termination

  1. Effect of Termination. Upon termination of this Agreement, Kobo shall cease to offer the Subscription eBooks within the Subscription Service. Any Users who have downloaded any Subscription eBooks shall continue to have the right to access and read the eBooks for a period of 120 days following termination of this Agreement; provided, however, that Kobo’s payment obligations described in Section 4 hereof shall not apply in respect of such eBooks.

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Fbone February 22, 2017 um 1:58 am

Unless I’m mistaken, I see publishers are paid list multiplied by 60%.

Darryl February 22, 2017 um 3:27 am

You’re missing out the "price factor". This is the total subscriptions Kobo gets in the month divided by the total value of the books read during that month at list price. So if total reads for all books in the service at list price totalled $5,000, but total subscriptions for the month totalled only $1,000, then the price factor for the month would be $1,000 divided by $5,000 or 0.2 (20%). So the author would get $10 x $10 x 0.2 x 60% is $12. If Kobo had subscriptions eaual to the value of books read, in this example $5,000, then the price factor would be 1. Only in this case would an author get a 60% royalty.

Fbone February 22, 2017 um 3:53 am

Why is the list price even in the equation at all? In your example the author would receive only $1.20 per read for a $10 book. If their book was priced at $2.99, they would receive 36 cents.

Or the price factor was 0.02 ($1000/$50000) the author would receive 12 cents per read.

Darryl February 22, 2017 um 5:01 am

The list price is being used to calculate how to divide the pool of subscriptions. They basically multiple all the reads for the month by the list price for all books and add them all up. An author’s entitlement will be calculated using the value of their reads over the total reads. This is what the price factor does. Basically if Kobo has a million dollars in scubscriptions in a particular region for the month, it takes $400,000 and the reamaining $600,000 is divided between the authors in proportion to the value of their reads to total reads. The list price is used only in calculating this proportion, but bears no other relationship to what an author actually gets. The number of subscribers is very important. To use an absurd example if there is only one subscriber so the total pool is only $10, and that subscriber reads 100 books, Kobo would take $4 leaving only 6 to be divided amongst the 100 authors. An author with a high list price may manage to grab a slightly greater share of this $6, but the list price of the books is otherwise not relevant. If Kobo does not control list prices there is an incentive for authors in this scheme to inflate them. It is actually worse, of course, becuase sales taxes and the like come off the authors share also.

Other potential problems include capturing all reads. Good idea but a lot of potential problems.

Sharon February 22, 2017 um 7:18 am

I’ve been getting substantially more sales from Kobo than any other market lately and their promotions are also reasonable (when not sold out!)

I look forward to this.

Jussi Keinonen February 22, 2017 um 12:12 pm

Great scoop, Nate!

Steve Vernon February 23, 2017 um 6:19 am

I do fairly well in Kobo and I’ve been impressed by their steady drive to improve themselves. They are a long way off from being the size of Amazon but I still see them as being Amazon’s only real competition out there.

I’ve signed up all of my Kobo books for this opportunity.

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