Oyster’s New eBookstore is About Customer Retention, Not Competing With Amazon
One of the three big names in subscription ebooks suddenly decided to launch a retail ebookstore to complement its Netflix-style unlimited service. Am I the only one who wondered why?
Earlier today many news sources reported that Oyster was launching an ebookstore. They’re saying that the startup is trying to take on Amazon, or that Amazon is under attack, or stuff like Oyster wanted to take on both Amazon and Apple.
I’m coming to this story late in the day not because I missed out on the pre-brief (I got it, actually) but because I spent some time thinking about why Oyster launched the ebookstore.
To put it simply, Amazon has nothing to do with it. Here’s why that premise is wrong:
- An ebookstore with its own proprietary DRM and walled garden is not a threat to Amazon (exception: Apple, with its huge hardware platform).
- An ebookstore which only sells in the US is not a serious threat to Amazon.
So why did Oyster launch an ebookstore?
To explain that, I’ll have to share some background.
Founded in late 2012, Oyster has run a subscription ebook service for the past 18 months. It offers a million title strong catalog which users can read on Android, on the iPad/iPhone, or in the web browser. The service costs $10 a month and is limited to the US.
Oyster has ebooks from 3 of the 5 major US trade publishers as well as a bunchaton of other publishers, including indie authors. But the service doesn’t have nearly as many titles as the Kindle Store. In comparison, the major ebookstores carry millions and millions and millions of titles.
That difference in selection is the indirect explanation for Oyster’s new ebookstore. Tell me, what do you think is the most common reason given for cancelling a subscription ebook service like Oyster?
If you answered "I can’t find the ebooks I want" then you won the prize.
Folks, this is why I say that customer retention is Oyster’s focus here, not Amazon. Oyster might not be losing all that many subscribers each month, but they were losing some.
But now Oyster can promise to sell the ebooks which it was unable to lend, and that is going to keep some subscribers from leaving. Or at least that is what will happen in the long run; the ebookstore only has a million titles at the moment. The catalog does include titles from the Big 5 (Hachette, HarperCollins, Macmillan, Penguin Random House, and Simon & Schuster) as well as titles from smaller publishers like Scholastic, Harlequin, Norton, and Chronicle.
Customer retention is not as amazeballs hypeworthy as competing with Amazon, but it is a critical part of any service.
Today Oyster repaired a deficiency, making them more competitive against their immediate competitor, Scribd. The latter company offers a more diverse selection of formats, and it too has an ebookstore (albeit one with a limited catalog).
P.S. I’ll be adding an early review of the ebookstore in the comments. What did you think of it?
Ben Sobieck April 8, 2015 um 2:51 pm
I wonder if this means getting those e-books into the store will require a second submission process. Smashwords distributes to Oyster, but I can’t tell if those titles have been ported into the store. From the product page, I can only see that my latest is available for the unlimited service:
Nate Hoffelder April 8, 2015 um 2:52 pm
The store doesn’t appear to be functional today. I think the servers buckled under the strain.
We’ll have to check on this later.
Ben Sobieck April 8, 2015 um 2:54 pm
Good call, I’ll watch for this later.
Maria (BearMountainBooks) April 8, 2015 um 4:13 pm
Smashwords has a notice up that it will not be selling titles there initially. They are waiting to see the terms and also work timing.
Ben Sobieck April 8, 2015 um 4:55 pm
Thanks for the update
Nate Hoffelder April 8, 2015 um 3:12 pm
I don’t think much of the ebookstore at first glance. It’s ugly and difficult to navigate, and Oyster is charging $3 to $5 for public domain titles. They also were unable to sell me one (I think their servers are overloaded).
Nate Hoffelder April 8, 2015 um 6:45 pm
Okay, I’ve tried it again and this is a pretty shitty ebookstore. I’m having trouble finding anything, I still can’t actually buy anything, and what’s more Oyster won’t even give me the option of trying to buy the ebooks offered in the subscription.
From what I can see, there are two groups of books: one set which I can get by subscribing, and another set which can be bought at retail. The two sets do not overlap.
Kathy April 8, 2015 um 3:18 pm
I can’t figure out who the Oyster bookstore will appeal to, besides someone with plenty of time to read to justify the monthly subscription and plenty of money to be willing to pay more for books than they would on Amazon.
Nate Hoffelder April 8, 2015 um 3:23 pm
It’s certainly not price competitive.
Paco Torras April 8, 2015 um 5:25 pm
"Oyster can promise to sell the ebooks which it was unable to lend, and that is going to keep some subscribers from leaving. " Are you saying subscribers will pay twice, once for the subs and again for the single purchase? Don’t think so. Maybe they will not lose the customer but will lose the subscriber and the recurrent payment in exchange of the single purchase.
purple lady April 8, 2015 um 5:50 pm
It looks like I have to have a subscription with Oyster to buy a book? Am I missing something?
Nate Hoffelder April 8, 2015 um 6:34 pm
No subscription is required. At least, I don’t _think_ they signed me up for a subscription when I tried to buy a book this afternoon.
purple lady April 8, 2015 um 6:43 pm
I was trying the app. The only thing you can do in the app is sign in or try a free trial. On the website there doesn’t seem to be a way to look at the bookstore only, and I wanted to look for something cheap.
Nate Hoffelder April 8, 2015 um 6:50 pm
There are books you can buy when you browse from the app. I know because I found them – somehow. They are well-concealed.
purple lady April 8, 2015 um 7:09 pm
Feeling rather stupid today. How do you create an Oyster account without signing up for a free trial? You need to sign in to the app to do anything. On the website to create an account you need to sign up for a trial. I won’t sign up for a trial without being able to test the app.
Nate Hoffelder April 8, 2015 um 7:16 pm
I’m not sure. I already had an account from way back when, and canceled the subscription.
Nate Hoffelder April 8, 2015 um 7:27 pm
I just got an email from Oyster with a link to the bookstore.
William Ockham April 8, 2015 um 7:29 pm
This is the announcement of the end of Oyster. They are pivoting from being "Netflix, but for ebooks" to being "Netflix and Amazon, but for ebooks, because we couldn’t make the Netflix thing work for ebooks".
Who thinks that will work?
Nate Hoffelder April 8, 2015 um 9:57 pm
If the ebookstore were halfway usable, maybe. As it is, nope.
Kathy April 8, 2015 um 10:13 pm
I’ve never really been able to understand the comparison to Netflix with any of the book subscription services. It’s pretty easy to watch a bunch of 1 hour shows in a month, but unless you really read a lot or you don’t also get books from other places, I think it’s really hard to make any of them worthwhile. I’ve tried them all and spent most of my time just adding books to my reading list!
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[…] Why Oyster’s Retail Launch Isn’t about Amazon (Ink, Bits & Pixels) Taking a different tack, another industry watcher sees Oyster’s new retail venture primarily as a bid to keep its subscriber base intact and growing. Pointing out that Scribd offers both an ebook subscription program as well as an a la carte bookstore, the move, in this view, is more about bringing Oyster up to speed than about competing with Amazon. […]
Joe Wikert April 9, 2015 um 10:17 am
I think this move is mostly about trying to introduce a more sustainable business model. Oyster pays publishers their share of full digital list price when a reader reaches a particular point in the book. That means fast readers are going through multiple books per month. Since they’re only paying $9.95 per month Oyster loses money on subscription every month. Their model is best for slower readers, like myself. My wife and I have had an Oyster subscription for over a year now and I figure they’re breaking even at best with us as my wife is a much faster reader than I am.
It’s hard telling how many Oyster subscribers are slow readers like me or fast readers like my wife. The all-you-can-read model definitely attracts the faster readers though, just as the all-you-can-read buffets tend to attract folks with larger appetites.
So it’s not really about competing with Amazon, as Amazon can squash these guys at any time. And while it’s partly about becoming more competitive with Scribd, I’m quite certain the goal here is to counterbalance the unsustainable business model they have today with one that doesn’t lose more money as volume increases.
The other key point Oyster and Scribd need to think about is customer loyalty. As with streaming audio services, a subscriber never owns the all-you-can-read content. If subscribers start building a library of titles they own with Oyster, for example, they’ll be less likely to abandon the service altogether.
William Ockham April 9, 2015 um 5:41 pm
But they can’t "counter-balance an unsustainable business model" with an even less sustainable business model. It’s pretty easy to demonstrate that their ebookstore is less sustainable than their subscription business. Creating a multi-publisher ebookstore is a non-trivial task. It will take a huge investment of attention and energy. Let’s assume they succeed. Where do the customers come from? Certainly not their current customer base. They can’t attract customers away from Amazon or Apple because they can’t compete with them on price, selection or convenience. There isn’t any pent-up demand for their service. There is no reason for anyone to buy an ebook from Oyster.
They are taking a huge risk with no prospects for a big payoff at the end. They are muddling their value proposition and risking alienating their current customer base. There is simply no scenario where this ends up being a good idea. And that leads to the real question:
Where is the money coming from to fund this new direction? If Nate finds that out, he’ll be on his way to figuring what the real score is with this move.
Mackay Bell April 11, 2015 um 3:23 am
Sorry, this is totally about competing with Amazon. This is part two of the move to force Amazon into agency deals. First the big publishers force Amazon into agency so they can’t compete on price. Then they support other ebook sellers who offer the same books that Amazon offers at the same price.
Part three, Amazon continues to sell a lot of ebooks, but it’s market share shrinks to a more manageable 30% something, with some 20% to Apple and maybe 20% to Oyster and the rest Barnes and Noble, etc. The NY Publishing scene has been talking about how Amazon is going to have to settle for less market share for some time now. This is part of their grand plan to make it happen.
It’s a stupid plan.
It won’t work. But stupid plans are kind of the only plans the big publishers have had since the digital revolution. It’s going to backfire big time on the big publishers, but that’s what’s going on. Who’s funding Oyster? Probably some investment types who have been promised in back rooms by the big publishers that if they can make a go of it, one of the big media conglomerates will buy it up for big bucks to pay them back.
The problem, of course, is Oyster has nothing to offer readers other than publishers fantasies of knocking Amazon down a notch. So that ain’t going to work.
Second, the biggest threat to big publishers is self-publishing, and these continued failing efforts to try to sabotage Amazon just encourages Amazon to nurture Indy’s. Oyster, of course, is not Indy friendly, you have to publish through Smashwords (who take a cut) and I’m guessing their search engine isn’t as favorable to Indy books as Amazons. (Add into that it’s editorial staff who recommend the kind of stuff the big publishers want to push.)
Anyhow, it’s all going to go nowhere in a slow and painful way. A lot of money will be thrown at it. There will be tons of press trying to promote it (perhaps the Author’s United crowd will sing it’s praises). The big publishers will probably try to offer some exclusives to prop it up. But ultimately it will fail and the big five will be even more dependent on Amazon.
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