A mobile app designed to simplify the way digital books are sourced and read.

Oyster offers a subscription-based lending service for e-books

With sales of e-books in the United States estimated to be worth over $3 billion in 2012, an increase of 44% in one year, New York-based startup Oyster has set out to revolutionize the business model for the supply of digital books to readers. While there are already a number of platforms offering e-books, with the sector largely monopolized by the giants of the web – the Apple Store and Amazon – the pricing for either sales or rent is nearly always the same, i.e. a unit-based structure, the only exception being Amazon with its Kindle FreeTime Unlimited which is aimed at young children. Oyster is however imitating the approach and emulating the monthly fixed-price models used by Netflix and Spotify for films and other audiovisual content and is offering to rent out e-books from a sort of online digital lending library. However, if the startup is to forge sustainable partnerships with major publishers long-term, this pricing structure may need adjusting.

Unlimited consumption à la Netflix

Oyster is providing the service via a mobile app which offers carefully chosen books. At the moment the app is available only for iPhone but iPad and Android versions are said to be on the way. Having partnered with a handful of publishers such as HarperCollins, Houghton Mifflin Harcourt and Workman, plus e-book self-publishing and distribution platform Smashwords, Oyster has over 100,000 titles available for rent. Following the Netflix approach, Oyster offers unlimited access to these works for a monthly subscription of just under $10. The company has developed a simple search function which enables searching by genre, title, and subject matter. It also adds ‘social discovery’ and sharing functionality into the app so that subscribers can keep up with what others are reading, make/receive personalized recommendations and maintain a curated reading list.

Pricing model the decisive factor?

While the idea sounds attractive, the viability of the business model has yet to be proven. Many book publishers have refused to make any agreement of this kind for fear of undermining the value readers place on books. In this kind of environment it will be difficult to come up with a pricing structure that is attractive to readers and at the same time able to remunerate publishing professionals and writers adequately. Another startup, privately funded North Carolina-based eReatah, is taking a different approach, based on sale – not renting – of titles. Reasoning that an ‘all you can read’ model is not warranted, eReatah has created a progressive pricing structure going up to just over $30 a month for four books, which customers get to keep. In fact, given that 75% of the books offered by eReatah cost an average of $8 each in a physical store, it would be difficult to negotiate pricing for unlimited reading with the publishers.  Evan Schnittman, Chief Marketing & Sales Officer at the Hachette Book Group, points out: “The problem with an all-you-can-eat model is that authors stand to make pennies, not dollars.”  Meanwhile, from the readers’ viewpoint the value of most subscription models is the perception of getting more than you paid for and with the Oyster model the reader would have to read at least one book a month to see a return on his/her subscription. However a recent survey from the Pew Institutereveals that only 27% of US Americans read the equivalent of one book or more per month. Spending $10a month could therefore prove to be too high an investment for the majority.

By Thomas Meyer
Journalist, Business Analyst