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Old 01-17-2012, 01:53 PM   #1
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Kindle Owners' Lending Library as a Subscription Service?

With over 81,000 titles available, is Amazon's Kindle Owners' Lending Library on it's way to being spun off as a subscription service?

Currently, Prime members get to read one Prime Eligible Book per month for free as part of their overall Prime package (free 2-day shipping, unlimited Prime Eligible Videos, 1 Prime Eligible Book per month). The cost is $79 per year ($6.58 per month).

Question - would you pay a monthly fee of $7.99 if the Lending Library was spun off? Of course, the amount of books you're allowed to check out would have to increase substantially. Or do you feel that while the numbers are there, the selection of "good" books is lacking?

Once the book and video selection is beefed up, I envision Amazon Prime being morphed into three separate subscription services:
  • Prime Books w/ free 2-day Shipping: $7.99 / month
  • Prime Videos w/ free 2-day Shipping: $7.99 / month
  • Prime Package (Books + Videos + Shipping): $14.99 / month
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Old 01-17-2012, 01:59 PM   #2
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I am sure Amazon is considering many options when it comes to ebook subscriptions.

If we can shorten copyright a bit, say to a decade or so, then Amazon could begin competing on service. Meaning the ENTIRE back catalog could be made easily available and Amazon could focus on selling books published in the last decade.
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Old 01-17-2012, 02:18 PM   #3
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Quote:
Originally Posted by tubemonkey View Post
Question - would you pay a monthly fee of $7.99 if the Lending Library was spun off?
I wouldn't subscribe, but that's an interesting idea. It would entice even more indie authors to go Amazon-exclusive and join KDP Select, which is how their ebooks are available for borrowing through Kindle Owners' Lending Library. KDP Select authors are paid for each borrowed book (December's royalty was $1.70 per borrow). If borrowing would be allowed more frequently than once a month, that would increase the odds that an author's book would be borrowed!
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Old 01-17-2012, 02:40 PM   #4
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I wouldn't subscribe, but that's an interesting idea. It would entice even more indie authors to go Amazon-exclusive and join KDP Select, which is how their ebooks are available for borrowing through Kindle Owners' Lending Library. KDP Select authors are paid for each borrowed book (December's royalty was $1.70 per borrow). If borrowing would be allowed more frequently than once a month, that would increase the odds that an author's book would be borrowed!
With the Big Six acting the way they are (severe library restrictions and agency pricing), indie authors are starting to get a major bump in visibility.

Here's an article on the relationship between KDP Select and the Kindle Owners' Lending Library.

Quote:
Amazon’s Kindle lending library now contains over 75,000 titles, and the company is reporting that customers borrowed 295,000 titles in December. In addition, self-published authors and independent publishers who make their titles available to the lending library have earned $1.70 per borrow.

Amazon maintains a pool of money to reward this group of authors and publishers who use the Kindle Direct Publishing (KDP) program and also participate in the lending library. The company has deepened the pool (called the KDP Select fund) from $500,000 in December to $700,000 in January.
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Old 01-17-2012, 03:15 PM   #5
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If it was a subscription service akin to eMusic, where you get so many credits for purchases each month, I'd consider it. If it was a netflix style subscription, then no.
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Old 01-18-2012, 10:39 AM   #6
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I don't think Amazon is going to do this. They already have had a heck of a time getting publishers to agree to ONE checkout a month per person. My source tells me that this is just a minor feature of the Amazon Prime product and isn't planned on being increased. The costs that it'd take to increase it are in the realm of $15-$20 per user per month.
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Old 01-18-2012, 11:30 AM   #7
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I don't think Amazon is going to do this. They already have had a heck of a time getting publishers to agree to ONE checkout a month per person. My source tells me that this is just a minor feature of the Amazon Prime product and isn't planned on being increased. The costs that it'd take to increase it are in the realm of $15-$20 per user per month.
Ah, but there are publishers and there are publishers.
The thing about the KDP and the Prime library is they are opt-in operations.
The Price Fix Six would-be overlords have no say to on it.

What Amazon is doing with the Prime Library is an experiment to establish the parameters--total usage, checkout distribution, payout formula, sales enhancement/degradation, etc--that define the service as a *business*. Once they (and the participating publishers and authors) get the data from this experiment they can analyze it and make cold, fact-based decisions on whether or not to continue the experiment, end it, or take it to the next level.

Right now, the checkout fee is determined by two variables: the size of the pool, which is (arbitrarily?) set by Amazon and checkout rate, which is a function of the book/author itself. Presumably, once the impact of the library on *amazon* sales can be quantified, the size of the pool will be adjusted to track the added revenue.

It is at that point that Amazon could spin it off as a standalone service, with its own subscription rate. Based on the current author payouts, I would expect a monthly fee based on around $1.99-$2.49 for one book a month and maybe $4.99 for three or four.

But there is no guarantee that it will ever be spun off thatway. There are other ways to leverage the Prime Library. Instead of explictly charging a monthly fee, Amazon could tie it to all hardware Kindles, not those of Prime subscribers. It certainly would change the reader business if each Kindle came with a free subscription to a library of 100k contemporary ebooks. And it might even allow Kindle pricing to be slighly higher than that their competitors.

There are lots of ways to play this game and there is no reason not to explore the possibilities just because a handful of publishers don't get it. For that matter, once the results of the experiment are in, it may be that the Price Fix Six, or at least some of their authors, will sign up for the Library.

The thing to consider is that it is early; the experiment needs to run a while longer before any valid conclusions can be made of the viability of the Lending Library.
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Old 01-18-2012, 11:35 AM   #8
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Ah, but there are publishers and there are publishers.
The thing about the KDP and the Prime library is they are opt-in operations.
The Price Fix Six would-be overlords have no say to on it.

What Amazon is doing with the Prime Library is an experiment to establish the parameters--total usage, checkout distribution, payout formula, sales enhancement/degradation, etc--that define the service as a *business*. Once they (and the participating publishers and authors) get the data from this experiment they can analyze it and make cold, fact-based decisions on whether or not to continue the experiment, end it, or take it to the next level.

Right now, the checkout fee is determined by two variables: the size of the pool, which is (arbitrarily?) set by Amazon and checkout rate, which is a function of the book/author itself. Presumably, once the impact of the library on *amazon* sales can be quantified, the size of the pool will be adjusted to track the added revenue.

It is at that point that Amazon could spin it off as a standalone service, with its own subscription rate. Based on the current author payouts, I would expect a monthly fee based on around $1.99-$2.49 for one book a month and maybe $4.99 for three or four.

But there is no guarantee that it will ever be spun off thatway. There are other ways to leverage the Prime Library. Instead of explictly charging a monthly fee, Amazon could tie it to all hardware Kindles, not those of Prime subscribers. It certainly would change the reader business if each Kindle came with a free subscription to a library of 100k contemporary ebooks. And it might even allow Kindle pricing to be slighly higher than that their competitors.

There are lots of ways to play this game and there is no reason not to explore the possibilities just because a handful of publishers don't get it. For that matter, once the results of the experiment are in, it may be that the Price Fix Six, or at least some of their authors, will sign up for the Library.

The thing to consider is that it is early; the experiment needs to run a while longer before any valid conclusions can be made of the viability of the Lending Library.
Excellent post
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Old 01-18-2012, 01:19 PM   #9
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There are other ways to leverage the Prime Library. Instead of explictly charging a monthly fee, Amazon could tie it to all hardware Kindles, not those of Prime subscribers. It certainly would change the reader business if each Kindle came with a free subscription to a library of 100k contemporary ebooks.
That would be brilliant!
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Old 01-19-2012, 02:57 PM   #10
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It would have to have better selection and terms than my public library's Overdrive digital stuff to make me interested. That would be 10 checkouts for 21 days, at a time, early rotating returns.
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Old 01-19-2012, 04:47 PM   #11
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The problem is the Big Publishing Houses are on an anti-library kick so there is no guarantee Public Libraries will be able to keep on offering new ebooks on current terms, if at all.
Interestingly enough, if Amazon can document that lending libraries improve ebook *sales* they might get the BPHs to relent on their library obsession.
Failing that, the only ebook libraries with contemporary content might end up being Amazon's and any emulators.
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Old 01-19-2012, 05:31 PM   #12
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Quote:
Originally Posted by fjtorres View Post
Instead of explictly charging a monthly fee, Amazon could tie it to all hardware Kindles, not those of Prime subscribers. It certainly would change the reader business if each Kindle came with a free subscription to a library of 100k contemporary ebooks. And it might even allow Kindle pricing to be slighly higher than that their competitors.
First, I agree with TubeMonkey, that this is an excellent post, and I agree with most of it. However, I'm not so sure about the section above.

The problem is that Amazon loses money on the hardware (slightly) and makes money on the content. If prime book lending was unlimited, I wouldn't need to buy other books. I know many books aren't in prime, but I think I can find reading material among a 100k library -- I read a lot of independents now. Your idea could work if the basic subscription continued to be limited in the number of checkouts per month (maybe that's what you meant).
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Old 01-19-2012, 08:47 PM   #13
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The problem is that Amazon loses money on the hardware (slightly) and makes money on the content.
We keep hearing this but I have my doubts.
To put it briefly:
Amazon sells the KTouch subsidized by ad revenue at $99.
Kobo does the same.
B&N does it with only in-house book ads.
All three can expect significant content revenue from their walled gardens so a hardware subsidy sounds reasonable.
But so does Sony and they don't have any guarantee of significant content revenue. What if those readers aren't as expensive as everybody thinks?
Even a $5 difference could be enough to a company playing for the long haul.

Regardless, Amazon could use the Prime library as a value-add to position Kindle as a Premium reading platform, letting everybody else fight it for the entry-level, generic reader market.

Remember, Amazon is actively building up their exclusive content and paying some hefty advances to get it. Generally, hefty advances and rock-bottom prices don't go together. What I think Amazon is doing is positioning themselves to maintain their current price points indefinitely. So, next time Kobo or Nook drop their price, instead of dropping theirs, Amazon just adds features. Say, a free ebook a month forever.

Also, don't forget the flip side: Amazon sells the kindle platform to readers and then sells the reader base to authors and publishers. The Library is being sold as a way to boost visibility to authors so extending it's reach to the full Kindle user base increases the Library's value to the content providers.

Pure speculation, of course.

My point is that there are many ways to play this game and many different ways to win. The key is to leave as many options open as possible as long as possible and so far Amazon is keeping all of them open. They can just as easily cancel the lending library as they can expand it or make it a paid service.
They'll eventually pick one but it'll likely be the one we least expect.
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Old 01-20-2012, 11:42 PM   #14
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Regardless, Amazon could use the Prime library as a value-add to position Kindle as a Premium reading platform, letting everybody else fight it for the entry-level, generic reader market.
Kindle already is "the Premium reading platform". Would be interesting to have an insider from Amazon reveal just how many Kindles are beeing sold. Amazon should consider selling epub books as well, but leave the library and most of their discounted and free books Kindle exclusive. Nobody would ever need to go anywhere else when it comes to buying ebooks.
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Old 01-21-2012, 12:57 PM   #15
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Kindle already is "the Premium reading platform". Would be interesting to have an insider from Amazon reveal just how many Kindles are beeing sold. Amazon should consider selling epub books as well, but leave the library and most of their discounted and free books Kindle exclusive. Nobody would ever need to go anywhere else when it comes to buying ebooks.
Re: Kindles already being "Premium" Priced - yes and no.
Outside NorthAM where competitor volumes are low and prices high Kindles are by far the low cost leaders. In NorthAM, where volumes are high and B&N has been low-balling the market and driving unsubsidized prices to KSO levels, Kindle pricing is slightly higher that equivalent rivals. And since they're on the only ones still doing 3G-capable readers, they are by default the only ones with a "Premium" product still in their lineup. But they aren't actually charging substantial premiums for equivalent features. KTouch prices, for example are not much higher than Kobo Touch or Sony's pre-xmas sales T1. And the K4 pricing is due to cost-reduction engineering and stripping out features more than aggressive pricing. As I said above, the evidence says Amazon sells Kindles at low margins but not a loss. (For them. Given that their overhead is unusually low, Amazon's pricing probably is lower than *some* competitor's costs.)

re: Selling epubs - With all the flack Amazon takes for allegedly trying to monopolize ebooks (which they clearly aren't) why would they invite governmental/bureaucratic meddling by doing exactly that? The *business* case against epub these days is pretty extensive and growing bigger by the day. It would take an entire thread to list all the ways generic epub is a bad business to be in but let's just focus on two:

1- Amazon could setup a generic ADEPT epub ebookstore parallel to their own. That means paying Adobe for using their DRM, authentication serves, and back end services (whether directly or through somebody like Bluefire). Aside from the fact that outsourcing sales is what got Borders in trouble in the first place, how would this make the Amazon epubstore any different that all the other ones out there? All the advantages of the Kindle ecosystem come from Whispernet which is incompatible with the Adept ecosystem. And with the added costs, Amazon epubs would have to be more expensive than their azws. Who is going to buy Amazon epubs without the guarantee of amazon customer support (ADE problems are Adobe's responsibility, not the ebook vendor's), the convenience of Whispernet, or the lower prices?

2- Now, assume Amazon sells generic epubs using their own DRM wrapper and their own back-end servers to equalize costs a bit (never mind that they'll be doubling their file storage and tracking needs) and offer up epubs through whispernet. To whom? No hardware out there does epub with Amazon DRM. To apps? Fine; they do a KindlePub app that gets epubs from Amazon. How is this any different that getting Kindle azw files from amazon? They still won't work anywhere else. Amazon doubles their operating costs to achieve what?

Folks who want Amazon to do epub usually want access to Amazon's Kindle ebook catalog at Kindle prices. But they also want it on non-Kindle hardware. And that just won't fly; Amazon is not going to spend money supporting a commpetitor which is what using Adept comes down to; paying Adobe fore something they already do on their own and do it better.

Thing is, in the NorthAmerican market the verdict is in: consumers buy ebooks, not ebook formats. Azw or epub is a plumbing matter (copper vs PVC) not something that impacts the reading experience in a way that matters to the consumers. Generic epub's calling card is supposed to be interoperability but the numbers say that consumers don't care about interoperability: Kindle own 50% of the US Market; Nook, 30%; Apple, 10%; Kobo claim high single digits so let's say 8%. That leaves 2% for Sony and the other ADEPT ebookstores. 90-98% of the market is buying their ebooks from walled garden, non-interoperable vendors (depending on whether you think Kobo's kepubs are interoperable or not).

Amazon is going to double (or more) their ooerating costs to go after a 2-10% market? One that is centered on Amzon-haters that wouldn't do business with them on any terms?

Sorry but that doesn't make business sense.

Amazon started Kindle before there was an epub. (They bought Mobipocket in 2005, remember.) The first Kindle came out in 2007, a year before epub went live. They had already built their entire business around Whispernet and the mobi format. Switching at that point was dangerous. (Look what it did to Sony.) So far, the market has done nothing to make them change their mind.

And the way epub is fragmenting into incompatible DRM camps and now even incompatible implementations (Kepubs, ibooks for starters, with epub3 variances to come) even the illusion of epub interoperability is starting to fade. Amazon is best served staying away; at least nobody can blame them for "meddling" if epub collapses in the next few years.

When your oppossition is fighting themselves it is generally best to keep your distance and let them settle it themselves. Then you can focus on the survivors.

Things may change but until they do it is prbably wisest to simply look for ways to widen their lead; with the free library, better magazine and rich-formatting content, and better functionality. And always, more content than the opposition. Those are better uses for their money.

$0.02 worth.

Edit: as for how many Kindles have been sold, it is definitely north of 20 million, maybe as high as 30 but not higher. No other competitor has yet cracked 10 million with precious few getting past 2 million *B&N, Sony, maybe Kobo). The last two years have been pretty good to Kindle with sales averaging about a million a month. And with Brazil and several more european markets on the horizon, 2012 should be pretty good too.

Last edited by fjtorres; 01-21-2012 at 01:05 PM.
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