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Amazon announces all-you-can-read plan

Last modified: 7/20/2014 11:51:00 PM
Amazon.com announced Friday that it is instituting a monthly subscription service that will allow as many ebooks as a customer wants. The service, called Kindle Unlimited, gives customers access to Amazon’s catalog of 600,000 Kindle books and “thousands” of audio books.

For a monthly fee of $9.99, Kindle users will be able to browse the Amazon bookstore and wherever they see the logo for Kindle Unlimited, they’ll be able to download the title at no additional cost. Decide that you don’t like a book halfway through? Pick another one.

The business model should look familiar to anyone who’s binged on House of Cards and Orange is the New Black. But it’s now being applied to a very different industry. And if it takes off, Amazon would be the perfect company to extend it to even more retail sectors. (Amazon chief executive Jeffrey Bezos owns the Washington Post.)

All of this is happening against the backdrop of a larger struggle between Amazon and publishers who disagree over how much Amazon should pay its suppliers for ebooks. The question is, will Kindle Unlimited drive ebook prices even lower? Or could this alternative help drive more money to companies like Hachette?

To understand what might happen, consider how the revenue is determined. Typically, once a subscriber has read a certain percentage of a given book, it’s considered a “sale,” and the company that runs the subscription pays the publisher for it – at retail prices, not wholesale, according to Robert Gottlieb, chairman of the Trident Media Group.

“That percentage can be anywhere from 20 percent to 25 percent,” Gottlieb said.

With the retailer paying a slightly higher price for the books, it could be a boon to authors and publishers. But it could undermine the trade paperback business, Gottlieb said. That’s because books from services such as Amazon Unlimited are typically older titles. If people begin reading more of those on their e-readers, the industry that produces paperback reprints of hardcover books could suffer.

The ebook subscription space already has players such as Oyster and Scribd. With Amazon joining in, it will be a surprise if it doesn’t wind up dominating the business. Amazon’s sheer size means that, just as with the normal e-book business, it will have a lot of power to set the percentage that determines when a book has been “sold.”

“Amazon can leverage whatever percentage they want,” Gottlieb said. “They can say, ‘We’re not going to take your books if you don’t do this.’ ”

Could Kindle Unlimited have been a factor in the ongoing dispute between Amazon and Hachette? It’s unlikely; the disagreement has more to do with how to sell books that are just coming onto the market, rather than how to sell books that have already been available for a year or more. A Hachette spokesman didn’t immediately respond to a request for comment.

Another advantage Amazon has over other ebook subscription services is that it has its hands in so many other industries that it could easily export to other areas of its business.


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