From the Rosetta Stone to Amazon’s unlimited e-book subscription

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The latest announcement of an unlimited e-book subscription service from Amazon reminds us that when media production and distribution mechanism changes, so does the accompanying business model.

To illustrate the point let’s look at the past and early days of publishing:

amazon subscription image

You needed the power and resources of state to create Rosetta Stone or Trajan Column. Handwritten books were as expensive as paintings and market had been limited to the church and rich elite. When the printing press was invented, educated Renaissance men like Lorenzo de’ Medici still continued to order hand-copied books and referred to printing as a vulgar German invention. But the modern printing press created the mass book market that we enjoy today. Now, we are witnessing another fundamental change.

I have been a reader and book collector all my life. About two years ago, after discovering the Kindle app for iPad, I donated all my paper books to a library and switched to e-books. When people tell me that for them reading means holding a physical book in their hands and an e-book reader ruins the experience, I quote my friend who summed up the discussion nicely by saying that there was a point in history when people were saying the same about their bellowed clay tablets.

What really won me over to Kindle was convenience. You spot a book review online, find it interesting, tab over to Amazon.com, read review there, add book to your shopping cart, select delivery to your iPad or other device, and start reading it in less than two minutes. Nothing can beat this.

It takes time for business to understand that changes in production and distribution require re-thinking of its pricing and business model. Remember days when airlines were charging extra for e-tickets? Consumers understand that the cost of producing an e-book vs. a printed book is negligible and feel cheated when publishers insist on the same pricing as for paper edition.

Physical books distribution chain is expensive and inefficient:

Writer→Agent→Publisher→Wholesaler→Retailer

Distribution accounts for the bulk of a book’s price and is absolutely unnecessary in its current form for digital books. Some of the big publishers realize this and started selling direct, and media’s old guard is fighting back against Amazon and Google.

Of course, another big component in a book’s price is marketing. But thanks to social media and the Internet, this is becoming cheaper as well.

Now let’s go back to subscriptions. Subscription makes perfect sense for a consumer. We are all busy people and even if we would like to read more, most people can finish a maximum of two books per month and $10 sounds like the right price for me.

E-books are here to stay and quite soon paper books will be sharing the fate of papyrus and clay tablets. Publishers that do want to compete in the Amazon age need to drastically change their business model and invest in optimizing their backend systems to support flexible subscription and consumption-based pricing.

MichaelVax_WP bio

Michael Vax is an accomplished leader and entrepreneur with many years of experience in developing highly scalable web applications since the dawn of the Internet. For last six years he has specialized in digital Ecommerce, first working as the CTO of Elasticpath, then as the vice president, engineering of Partnerpedia, a provider of hosted enterprise app stores and marketplaces. At hybris, Michael is responsible for developing innovative solutions that address commerce needs of enterprise companies in publishing, software, financial, services, and telecommunication industries.

Michael Vax
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July 21, 2014
Michael Vax

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