April 9, 2015

Oyster is selling ebooks now. But is it targeting Amazon?


Oyster offers unlimited access to over 100,000 books for $9.95 a month on iPhone and iPod Touch.

Oyster launched an ebookstore yesterday. In related news, I really don’t like the word “ebookstore.”

Since launching in the fall of 2013, the ebook subscription app Oyster has set out to create a f”comprehensive e-reading environment.” The company has grown significantly in its eighteen month existence, launching with titles from HarperCollins (and Melville House, among many other small presses), before quickly adding Macmillan and Simon & Schuster as partners—its grown from offering over 100,000 titles to offering over half-a-million in that period.) Last fall, the company added an editorial component—the consistently superb Oyster Review—and a social one—lists curated by users and various literary superstars.

Yesterday, the company announced it would be opening an ebookstore, featuring titles from existing clients and the two Big 5 holdouts, Hachette and Penguin Random House. The ebook subscription—which earned the company the moniker ‘The Netflix for Books”—remains the company’s core identity, but the store is a major development, especially because it’s open to non-subscribers. (Melville House books are available for purchase because—final full disclosure—we are distributed by PRH.)

While the “ebookstore” (which is a bad word, by the way) element of this story has gotten the most play in the media—more on this in a moment—I think the fact that Oyster is selling books is less important than whose books it’s selling. Scribd, Oyster’s main subscription competitor, already has a bookstore, but it doesn’t have a comprehensive one. In the domain of the digital subscription, only Oyster can claim to offer a comprehensive selection of books—even if those books aren’t necessarily available to its subscribers. Penguin Random House’s market share cannot be underestimated—Hachette is also powerful, but c’mon—and pretty much every potential user scanning Oyster’s wares will now see everything that they could ever want because Oyster will now offer titles from pretty much everyone—the Big 5 dominate the publishing industry and Oyster is the only subscription app that can boast all five.

This should give the company a boost with consumers—at the very least, it should make it sexier than Scribd, whose ebookstore doesn’t feature books from Penguin Random House, America’s biggest publisher by a country mile, or Hachette, which is, well, big, but not Penguin Random House big. Ironically, the best metaphor for Oyster at the moment may not be the “Netflix for Books” but the “Amazon Instant Video for books”—unlike Netflix, Oyster is adopting a hybrid strategy where users can subscribe, buy, or both (though, unlike Amazon, Oyster doesn’t have a “rent” function, so maybe my metaphor isn’t as good as I thought).

This move strikes me as being about three things. First, Oyster’s creativity and ambition: the company has shown it has a hell of a lot of both and that it’s interested in making big splashes in interesting ways. Both PRH and Hachette have been pretty open about their disinterest in subscription—and Penguin Random House, at least, is big enough to do whatever it pleases—and if big publishers are being open about something, you can only imagine how vociferous they are in private. (If you need that spelled out, it’s because big publishers hate stating things publicly because they are extraordinarily risk-averse.) But Oyster went ahead and got Hachette and Penguin Random House anyway, and they did it by working with them, rather than against them—more on this in a moment.

Second, it’s about Scribd. Oyster and Scribd are the two most visible and attractive subscription apps and Oyster just made a major move to make itself more visible and attractive than its competitors to its customers. (Nate Hoffelder is also very good on this point.)

And third, it’s about the return to agency pricing in the wake of U.S. v. Apple. Oyster’s CEO Eric Stromberg had this to say about agency in an interview with Digital Book World: “As large publishers move toward an agency model, in general in the marketplace it’s harder to compete just on discounting or on undercutting price.” That movement is too big a subject to get into in detail here, but it’s worth reading the DBW piece in full, if that’s something that interests you. (Harper, by the way, announced a return to agency yesterday.)

But most media outlets didn’t read it that way.  Here are a few sample headlines:

There are a lot more like those! Nearly all of the coverage of the coverage of this story read it in the context of Amazon; chances are, if you read about Oyster yesterday, the story you read was also at least sort of about Amazon, if not mostly about Amazon.

Some of these are technically right—Oyster is, I guess, invading Amazon’s turf because it’s selling ebooks and Amazon dominates ebook sales (like, controls over half the market, at least—I’ve talked with other publishers who put that number at over 75%). But if this is an invasion, it’s one by a guerrilla army (at best!); instead, I see it as another retail channel opening up for publishers—that may become more significant over time, but at the moment, it’s just that. As Nate points out in his piece, this is all about customer retention and acquisition, not trying to eat Amazon’s lunch.

But some of that coverage was still fascinating and, I think, instructive about the ebook market today, and, perhaps, the difference between Amazon and Oyster. Here’s Slate‘s Alison Griswold, taking a look at David’s prospects against Goliath:

[Oyster co-founder Willem] Van Lancker didn’t want to talk about how much Oyster’s users had been clamoring for new titles, but he did volunteer that about 80 percent of books read by subscribers are found through Oyster’s discovery features (think Netflix-style algorithmic recommendations). Numbers like that would suggest the two-pronged subscription and retail strategy has a lot of potential, especially if Oyster’s algorithms start recommending e-books in its store to the most dedicated readers. Then again, Oyster’s book prices—which Van Lancker described as “competitive”—from a cursory search aren’t all that great. The Girl on the Train is selling for $12.99 on Oyster versus $6.99 on Amazon. Gone Girl on Oyster is $9.99; on Amazon it’s $4.20. Other Oyster-Amazon price comparisons that I searched at random: The Lowland ($11.99 vs. $9.65), The Big Short ($11.99 vs. $9.73), Gods Without Men ($11.99 vs. $9.99).

Anyway, you get the idea. Amazon has long maintained that e-books are highly price elastic—i.e., something that consumers will buy a lot more of as the price drops. Where publishers have asked to set higher prices, Amazon has insisted that keeping the cost low will actually make more money for everyone involved because “the pie is simply bigger.” For now, it looks like Oyster wants to test that proposition.

Here, Griswold is simply reading Oyster’s announcement with Amazon’s logic: lower prices sell more books and selling more low-priced books means that everyone makes more money. It’s a logic that discounts quite a lot—labor, in particular, but also publisher’s opinions of what their books are worth. Amazon’s idea of elasticity has never made a lot of sense to me, not only because books (and ebooks!) require a lot of expensive, labor-intensive, back-end work to become market-ready, but also because most are phenomenally different. (Seriously, look at your bookshelf and tell me everything on one shelf should be priced the same way.) They may have the same binding—I suppose they mostly contain the same words, just in a different order—but if you spend a month working in publishing you realize pretty quickly that they’re all pretty different, and that some take more labor and capital (sorry) to produce than others. Books aren’t putters, in other words.

This gets at what I think is the biggest distinction between Amazon and Oyster at this point—and why I don’t really think it makes a ton of sense to compare the two. Amazon has made its name as being “consumer-oriented”—by providing low cost products with exceptional customer service—but it’s done so by squeezing its partners. The quality of the product itself is secondary to the cost—one reason why Amazon detests publishers is that a lot of work goes into making books quality products, and Amazon sees that work as being unnecessary.

Oyster, on the other hand, has made strides in balancing being “consumer-oriented” and “supplier-oriented.” Subscription may never interest a corporation like Penguin Random House. Presented with a similar landscape, Amazon would likely throw its weight around to try to get the outcome it desires; Oyster, instead, tailored its business model to make room for Penguin Random House’s demands.

Of course, that doesn’t necessarily mean that they’re being magnanimous—another way of reading this story is that it shows Penguin Random House’s incredible power in the marketplace. Oyster wanted PRH for subscription and didn’t get it, so it changed its business so they could be partners. That decision ultimately benefits everyone involved—it’s good to have Oyster as a retailer.  I don’t doubt that this was one of their ambitions all along, but I’m not sure that this would have happened as quickly as it did if Penguin Random House was interested in subscription. (As Peter Ginna wrote on Twitter yesterday in response to my typical, somewhat embarrassing PRH badgering, that kind of power is an argument for future mergers.)

Nevertheless, Oyster’s decision to work with publishers, rather than against them, to reach a common goal is important. In many ways, the company is trying to carve a third way in the bookselling world—one that’s consumer-oriented, digital, and disruptive—but not too disruptive. It’s not as conservative as many big publishers would like, but it isn’t committed to devastating suppliers to create the kinds of libertarian market conditions it would like to see.

Perhaps most importantly, it’s actually created a meaningful, multi-faceted series of recommendation engines, from its algorithms to lists to the Oyster Review. That’s incredibly important, especially when you remember that “discoverability” has been the Afghanistan of digital bookselling for a long time. Amazon also excelled at this at one point—in its less-egregious days (before embracing the algorithm above all else), James Marcus, who remains one of the best writers and critics in America, reviewed and recommended books for the company and it backed the consistently pretty solid Omniveracious—but Oyster has never seen books as only being products, unlike its competitor. 

There are really two narratives here. One is that this move is all about Scribd and all about acquiring valuable, powerful clients like Penguin Random House before anyone else does. The other is that Oyster has shown a surprising willingness to work with and around publishers’ interests and concerns and has created a product that, in my opinion at least, works for consumers and suppliers. I don’t think Amazon was the dominant concern when Oyster set out to create an ebookstore, but it’s undeniable that Amazon has a part to play in this story— it’s certainly not a well-kept or even dirty little secret that every narrative about bookselling in the 21st century is about Amazon to some extent.

Everything digital is a “for now.” Amazon was a bookseller before it became the “Everything Store.” Now, it’s even more than just that—it’s not a retailer, it’s that most frightening of ambiguous definitions, a “tech company.” There’s no telling what Oyster will be 18 months from now, let alone in five years. But for now, it’s not quite an Amazon competitor—it’s a bookseller, and a pretty good one at that.


Alex Shephard is the director of digital media for Melville House, and a former bookseller.