The recent news that musicians in Europe are making more from Spotify royalties than via iTunes is a big deal for all content producers. It may be a defining moment in the ongoing competition between subscription services and pay-as-you go digital downloads in the West.
The same struggle is going on right across the film, TV, music and ebook industries. However, in emerging markets, subscription-based services are having a much tougher time.
Due to the prevalence of piracy, most content providers that rely on subscriptions to make money are having a much tougher time gaining traction.
Across Africa, Asia and South America, piracy is rife and compounded by cultural attitudes that generally regard content as something that should be free.
Many people in countries like Russia don’t feel like they should pay for ebooks, digital music or TV programmes and services have to create innovative new models to hack this market reality.
One effective solution we’ve found is to approach content in a similar way to services such as mobile gaming or dating. We look at the user experience and on-board customers in ways that bring them very naturally into the reading or listening experience.
We take a free-to-play approach, this means we build features into the service that can enchant users and pique their curiosity. In this way, they can easily and quickly find something that they relate to and that is useful for them.
This gives us a degree of understanding of the customers and a reason to invite them back to experience more. Over time we introduce them to more features that encourage them to invest emotionally into the service building their own experiences into their profiles, arranging and curating their own content and developing a network of relevant connections on the service.
This is what Eric Ries refers to as the sticky engine of growth in his book the Lean Startup, but applied to content it’s the equivalent of being part of a great book club or receiving a mixtape from a friend.
In the case of making e-reading work sustainably at scale across developing markets, the right formula seems to be the combination of mobile + subscription + social. Independently these components fail but together they create a compelling growth engine.
Subscription services need to be much more than just a way to access a library of books - they must focus on the experience around reading itself. Accessing a book is not the problem that needs to be solved (especially in high-piracy markets). What to read and why has become the greater question.
In answering this, ebook services can build a compelling alternative to piracy. A reader may find a service because they were searching for a book, but they stick around because it feels like a place where they belong.
Social media is an element that has, so far, been mostly neglected in this space. By giving readers the opportunity to share their favourite quotes, what they are reading and message favourite passages to friends, e-reading apps can replicate the social aspect of book clubs, create a sense of community and build better retention.
Subscription changes the way readers read. It removes the monetary decision from reading, as long as your subscription is current you can browse freely throughout the catalogue, dipping into as many books as you like.
In short, people read more books, more often. This reflects the reality of how we access information today, reading from multiple sources.
Netflix and Spotify have transformed how consumers pay for films, TV and music and these subscription based models are only going to increase in popularity.
A recent report by Strategy Analytics expected the consumer ebook market to double from $7 billion (£4.4bn) to $16.7 (£10.6bn) billion by 2020. It also predicts that more than a fifth of the total ebook market will come from subscription services – predominately in emerging markets.
A lot of time and money has been invested in the pursuit of the perfect recommendation algorithm for ebooks to recommend books for users based on behaviour.
As good as these algorithms may be - they cannot replicate the success of recommendations from friends, family or like-minded readers. Intuitive social functionality combined with the convenience of a subscription model creates value in the eyes of the consumers.
The importance of social recommendations will transform the relationships between the producers of content (i.e. artists and authors) and consumers and record labels/publishers.
The e-reading market across the world will look very different in five years. Services that are nothing more than libraries of books will find that, to crack non-Western markets and continue to grow their consumer base in Europe and the US, they will need to provide more.
Those that don’t change will find their market share eroded by startups that offer more to increasingly demanding consumers.
Simon Dunlop is the founder and CEO of social e-reading service Bookmate and co-founder of music streaming service Zvooq.