“Attention Marketing”; or, What If You Sold Books by Subscription?
by Joseph Esposito
Several years ago I happened to be introduced to Reed Hastings, the founder and CEO of Netflix, at a Little League baseball game. I was already a subscriber, and I got to ask Hastings the question that had been nagging me: “Don’t you risk losing money if your customers order too many movies?”
This was before Netflix began streaming video to the home; its entire business was in DVDs sent via the USPS, and the odd thing about it was that a customer got unlimited usage: all the DVDs you can watch for a fixed-price subscription (at that time, around $20/month). I assumed that Netflix had an interest in handling those DVDs by mail as slowly as possible, but the fact was that the mailings were becoming more efficient. Mail a DVD back on a Tuesday, and a replacement DVD would arrive on Thursday. Why was Netflix operating against its economic interests?
Over the course of the ballgame, Hastings patiently set me right. What limits usage, he said, is not how many DVDs a customer has; the limiting factor is how many DVDs anyone can watch in a month. After he compared Netflix to a smorgasbord where people eat their fill and no more, I realized that although Netflix was ostensibly in the business of renting videos, its real business was in monetizing users’ attention.
It can profit while putting all that food on the table because no one person can eat all of it. Before long, I also realized that business people in the media industry—including publishers—are studying Netflix as they consider online subscription models for books.
Pricing and Other Obstacles
How many books can you read in a year? In the consumer market, a book a month would be a fairly big number (the Book-of-the-Month Club knew what it was doing). More earnest readers might read two to four books each month; there are reports that readers of genre fiction purchase several books a week. In academic markets, the numbers would be different—higher on all counts, and including many texts that are only sampled. But even the most assiduous professor comes up against the natural barrier of the number of hours in a day. Access is not the problem; attention is the scarce resource.
If someone wanted to knock Amazon off its pedestal, an all-you-can-eat subscription model might be the trick. But who would do this? It would be hard to aggregate all the content in digital form. As I write, the contestants appear to be Barnes & Noble, Google, Apple (whose collection of titles is disappointing), Kobo (whose position has been undermined by the bankruptcy of Borders, its principal client), and Amazon itself. Hmmm . . . Google.
Publishers may have an opportunity to make use of the Netflix model themselves, although in a limited way. Bookish, the new joint venture put together by three of the largest trade publishers, could evolve into a subscription service. And a publisher with a deep list in a particular category could develop its own programs, or, to use the current buzzword, a “vertical.” In some consumer categories this is already happening (think romance, for example, and technical/business as exemplified by Safari Books Online).
The obstacles for putting such a service together include technology, finance, marketing, and clearing the copyrights. But the biggest obstacle for publishers may be pricing. It will seem natural to focus on the price of each individual book and attempt to capture most or all of that price in a subscription plan—say 500 books with an average cover price of $14.95 priced at $7,475. An appetizing number. The only problem is that there will be no customers.
But publishers need to develop workable plans for “attention marketing” and “attention pricing” because, increasingly, we will find that we don’t sell books or any other form of content any more. Instead we put a price on the amount of engagement we can foster with a user.
What is the price to be the center of attention for an hour a day? Two hours a day?
Classics as a Case in Point
Let’s work through this idea with a concrete example. Consider Penguin Classics, one of the most distinguished series for the intelligent general reader. There are 1,082 titles in Penguin Classics, more than many readers will read in a lifetime. You can buy the complete series on Amazon for the self-declared “low” price of $13,413.30, which implies an average cover price of around $15.
I am a reader of Penguin Classics myself. I read perhaps two books from the series every year, at a cost of approximately $30. On that $30 Penguin makes a gross profit of perhaps $7.50, perhaps a bit less after royalties are taken into account. I read more than two books a year, of course, but Penguin has to compete with many other claims on my attention, whether they come from other publishers, film, music, or any other way I might spend my discretionary time.
If Penguin is going to become an attention marketer, it will quickly realize that the biggest opportunity is to convert the $7.50 it earns from me into a bigger number. What if Penguin made its entire Classics series available directly to individuals in electronic form for a subscription of $50 a year? The first reaction to a suggestion like this is, “We can’t give all those books away for that price!” But of course Penguin would be “giving away” only what a reader allocates the time to consume. Such a strategy would increase Penguin’s profit on me by almost 700 percent. And the publisher might retain me as a subscriber and continue to collect that money for many years.
I would sign up for such a subscription from Penguin in a minute. As a subscriber I would quickly see that every Penguin book I read would be “free,” that is, it would have no cost to me beyond the fixed cost of the subscription. This will provide an incentive for me to read more Penguin Classics—Penguin would begin to monopolize my attention.
If any of this sounds bizarre, reflect for a moment on how your subscriptions to cable television and Netflix work. Since I became a Netflix subscriber, the number of movies I watch has skyrocketed. Netflix offers me far more movies than I could ever watch, and all for one fixed price. As a consequence of my Netflix subscription, I use my television set less and less as a television and increasingly as a display monitor for Netflix.
The Evolving Aggregation
Any publisher interested in following this model will need to hone its direct-marketing skills. Since it will also need the technology for delivering the works in digital form (preferably in a way that does not encourage piracy), it’s likely that the proprietary systems of Amazon, Apple, and so on will soon be competing with service providers that create subscription-based applications for publishers, just as we now have in the library market for journals, where the likes of HighWire, Atypon, SilverChair, and AIP compete for clients.
Learning from Netflix doesn’t mean stopping there. Netflix is an aggregation of movies and TV shows. A publisher might start with an equivalent, but over time the elements in the aggregation will begin to “talk” to one another. Books that were written as stand-alone entities will begin to reference other books and be referenced by them. Reader commentary will knit the collection closer and closer together. At some unknown future point it will be hard to say where one book ends and another begins. The evolving subscription is thus just one step in the ongoing evolution of books and how they are published.
Joseph J. Esposito, the “portable CEO,” is an independent management consultant who provides strategic advice, operating analysis, and interim management in the area of digital media to publishing and software companies in the for-profit and not-for-profit sectors. He writes extensively on digital media and has been awarded research grants from the Hewlett, MacArthur, and Mellon Foundations.