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How the Netflix For Books Is Changing the Game [e176]

Nasir and Matt discuss Oyster, coined the Netflix for Books, and why their model may work out over the long-term.

Transcript:

NASIR: All right. Welcome to our podcast where we cover business in the news and add our legal twist. My name is Nasir Pasha.
MATT: And I’m Matt Staub.
NASIR: I’m excited for today because we’re going to start reading some books for the first time. I don’t think I’ve read a book all the way through – at least a fiction book all the way through – in a long, long time.
MATT: I was just telling somebody this story. It’s probably more embarrassing so I shouldn’t tell it.
NASIR: No, it’s okay.
MATT: Many years ago, a long time ago, I was in an interview for a job and one of the questions they asked me was…
NASIR: “What was the last book you read?”
MATT: Well, I don’t think it was. I don’t remember the exact question but it was something along those lines or, like, “What book would you use to describe…?” whatever the position was, and I hadn’t read a book in a while so I just made something completely up. Someone had told me about a book a couple of months ago so I just said that book and then completely made up what the book was about – just made up facts and everything – and the guy goes, like, “All right. Good answer. That’s a good answer.”
NASIR: He was like, “Yeah, I read that book, too. I enjoyed it,” and you guys are both making up the story as if you guys have read it. That was for your pizza job, right?
MATT: Yeah, it was very important to be well-read at that pizzeria. Yeah. Well, I think you and I are probably the same in that we read so much – you know, either case law or statutes or practice guides or just blogs. I mean, there’s a good amount of reading and, by the time I get done with all that, I don’t really want to read a book. I’d rather just watch something and not have to make my eyes work as hard.
NASIR: Yeah, and even from an entertainment perspective, when I want to read for entertainment purposes, I don’t want to read fiction. It’s just I want to learn – read information, I suppose, I guess.
MATT: I’m with you on that. Pretty much every good book turns into a movie or a TV show.
NASIR: That’s right. That’s your screening process, right?
MATT: Yeah. That’s why I’m not too concerned, but a lot of people are pretty excited about this Oyster which I think I might have heard about this before but I don’t know. Essentially, they’re calling themselves – or they’ve been called – the Netflix of books which, I guess, a book can be just as easily binge-read as it can a show on Netflix binge-watched or, you know, a documentary or something like that.
NASIR: Yeah.
MATT: Is that how you interpret that?
NASIR: Well, I would say Netflix is the idea that it’s kind of unlimited. What’s interesting about this model is that, first, actually, Amazon has its own unlimited subscription service. I think it’s $10.00 a month or so.
MATT: Yeah.
NASIR: But it’s actually a little known fact that another company or another business model that’s very similar to this was invented a long time ago before Oyster and Amazon was even around and it was called the public library.
MATT: I knew you were going there before you finished it. I was hoping you weren’t but…
NASIR: I love how things just get reinvented. Obviously, the nuance to this is that it’s electronic. You know, you get ebooks. You don’t actually have to drive to the library and they’re not physical books but, hey, power to them.
MATT: And you mentioned the Kindle part. This is different. Oyster is different because it’s actually somehow got some sort of agreement with I guess the five biggest publishers so it seems like it truly is an unlimited – I was going to say all-you-can-eat but that doesn’t make sense – all-you-can-read book arrangement.
NASIR: No, you’re right. That’s the big difference here. The big five publishers – and you guys probably haven’t heard of these publishers – I mean, Hatchet and Harper Collins, I mean, in the publishing industry, these are the ones that pretty much control the industry. But what’s interesting, the real story behind all this is the back workings behind Amazon and these publishers and why Amazon’s service, for example, unlimited service don’t include books from these publishers because they’ve been in this constant battle for the past couple of years and I think they’re going to continue to be with how Amazon prices their books. And so, for example, they just settled I think with Hatchet and now Harper Collins is making complaints and so forth with Amazon in their negotiations with that as well. I mean, that’s the real reason why Oyster and some of these other third parties are able to make this pretty big deal with these guys because, right now, Amazon has pretty much the majority of the ebook market and so they have I think these publishers big in their own name feel that Amazon has too much negotiating power.
MATT: Yeah, and it’s interesting that Oyster was able to come in and make a deal with these big-name top five or big five publishers. I assume these are the top five out there but we made it pretty clear at the beginning of this we don’t read that often.
NASIR: Yeah.
MATT: Who knows? The interesting thing – I was thinking about this – is just it’s on-demand product or service but it’s a little bit different here also because it’s an all-inclusive – well, Netflix is inclusive but not all-inclusive because there’s still quite a few things on Netflix that are not available. Any newer movie for the most part is not going to be on there, and by newer I think it’s usually like, what? A couple of years until a movie is on Netflix?
NASIR: There are some movies that go pretty quick to it. I know that – what’s that one movie when they went to North Korea? That whole controversy?
MATT: That was different because that never got released. The Interview?
NASIR: The Interview, yeah, yeah, yeah. I guess that is different.
MATT: Yeah, that got taken out or never got put in theatres so they just instantly put it up. But, I mean, every year, you see the ten movies that are nominated for a Oscars?
NASIR: I believe it’s called the Oscars, yeah.
MATT: None of them are ever available to watch so you can never really see for yourself. Oh, sorry, on Netflix. They’re always available on other mediums.
NASIR: Yeah. Well, I feel like they’re not even available anywhere. It’s like these movies that you’ve never heard of and that they’re only in select theatres, too. But that’s a different issue. So, all these companies – Oyster, Amazon, and even Netflix and Hulu – how they produce their content, they have to make these deals with these publishers and, from a business perspective, your content is what is going to excel in your industry and just by having a wide selection, Oyster has been able to really come out pretty quickly. At the same time, they’re also in the retail market, right? I mean, they’re still selling these books a la carte. Is that what that means? I’m trying to figure out what they mean by they’re “in the retail market.”
MATT: Yeah, they have a retail store.
NASIR: Oh, okay, some kind of brick-and-mortar. That’s interesting.
MATT: Yeah, they’re a typical book subscription service like we were describing, but they also added this retail store. I mean, to me, it’s not really even necessary.
NASIR: Just to get back to this Amazon and publisher fight, I think it was Hatchet that they came to a deal with but I believe Hatchet’s a public company and so their revenues weren’t that great. One of the things that they’ve cited was Amazon’s punitive actions against them throughout the contract negotiations. Apparently, what Amazon was doing was taking their books specifically and in all pre-orders for upcoming Hatchet titles which is, for the book industry, pre-orders, I guess, apparently on Amazon is a big way to boost sales. And then, also started taking away discounts which basically translated to lesser sales because, obviously, if you take away the discounts, less people are going to buy and so, therefore, there’s going to be less sales. And so, that affected them. This is just kind of giving you an idea of kind of the harsh business tactics that were going on between Amazon and this particular publisher.
MATT: And I did want to clarify one thing, too. I think you said brick-and-mortar. It’s not. It’s still an online store.
NASIR: Oh, okay.
MATT: Because I don’t know if there’s even brick-and-mortar bookstores that even exist anymore at this point – or it’s got to be very low.
NASIR: If it’s brick-and-mortar and they’re still selling ebooks, that would be even stranger.
MATT: I wonder if public libraries will ever, they probably already start having access to ebooks or I wonder how that would work.
NASIR: Well, what’s interesting about that is I remember Google was basically scanning as many books as possible, like, basically everything. We covered it, right? There was a whole issue about it. I think it was last year, beginning of last year in 2014 where there was copyright infringement issues and Google had their fair use kind of perspective and they were making the analogy of a public library. It is interesting that, okay, all of a sudden, since I could go to the public library and get a new title that’s out, a lot of times they get those fresh titles, borrow it, read it, and return it and not pay anything, yet now, since it’s online, all of a sudden, that’s not allowed unless I pay for it which is kind of strange.
MATT: Well, that was pretty interesting. I don’t know whatever ended up even happening with that because I still see the Google Books that are out there.
NASIR: I think there was a legal settlement. I think we covered it. In fact, I’m searching it right now. The Google Books search settlement agreement was proposed settlement agreement between the Authors Guild and Google. The settlement was initially proposed – oh, it was rejected. In late 2013, the president presiding US circuit judge dismissed the case against Google.
MATT: From a business perspective, the model of this all-inclusive model or whatever you want to call it, obviously, it will vary business to business. But do you think it’s a viable way for some businesses to survive?
NASIR: From a perspective of the contracts that they have these publishers?
MATT: I’m not even saying just in the book industry – just other businesses that are looking to try to possibly do this, maybe they sign people up for a one-year arrangement where they pay, you know, $10.00 a month or $9.99 a month over twelve months and something as opposed to them coming in one time and paying $15.00.
NASIR: Well, the think the subscription model for everything has just become, I mean, that has become the standard for services now. I mean, if you think about it, everything from cell phones to Netflix to any kind of online services – I’m just trying to think. If I go through my credit card, how many recurring bills and subscription fees that I pay is almost hard to keep track, you know? A lot of times they’re small. It’s like $5.00, $10.00 here. Like, for example, we pay $5.00 just for tracking our podcast statistics a month – you know, it’s cheap but it’s $5.00. And then, there’s another $15.00 for some kind of email tool that I use and you have Netflix and all that. I think there used to be, before when you were buying software once or entering into some kind of long-term service plan which had a year contract and so forth, people don’t like that inflexibility of that and so it becomes a trend. Now, the only danger is that – you know, with Oyster and these other companies – I think the most important thing is the contracts that you have with these publishers. For example, you have other companies that sell games on a Netflix model. You have obviously book, movies, TV shows, and things like that, and it’s all going to be dependent upon what kind of agreements that you can have with your publishers to make sure you have good content.
MATT: I think that answered my question.
NASIR: Well, that’s what I’m here for – to serve.
MATT: Ah, all right, well…
NASIR: I’m looking at this Google lawsuit again. It looks like the case got dismissed. I wish we would have researched it before but the case got dismissed which was a huge win for Google and they were able to continue to expand their library. So far, that’s pretty much what they’re doing. I don’t think they’re actually publishing every word but being able to search these books is still available, I believe.
MATT: There you have it.
NASIR: There you have it. So, let’s follow Oyster unlimited. I’ll think about actually – $9.99 I think is the monthly model so that’s where it starts, I believe.
MATT: I don’t know if I’d use it.
NASIR: Yeah, I don’t know if I’d use it.
MATT: I wonder if it’s named with the “the world is your oyster.” I wonder if that’s where their name came from.
NASIR: Yeah, I can’t think of any other idiom with “oyster” but, yeah, that’s probably it.
All right. Well, thanks for joining us, everyone. Don’t forget to leave a positive review on iTunes.
MATT: Keep it sound and keep it smart.

Nasir Pasha & Matt Staub

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The Podcast Where Nasir Pasha and Matthew Staub cover business in the news with their legal twist and answer business legal questions that you the listener can send it to ask@legallysoundsmartbusiness.com.

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