The German Ebook Market and the Success of the Skoobe app

According to an interview last year with the managing director of the German Booksellers and Publisher’s Association, Alexander Skipis, “Germany is a nation of readers. As the second largest book industry in the world, the German market functions as a role model for both quality and diversity, and market performance is generally stable. We are eager to maintain and expand this state of affairs.” (Sussman, 2015). While this is coming from someone promoting their own segment of the book market and therefore might be taken with a grain of salt, it is undeniable that Germany is a huge player in the world of books, acquiring a turnover of 9.32 billion Euros last year.

One of the things that really stands out in the German book market is the strength of their print and brick and mortar retail sales. In 2014, physical bookstores still outperformed online retailers in Germany (Sussman). To go hand-in-hand with this, ebook sales have not taken off at all in this part of the world. This essay will explore why Germany has this stagnant ebook market and how one subscription based ebook app took off despite this.

As in North America, ebook sales in Germany have been rising. However, unlike in the US and Canada, they have risen at a very slow and almost reluctant pace. As you can see in the following graph, in 2014 the numbers reached 4.3% of the overall German book market (Sussman, 2015).

German graph

Looking at the overall picture since 2010, one can see that growth was never particularly huge, but has slowed down even more in the past three years. If you compare this to the North American ebook sales numbers, there is a dramatic difference. The graph below illustrates US ebook sales and shows a rise to 20% of the book market by 2014 – in huge contrast to 4% in Germany (Statista).

US graph

A Bloomsberg business article from a number of years ago, when this trend of slow sales in Germany was just manifesting itself, noted a few potential reasons for this (Winter). This article suggested that Germany is set up to support print books but not ebooks and that certain economics play into the slow adoption pattern (Winter). For example, print books are exempt from the full 19% VAT tax, with only 7% being added on to the price set by publishers. For ebooks, this tax is still applied in full (Matting). There have been some moves on the part of cultural ministers in France, Germany, Italy, and Poland to lower this tax, but is hasn’t met much success yet (Adamowski).

Another key factor cited in the Bloomsberg article and elsewhere, is the long held pride in print books that Germany has (Winter). Since the time of Gutenberg, German book printing and publishing has been a thing of high regard and print book sales have reflected this throughout their history. Elements of the current economy such as the VAT tax reflect this value.

Despite how small the ebook segment of the market is, a particular subscription based ebook app has taken off with relative success. At a time when subscription models in North America are under debate, this case study can provide us with some insight into what it would take to have a successful subscription model.

Skoobe 01
This German app is called Skoobe – if you are particularly adept you might notice the name spells “ebooks” backwards. Bertelsmann and Holtzbrinck, two publishing media conglomerates, launched the app in 2012. On its website Bertelsmann describes itself as “a media, services, and education company that operates in about 50 countries around the world” (Bertelsmann). Among many other organizations, they own Penguin Random House and the magazine publisher Gruner + Jahr which publishes magazines all over the globe. In 2015, it generated more than 17 billion Euros in revenue and currently employs 117,000 employees (Bertelsmann).

Holtzbrinck is also a huge media group that focuses almost exclusively on publishers. They have brought four well-known publishers with long histories together: Macmillan Publishers, Nature, Springer, and S. Fischer. They describe themselves as “As a media group dedicated to science, education and the wider cause of reading the Holtzbrinck Group aspires to provide first class service to our authors, researchers, academics, educators, librarians and readers” (Holtzbrinck website).

In the publishing industry we often hear people ask why publishers have not taken up the reigns on digital publishing enterprises such as Kobo or Goodreads or something new we cannot even imagine. Skoobe is unique in that it stemmed from the owners of some of the largest publishers in the world. These two media corporations together have a lot of money and experience in the publishing and media world and were able to put that towards their new venture.

 

Skoobe app

They launched Skoobe as a German-language-only service providing subscribers a large library of books for 9.99 Euros per month. You could have five books out at a time and register your app on three devices (Hoffelder). Another key highlight was that you could stream your books online or read offline across multiple devices.

Today, four years later, they have over 150,000 high quality books available, with hundreds of new ones coming online everyday (Skoobe). Last year, Skoobe expanded into Spain and they now have books in German, English, Portuguese, and Spanish (Hoffelder, 2014). In a Buchreport article from 2014, Skoobe reported that its app had already been downloaded over a million times since its launch two years before (“Ins Ursprungsland der Flatrates”). So despite the low rate of ebook sales in the overall German market, Skoobe is claiming good success with its subscription model.

And this is in the midst of intense debate in North America around whether or not the subscription ebook model is sustainable (Klosowski). In our part of the world, subscription services like Kindle Unlimited, Oyster, Scribd, and Bookmate have opened, but with varying success. Oyster and Kindle Unlimited are US only services, Bookmate is focusing its services in Russian, the Ukraine, and Turkey, and all of them work on different platforms and different devices with little consistency.

Last September, Oyster fell and its staff moved over to another company and in July, Scribd reduced the romance titles they were hosting, “due to the high volume at which subscribers presumably read those titles” (Duffer). In other words, this model has been struggling to find it’s footing in North America and causing many people in the publishing world to question its viability. As Ellen Duffer put it in a recent article on subscription models, “This recent movement [Oyster and Scribd] has sparked an increase in doomsday analyses of the subscription ebook model” (2015).

So how is it that Skoobe is finding such success in Europe despite the fact that the German ebook market is far smaller than the one in North America? And what is it that we can learn from Skoobe’s success?

A key downside that is often cited for the North American services, is that they all work on different devices. In other words, there is a need for one service that works across all iOS, android and other e-reader devices. This is what Skoobe provides. There are now even a number of e-reading dedicated devices such as Icarus Illumina that comes with the Skoobe app installed on them. This ease of use across multiple platforms, including Kindle Fire, provides users with an easy-to-use service that is far more accessible than equivalents that only work on one platform.

Furthermore, there is no denying that having a close connection to some of the world’s largest trade publishers through its founders was key. One of the things criticized in North American is that US providers of subscription services do not offer access to the bestsellers and instead have large volumes of books that nobody wants to read (Illian). Additionally, Jason Illian from the Entrepreneur notes how many of the world’s top publishers who produce these bestsellers are just not on board with the subscription services out there, and therefore, services like Oyster and Scribd just cannot get the books people want to read (Illian).

This doesn’t seem to have happened to the same extent in Germany, and the reason for this is that media and publishing companies started Skoobe and they already had a stake in the publishing industry (Duffer). With publishers like Penguin Radom House and the two largest German publishers Bertelsmann SE & CO and George von Holtzbrinck Publishing Group under your wing, you can rather quickly start to bring under contract other presses (Duffer). Skoobe currently hosts titles from more than 1,600 publishers including almost all of the German bestselling titles.

Although I was unable to find any information on the payment system that Skoobe works out with their publishers, Skoobe puts themselves forward as a company in close relationship with publishers and their collaboration with so many across the industry indicates that these partnerships are going well. This kind of collaboration is what is needed in North America.

Chrisitan Damke, the founder of Skoobe was quoted as saying, “Skoobe aims to enlarge the market for major publishers by offering easy ebook access to price-sensitive readers who don’t necessarily want to own the books” (Kozlowski). Skoobe argues that by providing a subscription service, they allow publishers to reach readers who might not normally spend money on a given book, but will read it for free if it is part of a flatrate service. This expands the reach of the book. According to data provided by the company, three-quarters of the books that users read – and enjoy with high satisfaction rates – within Skoobe are ones the readers claim they would not have been likely to purchase as an individual book before reading them on the app (Albanese).

Skoobe has also established themselves as a service that provides high quality books, as the current CEO Constance Landsberg said in a recent interview at the Frankfurt Book Fair, “Publishers are growing their title base constantly [on Skoobe] and are establishing strategies on how best to use the potential of subscription services. Skoobe is proving to be a great opportunity to market titles, especially from the backlist, and new authors alongside bestsellers and new releases” (Albanese).

She went on to say that 80% of their customers rate their books as “very good” after reading them and this is something they take great pride in (Albanese).

Thus they have been able to avoid the fear that many authors have regarding the subscription model: that their books will be undervalued in an environment that is full of bad quality books that could come from anywhere – something that is sometimes the case with North American versions of this same kind of service where many self-published books drown out the books the service can get from publishers (Weinberg). Instead, Skoobe not only provides new readers for certain authors, but also 25% of the readers on Skoobe buy print versions of books they discovered there (Albanese).

Thus, the North American publishing industry should look to the success of Skoobe and see that subscriptions can be done. This case study has shown that it is okay for ebooks to not hold a large part of the book market, and owners of publishing companies can still be in the subscription ebook business and make a success out of it. CEO Constance Landsberg acknowledges that it is essential to keep all parties involved benefiting from your business model – customers, authors, and publishers. With this in mind, Skoobe has been able to provide an accessible service across multiple platforms that offers high quality books, all in a very small ebook market. If they can do it, so can we.

Resources:

 

Adamowski, Jaroslaw. “France, Germany, Italy and Poland Call for Lowering VAT on Ebooks” Publishing Perspectives. April 2015. http://publishingperspectives.com/2015/04/france-germany-italy-poland-call-for-lowering-vat-on-ebooks/#.VvGzZxIrKRs
Albanese, Andrew Richards. “Frankfurt Book Fair 2015: Skoobe – Subscription Ebooks are Succeeding in Germany” Publishers Weekly. October 2015. http://www.publishersweekly.com/pw/by-topic/international/Frankfurt-Book-Fair/article/68326-frankfurt-book-fair-2015-skoobe-subscription-e-books-are-succeeding-in-germany.html
Bertelsmann. Accessed March 24th, 2015. http://www.bertelsmann.com/company/company-profile/

dpa. “Deutscher Buchmarkt weiter im Umbruch” Zeit. October 12, 2015.

http://www.zeit.de/news/2015-10/12/literatur-deutscher-buchmarkt-weiter-im-umbruch-12121402
Duffer, Ellen. “Subscription E-Book Service ‘A Success’ In Germany.” Forbes. Oct. 31 2015. http://www.forbes.com/sites/ellenduffer/2015/10/13/subscription-e-book-service-a-success-in-germany/#1891ec8f2a15

German Book Association, ebooks:

http://www.boersenverein.de/de/portal/Presse/158382?presse_id=1100374

G., Nelly. “Meine Erfahrung mit Skoobe – der Ebook Flatrate.” Nelly’s Lesseecke blog. June 19th, 2015. http://nellysleseecke.blogspot.ca/2015/06/meine-erfahrung-mit-skoobe-der-ebook.html
Hoffelder, Nate. “Streaming ebook Service Skoobe Gains support from the Illumina eReader.” The Digital Reader. July 22nd, 2015.

http://the-digital-reader.com/2015/07/22/streaming-ebook-service-skoobe-gains-support-for-the-illumina-ereader/

Hoffelder, Nate. “Skoobe Launches in Germany.” Digital Reader. March 2012. http://the-digital-reader.com/2012/03/01/skoobe-launches-in-germany-publishers-do-like-ebook-rentals/

Hoffelder, Nate. “Skoobe Expands into Spain.” Digital Reader. October 2014. http://the-digital-reader.com/2014/10/28/skoobe-expands-spain/

Holtzbrinck. Accessed March 24th, 2015. https://www.holtzbrinck.com/

Illian, Jason. “Why the Subscription Model for Ebooks Doesn’t Work (at Least Not Yet)” Entrepreneur. June 26th, 2015. http://www.entrepreneur.com/article/247762

“Ins Ursprungsland der Flatrates” Buchreport. October 2014. http://www.buchreport.de/nachrichten/nachrichten_detail/datum/2014/10/28/ins-ursprungsland-der-flatrates.htm?no_cache=1

Klosowski, Thorin. “Are Ebook Subscription Services Worth it?” Lifehacker. January 31, 2014. http://lifehacker.com/are-ebook-subscription-services-worth-it-1513205735
Kozlowski, Michael. “Macmillan Buys Into the Ebook Subscription Model Via Skoobe” http://goodereader.com/blog/e-book-news/macmillan-buys-into-the-ebook-subscription-model-via-skoobe

 

Lischka, Konrad. “App-Test Skoobe: Das taugt Ebook flatrate” Spiegel Online. 2012. http://www.spiegel.de/netzwelt/web/e-books-flatrate-skoobe-a-821881.html

 

Matting, Matthias. “VAT on Books and Ebooks in German Speaking Countries” How to Publish in Germany. September 2015. http://www.how-to-publish-in-germany.com/vat-on-books-and-e-books-in-german-speaking-countries/

 

Shaw, Hollie. “Ebook sales are flattening, but does that mean the technology is dying as consumers unplug?” Financial Post. July 15, 2015. http://business.financialpost.com/news/retail-marketing/e-book-sales-are-flattening-but-does-that-mean-the-technology-is-dying-as-consumers-unplug

 

Skoobe website. https://www.skoobe.de/

 

Statista. “E-book share of total consumer book sales in the United States from 2009-2015.” Accessed March 23rd, 2016.  http://www.statista.com/statistics/190847/ebook-share-of-total-consumer-book-sales-in-the-us-till-2015/

 

Statista. “Statistiken und Umfragen zu E-Books.” Accessed March 20th 2015.
http://de.statista.com/themen/596/e-books/

 

Süssman, Ingrid. “German Ebook Sales Reaches 4.3 of Overall Book Market” Publishing Perspectives.  June 24th, 2015.  http://publishingperspectives.com/2015/06/german-ebook-sales-reaches-4-3-of-overall-book-market/#.VuoTlJMrKRs

 

Süssman, Ingrid. “German Book Market 2014: Nonfiction Up, Overall Sales Down.” Publishing Perspectives. June 16th, 2015.
http://publishingperspectives.com/2015/06/german-book-market-2014-nonfiction-up-overall-sales-down/#.VuoAGJMrKRs

 

Weinberg, Dana Beth. “Which Authors Do Subscription Service Benefit?” Digital Publishing. April 2015. http://www.digitalbookworld.com/2015/which-authors-do-subscription-services-benefit/?et_mid=745706&rid=240986630

 

Winter, Caroline. “The Story Behind Germany’s Scant E-Book Sales.” Bloomberg. April 19, 2012. http://www.bloomberg.com/news/articles/2012-04-19/the-story-behind-germanys-scant-e-book-sales

2 Replies to “The German Ebook Market and the Success of the Skoobe app”

  1. Kathleen,

    This was a great essay and a really interesting glimpse into a market that I am completely unfamiliar with. I always enjoy when international perspectives are raised in our discussions, so thank you for sharing this one. As you pointed out, there are ways that the North American market can learn from its international peers, and an understanding of international markets can only benefit North American publishers as we become more global.

    I also like that your essay covers all the major stakeholders who are invested in the success of the ebook market, while acknowledging that the publisher statements should be taken with a grain of salt. It’s a difficulty in any discussion of industry issues that everyone speaks carefully and your acknowledgement of those limitations is a strength.

    However, I don’t think I’m quite as hopeful as you that the North American book market could or will learn from the success of the Skoobe model, partly because the two markets appear to be so different. As you established right at the beginning, ebook sales in Germany are extremely low compared to North America, and this seems to be somewhat because of the 19% VAT, and the fixed pricing model (http://www.young-germany.de/topic/work/language-communication/e-reading-in-germany) that make ebooks prohibitively expensive. In light of this, you can see how a €9,99 a month subscription is appealing to consumers, and to publishers who aren’t making much from their ebook sales anyway. I also think the market dynamics are very different, with Germany seemingly quite regulated, and North America competitive and hostile.

    In light of Natalie’s presentation in Industry on Monday, it’s interesting to take Skoobe’s success as a counterpoint to Oyster’s failure. There are some clear similarities and some of the differences that you raised; both were multi-device compatible, but Skoobe is publisher owned, where Oyster had publishers as customers, and Skoobe has a more curated selection of books. Would changing either of these have made Oyster successful? I wonder. The reasons for it shutting down remain a bit of a mystery (http://www.wired.com/2015/09/netflix-books-startup-oyster-shutting/), but the suspicion is that it was the payment model that failed to work, rather than a failure to get customers or keep publishers happy. In this, the lack of information around Skoobe’s payment model is significant, as it could be the missing link in the chain for North America. It is not surprising that it is kept secret, but what could be interesting is if the publisher-owners offered their lessons internally, to the North American branches of their holdings.

    From reading a few of the articles that you linked to, the conversation around subscription models is clearly far from resolved and your essay makes a great contribution to the debate with another angle that should be considered. Interestingly, contrary to what we discussed in class, when the Oyster founders jumped ship to Google Books it was part of an acquisition deal that included their IP (http://fortune.com/2015/09/22/oyster-shuts-down-founders-to-lead-google-books-new-york/), hinting that there may yet be more to come in this story.

  2. A point of comparison in a completely different market is always a good lens through which to understand what is happening here. I wonder, however, how comparable the two really are. It does seem that the main difference is that the market is such that the subscription service could be offered by the publishers themselves, but as soon as you made the essay about using the German case as an inspiration for best practices, I wanted to see you draw the parallels, and suss out the differences, in more detail. Still, the case study is in itself fascinating, and well presented.

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