Amazon Starts $9.99-a-Month Service for Unlimited E-Books

July 14 (Bloomberg) -- Marshall Sonenshine, chairman and managing partner at Sonenshine Partners, explains the business behind the e-book price war between Amazon and Hachette. He speaks on “Bloomberg Surveillance.”

Amazon.com Inc. (AMZN) introduced a $9.99-a-month service for unlimited Kindle e-book downloads, letting customers devour books like they binge on TV services like Netflix Inc. and Amazon Prime.

Kindle Unlimited includes more than 600,000 Kindle books and thousands of audiobooks from Audible Inc., Amazon said today in a statement. Readers can access titles like “The Hunger Games” and “The Lord of the Rings” without paying for them individually.

The plan presents a more affordable option for heavy readers, following the model Amazon and rivals such as Hulu LLC are using to change how viewers consume television. Kindle Unlimited could be generating about $1 billion revenue in five years, Gene Munster, an analyst at Piper Jaffray Cos., wrote in a research note before the service was officially announced.

“This program would be a step towards bringing consumers into the Amazon content subscription ecosystem,” wrote Munster, who rates the shares overweight.

Amazon is putting a new twist on its e-book model in the midst of a high-profile battle with publishers for a greater share of income from e-books. The world’s biggest online retailer is locked in a dispute with Hachette Book Group and has blocked pre-orders for some of the publisher’s titles to gain leverage in the negotiations.

Before this service, Amazon Prime subscribers who owned Kindles could borrow more than 500,000 e-books. Kindle Unlimited differs in that it allows readers to download multiple digital books simultaneously as well as audiobooks through Audible, an Amazon subsidiary. Customers also don’t need to own a Kindle device.

Publisher’s Reluctance

The digital and audio books downloaded through Kindle Unlimited don’t belong permanently to readers, Brittany Turner, a spokeswoman for Amazon, said in an e-mail. Customers who cancel their subscription will lose access to their downloads after the next billing date passes, Turner said.

Adopting a subscription service has met some reluctance from publishers and book distributors. Carolyn Reidy, the chief executive officer of Simon & Schuster, said in January that the company had unresolved questions about how to avoid devaluing books and hurting sales.

While physical book sales in the U.S. are projected to fall to $19.5 billion this year from $26 billion in 2010, e-book revenue is anticipated to jump more than eightfold to $8.7 billion, according to Forrester Research. The growth is being spurred by the increasing consumer use of tablets and smartphones, through which people read e-books.

Amazon rose 1.8 percent to $358.66 at the close in New York. The Seattle-based company’s shares have dropped 10 percent this year.

E-Books Growth

The number of e-book readers has steadily grown, with 28 percent of American adults reporting to have consumed at least one digital book in the previous 12 months, according to a Pew Research Center study published in January. That was up from 17 percent in 2011.

Meanwhile, 14 percent reported listening to an audiobook, said Kathryn Zickuhr, a Pew research associate who conducted the study. Adult Americans read an average of 12 books all or part of the way through, in line with previous years, the survey said. Only 24 percent read 12 or more books in any form, said Zickuhr.

In comparison to print books, “people generally like the ease and convenience and mobility of e-books and the ability to find a book that matches your mood at any given time,” Zickuhr said.

Print books still dominate, with 69 percent of Americans having read at least one in the previous 12 months.

Kindle Unlimited isn’t the first of its kind. A New York startup, Oyster, offers access to more than 500,000 books for $9.95 a month. Scribd Inc.’s service has more than 400,000 titles for $8.99 a month.

“We’re not surprised,” Eric Stromberg, chief executive and co-founder at Oyster, said in an e-mailed statement. “They have pivoted from transactional to subscription-based in other media, and have had limited success. They really paved the way in e-books, and it’s exciting to see them embrace the market we created as the future of books.”

To contact the reporter on this story: Jing Cao in New York at hcao38@bloomberg.net

To contact the editors responsible for this story: Sarah Rabil at srabil@bloomberg.net James Callan, John Lear

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