The folks at Founders Fund and Highland Capital Partners just bet a lot of money on the future of ebooks. They have shelled out $14 million in a venture round for New York startup, Oyster.
The company fancies itself as blend of Spotify and Netflix (NFLX). In other words, Oyster provides a subscription service — pegged at $9.95 per month — to get unlimited access to more than 100,000 ebooks. So far, the service is available on Apple’s (AAPL) iPhone and the iPad platforms (although, the thought of reading a book on your iPhone will probably give most users a headache).
Right now, Oyster hasn’t released any details on the size of the company’s user base. But then again, Oyster is still in the early stages, having launched in early September. It’s a good bet that a big part of the recent funding will go into marketing. But the cash will also go to building a Google (GOOG) Android version, and the company will continue to strike deals with publishers (there are already more than 800 publishers, including biggies like HarperCollins, Perseus, Melville House and Houghton Mifflin).
For ebook lovers, a subscription service would certainly be attractive. Let’s face it, if you buy a book Amazon (AMZN) and it turns out to be a dud, you’re out of that money. But with something like Oyster, that risk largely goes away. Besides, by using sophisticated online technology, the company can get a better sense of what readers really want and make more accurate recommendations.
Yet Oyster must deal with alternative offerings on the market, such as Scribd. And of course, AMZN has its lending library for Kindle owners who belong to the AMZN Prime Program, offering free access to more than 350,00 ebooks. And don’t count out Barnes & Noble (BKS) — given its string of disappointing earnings reports, the company needs to do something to revive its business, which could mean a major push into ebooks.
Tom Taulli runs the InvestorPlace blog IPO Playbook. He is also the author of High-Profit IPO Strategies, All About Commodities and All About Short Selling. Follow him on Twitter at @ttaulli. As of this writing, he did not hold a position in any of the aforementioned securities.