By Beth Kowitt, writer
FORTUNE -- Could Oyster be the Netflix for books? It's the question many industry-watchers have been asking since last October, when the New York City-based startup received $3 million in funding led by Founders Fund.
Today's launch of Oyster in Apple's (AAPL) App Store gets us closer to an answer. With Oyster, subscribers get unlimited digital access to more than 100,000 books on their iPhones for $9.95 a month. Backing from a venture capital firm with the star power of Peter Thiel gave Oyster an important seal of approval, but up until now, with just over 100 users trying out the service in beta, it's been virtually untested.
Oyster's founders don't shy away from the Netflix (NFLX) comparison. Even the interface "feels like the Netflix experience," says co-founder Willem Van Lancker.
But in the realm of book publishing, which is dominated by one 800-pound gorilla by the name of Amazon.com (AMZN), industry players seem eager to support an initiative that distributes power more broadly. Oyster has done deals directly with publishers such as HarperCollins, Houghton Mifflin, Harcourt, and Rodale, and has also signed up Smashwords, the world's largest distributor of self-published e-books. While Oyster wouldn't comment on the mechanics of the deals, it has previously been reported by TechCrunch that publishers get a cut of the revenue every time their books are read.
There is the big question, of course: What's to stop Amazon from offering the same service and shucking Oyster before it gets out of its shell? Indeed, Amazon already has its own Lending Library, which lets Kindle owners who are Amazon Prime members borrow one book each month for free. Offering Amazon customers an all-you-can-eat version isn't much of a conceptual leap. And even other startups are getting into the mix: eReatah recently launched a private beta app for e-books, which lets you choose between three plans (two books per month for $16.99, three for $25.50, or four for $33.50).
But there is something compelling to the Oyster idea. Just as Netflix altered the way people consume movies, Van Lancker and his fellow co-founders Eric Stromberg and Andrew Brown are trying to impact the way people read.
Having a flat monthly fee makes it easier for any reader to check out a book on a whim -- or discard a book they're not enjoying and move on to another one instead. Oyster's team says its goal is to inspire people to read titles they wouldn't otherwise pick up. "We're trying to allow people to spend less time deciding if they should read a book and more time just reading it," Stromberg says. (Hence the company name that stems from the Shakespeare line "then the world's mine oyster." Stromberg and Van Lancker say it's meant to capture the Oyster library's sense of limitless opportunity.)
Oyster is iPhone-only for now and has not announced plans for Android or for e-readers. The iPad app will launch in the fall. Stromberg says the team is targeting phones first because it's a device you always have on you and engage with at a high frequency. But even if they wanted to have a presence on e-readers, there's a big hurdle in Amazon, which would have little incentive to allow Oyster on its Kindle.
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A big challenge for Oyster (again, as was the case for Netflix) is not accumulating books, but accumulating the right books. Van Lancker says that he's read that a typical big-name bookstore has 40,000 to 50,000 titles, a number that Oyster has well surpassed. But if Oyster doesn't have the hot book of the moment or a handful of searches come back with "no results found," the service will quickly alienate users.
What Oyster really does have going for it is its clean, easy-to-use experience. The last 10 books you've opened are kept available offline (I found they download quickly), so you don't have to worry about trying to open them when you're without Internet access. Your activity helps inform recommendations, and genres are laid out in a carousel design -- "Sweeping Histories," "Book to Blockbuster," "Rebels and Groundbreakers." Users are encouraged to create profiles and follow friends to see what they're reading. But you can also hide your activity if you'd rather they not see how much progress you've made in your favorite romance novel.
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