Kindle Unlimited is Cutting into Authors’ Sales, and Other Market Scrying

ebook-best-seller-pricing-aug-2012-to-nov-2013[1]I was the first to break the story last week that KU might be having a negative impact on indie authors' ebook sales, and as I have been reading the ensuing coverage I have realized that someone needs to point out the problems with relying on anecdotal data.

And as I sit here reading Porter Anderson's piece in The Bookseller on Sunday, I can see that even Porter missed a valid counterpoint: that this type of decline has happened before (he also missed including me in his roundup of the discussion, but I am used to that by now). That leaves it up to me to question the narrative.

Last week I shared the tales of several indie authors who had seen a sharp dip in ebook sales in the months since Kindle Unlimited had launched. To make this even scarier, this included authors who both did and did not have ebooks in Kindle Unlimited.

There's a scary trend if true, but as with any report based on anecdotal evidence there's always the risk that your examples are the exception and not the rule. To be fair, sometimes the outliers are also the bellwethers, but given the history of the ebook market I wouldn't be so sure in this case.

One other reason to doubt this trend, and this is a good one, is the behavior of the market last year.

It was around this time last December that I reported that some indie authors were seeing a big drop in sales during fall 2013. I cited Toby Neal (who had corroborating reports from other authors) as saying:

The DOJ price-fixing case with Apple and the Big 5 publishers was settled awhile ago, but September was when Amazon began really discounting big name books. I get several email lists of discounted books daily in my inbox, and I’ve been agog to see big names like Janet Evanovich, Louise Perry, Michael Connelly, Patricia Cornwell and most recently, Donna Tartt’s Goldfinch, one of the Best Books of 2013, going for 2.99 or less.

...

And in September, my sales went to half of what they’d been. They’ve stayed at half what they’d been in spite of doing active marketing, ads on Kirkus Reviews, giveaways, promos in those same lists I get in my email inbox, and launching two new books.

When I reported on indie authors' drop in sales last year I attributed the decline to greater price competition from the major publishers, a plausible idea. This year we are looking at anecdotal evidence of a similar decline and attributing it to the effect of Kindle Unlimited.

While it is entirely possible that we did identify the respective causes, it is just as likely that we fell for the post hoc logical fallacy. Given that we are looking at what could be a cyclical market trend, I think we need to consider the possibility that both declines have the same cause.

And in case you're wondering why I didn't raise this point last week, it's because I didn't think of it until a couple hours after I published that post.

I don't know what would cause the declines, but I do think that it's worth our time to ponder it and be ready just in case it happens again next year.

Why do you think the sales have declined?

About Nate Hoffelder (11598 Articles)
Nate Hoffelder is the founder and editor of The Digital Reader:"I've been into reading ebooks since forever, but I only got my first ereader in July 2007. Everything quickly spiraled out of control from there. Before I started this blog in January 2010 I covered ebooks, ebook readers, and digital publishing for about 2 years as a part of MobileRead Forums. It's a great community, and being a member is a joy. But I thought I could make something out of how I covered the news for MobileRead, so I started this blog."

36 Comments on Kindle Unlimited is Cutting into Authors’ Sales, and Other Market Scrying

  1. Pbook sales have traditionally been seasonal and ereaders are strongly seasonal.
    eBooks have previously shown some signs of seasonality but mild, probably masked in part by the boom in adoption. Now that adoption growth has slowed some, the seasonality might be becoming more obvious.

    It’s way to early to conclude anything definite.

  2. I’ve noticed seasonality in my own reading habits. Got my first Kindle in November (a few years ago) and of course went crazy spending all the associated gift cards then and in December. Except for that year though most of my purchases of author’s I love happen in January, May, and August (basically when they publish new books). If I’m looking for a new author it usually happens in March and Summer/Fall. In November/December I have limited reading time and tend to re-read old favorites.

  3. Publishing of all sorts has always been up and down cyclical, sometimes for obvious reasons, sometimes not. I think it relates in a way to the thinking that books aren’t regular products. It’s true to a point in the sense that, particularly with fiction, every dollar brought in is discretionary spending. A couple things are going on right now. One, the economy is improving and that may lead to a bump eventually, but right now, we’re at the early stages of it and I suspect people are using their somewhat modest increase in discretionary income to buy bigger things they couldn’t afford the past few years. The second is the blockbuster issue. It’s easy to make fun of 50 Shades, but it’s a classic example of the cross-cultural mega-bestseller. Those things usually bring a “rising tide lifts all boats” effect. We haven’t had one since, going on two years now. It’s also easy for indies to decry the blockbuster model, I’ve done it myself and there are lots of distasteful elements of it, but one of those things brings a bump across the industry. The lack of one has a tangible impact too, in that discretionary spending by non-committed mega-readers gets somewhat splintered when there’s no bellwether to draw in the casual or occasional readers. The notion that anything related to sales in publishing stays consistent for more than two or three year stretches has always been a fallacy of sorts.

    As for KU, it could well be contributing but correlation does not equal causation. A shift in discretionary spending away from buying lots of books could make a cheap, plentiful option like KU subscription service look more attractive. Has anyone checked to see if library checkouts have increased in volume recently? Or how about sales in used book stores, which is a huge market that often gets overlooked when people talk about indie book stores? It’s not as simple an answer as saying simply KU is responsible and if Amazon does away with it, we’ll all be back in happy-land. It’s entirely possible if Amazon were to shut down KU today, we’d still see the same problem at the moment. Sort of like the piracy argument, you can’t really argue that people paying into this subscription service will automatically shift to buying books if that service were to go away. Very likely, given current conditions, that discretionary spending would just be switched to another plentiful, low cost option or leave the book market altogether.

  4. One needs to be cautious about books. All books are not the same. Some fiction genres sell more or less than other fiction genres and the same is true for nonfiction genres and for nonfiction vs. fiction in general. When you analyze sales in a food supermarket, you do not expect the sales volume for eggs to fluctuate in synchrony with the sales volume of cantaloupes or porterhouse steaks. As for Kindle Unlimited, many authors find they now sell 5 or 6 times in KU what they previously did in regular sales–and the total revenue from KU far exceeds what used to be the total revenue from regular sales–and of course it all depends on the type and genre of the title. What many people fail to understand is that the book borrowing habits of reader can be quite different from their book buying habits–and again, the kinds of books are important variables. What is important to remember from a financial standpoint is that total revenue is much more significant than total sales as a marker of what’s happening (aside from being more significant for the author’s bank account). So what if regular sales have gone down if KU borrows bring in more money than previous regular sales before KU? Of course many authors have chosen to not be in Kindle Select and so they are not earning income from KU and if their regular sales are down they are hurting. These authors avoided Kindle Select usually because of the exclusivity requirement–a bad decision given Amazon’s market share. So in summary, if your sales are down and you are not in KU, what did you expect to happen when a huge lending library came into existence? And if your regular sales are down and you are in KU and still hurting, write and publish what people will want to borrow rather than buy and forget about the old business model of publishing in this time of fundamental transition. We are riding a tidal wave in the middle of an ocean and no one yet knows where the tidal wave will take us.

    • borrowing habits of readers–and not reader. Sorry. There ought to be a way to edit a post for a short time after posting.

    • Really you know of someone who has borrows 5 to 6 times their previous sales? I would like to know who these phantom authors are. I lost $100 the first month Amazon came out with this asinine scheme, $200 the second month and now my royalties are almost non existent.

      • Go to the Amazon KDP forum and you will find plenty of writers who are making more money with KU than they ever made with without KU. As you might expect, high volume borrows are in certain genres but not in others. Consider that there are about two million books now borrowed each month in KU with the authors getting about $1.50 for each borrow. Can you justify thinking that no one is making serious money? Authors with many titles make money. Authors with few titles make less money. What else is new? That has always been the case in category genre publishing, print or ebooks. As for “quality” books, this is America, the Land of Opportunity Without Quality. Quality books are too often lost in the debris, the flotsam of capitalism

      • I was selling 400-450 books per month, steadily, until September. Then they went down to 200 and stayed there. In December 2013, I sold 1250 books. This December, 2014, I sold 450 books. And this is despite the fact that I’ve added three books during the year!
        I have seen no sign of the market improving, and borrowings do not make up for lost sales by a long way!

    • “write and publish what people will want to borrow rather than buy” –

      Agree, and have come to that conclusion very recently myself, and am exploring what that means in terms of what I offer. And I think, regardless of causes, this is a viable strategy in the near term.

  5. I have seen very little systems thinking applied to Kindle Unlimited. M. Louisa Locke’s comment on Porter Anderson’s post is probably the closest thing I have seen. She asserts that Amazon has shifted ‘the buy pattern’ back to free. It is probably a bit more complicated than that, but that is an important point. KU, as a system, encourages certain responses from readers and writers. Winning the KU game will require a different strategy than the Select game.

    • I don’t understand the difference between the “KU game” and the “Select game”, since every author in Select is automatically enrolled in KU. You cannot be in one without being in the other.

      • If you prefer, you can think of it as the new Select game with KU vs. the old Select game before KU. I was trying to emphasize that the dynamics of KU overwhelm the rest of Select’s features, but I guess that was unclear.

  6. Sometimes people forget that capitalism works not because some businesses get rich, but because most fail and go away, clearing out the dead wood as the world evolves. Likewise, it’s all nice to talk about how great it is that self-publishing cuts out the middle man, but then the writer is much more at the mercy of constantly changing customer habits. What works one week might not the next.

    It’s still early to know exactly what the “Netflix” for book model will mean for self-publishers in general, but I would guess it is simply another tool for them to use. Some people will use it better than others. Those people will get more readers/money, other people who don’t use it, or can’t figure out how to use it right, will lose readers/money. Being generally optimistic about the progression of human society, I would hope that in the long run it will be a good thing for the majority of self-publishers and writers in general. But many will get wounded or killed along the way.

    In terms of Amazon, it clearly had to respond to this potential market threat by Oyster and Scribd and try out an unlimited book rental service, even if that meant some writers might get hurt. Obviously, the best way for Amazon to help those writers already making money is to never change anything. Then even if the rest of the world changes, their sales will only slowly go down. But the danger in Amazon not responding to market forces is much greater. Amazon has a history of making a sudden pivots to deal with market pressures, and that’s why it is so successful. But obviously any big pivot in relations to books is always likely to hurt some of the highest earners. Is it hurting all of them? That would be interesting to know.

    In retrospect, it seems to make sense that the authors of higher priced self-published book series would get hurt by being in KU. What used to be a great model, a cheap or free first in series and more expensive sequels, doesn’t make sense when you get paid the same per rental and a lower price at that. It would seem to me the way to respond to this is to have the first book be in KU, and all the others for sale only. And as others have mentioned, the writers of really short books will clearly benefit, so there will be winners and losers. It’s also likely that KU will be of more benefit to newer writers looking for readers than established writers with a loyal fan base.

    On a personal note, I got KU as a free trial, so I’ve been really checking it out. I might or might not keep the subscription. It’s possible there are thousands (hundreds of thousands) of Amazon customers doing the same thing. Just checking out KU. So some my simply be too busy to buy books now, but will eventually return to their old practices. In terms of my buying habits, I would say the vast bulk of books I have checked out are not books that I would have bought otherwise. And it hasn’t really stopped me from buying books I would have otherwise. So in terms of my tiny spending, KU has definitely paid out more to writers than not having KU would have. If I keep the subscription, that will probably remain true.

    • “In terms of Amazon, it clearly had to respond to this potential market threat by Oyster and Scribd and try out an unlimited book rental service, even if that meant some writers might get hurt.” –

      I think that gets disregarded way too much, so glad you said this, thanks!

      • Here’s another way to think about it. Since Oyster and Scribd don’t have a method of buying books (at least I think they don’t), it’s much more dangerous for writers long term if everyone ends up spending all their time on those services. If one were to become as big as Netflix, writers would have little choice but to offer their books there or not be noticed by their subscribers. (Netflix pays terrible for indy films, pennies per view, all their money goes to big studios. And they don’t accept all films, it’s a battle to get an indy film accepted.)

        KU is better because authors can offer books in KU, but also sell books that aren’t in KU. Often after renting a book, I check out the authors page to see what else they have and many are for sale only. That’s a better model long term because it gives writers more options.

  7. Ok, so as a subscriber to both Scribd and Kindle Unlimited (past initial grace periods on each), these are my thoughts and a reader who “borrows” books to read. How far this can extend to readers in general, who knows 🙂

    It used to be, if a book I might really like went on sale, or was free, I grabbed it while I could. Now, unless it’s free, I check both subscription services to see if it’s there.

    If it is, I may or may not put it in my library right now; which won’t mean it’ll get read right then.

    If I do begin a book, I sample it. If I like it enough, I keep the book. If I don’t, I return it to make more room for other books. If I really like it, I’ll go as far until I get bored or tired with it, then switch books for variety. Usually I’ll eventually return to a book I like, but not always.

    It crosses my mind, hearing the bigger selling authors tell about lost sales, and even hearing from the mid-selling self-published writers, that at one time, I really depended on trying titles that were front and center and catching everyone’s attention. In a subscription model, I don’t feel that compulsion anymore.

    The thing is, as many have said (Joe Konrath, etc), an ebook is forever.

    I don’t need to worry I’ll miss a sale or the book will be sold out. It’ll be there, later and maybe forever. In other words, I know I can return to it any time in the future, even if it’s only for sale and not in a subscription plan (unless it’s been unpublished electronically.)

    I totally agree, Amazon had to respond to Scribd and Oyster. But I suspect a subscription plan was in the works for possible future use all along. Amazon’s too experimental and exploratory of trends not to have been contemplating and preparing.

  8. Selling ebooks from popular authors and major publishers at discounted prices, as this article notes Amazon doing, illustrates what really should bother authors about Amazon.

    That’s the enormous power Amazon has to puff or conceal books from potential readers. Amazon wants to use that to get the major publishers to pay them for the puffing. It wants to use the potential for concealment to force independent authors to give it an exclusive, not selling that ebook through any other retailer.

    For the major publishers, that pay-to-play income will allow Amazon to undercut the prices of competitors, ensuring even more market dominance. For smaller publishers and independent authors, Amazon will enlarge the nasty favoritism game it is already playing. To get decent placement online (i.e. come up high in search results), they’ll need to either give Amazon an exclusive or severely limiting marketing through other retailers.

    In the long run, Amazon is most unhappy with the 70% royalty rate that Apple pays at all price levels. It’s kicked against that by only paying 70% (less a hefty download fee) over a narrow range ($2.99-9.99) and paying only 35% outside that range.

    With its crowdsourcing scheme Amazon is giving us a clue to the future it has planned. It pays only 50% and comes with a host of restrictions on what authors can and cannot do. Amazon intends that 50% to be the high-end royalty rate, one an author only gets by giving up a lot of rights. Display any independence as an author, and you’ll have to accept only 35% royalties, a mere pittance. Amazon will pocket 65% for a financial transaction and file download that costs it pennies. And it will use its out-sized profits to crush competition, ensuring that authors have still fewer choices.

    Keep in mind that Apple has done something equivalent to ebook sales with its iTunes business. When that began about 2003, Steve Jobs said that selling music for 99 cents and giving 70% to the musicians was break even for Apple. Over a decade later, the cost of providing those services has declined dramatically. I heard precisely than in a speech an Amazon web guru made at and event I attended in Seattle. And for ebooks costing over 99 cents, the costs are the same so the profit is even greater.

    What that means is that an 80/20 split between author and retailer is quite possible. 70/30 is justified if the retailer provides tools, much as Apple is doing with iBooks Author and supporting Adobe in creating epub export from InDesign.

    Anything less that 70/30 at any price level, is little more than robbery. Amazon goal of at best a 50/50 split dropping to a 35/65 split for authors who show independence is sheer highway robbery.

    Authors need to get their act together, quit being such wimps, and demand at least a 70/30 split at all prices with no restrictions. To do anything else is folly.

    • You always have to pay for exposure. Or rather, those who can pay can always get more exposure. Whether it was print ads or radio spots or TV spots or better placement on shelves. Or just being carried on shelves to begin with. The rich will always have more ways to get richer.

      It’s still a little early in the game to get angry at Amazon for “only” giving 70%. It seems there are bigger battles indies can fight for right now that are win/win. (Like subscriptions for authors.) KU, with writers being paid from a pool, is potentially a much bigger threat than the 70% issue. But I think the writing is on the wall for it. Many writers are going to pull out unless the terms are better. And if it becomes a ghetto for short or junk books, and a few full pay best sellers, it won’t work as much more than a free perk for new Kindle purchases.

      • I agree. It will become a ghetto–unless Amazon is committed to revitalizing publishing rather than destroying it and finds ways to make good books worth writing. But I don’t think Jeff Bezos wants to destroy publishing and book culture. He’s too smart.

        • If it becomes a ghetto for only short works and junk, is that really a problem?

          I think it would free up the retail part of the Kindle Store for longer works.

          • But is it not already free? An author/publisher can publish anything in KDP without KDP Select /KU. Set their own price and get 70 per cent royalty if the price is from $2.99 up through $9.99. I don’t know what will happen, but if KU becomes a ghetto for short work and junk, there will still be authors making money writing for people who borrow rather than buy books and the authors who pull out of KU will be in KDP but not in KDP Select. It’s all speculation, especially since Amazon plays its cards close to the chest and whatever agenda they have is not public.

          • My point was that the Kindle Store has works of all lengths, including novellas and short stories, and that a lot of readers aren’t happy when they get to the end of a short work when they were expecting a novel.

            If KU becomes synonymous with short and junky then retail customers will know to avoid buying any works tagged with KU (or Prime). This could leave everyone happier.

          • No, it’s not a problem if it is just a little free ghetto for an odd assortment of content. Then it would be a lot like Amazon Prime video. In fact, Amazon might roll it into Amazon Prime.

            From a writer’s standpoint, it then becomes another tool. Smart writers will put in books that aren’t selling anyway, and write specialized short fiction that suits it well. Longer books they sell.

            From Amazon’s standpoint, it becomes an extra content perk to help sell Kindles (which is good for writers anyway) and also undermines Scribd and Oyster.

            However, if Amazon seriously expects a lot of people to pay $10 a month for it, then it’s going to need to offer more value than short stories and second rate books authors toss on because they aren’t selling.

          • Actually, there’s no need for a ghetto for free content; that can be found in the Kindle Store. My mother reads two ebooks a week but hasn’t paid for one for over a year.

            And as for the value of KU, I’m not sure that “it’s going to need to offer more value than short stories and second rate books”. It seems to be doing quite well right now. That might continue.

          • Nate, no one needs to be disappointed about the length of a book they buy. On every book product page, the estimated number of pages in the ebook are stated in two place. In addition, only ignoramus authors call a short story a novel. Nearly all authors explicitly state that it’s a short story if it is a short story. If a buyer is disappointed, it’s likely they bought a book from its cover and without looking at the specs. But there is a problem in nonfiction, because there are no widely used terms to differentiate short nonfiction from long nonfiction. Still, the estimated pages are indicated on the book product page. People need to look before they buy.

          • My mother has remarked on it.

    • I don’t understand your argument. If it’s a trade book, the author’s royalty is set by the contract between the author and publisher and in general discounting by a retailer does not affect the author’s revenue and in truth may increase the author’s revenue by increasing sales. Brick and mortar chains always discounted in the past. Discounting by retailers is nothing new anywhere and it’s the retailers who are taking less profit per unit and not the suppliers. The retailers discount in order to make more revenue from the increase in total sales.

      If it’s a KDP ebook, the price is set by the author/publisher and not “discounted” by Amazon, although Amazon will match any lower price found elsewhere. For KDP books in KDP Select, exclusivity to Amazon is required, so there is never any price matching by Amazon and the price set by the author is fixed (until changed only by the author).

      So if the crux of your argument is that a book selling at “discount” by Amazon is making less money for the author, I see no evidence for the idea–unless it’s a trade book and the author got sucked into a crap contract with the publisher.

    • Why do still sell your books on Amazon? They are, in your own words, robbing you. You are deliberately allowing them to take advantage of you.

  9. I think, the same way ebooks enabled traditionally published books to become more diverse and of varying lengths, Scribd and Oyster and Kindle Unlimited are enabling the same.

    That this may be serial-sized items, returning readers and writers to an era dating back to (at least) Dickens, is more an evolutionary change than an intentional disruption.

    Though…considering that compelling serial-style story lines lend themselves more ready-made for TV, cable, streaming, and movie production…hmmmm 🙂

    Maybe that latter thought was a by-product of having a subscription program worth keeping, and pursuing, by KU, and even Scribd and Oyster (via connections with trad publication’s network of media folk).

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