Debunking the Claim that “the ‘Author Earnings Report’ is Misleading”

2534781518_a05a0b9947_bIf you've caught up with today's morning coffee post then you've probably already read Oscar Bernie's criticism of the Author Earnings Report. That post was picked up by The Passive Voice blog yesterday and lead to a discussion which is now 292 comments long and counting.

While Bernie's post was a good read, the ensuing debate illustrated a number of flaws with his arguments and I would like to address them.

To start, Bernie showed up in the comment section of TPV and argued his case. I have to give the fellow points for showing up at his own vivisection; that takes gumption, and it is why I am willing to look past his condescending remark about housewives, the ad hominem and false attack that TPV is "sponsored by Amazon", and the other ways Bernie shot himself in the foot.

In the Problems section of his post, Bernie raised a number of issues with the latest Author Earnings Report (he did not read the earlier reports, apparently). He then helpfully summed up his arguments in the comment section at The Passive Voice:

But give me a logical counterpoint to any of my assertions:
– Seasonal variation isn’t accounted for.
– Increase of indie books (change to sample size) makes the pie charts useless. If the market doubles but Big 5 stays the same, a pie chart appears to show a shrinkage that doesn’t exist.
– We don’t know the impact to the Big 5 without print sales.
– The overall market is growing and cannibalization doesn’t seem to be an issue.

I’ll discuss real things. But the number of logical fallacies here is staggering.

Let's address his points one at a time, starting with seasonal variation.

Bernie objects to how the latest Author Earnings Report compares data from January 2015 and May 2015, and points to the problem of seasonal variation.

This is indeed a valid concern (it is for example why you read year-over-year comparisons in a company's revenue reports). It is also why I went looking for the older reports when I covered the latest Author Earnings ReportBernie did not bother to do so, but the data is there so this point is irrelevant.

What's more, others have looked at the source data and concluded that seasonal variation doesn't have an impact on relative market shares.

And while we're on the topic of data, Bernie also demanded (in his post) that the AE Report provide more raw data. Apparently he skimmed the report and missed the fact that source data is provided. Bernie is welcome to go dig through it and crunch his own numbers.

Next he raises the issue of sample size.

Increase of indie books (change to sample size) makes the pie charts useless.

In a word: no.

If this were a valid complaint then it would mean that no consumer market survey is valid. Those surveys, whether they're performed by Pew, BISG, Neilsen, or whoever, rarely use more than a few thousand participants to draw conclusions on millions. Consumer survey groups are never the same size, and they rarely have all the same participants from one survey period to the next, but they are always taken seriously.

The Author Earnings Report tries to solve the sample size problem by using a sample size as large as possible. To complain that it is not big enough is simply ridiculous.

 

Next, Bernie raises a point about print sales:

We don’t know the impact to the Big 5 without print sales.

That is irrelevant. This report has always been about digital and how much money there could be in the ebook market.  Yes, digital affects print and print affects digital, but we're talking about the digital market here. Print is irrelevant to this discussion of the size and value of the digital market.

Let me give you an example: this would be like arguing that a report on tablet shipments is irrelevant because it did not include laptop sales (because one market influences the other). Clearly the argument makes no sense.

Bernie then closes out his arguments with an unsupported claim:

The overall market is growing and cannibalization doesn’t seem to be an issue.

He offers no evidence to support this claim, so there's no need for me to refute it.

***

All in all Bernie's report was an interesting read, but as the many commenters showed over on The Passive Voice, it has serious flaws.

I can't quote them at length here but if you have the time today, I would go read the comment section for this topic. It shows why I often feel the debate on that site is sometimes more valuable than the original source.

image by garryknightBetween a Rock

About Nate Hoffelder (11579 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."

12 Comments on Debunking the Claim that “the ‘Author Earnings Report’ is Misleading”

  1. The whole thing is a total misread of the AE reports.

    The reports very specifically state that their primary goal is to estimate the relative market share of ebook sales by source: BPH, small/medium tradpub, Amazon Tradpub, and Indie, so authors can weigh the value of the different roads to market. That right there means seasonality is (mostly) irrelevant because seasonality impacts the size of the market but not consumer preferences. (As is, the biggest seasonality–holiday pbook gifting–is disappearing.)

    Because the focus is, ahem, *author earnings* the reports do the obvious: they follow the money. They track sales ranking (as a proxy for unit sales) by category and go as deep as makes sense; titles with less than one unit per day aren’t generating enough cash to worry about, yet he harps over and over on “missing data”, as if those low-volume sales could possibly change the relative market share. Which they can’t: book sales are top-heavy and most of the money is concentrated in the top sellers. That *is*, after all, why the BPHs are so obsessed with bestsellers.

    Now, in focusing primarily on unit sales as the tracking metric, AE goes where traditional industry reporting doesn’t; tradpub focuses on reader spend, total dollars, because it masks volume declines. As long as they can keep on raising prices or shifting buyers to more expensive formats they can pretend they aren’t losing customers. Losing control of the market.

    However, authors and especially indies, do care about unit sales. Because they have a brand to build and a reputation to support, they care about the number of readers they draw and they care a lot about repeat buyers; “fans”. Unit sales is their metric of choice and AE accomodates them. Which is where all the detractors of the reports come from; their narrative is built around puffing up their business and anybody pointing out that, yes, Indies *are* cannibalizing BPH sales is not welcome in their world.

    Doesn’t make it any less true, though.

    His underlying thesis about “missing data” implies that high volume selling ebooks are dominated by indies and slow sellers are dominated by tradpub so that excluding slow-sellers penalizes tradpub. Not true, as even a cursory scan of the sales rankings can demonstrate. The lower reaches of the Kindle rankings are populated by Indie newcomers, not tradpub. At least for now.

    The AE reports have limitations, but they explicitly call them out themselves.
    It is hard to be misleading when you highlight the weaknesses of the methodology and provide full raw data dumps. Of course, if you don’t pay attention to the caveats and don’t understand the data…

  2. I don’t know why indie writers care so much about this report. What does it matter that Hugh Howey and 10 other indie writers make 90% of the profits? Because let’s face it–it’s Howey, AG Riddle, Blake Crouch, and Joe Konrath, and 10 other female writers who crank out those werewolf threesome alpha stepbrother books. The rest of the indie population can’t make enough to buy a cup of coffee. And yet, indies are just soooooo desperate to hail and defend this report. Why? Why does it MATTER?????

    I guess when you come down to it, it’s all about the need for validation, isn’t it? The vast majority of indie writers were turned down by trad pub, so this has become a crusade for them. “Look, see, self-publishing is just as good, if not better!” But the honest truth is, if a trad pub offered them the most Draconian of contracts, they’d sign it in a heartbeat. Let’s not fool ourselves.

    • I can’t speak for all Indie authors but a good 80% of the indie authors I know are former traditionally published authors that got tried of being screwed over by traditional publishers.

      To me the question is if the report is such BS, why do traditionally published authors feel so threatened by it?

      • That includes me. First novel with a small press. Turned down the offer for the second. Then began a long process of rejecting offers from the Big 5.

        Most of the people Greg mentions have similar trajectories. And the story of the reports is not that the top 1% are exceptions, but that many are now making a living in the midlist. We have since heard from authors making a full-time living whose individual books aren’t even ranked high enough to appear in our lists (their books aren’t on any top 100 lists on Amazon, but cumulatively sell enough copies at enough outlets to pay their bills).

        Literature has been democratized. That’s the real story here. The ancillary story would be to ponder why the New York Times, Salon, and other outlets normally known for celebrating the freedom of the people (and free speech) have been so horrified by the emancipation of so many creative voices.

    • Indies care because for the first time in history, such an enormous amount of data is available and we are trying to get to grips with it.

      Prior to this, if no one (emphasize: no one) but Amazon had this much data. The BPH’s didn’t have this data. At best they had the data on what they shipped- data on what they sold was always a month or two (at best) out of date. And they certainly didn’t have their competitor’s data.

      Yes, the Author Earning’s data set is flawed, all datasets are. But it is willful blindness to think it doesn’t contain value. Most of the conversation is about how to extract that value for the benefit of authors.

    • I’m not an author but I care because it answers questions about the market which no one else is asking.

    • Hi Greg,

      I’m not Hugh, Joe, AG or Blake – and I don’t write about werewolf threesomes, however I am a female indie author who earns mid-range six figures with my books. I really appreciate what Hugh is doing – not because it validates me (although I must admit, I love it when I see that e-books and indie publishing are continuing to be a growing trend) – but because I am in a business and I want to be as informed as I can to growing trends, to market analysis and to competition. I pay attention and I care and I’m grateful that Hugh is taking the time and effort to allow us to have access to this information. Oh, just to be perfectly clear, I would NEVER sign with a traditional publisher. But I have no problems with authors who do – I just think the way I’m doing things works pretty well for me. Terri Reid

    • Smart Debut Author // 15 May, 2015 at 5:23 pm // Reply

      “What does it matter that Hugh Howey and 10 other indie writers make 90% of the profits? Because let’s face it–it’s Howey, AG Riddle, Blake Crouch, and Joe Konrath, and 10 other female writers who crank out those werewolf threesome alpha stepbrother books. The rest of the indie population can’t make enough to buy a cup of coffee… The vast majority of indie writers were turned down by trad pub… But the honest truth is, if a trad pub offered them the most Draconian of contracts, they’d sign it in a heartbeat. Let’s not fool ourselves.”

      Greg, it’s pretty obvious to everyone that — whether you know it or not — you are mostly describing yourself. 🙂

      But there are many writers who publish indie who don’t fit your simplistic description.

      Many of us are making high-five-figure and six-figure incomes — sometimes from just our first couple of books. Some of us (like me) are doing so despite have never, ever submitted anything to anyone associated with the legacy publishing industry. Some of us (like me) have already turned down big publishers who have approached us out of the blue, because we didn’t like the deal terms they offered us. And not all of us write vampire alpha threesomes; some of us are doing quite well writing books that compete with Michael Crichton and Stephen King.

      For every indie published writer blogging and talking about the industry, there’s quite a few more who couldn’t care less. Those are the ones quietly and cheerfully cashing their checks.

    • I put my debut novel up on Amazon about a month ago. Discounting copies I know where bought by friends and family, I’ve sold three copies to complete strangers. This with little to no marketing effort on my part.

      More than enough for a couple cups of coffee. I’m not expecting to sell millions or be able to quit my day job. But knowing my novel is available and selling a couple copies here and there is terrific fun. And who knows where it will go if I’m willing to invest the time to market it and follow up with more books.

      What would not be fun, would be chasing after traditional publishers and getting rejected and feeling like I’m wasting my time. And yes, if a traditional publisher offered me a deal, I would most likely reject it (since it would likely have a low advance and require signing over life of copyright).

      What is great about what Hugh is doing is providing information about what is possible. Right now, I don’t see this as a business for myself, but it’s nice to know that if I did want to pursue that aspect, there is a viable business. One with risks, but with the potential for profit. As someone with a background in business consulting, information is always useful.

      What is the agenda of people who are questioning the report? Are they trying to provide information? Or are they simply trying to create confusion so writers keep wasting time submitting to slush piles that are not read? Or so writers accept low advances and poor contracts out of fear?

      One side of this debate (Hugh’s) is working hard to provide information. The other side (traditional publishing pundits) is simply blowing smoke.

    • Hi Greg,

      Sounds like you’re struggling to find readers with your indie books. Drop me a line, I’d be happy to take a look at your titles and offer any insights I might have about how to make more than pocket change every month. A vast majority of indie writers you’ve never heard of, in all kinds of genres, are quietly making good livings via self-publishing.

    • The others have given good answers Greg, I would like to add that you are comparing different types of numbers here.

      You can’t compare all of indie published books with all those published by traditional houses. The comparison is all manuscripts submitted v. all indie books put up. The majority of indie books might not make money, but neither do the majority of books in the legacy system.

      The advantage of indie is that we can let the consumers decide, and not the traditional houses.

      Also can you believe how much money the big houses left on the ground by moving away from Vampire Threesomes? Lol.

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