Amazon.com’s decision to launch Kindle Unlimited (KU), a subscription book-borrowing service, is still shaking out: but already, based on my own sales and loan figures for the month of July 2014, I can see it’s likely to have a significant impact on independent authors.
I currently have only one book, ‘War to the Knife’ (‘WttK’), in the KDP Select program (from which KU books are drawn). I withdrew the rest from the program a couple of months ago in order to make them available through other vendors and in other formats. Nevertheless, in the couple of weeks that KU was available during July, there were almost 300 ‘borrows’ of WttK – vastly more than usual under the previous Kindle Owners Lending Library (KOLL) program, which continues alongside KU. Furthermore, the fact that a KU ‘borrow’ is counted as a ‘sale’ for book ranking purposes in the Kindle Store meant that WttK, which had begun the usual slow but steady decline in sales after a successful launch, was suddenly booted more than a thousand places back up the Kindle Store ranks. It’s since declined again from those levels, but it’s undoubtedly still several hundred places higher in the list than if it were relying on sales alone for its position.
This poses a conundrum for new book releases. If they’re not part of the KDP Select program on Amazon.com (i.e. Amazon-exclusive and hence available under KU), their Kindle Store sales rank will undoubtedly be quite a lot lower than if they were; but if they are in KDP Select, they can’t be offered through any other vendor. For those of us already using other vendors, we’re faced with a situation where the disadvantages of doing so – i.e. lost revenue from KU – may outweigh the advantages, as well as the convenience to our readers of being able to buy our books in multiple formats.
We still don’t know how much the fee per KU/KOLL ‘borrow’ will be. In the past, for KOLL alone, every loan of a book earned plus-or-minus $2.00 – almost as much as a sale for an author whose books were priced in the $2.99-$3.99 bracket. However, given the vastly higher number of loans under KU, plus the fact that Amazon.com’s monthly loan ‘pool’ has only increased by two-thirds (from an average $1.2 million per month in recent months to $2 million for July and the same for August), the amount available per loan must inevitably decrease drastically. We’ll only know for sure when our July statements become available in mid-August. I’m expecting a two-thirds to three-quarters drop in revenue per ‘borrow’. I won’t be surprised if it stabilizes at or below $0.50 per loan. Amazon.com will doubtless argue that if independent authors are getting many more loans than before, this is still a viable proposition for them: but those loans will inevitably eat into our sales, so that one way or another (or perhaps both ways), we’re still likely to lose money.
I don’t blame Amazon.com for starting the KU program. Their focus is on their broader customer base, which clearly wants low-cost access to e-books. Amazon’s catering to readers, rather than authors, with this new service – a logical extension of its consumer focus. Nevertheless, it’s going to mean that independent authors will have to take a long, hard look at their marketing strategies in order to maximize revenues in a rapidly changing business environment.
I think the first thing to do is to examine our existing markets and decide whether they’re worth pursuing. I’m still in the early stages of broadening my books’ vendor and format base, and I now seriously question whether this will remain a cost-effective exercise. If my predictions are correct, and Amazon.com’s payment per book loan stabilizes in the $0.50 range, it will probably be more profitable in the short to medium term to pull my books out of other vendors, put them back into the KDP Select program, and enroll them in KU.
On the other hand, this means that I will once again have to ‘put all my eggs into one basket’ – a basket named Amazon.com. I was trying to escape that potential trap by using other vendors. Should I accept that limitation, with the implication of future problems if anything should happen to Amazon.com and/or its relationship with independent authors? Or should I forgo KU’s promise of higher short- to medium-term revenues and higher Kindle Store rankings for my books, and continue to try to build up multiple vendor relationships? Right now, I don’t know how to answer those questions.
There’s also the factor of lost sales due to larger numbers of loans. To a certain extent one can compensate for that by increasing prices, but as indies we can’t afford to price ourselves out of the market. I’m currently using a mixed price structure of $2.99 for earlier novels and $3.99 for later ones. I may have to go to a $3.99-$4.99 mix, knowing I’m going to sell less books anyway, but hoping that an additional 70c revenue per sale will at least partly offset such losses. (Serendipitously, Hugh Howey has just confirmed that the $4.99 price point is very viable at present.)
However, I believe very strongly that I daren’t go above the $5.00 psychological barrier. I’m competing with traditionally-published authors at higher prices, and better indie authors at that price level. If I go above $5.00 per e-book, I’m out of the ‘impulse buy’ range and into a different market segment. There’s also the factor that some readers won’t spend even $5 on an e-book, looking for ‘bargains’ below that price point. If I increase my price by even a dollar, I’ll lose sales to that market segment. Can I afford to do so? Right now, I just don’t know.
What does this mean for traditional marketing tools such as making the first book in a series free of charge, or pricing it at a give-away $0.99? What about promotional tools such as BookBub and similar services? If KU users can pay a flat $9.99 per month and read as many books as they want to, I suspect that those tools are about to become much less useful to authors. What – if anything – will replace them? Your guess is as good as mine.
I think my short- to medium-term ‘game plan’ will probably – but not yet certainly – involve withdrawing all my books from other vendors, re-enrolling them in KDP Select, and putting them into the KU subscription borrowing service. At the same time I’ll probably have to raise my sale prices a little, in an attempt to compensate for losing potential buyers who’ll now read them through KU instead; but I’ll have to be very careful and watch my sales like a hawk. If there’s any sign of increased resistance to higher prices, they’ll have to come down again.
I’m also going to have to get creative in my marketing. Can I sell multiple books at an overall discount in series anthologies – for example, a ‘3 for the price of 2’ promotion? Can I write more short stories and/or novellas to boost my income stream, interspersing them with 3-4 novels every year? Will KU provide more incentive for indie authors to work together, contributing stories to anthologies so that everyone will benefit from increased exposure, if not increased revenues? The jury’s still out on those questions, but I’d better get cracking and find some answers!
The market won’t stand still and wait for me, or for any of us. Our big strength as indies is the ability to ‘think on our feet’, to react to changes in the market before the lumbering traditional publishers can wrap their collective minds around them. We must take advantage of that.