Decisions, decisions . . .

 

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.

 

 

47 comments

  1. Reblogged this on The Worlds of Tarien Cole and commented:
    These are thoughts going through my mind as I try to decide how I’m going to enter the Indie Market. Right now, I don’t see a huge incentive to go anywhere but Amazon and KDP. On the Other Hand, sooner or later, someone will figure out how to compete with them. And if I’m locked into one company and ‘comfortable,’ that might make for a dangerous situation down the road.

  2. I am seriously looking at leaving books off other platforms myself – I’d prefer like you to have irons in several fires, but the return from them has been more than an order of magnitude less – for a lot of time and work on Stardogs. Createspace too is not worth the time investment – and that’s just it – I’m using writing time to do these things. They keep complaining about Amazon… but really, they also need to work harder to promote authors and make sure their sales pay for the time investment.

    1. I look at Createspace as my slow infiltration force. I have the whole process down to a system — converting from my ebook MS to print only takes a few hours, including the cover. (It takes more time coming up with the marketing copy for the back, but it can be reused elsewhere). I’m not to the point where I make more than a decent meal’s worth of income per month on print, BUT having physical books for gifts, giveaways, and other promotional activity is worth it to me.

      I also want it to create mindshare in the bookstores that do stock it. People browsing the shelves will get used to seeing my name in with all the other authors, perhaps subconsciously. All this takes time, like glacial terrain shaping, and it needs to be set up and left to do its work.

  3. “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.”

    I certainly don’t blame Amazon. I am scratching my head over why indies have to be exclusive to Amazon and traditionals don’t. Yes, I understand that there is greater market power in the hands of the big publishers, but I’d far rather not have to make the choice.

    I just let Manx Prize’s exclusivity expire. I published it in May and had one borrow under KOLL and one under, I presume, KU. My plan had been to put short stories in Select and offer them at 99 cents or for free to acquire readers. One short story will go free at the other vendors and not go into Select. I think I had all of 12 sales last year on my first book at other vendors, but I used D2D this time, so unpublishing shouldn’t be too hard if Plan A doesn’t work.

    Btw, could anyone tell me if, for Smashwords, I can just put my Kindle Word document up? I am not using Smashwords’ premium channels, but I would like to get another 5 sales there for Manx. There’s cash I want liberated.
    I started working on the conversion, but it’s really annoying and seems directed at Premium.

  4. Another factor to consider is whether or not the earnings per “borrow” will change once the free trial for KU is over and people start paying for the service. If the amount to be divvied up goes from 2 million to 5 or 10 million, things might be great, but that’s a big if. If the pool remains the same, earnings may plummet. If the amount per KU picked up goes below some threshold, I’d definitely consider removing my books from KDP Select. I figure I’ll wait and see what happens over the next few months.

    1. Hmm. Maybe I should speed up publication of a short story while the pool is still sizeable.

      1. On the other hand, if the number of subscribers is big enough, the pool might grow substantially in the next few months. No way to tell until it happens, of course. If the number of borrows goes up fourfold, then we’d need a pool of $8 million or so to keep our royalties per unit the same. How much of the KU subscriber money goes into the pool? I haven’t been able to find that out. If, say, the pool needs to grow by $6 million to keep pace with the increased borrowing, and Amazon keeps 50% of the subscriber money, then it would take over a million paying subscribers to keep us at the $2 level (I hope my math isn’t off here, I’m writing this in between breaks from writing).
        Worst case, actual sales will plummet and be replaced by tiny royalties per borrowed units, which means KDP Select stops being a good deal altogether. I’m hoping for something better, which means I’ll be staying in KDP Select for the rest of the years and see what happens.

  5. I’m in KDP Select, and I’ve never had a borrow. The question is purely academic to me, but the advantage of KU vs. KOLL is that with the limits on borrowing under KOLL, readers want to get the most bang for their buck, and won’t “waste” a borrow on shorts or Novellas, or unknowns. KU makes getting something trivial. Time to read will run out before the loans do. And apparently they’re limited to 10 out at a time. Perhaps the theory is that if the borrower likes it enough, they may buy a copy so they can keep it around. I have no idea if that conversion ever happens….

    The payment in “Shares” is harder to predict. But like the Hachette logic, you may make more through increased borrows (rentals?) than you do from fewer, more expensive sales. Only time will tell.

    1. I personally am using Kindle Select to try out new authors. Loving it so far, and plan to join for the 9.99 a month. Of course, that represents 10 to 12 percent of my book budget, and with Weber,Ringo,Flint and Lee/Miller prolific enough to absorb 25 to 30 percent more, only a limited amount will be available to buy those authors I want to add to auto buy.

      1. Interestingly, I just had my first KU/KOLL “sale” (Was that you?) The question is, which is which? If I understand correctly, KU would give me the amount of a regular sale (35 cents) but KOLL could be as much as $2. the reports don’t say.

        On the other hand, KOLL rentals are much more dear to the members, and I doubt they’d waste it on a Novelette by an unknown.

            1. Well written, and interesting concept. Only issue I have is the same one I had with Silverlock years and years ago, the main character in unsympathetic, enough so I would probably not read an entire novel about him. Not your fault, I was raised on Heinlein, and Roy Rogers and The Lone Ranger, I like my heroes to be paladins. A weakness I know, but there it is.

              1. He was never meant to be sympathetic, so I’m glad that came across. And he’s unlikely to make it into a novel. (Basically he’s going to die in that room eventually. And when the keepers who at that time don’t know what’s going on discover Aniti and release her, after she’s gone full mad, well, It’s a dark time for the Al-Natiri under the rule of Queen Aniti the Mad. Dunno if I’m gonna write that though.)

                It’s an Elevator Story, where two incompatible characters get stuck with each other and fight like two rats in a cage. Only even with the deck stacked in Alex’s favor, the outcome is still nothing anyone predicted.

                I really like Benita and Cisi from my Baen Fantasy story. THAT one I may expand into a Novel.

  6. I have “Elizabeth of Vindobona” in Select and it’s moving, but not as fast as “Elizabeth of Starland” is. EoV is $4.50, EoS is $3.99. I’ve had six borrows in just under 30 days of availability. I think when the 90 day enrollment is up, I’ll pull EoV out and will keep the next books out. I don’t make nearly as much at Kobo and B&N, but as a low-numbers seller, I’m just not seeing enough difference to be worth staying in Select.

    1. That’s definitely something to take into consideration. If your sales aren’t at a level where KU poses either a threat or an opportunity, it changes the decision-making equation – or, rather, adds another element to the decision-making matrix. On the other hand, I doubt you’ll remain a low-selling author! I think your work is very good. As your visibility and sales grow, you’ll move into a different league.

      1. 😀 Thank you. If I could truly market, I suspect my sales would be larger, but word of mouth has been enough that June and July exceeded the previous two years sales combined. I suspect once I get the next three in the series out, sales will accelerate.

  7. I did notice a huge spike in borrows in July after KU went live (it went from 25 for three books in June to over 100 for the same three books in July; perhaps not coincidentally, it was my best sales month so far, beating the previous contender handily – $1,200 versus $800).

    So far this month KOL/KU borrows are accounting for 35-40% of books “moved” (sold or borrowed), but I won’t know exactly how much I’m making of the borrows until the 15th, when I get the sales breakdown for July; at this point, I don’t know if the 100 copies that were borrowed contributed $200 or $100 or whatever to my total that month. Assuming either share level, those 100 copies didn’t add much to the bottom line but certainly kept my Amazon ranking up, which certainly impacted regular sales. The question is whether or not that will continue or if KU borrows will erode regular sales beyond the point of negative returns.

    To add to the fun, the shares may change significantly from month to month. We’ll have to wait until we have sales figures for August and September (and beyond) to see which way KU/KOLL shares are trending. They may fluctuate wildly, or they may remain stable at a (almost certainly well under $2) level. It adds yet another layer of uncertainty to an already pretty uncertain business, but that’s the nature of the beast, I suppose…

    1. September sales tend to be dire as everyone runs frantically around getting everything they need for the school year. I’d hate to use it as a reference month.

      1. Good to know (my first book came out last November so I’m still learning the ins and outs of self-pub, mostly the hard way). So it’ll be hard to tell one way or another for several months if KU is a good or bad thing, IMHO.

    2. I did notice a huge spike in borrows in July after KU went live (it went from 25 for three books in June to over 100 for the same three books in July; perhaps not coincidentally, it was my best sales month so far, beating the previous contender handily – $1,200 versus $800).

      A factor on this is probably people like me who use a Nook brand Kindle 😉 or some other non-Amazon device with Kindle reader. We didn’t have access to KOL but we do to KU.

      As for other sites despite owning a Nook I make far and away the majority of my purchases at Amazon using the Kindle app on the Nook. KU has lead to even more. I use KU more for short stories than novels.

  8. I think I’m probably staying with Kindle Select out of convenience. Lots of irons in different fires, so I really don’t have the time to wrestle with learning a new system. My numbers are steady-ish, and the borrows have helped monthly sales a few times.

    1. So far, the five-days-free from the Select program has been a winning strategy for me. If KU lessens the impact of that, I may withdraw from the programs and finally add the other outlets. Meh. Every time I think I’ve got it figured out, they change the system.

  9. Just a note Peter, when I started my Kindle up a few days ago WttK was the featured advertisement on it. I’d purchased all of your Maxwell books already so it wasn’t a big leap for me to get it and I did know of it from here and the Book Promo links. Keep up the writing.

    I’ve had a prime account for about a year and a half. I’ve only use the Kindle lending library twice due to the one book a month. Ha, one book a month, when I’m in the mood I’ll devour a series in a few days.

    1. One book a month: I say HA!! From the perspective of a dedicated reader, KU may just hit the spot. I don’t know how the royalties are going to work out for the authors, though. Even if I cut my reading WAY back, to one book a day, the $9.99 I’m paying gets sliced pretty thin. On the other hand, right now I’m effectively contributing nothing to your balance sheets, since I can’t afford to buy and am limited to free sources.

  10. As a reader, I would add that I am very sensitive to price point right now. I am much more likely to spend 2.99 or 3.99 than 4.99. I have not yet tried KU, but that would be the equivalent on 3 books for me. Right now, once a book hits 5$, I have to really want it before I’ll buy it. In fact there are a number of books I’d like to buy, where I’m waiting for a price drop.

  11. Don’t know that there are a lot like me out there, but I’m on a fixed income and I can budget the cost of Kindle Unlimited a lot easier than many individual purchases. I use Open Library and Gutenberg a lot, and since I’m disabled Baen gives me access. If I read less than three books per day, it’s rare. So if you attract readers like me, I’m thinking KU will be a big revenue stream for you.

  12. Thank you Peter. For me, just in time. I’ve got five novels in the basket, am having the cover of the first worked on, should have it this weekend, and the first should be edited and proofed early this week too. I am in that indecisive phase of where to hang it, and your article showed up in time to hopefully make a more informed decision.

    Much appreciate your article, and the links to Hugh’s site.

  13. I’m publishing everything on Amazon Select for the moment; I may opt out of that around late November or December.
    As for KU, it’s my understand that it doesn’t pay from the ‘borrow’ pool, it’s supposed to be a ‘sale’ as soon as the reader has read at least 10% of the book.
    I tried D2D and a lot of different publishers; Apple, B&N, KOBO. One sale. And the money is still there, since they don’t send it out until your reach at least ten bucks.
    I’m not gettin’ rich, but I won’t publish my books too cheap either. I’m in this for the long haul, and my books are good quality. I know of a few indie writers who appear not to have done much editing, including some who are otherwise excellent. So I set my ‘shorter novels’, the ones in the 75 000 to 85 000 word range, at $4.99; longer books in the 100 000 plus word range I list for $5.99. Probably not the best marketing strategy, but that few sales every month adds up, and I need do nothing other than what I want; the books keep selling, particularly in Australia; the Wizards books are rivaling the income I get from Amazon.com.
    Something to consider: so far, those KU books are free after the subscriber pays his $10 per month. Price doesn’t really mean anything after that.
    I’m also using the ‘Countdown Deals’; they appear to me to work at least as well as the freebies do. Too may freebies just sit on someone’s device, waiting months or years to be read.

    1. The royalty reports lump the Prime (KOLL) and the Kindle Unlimited (KU) borrows together as “units.” We don’t get credit through KU until the borrower has read at least 10% of the book, but the credit per unit appears to be the same as with the Lending Library.

  14. I remain watching and waiting for these critical pieces of data:
    1. Number of borrows in first two weeks. (Size of July pool divided by size of share.)
    2. Size of August Pool ($2 million)
    3. Number of borrows in August.
    4. Size of Pool in September.

    I would like to keep Peter’s book available in all outlets, because the long-term game is to get your books in front of as many eyeballs as possible, and be as easy for readers to find and read as possible. Createspace is a pain, but books in paper means that his books are available to people who prefer paper, can be gifted, shared, passed on, and pop up on used book shelves. Extended distribution means we have to hike the price and take a razor-thin margin (about what we’d get with trad pub) for bulk sales to bookstores, but it means the book will be out there for the browsers and the bookstore buyers.

    On the other paw, the most powerful and least controllable marketing out there is word of mouth. Do we keep the book on other channels and therefore it can’t be read by the KU users? They may well be the very people to turn around to more potential buyers and say “You’ve got to try this!” Or do we put it in KU, and risk losing all the sales of “Oh, that sounds awesome! Nevermind, it’s not available on my device / in my country”?

    The other channels are currently a fraction of Amazon – but if you yank seedlings out of the garden because they’re paltry compared to your potted plant, you’ll never have anything else producing food for your table.

    I really wish I had this data now, so I could do a six-month forecast for the market. I really would like a 5-year plan. But right now all I’ve got is speculation, and thus end up waiting and debating opinions with Peter.

      1. Now I need to go back and read the fine print to see if I can release the books overseas – just not in the US market – if I make a title US-only KDP exclusive…

        Because if, say, someone in South Africa currently wants to read WttK, they can only do so with significant surcharge buying from Amazon.com. If I release it on google Play, kobo, and itunes, it’ll be far less expensive and easier for them to get.

  15. OH joy… one more thing to worry about… I agree Dot, gotta go read the ‘fine’ print on this stuff.

      1. Oh, it’s just Kiwi on Amazon (click my name). It was a short and not very specific review. When he says plot inconsistencies, I wonder if he missed the whole “Bending him back and forth like a wire to break it” thing.

        I wonder if I should change the blurb, I’ve been pondering a statement about what happens when you put two rats in a cage, but even with the deck stacked in his favor, the outcome is not what anyone planned. But I think that gives away too much.

  16. I feel any short term returns are not worth the long range risk of giving Amazon too much leverage over me in the market place. Right now they are the big dog and I can still work with them. If however they are the ONLY dog in town with no competition they may decide to treat me less well. A little competition is a GOOD thing.

  17. Sounds like it’s time to put together a few possible scenarios and make some guesses of initial probabilities… Classic Bayesian/Operations Research problem… (Sharon McGrayne’s “The Theory that would not Die” is a delightful read…)

    unknowns: How many buyers will leave other sources to take advantage of the new Amazon plan? Percentage of prospective buyers will instead “rent”? Percentage of renters who will convert to buyers of that work or of others by same author? And …

  18. I like long stories, although Robert Jordan drove me to distraction (i.e. reading something else). My buying pattern is usually: Get the first one from the library; if I like it, buy the entire series. I don’t like borrowing the entire series because if I like it enough to buy it, I’ll probably read it again and that’s easier if it’s “on the shelf”.

    Because I like her blog, I bought the first Shifters and Darskship books rather than borrow them. I hadn’t finished the first one before I bought the rest. If KU had been around, I still would have bought the first ones – but after reading them.

    Definitely anecdote, not data.

    (This is also one thing I don’t like used book stores: They rarely have an entire series.)

    1. I do something similar but I leave out an important part. I don’t buy the first book, and then I drive myself crazy a few years later looking for it when I want to lend it to someone or re-read. Sharpe’s Rifles and the Master and Commander series are both missing the first book. Got them from the library.

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