October 2014 Author Earnings Report from Amazon

These data include results of Amazon’s Kindle Unlimited Program

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October 2014 Author Earnings Report

As with our previous reports, we are looking at projected sales and author earnings by pulling data for over 120,000 ebooks off Amazon’s product pages. Using known rank-to-sales rates, we are able to estimate the daily share of earnings by publishing path. The goal is to provide a deeper understanding of the ebook market than is afforded by reporting from major publishers or by tracking ISBNs, which many self-published authors do not use. Amazon is our focus by dint of controlling an estimated 60%+ of the ebook market.

One of the great advantages of these reports is the historical snapshots they provide. Soon after releasing our July 2014 Author Earnings Report, Amazon launched a subscription ebook service called Kindle Unlimited (KU). The method of payout for this service has been controversial among self-published authors, and requires an explanation: Traditionally published ebooks downloaded from Kindle Unlimited earn the same amount as a sale, but for self-published authors, a “borrow” pays out differently than a purchase.

The amount paid per borrow is independent of price and depends instead on how much Amazon funds a shared pool. The rate per borrow has averaged $1.62 over the three months since KU launched. Each borrow appears to affect ebook ranking just as a sale does, so we have to take the borrow-to-sales rate into account for our earnings projection. As you will soon see, our data is robust enough that even wildly varying estimates for this rate do not appreciably affect our results. Before we get to our new baseline earnings report, let’s look at what our final graph would look like with five different assumptionsfor the borrow rate.

We start with the extreme assumption that KU books are being borrowed 100% of the time while generating zero sales. This is clearly not the case, but it goes to show a “worst-case-scenario” for self-published earnings. The reason we call this a “worst-case-scenario” is that the latest KU payout for a borrow ($1.52 this month) is below the average sales payout from our October report ($2.06).

WORST-CASE SCENARIO: If KU books were 100% borrows and 0% sales…

authorearnings-2014oct-100pct-borrows

 

Next we have our HIGHLY-CONSERVATIVE SCENARIO: If KU books were 70% borrows and 30% sales…

authorearnings-2014oct-70pct-borrows

 

BASELINE SCENARIO: If KU books were 50% borrows and 50% sales…

authorearnings-2014oct

 

OPTIMISTIC SCENARIO: If KU books were 30% borrows and 70% sales…

authorearnings-2014oct-30pct-borrows

 

“BEST CASE” SCENARIO: If KU books were 0% borrows and 100% sales…

authorearnings-2014oct-0pct-borrows

As you can see, the difference in the total share of earnings by publishing type is only affected by a few percent even with wildly impossible assumptions about the borrow rate. In order to determine which of these charts to go with, we collected data from hundreds of authors and their individual titles, and these averages showed an average borrow/sales rate close to 1:1. The 50% borrow/50% sales data will be used for the rest of the report, and it will provide a baseline for our future reports.

Now let’s see how this quarterly report compares to the last three reports. We start with a simple count of the number of titles on every Amazon bestseller list, separated by publisher type. For more on these publisher types, click here.

titlecount-2014oct-3up

And now the daily sales rate by publisher type, taking into account the rate of sale by overall Amazon rank. Think of this chart as being able to glance at the distribution of Amazon rank by publishing type:

unitsales-2014oct-3up

Since we know the price of each title, we’re able to calculate gross dollar sales by publisher type. This chart reveals the price disparity between various publishing paths:

grosssales-2014oct-3up

And with known royalty rates for each publisher type, we get the graph that most impacts the decision on how to publish, and that’s the daily share of author earnings. This chart highlights the roughly 5 times difference in earning rates between Big Five and indie ebooks:

authorearnings-2014oct-3up

Despite what appears to be a dwindling share of ebook earnings for traditionally published authors, it’s too soon to discount seasonal variations and other effects. The next time we do a quarterly report, we’ll be able to compare year-to-year differences for the first time and might be able to say more.

It’s also too early to suggest trends for indie authors, but one might note that the share of earnings was on the rise until this last report, and that the big jump this time around has been for Amazon Imprint authors. It could be that KU is having an effect or that promotional and merchandising efforts are being reallocated. It could also simply be that Amazon’s publishing efforts were in their infancy when we began taking these snapshots and the number of titles are on the rise. Again, these are four snapshots taken roughly three months apart, and much more will be evident with annual comparisons.

We do think the consistency of these results over a nine-month period is worth noting. For all the attention Amazon receives from authors and publishers — and Amazon’s unwillingness to divulge sales data — this peek behind the curtains has proven invaluable, even for those of us putting it together. You’ll see why as we dive deeper into our data.

The Kindle Unlimited (KU) Effect

With past reports, we tried to look at some new feature of our data in addition to providing the four charts above. This time around, the subject of our analysis was obvious: Kindle Unlimited seems to have been a major shake-up to the rankings, to visibility, and possibly to author earnings. We decided to compare titles that appear in both our July and October reports to see what happened to the titlesthat entered KU and what happened to the titles that stayed out of the program. But first, how significant is KU when looking at Kindle bestseller lists, unit downloads, and author earnings today?

KU Titles Punch Above Their Weight

The first thing we noticed about KU Titles is that they are well-represented on the bestseller lists.

There are 2,908,475 Kindle eBooks in the Amazon store as we write this, of which 744,181 were KU-eligible. This means that 25.6% of the Kindle eBooks available in the Amazon store can be borrowed as part of a Kindle Unlimited subscription program. This is obviously great for readers; it remains to be seen if it’s great for writers.

More stats:

*   KU Titles make up 20.0% of the titles on Amazon’s Kindle Best Seller Lists and sublists.

*   KU Titles make up 32.4% of all daily unit downloads. (These are a mix of sales and borrows. From our baseline 50/50 borrows/sales split, we estimate that KU borrows alone make up 16.2% of all non-free downloads on Amazon).

*   KU Titles generate 30.5% of all daily author earnings on Amazon’s Kindle store, using our baseline 50/50 borrows-vs-sales split.

Thus we can estimate that KU borrows alone are generating 14.0% of all daily author earnings on Amazon. Keep in mind, however, that authors in this program are giving up income from other outlets, which must be taken into account and may mean a decrease in earning potential for some or even many authors.

Now let’s look at how KU Titles divide between publishing types:

Screen Shot 2014-10-17 at 8.48.10 PM

In the chart above, we see the number of KU titles in Amazon ebook bestseller lists by publisher type. Unsurprisingly, indies are very well represented. In fact, almost half (49%) of the KU titles on the Amazon Best Seller lists are indie-published titles. Amazon Publishing imprints make up 2% of KU Best Sellers (but only 1% of all Amazon Best Sellers). The Big Five Publishers have 0% — they have no ebooks in KU.

Next, the daily KU downloads (KU borrows and regular sales combined):

Screen Shot 2014-10-17 at 8.48.37 PM

Indies hold their own when it comes to units moved, making up nearly half (47%) of the KU titles downloaded (borrowed or sold) each day. But this is where Amazon Publishing imprints really show their power, outperforming other publishing types in KU on a per-title basis by a factor of 13, as A-Pub’s 2% of Best Selling KU Titles accounts for 26% of downloads. This is a little misleading, however, as A-pub represents far fewer titles, and thus their per-title averages are not brought down by a low-performing long tail. Again, the Big Five Publishers represent 0% of the downloads of KU Titles — they have no books in KU.

And now, a look at Author Earnings from KU Titles (Note that this includes both KU borrows and regular sales of those titles):

Screen Shot 2014-10-17 at 8.49.12 PM

Author Earnings is naturally the most interesting aspect of KU for us, as authors. And we see that indie KU titles appear to simultaneously benefit from the higher visibility earned through KU downloads and the higher revenue share earned on regular sales of those titles. 56% of the Author Earnings on all KU Titles goes to indie authors. Amazon Publishing authors are getting 28%, with 13% going to authors published by Small and Medium Publishers. Again, authors published by the Big Five Publishers are getting 0% of the Author Earnings on KU Titles — the Big Five have no books in KU.

To KU or not to KU: That is the Question — Comparing KU vs non-KU performance

If you are an indie author, the question of whether or not to put (or keep) titles in Amazon Select, and thus qualify for KU inclusion, is a tough one. Many authors are grappling with it now. And there will be no easy “right answer” that applies equally for everyone. It may depend on whether you are just starting out and want the extra visibility, or perhaps you are now being sought out by readers on other platforms and need to diversify.

In our July 14 report, we captured comprehensive data on 120,000 Amazon bestselling titles. Through fortuitous timing, this was a few days prior to Amazon’s launch of the Kindle Unlimited program. This provides us a rare opportunity: We can divide our bestsellers from July 14 into two cohorts: those that were placed into the KU program prior to October 4, and those that were not. And then we can compare their performance trends.

From our July 14 dataset, there were approximately 120,000 titles on various Kindle Best Sellers lists and sublists. When we compared that July data set against our October 4 data set, we see that:

8,784 of those July bestsellers appear in our latest October dataset as KU titles, while 31,681 appear in our latest October dataset as non-KU titles.

79,627 of those July bestsellers do not appear in our October dataset at all (they have fallen off the bestseller lists).

So how has KU affected the July bestsellers that we can track across both snapshots? Are the July titles that are now part of KU doing significantly better or worse than their non-KU counterparts? Below is a “traffic light” chart showing percentages of KU and non-KU titles whose downloads increased 25% or more, remained roughly the same, or decreased 25% or more between our July and October snapshots:

Screen Shot 2014-10-17 at 2.32.47 PM

41% of the KU titles had increased significantly in daily downloads between July and October, versus only 22% of the non-KU titles.

28% of the KU titles had decreased significantly in daily downloads between July and October, versus 46% of the non-KU titles.

In terms of overall averages across titles, we see the same effect:

*   Daily unit sales of the 31,681 non-KU titles in both data sets declined, on average, 21.0%

*   Daily unit downloads (sales + borrows) of the 8,784 KU titles in both data sets declined, on average,11.4%

Clearly, being in KU has had a significant mitigating effect on the average three-month decline in daily downloads. The decision to put those titles in KU is, on average, now generating 12% more downloads (borrows + sales) on Amazon.com than their counterparts that are not in KU.

However, indie titles receive on average less compensation per borrow than per sale. So once again, the more interesting question for those of us here at Author Earnings is this: Are indie authors who choose to stay with KU giving up author earnings for broader readership and longer bestseller list visibility? The answer below:

Screen Shot 2014-10-17 at 3.23.38 PM

Two bars of non-indie titles on the left. Two bars of indie titles on the right. Each is separated by KU and non-KU.

It turns out that 33% of the KU indie titles increased significantly in author earnings between July and October, versus only 19% of the non-KU titles.

At the same time, 37% of the KU indie titles had decreased significantly in author earnings between July and October, versus 47% of the non-KU indie titles.

In terms of overall averages across indie titles, we see the same effect:

*   Daily author earnings of the 4,234 KU indie titles on average dropped 26.0%

*   Daily author earnings of the 3,073 non-KU indie titles on average dropped 34.7%

Once again, we see that being in KU has had a significant mitigating effect on the average three-month decline in author earnings experienced by titles that were on the bestseller lists in July. The decision to put a title in KU is, on average, now earning indie authors 13% more money on Amazon.com for that title than their counterparts who chose not to participate in KU.

The big caveat here is that if we assume Amazon has even as high as 70% of the market for indie ebook sales, authors may be giving up 30% of their potential earnings in order to reap 13% more from a single outlet. And Amazon’s market share for indie ebook sales might be lower than 70%, which means giving up an even higher percentage sales. And so…

Conclusions on KU (Or Inconclusions)

For indie authors as a whole, Kindle Unlimited likely means a lower overall share of daily author earnings going to artists’ pockets. (Similar to the effect music subscription services have had for those artists.) The boost in sales do not seem to make up for the lost market share of other sales outlets. If exclusivity was not required to participate in KU (or if indie authors were paid the same as traditionally published ebooks), this would not be the case.

Does this make the decision to join or stay in KU any easier? Perhaps not. It depends on each author’s circumstances. There’s the argument to be made for the extra visibility and marketing tools gained from KDP Select, especially for authors just starting out or for those launching a new series. KDP Select was useful for authors back when it allowed ebooks to be given away for free. If free was useful then, earning roughly $1.50 per reader impression is arguably a lot more useful now.

Then we have the All-Star bonuses to consider, which amount to more than half a million dollars a month given to the most-read KDP Select titles (borrows + sales). It may be that those just starting out and those at the very top are most rewarded by participating in KU. The former get more visibility. The latter get more money. Those in the middle benefit less. This is all informed speculation for now; a deeper dive into the data (which is freely available below) may perhaps shed more light on these pros and cons.

Final Thoughts

We started this website to assist authors in deciding what to do with their unpublished manuscripts. There simply wasn’t any data on how authors performed based on their chosen publication path. But how to publish has been compounded with a second decision on where to publish. Exclusive with Amazon or not? With both of these questions, the decision will be a personal one with individual goals taken into account. Our attitude is that having more data can’t hurt in making these decisions.

The beauty of self-publishing is that none of these decisions are permanent. Authors are free to opt in and out of agreements with retailers as conditions and terms change. That may be the single greatest advantage of this publication path. We hope our ongoing efforts here aid in that decision making process.

We’d also like to remind those who read our reports that our results are not an indication that everyone in publishing is getting rich. As we warned in our very first report, self-publishing is not a gold rush. Publishing in general will disappoint most anyone who enters into the endeavor in order to make piles of money. There are many other reasons to write and publish, some arguably more noble than increasing wealth. And however you publish, the chances of earning a full-time living are not great. Our contention, however, is that the chances have never been better. Because every day, thewriter and the reader assume control of an industry that used to rely almost entirely upon middlemen to bring these two parties together. More money is now flowing to artists than ever before, and that art is costing consumers less than ever before.

So what does it mean to see that, on average, more daily ebook revenue is flowing to self-published authors than traditionally published authors? This isn’t a game or a competition. It’s merely a glance at a massive sector of the industry that remains in the shadows due to an incredible dearth of data. Amazon won’t share this information. Publishers don’t have their hands on this information. Publishing experts have no clue about the size of this hidden sector of their trade. And Bowker can’t track it, because many of these titles don’t employ ISBNs.

What the data tells us, then, is that self-publishing is just as viable as any other form of publishing. Perhaps more so. No one can halt your career because an early title underperforms expectations. You get to hire the editors and cover artists you want to work with. You get to write whatever you want and publish whenever and however often you like. And you can publish every which way. Self-publishing used to close you off to other avenues, now it simply opens them up. Many authors publish in several ways simultaneously.

Every author will need to find their own path. There is no one right answer. If there’s anything the data tells us, it’s that readers are starving for great stories at fair prices, and whoever can deliver that consistently has a chance at earning income doing something they love. Maybe not a great chance at earning a full-time living, but a better chance than at any other time in human history. And that must be celebrated, however you crunch the numbers.

 

DOWNLOAD THE RAW DATA THIS REPORT IS BASED ON (.XSLX)

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Author Earnings is licensed under a Creative Commons Attribution-NonCommercial-ShareAlike 4.0 International License.

 

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