Is Kindle Unlimited Gutting Author Earnings?

KDP Select logoThe indie-author intarwebz have been buzzing this week with the news that Joe Konrath is pulling all of his books out of KDP Select. Konrath mentioned it almost offhandedly in a comment on his own blog post fisking an open letter from MacMillan CEO John Sargent.

I won’t quote Konrath here, because Amazon has so many programs that it’s easy to mix up the acronyms, and I think Konrath himself was writing quickly and not being as careful as he could have been. The gist of it, though, is that Konrath’s titles will all be out of Select when their current enrollment period ends next month. This comes in the wake of complaints by author H.M. Ward and others that Kindle Unlimited borrows are gutting their sales, to the point where it’s affecting their livelihood.

To clarify the terminology, I offer this glossary:

* Kindle Direct Publishing (KDP) is the platform we all use to get our eBooks published for sale at Amazon.

* KDP Select (KDPS or KDP-S or Select) is the opt-in program that demands Amazon exclusivity for eBooks, and in return allows authors to sign up for free days and Countdown deal promotions.

* Kindle Unlimited (KU) is Amazon’s subscription service that’s similar to Oyster or Scribd. Readers pay $9.99 a month for unlimited borrows of books in the KU program. Books enrolled in KDPS are automatically enrolled in KU. Currently, there’s no way (that I know of) to opt out of KU while keeping your book in KDPS. Authors don’t get paid for KU-borrowed books until the reader gets to 10% of the book – if they borrow and bail, you don’t get paid.

* Kindle Owners Lending Library (KOLL) is the Zon’s other eBook-borrowing program. It’s open only to readers who are Amazon Prime members. Every KOLL borrow pays out, whether the reader cracks open the file or not.

Got that? Good. Let’s proceed.

The blogosphere blew up in part because Konrath is a long-time champion of all things Amazon. He was among the first to sing KDP’s praises and encourage authors to go indie. And he was crazy complimentary about his treatment by Amazon’s publishing imprint when they were brand-new. That he’s pulling back now, even while hedging about his reasoning, is quite a departure from his usual stance.

Konrath says in his comment that he can’t tell whether KU is cannibalizing his earnings or not. That’s why he’s pulling out of Select – to see what the effect is on his bottom line.

The problem with KU is the payout. Amazon has a fund out of which it pays for both KOLL and KU borrows. Before KU began, the payout per borrow hovered around $2.00 (making borrows quite lucrative if your book was usually priced at 99 cents!). Amazon sweetened the pot after KU got started, but even with the larger fund, the payout has decreased. Prior to July 2014, payouts for borrows hovered around $2 each. For July, the payout was $1.81 per borrow. It dropped to $1.33 per borrow by October. November saw an uptick to $1.39 per borrow, which is better, but the numbers have to come up by a lot to be back to where they were pre-KU. (We won’t know December’s payout per borrow for another couple of weeks.)

Authors who price their books at $2.99 lost one-third of their royalty every time a reader opted to borrow instead of buy in November. The hit is even harder for those who have set their list prices higher than $2.99. For those of us who don’t have a lot of borrows, the difference isn’t devastating. But if you typically sell a lot of eBooks each month, you could lose a lot of money if your readers borrow your books instead.

The Zon has never been cagey about one thing: Content is king. It has routinely lost money on its Kindle devices, figuring the real money was to be made on the stuff we buy to put on them. And the Zon is also big on exclusivity. So it makes sense to me that if authors begin fleeing Select in droves due to KU borrows gutting their earnings, Amazon will either modify KU or beef up the payout fund. But I’m only guessing. What do you think?

Author: Lynne Cantwell

Lynne Cantwell grew up on the shores of Lake Michigan. She worked as a broadcast journalist for many years; she has written for CNN, the late lamented Mutual/NBC Radio News, and a bunch of radio and TV news outlets you have probably never heard of, including a defunct wire service called Zapnews. But she began as a fantasy writer (in the second grade), and is back at it today. She currently lives near Washington, DC. Learn more about Lynne at her blog and at her Amazon author page.

38 thoughts on “Is Kindle Unlimited Gutting Author Earnings?”

  1. In the hypothetical scenario where I’m an author, I might have considered KDPS in the past for some or all of my books. Many authors get the vast majority of their income from Amazon and many that I follow reported the advantages of KDPS including the borrows through KOLL more than made up for whatever they lost through exclusivity. The argument against was always having to be exclusive which poses risk when something changes due to all your eggs being in one basket, however, if you change your mind you can be out in no more than three months.

    With KU, I think I’d be fleeing KDPS and aiming to diversify. unless my books were mostly priced at 99 cents and I planned on continuing to price them that way. If Amazon changed the rules for KU, I’d consider coming back. I’m not as risk averse as many, but as it stands it feels like the authors are shouldering the lions share of the risk of KU with very little upside. When it was just KOLL, limited to Amazon Prime members and only one book a month for them (many who rarely use their borrow – I know I only have a few times) the risk wasn’t as great. Amazon is setting the size of the pot in one of three ways: (a) based on how much they’re willing to pay out based on the number of KU subscribers they have that month. (b) Their best guess of the number of borrows they’re going to have multiplied by the amount they *want* to pay out on each borrow.

    If it is (a) then the economics of the program (if the last few months are indicative of what will happen long term) aren’t good for authors unless Amazon changes their expected margin. If it is (b) it means Amazon is either guessing poorly or doesn’t want to pay authors a reasonable amount.

    1. That’s only two ways, Al. 😉 But your reasoning is sound.

      I only have a couple of things in Select right now, and I will probably leave them there. I’m not selling so terrifically well that I can consider *any* payday as better or worse than any other. But if things take off, I may rethink my strategy.

    2. I keep forgetting to use my borrows. Which I guess is a good thing for the authors in the program, if they’re earning more from my purchases than they would from a borrow.

  2. I think you’re absolutely right, Lynne; if the program starts losing participants (and customers), Amazon will morph it into something new. Personally I’ve been pretty happy with KDPS and KU, and as a KU customer, I now find I get irritated with authors whose books are NOT in the program. I’m not going to make any changes yet. We’ll see where this goes. Good round-up of the matter.

  3. Well, that’s all very interesting…and you straightened out a few things for me. I have no idea where any of this is going or what Amazon will do to keep more popular authors from fleeing Select. As for the rest of us, I’m not sure how the program will affect our bottom lines.

  4. Thank you for the clarifications. I’d seen some others mentioning pulling out of KDP Select and hadn’t fully grasped yet that it was the only way to get out of the Kindle Unlimited program.

    The dropping payouts will likely keep me from doing KDP Select as well, at least for my novels. Stuff I’d planned to put at 99 cents, like side stories, maybe I’ll try it as a way to funnel readers to my other works.

    I think this is a good reminder of the mantra I’ve seen a lot of successful indies mention: don’t hinge your entire strategy (reaching readers) on a single tactic (KDP Select and Unlimited). 🙂

  5. Really nice summary of the situation! I tried select before KU was in existence with one of my books. My sales rose for the first month and then fell back to their usual place for the two months following. I didn’t see the point of losing sales at other vendors for that.
    I’ve heard a lot of complaints from authors–including many die-hard Amazon fans–about KU. A lot of them are pulling their books from select and testing the waters at other vendors (some for the first time). It’s traumatic for them, but really, the only thing that makes sense with the KU payout being so low.
    I’ve got nothing against ‘zon trying to make money at their business, I just don’t think they should do so on the backs of indie-authors. It’s just wrong on so many levels!

    1. If I had to guess, Meredith, I would guess that the Zon will spend some of 2015 looking for a sweet spot for their monthly payout per borrow. I’m basing all my suppositions on anecdotal evidence, which is never a smart thing to do. 😀 But I think authors starting bailing from Select when the algorithms changed so that free promotions didn’t get your book much of a bump on the paid sales charts anymore. KU was supposed to be a way to stem the tide, I think — and if that’s so, and if low payouts are again leading to an exodus from Select, then I’d expect Amazon to adjust the numbers. But again, that’s all just speculation on my part.

  6. Great summary of the problem, Lynne. I must say, it was interesting when HM Ward made her post, because up until then, the only people I’d heard say they were losing out to KU were those who weren’t in it. They were relying on heavy readers to try their indie books for cheap, and these heavy readers, instead signed up for KU, where they could get as many books as they wanted for $10 a month. So, I had been surprised when someone in KU came out against it, as a lot of authors had mentioned they’d had an increase in activity (borrows or sales).

    I think the real issue with KU is going to be content. If Amazon can’t get good content, subscribers will drop their subscription, in favor of buying books they actually like instead of having to search through a stream of titles they don’t deem worthy and finding nothing. If KU is going to continue to work, it’s got to give good content providers the financial incentive to stick with it, so that customers find content they like and continue to subscribe.

    Under the current system, I suspect the best content providers are most likely to have sales troubles. I imagine, given that Amazon’s motto is customer service and pleasing the customer first, that when customers borrow a book and leave it a good review (or borrow it and read it quickly–data Amazon has but we as authors don’t get), that Amazon assumes the book is good. In turn, in Amazon’s zeal to push liked/good content, the algorithms suggest that book to more borrowers (because hey, lots of borrowers have liked this and seem happy with it). A borrower, skittish about junk, looks at the recommendation, sees good reviews, then borrows the book. That will probably result in the algorithms suggesting it to more borrowers. This means, a good content producer is getting higher visibility to borrowers, and in turn getting more borrows, which pay less. Again, I have no idea how actual algorithms work at Amazon, but based on what others have said about the sales algorithms, I could see this being how it works for borrows. And maybe the algorithms aren’t set differently for sales vs. borrows, but I imagine borrowers are more likely to act on a recommendation than buyers (for borrowers, it’s a no loss deal to take a chance on a recommendation).

    I know people have said it before, but it would probably help to have a royalty split for books priced $.99 – $2.98 (like they do for sales, with the 35 percent royalty) and those priced between $2.99 and up. If authors in the 2.99-4.99 could get a higher royalty for a borrow, there would probably be fewer people fleeing the program

    1. RJ, what you’re saying about the algorithms makes sense to me.

      And the Zon may well tweak the payouts to institute some sort of tiered system based on price — although I’d be happier if they based it on length instead of a percentage of the book read, to discourage people who might otherwise be tempted to post 2,000-word stories so they’re guaranteed a payout as soon as the reader cracks the story open.

  7. Thank you for this round up, Lyn. I had ‘heard’ rumours but had not been abe to sort it clearly for myself.

    As a ‘foreigner’ living outside the USA and with books that are written for and about things in the British Commonwealth I have never found Amazon the best place for sales. Certainly the Kindle Select programme is a waste of time for my books which sell better through Smashwords with its world wide distribution. Others in our group find Amazon sells quite well but my colleagues and I are also enjoying trying other publishing routes.

    As others here are saying, it is probable that Amazon will cook up another scheme if enough writers ‘walk’. I just always worry about big groups which seem to want to create monopolies!

    1. I think it’s always going to be the case in a capitalist system that someone is going to try for all of the business in a given market. I have no doubt that if Mark Coker could figure out a way to be the 600-lb. gorilla, he’d do it.

      I think KU is just now gearing up in some non-US Amazon stores, isn’t it? It must be hard for non-US authors to hear about all the Amazon programs available to those of us in the States. Until these new programs start to crash and burn, that is. 😉 Thanks for commenting, p.d.r. 🙂

      1. I don’t think the problem is that Amazon is trying to “create a monopoly.” In a capitalist system, capturing as much of the market as you can is the goal. The situations where that fails to get a good result and a company becomes a monopoly (or too close for comfort) it is often because they operate outside the law in some fashion. But there’s no evidence of that with Amazon.

        The problem here, IMO, is that their obvious competitors aren’t doing a very good job of competing, at least in the US market. Barnes & Noble is a good example. The Nook ereaders have been as good or, by some accounts, even better than the top of the line Kindle a various points in the last three or four years. They started with the advantage of being a big name in the book business, stores full of potential customers who could see and handle a Nook in person. But they either didn’t try (or maybe tried and failed spectacularly) in making their online store competitive with Amazon.

        Amazon won’t be on top forever, but they will be until another company provides a shopping experience and customer service that is competitive with them. Right now, no company comes even close.

        1. I agree, Al. I too wish the other sales channels got their act together and took the Zon on. Outside the States particularly ,they would have an opportunity that Amazon don’t seem to bother too much about. Monopolists try to stiffle opposition but Amazon do it unfairly. They have a disdain for the smaller writer and even their own distribution workforce (particularly in Scotland where they pay low wages, accept government subsidies, and pay little or no tax. That is being addressed by the UK government but a bit late)

          In the long run, readers are not served well by Amazon’s bias towards established authors and even they know seem to be seeing the light of what the Zon is doing..

          1. Matt, here in the States, we’ve seen complaints about the way Amazon treats its workers, too. Let’s just say I’d rather sell my books through them than work in one of their warehouses.

        2. Agreed on all points, Al. I’d also like to point out that during the Apple price-fixing suit this year, the US Justice Department refuted the complaints about Amazon supposedly running a monopoly. It’s not prima facie monopolistic behavior to take customers from other retailers by running your business better.

          1. I missed your comment on working in Amazon warehouses, Lynne. While I agree with what you said (I’d much rather use Amazon to get an income by doing virtually anything other than work in one of their warehouses), I think they get a worse rap than deserved in that regard. Working in a warehouse isn’t my idea of a fun job, regardless of the employer.

            From what I’ve been able to tell, working in one of Amazon’s warehouses, while a tough job, is still better than the average warehouse job.

  8. I placed my first book, Love in the Dark, on KDP, but pulled out after 90 days. I just didn’t see the advantage.

    1. Isabel, are you talking about KDP or KDP Select? (See my definitions above.)

      Sounds to me as if you’re talking about Select. Did you run your book free during your 90-day window?

  9. You’ve done a good job outlining the overall situation at Amazon, Lynne. I tried a couple of 90 day terms with Select and find, generally, there are too many complexities for too little returns to be bothered.

  10. The only other new program not mentioned here is the Kindle Fire HD Kids Edition Tablet pre-loaded with Amazon Free Time which includes 5,000 children’s books chosen by Amazon.

    I’ve inquired how to apply to have my children’s book included in the selected 5,000, but have not received a response. I also told Amazon that this program has killed the indie market for children’s authors and requested a contest similar to ABNA for kid’s books. The best of the books would be included in the Free Time Program. I received a standard reply indicating they’d consider whether it was a viable option.

    1. PJ, That’s interesting and the first time I’ve heard that Free Time was having an effect on children’s books. I assume others are saying the same thing and I’m just not monitoring the right places to have picked up on that.

      What I have consistently read is that kids books in general haven’t gotten a lot of traction yet as ebooks. (All this prior to the introduction of the Kindle Fire Kid’s edition.) I think a lot of parents are leery about getting expensive electronics for kids that age. The Fire aimed at that age might overcome concerns, but then I can see how Free Time would limit those who benefit. I seriously considered getting one of the new Fires for one of my grandkids for Christmas, but after reading reviews and discussing it with her parents decided against it.

  11. Whew! I can tell you that I’m selling books and my royalties have dropped more than 50%. The only way I see to make KU work for me is volume sales. Thus, more promotion for less $$. The Bonus program in KU works only for authors whose books are already highly popular. I am going to consider moving some titles out of Select in late spring. I have colleagues who have books on all sales venues. They first used Amazon to build a readership…and slowly moved titles onto other sales venues, starting in 2012. However, it took a solid year to see sales of 1000 books on B&N. However, once a title received Best Seller stats on Amazon, sales jumped.
    Authors have to direct readers to B&N and other venues in promotions the same as they do Amazon. I am looking at a balance for 2015, marketing paperbacks in book signings as well as promoting my digital. We have to ride the curve. It is work. Best to all of you in 2015. Wishing you much success.

    1. Thanks, Jackie, and much success to you, too! 🙂

      One of the perennial problems I have with B&N is that they don’t offer any promotional avenues for indies that are comparable to what Amazon offers. Laurie and I talked to the Nook Press rep at SBPE in November. We asked whether anything was coming down the pike for us, and she gave us a non-response. Which left us unsurprised.

      I do agree with you about the Bonus program. With Konrath’s departure, it occurs to me to wonder whether Amazon didn’t anticipate some high-profile defections from Select as the payout dropped, and instituted the Bonus program as a way to keep those authors in the program.

      1. Ah, good observations, Lynne. Also, at this point, no other publishing platforms can compete with Amazon. As you mentioned, B&N falls a bit short on its end. Most people I know read books on tablets via various apps. I’m surprised that Kindles and Nooks are still selling! I have all kinds of apps on my iPad and can read books from just about anywhere.

        1. Linda Lee, I expect a lot of people fit the pattern you’ve seen of reading on tablets instead of a dedicated ereader, but there are a lot more who don’t. For some, it is because they’re avid readers, but don’t see the additional cost of a tablet being worth it to them. For others (and I’m in this category), reading on a dedicated eink reader is a much better reading experience. My old eyes rebel against reading on a tablet. I have one, but use it for other things. If (or when) my ereader dies, it will get replaced although my tablet is there as a backup. I’m much more likely to use my smartphone to read and then, only for a short period when I have time to kill while out and about.

          1. I agree, Big Al: Those lighted screens, even dimmed, hurt my eyes–probably because I’m a migraineur and I’m photophobic. When I use the iPad, it limits my reading time. Crazy as it sounds, I have to wear sunglasses when I work at my computer! I cherish my original Kindle e-ink reader. The Paperwhite, when dimmed, is also more “eye friendly” than a tablet.

Comments are closed.