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Wednesday, January 7, 2015

Why Kindle Unlimited Isn't Going to Matter in the Long Run

As I've said previously, I wrote very little and published only one thing in 2014. That doesn't mean I haven't been keeping up with industry news. By participating for little, I've gained a different perspective.

Some stuff I already knew. Like the fact that the publishing industry runs on fear. When you let fear overwhelm you, you're not going to make the best decisions.

Have you ever watched It's a Wonderful Life? At one point, the Bedford Falls bank is on the verge of failing. Potter, the richest man in town, bails out the bank. When the financial panic spreads to George's building and loan, Potter offers to buy the B&L's shares for fifty cents on the dollar.

George: "Don't you see what's happening? Potter isn't selling. Potter's buying! Why? Because we're panicking and he's not. That's why. He's picking up some bargains."

Amazon's launch of Kindle Unlimited (KU) has engendered a lot of fear in writers. There's all kinds of rants online about how Amazon turned its back in indies. There's a lot of glee from the Amazon naysayers too, in the form of "I told ya so!"

Let's break the business side down.

1) Amazon already had a lending function for the Kindle, i.e. if I buy an ebook from Amazon, I can lend it one time to one friend or family member for a maximum of two weeks. The writer/publisher only got paid for my initial buy, but it was a way for me to share really good books.

2) Amazon then started the Kindle Lending Library as part of their Amazon Prime program (currently $99). I can borrow one book per month from writers/publishers who put their books into the KLL program. In return, writer/publisher received a pro-rated payout based on the total borrows per month if they were in the KDP Select program. Bigger publishers that Amazon convinced to be included in KLL would receive their normal retail share per borrow.

3) In 2013, two companies, Scribd (which was notorious for pirated books and is trying to go straight) and Oyster, created subscription services. I could borrow as many books as I wanted for $8.99 to $9.99 per month depending on which service I choose.

4) Never one to be outmaneuvered, Amazon enfolded KLL into the newly created KU last summer. Amazon Prime members are still restricted to one borrow per month unless they cough up an additional $9.99 for unlimited borrows. Non-Prime members can enroll in KU only for the same $9.99. Again writers/publishers in KDP Select are paid from a pool of money and their share is based on their borrows vs. total borrows for the month.

I have no doubt that Amazon's creation of KU was in response to Scribd and Oyster's new revenue stream.

So, there's a number of concerns and fears:

1) Are subscription service viable in the long run?

That really depends on the readers. I currently have five novels in both Scribd and Oyster via Smashwords. The retail price of each novel is $2.99. If a reader borrows all five from Scribd, then Scribd pays out $2.09 per novel or a total of $10.45, which is more than their monthly fee from a reader.

Both Scribd and Oyster are gambling that each subscription holder will borrow less than that per month. In fact, in a recent press announcement concerning the $22 million on venture capital Scribd raised, the CEO stated that Scribd subscribers borrow less than one book a month.

Amazon took a different approach by pro-rating writer/publisher income shares that ensures that they make money regardless of the number of borrows.

2) Why do writer/publishers view borrowing and buying as equals?

Honestly, I really don't get this one because they are not equal. Just because someone borrowed or bought another book doesn't mean they will buy yours. A lot of readers are on limited incomes. If they perceive the subscription service as a better deal then they'll pay for that. For that matter, they may go to the library.

3) Is participating in a subscription service worth it?

I weigh the exposure I get from each retailer or service versus the payout I receive versus my time and money dealing with that retailer or service. I've donated books to libraries at their request. I have put my books in some subscription services and not others. I have put my books in some retailers and not others.

There's no right, and definitely no perfect, answer for every writer. I experiment because I've found I do well in areas where others don't. YMMV.

4) Is the income subscription services receive worth alienating the vendors?

I do think Amazon made a critical mistake in their rush to jump into the monthly subscription venue. They didn't raise the payment pool significantly when they went from one book/month/person to unlimited books/month/person. A lot of writer/publishers saw a massive drop in their per book share of income.

5) Is the drop in book sales over the last six months due to KU?

Yes, there was also a drop in book sales at that period, but I don't think it was all KU. KU launched in late July of last year. For the last four years that I've been publishing, my sales crash with the start of school in late August to Thanksgiving. That's because (1) my primary buyers (women) are busy as hell between kids and holidays, and (2) the BPHs release what they hope to be their bestsellers through Christmas. I'm not saying KU didn't affect sales, but I think its a minor reason for what is the normal seasonal sales slump.

6) Can putting only shorter works in KU help raise a writer's income?

There's been public statements from writers that they are pulling their novels off KU. if not pulling out of KU entirely.

In theory, shorter works would bring in more income, but the question you have to ask yourself is can you do without pissing off the readers. Too many folks are breaking up a larger work in order to make more money through more borrows. There's already a backlash in book buying with the numerous writers who end a novella or novel with a cliffhanger. Readers feel tricked into buying the next book, and many times will refuse to read that author any more.

Short stories are doable in KU, but again, are they complete and fulfilling?

* * *
I think the real problem is that too many writers/publishers rely on Amazon (and Amazon's exclusivity requirements) as their only means of income. Going all in with one source of income is never a good idea as a business. Often, these same people are ones howling the loudest about Amazon's switch from KLL to KU.

I also think that we need more data to determine how KU, or any subscription service, is affecting the market. There's also the factor that the BPHs are signing up with Scribd and Oyster, but not KU.

What else is going to change in the publishing arena in 2015? I don't know, and quite frankly, anyone who says they know are either lying or smoking some primo weed. KU isn't the end-all-be-all in publishing, so saying it's ruining the industry is right up there with e-book sales are stable at 25%.

I think all subscription services are going to help expand readership if used judiciously. If you don't like what they are doing, then there's always the option of removing your books from them.

Provided you can't because you signed away all your right to begin with.

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