How Kindle Unlimited can pay off for authors

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You won’t get Raymond Chandler’s The Big Sleep on Kindle Unlimited as the Big Five shun Amazon’s library service (for now at least)

A new report from best-selling author Hugh Howey’s Author Earnings’ survey suggests Amazon’s ebook subscription service Kindle Unlimited has brought a major shake-up in the market and KU authors are making an average of 13% more money per title on Kindle than non-KU authors.

Amazon launched Kindle Unlimited about halfway through July. KU is a library service which charges members $9.99 a month and allows them to borrow up to a total of 10 ebooks at any one time.

To make their ebooks eligible for Kindle Unlimited, self-published authors have to enrol a title in Kindle Select, which means the ebook must be exclusive to Kindle and not available elsewhere.

Payments for self-published borrows are made from the monthly Kindle Select Fund, which is set each month by Amazon and then divided out among authors according to the number of borrows for their book(s).

The fund has risen month by month since the launch of KU and was topped up by Amazon for September to a record high of $5 million. However, the payouts per borrow have been going down despite the total fund rising as KU gains traction with readers. The July payout (a partial month for KU) saw a payout of $1.80 per borrow but that sank to $1.54 in August and $1.51 in September.

Ebooks from traditional publishers are paid for borrows at the same rate they would get for a sale, while the Kindle Select Fund for self-published authors operates without regard for price, so, for example, an author with a $0.99 ebook gets the same per borrow as an author with a book priced at $4.99.

At the moment, self-published authors have a big advantage in the Kindle Unlimited marketplace as none of the Big Five trad publishers has signed up for KU. There are nearly three million ebooks available in the Kindle Store (2,908,475) but only one-quarter of that total (744,181) are signed up for Kindle Unlimited.

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The Author Earnings’ research collects data for over 120,000 ebooks off Amazon’s product pages. It shows an average borrows/sales rate of close to 1:1, and uses a data basis of authors seeing 50% borrows/50% sales. It reveals that KU titles are well-represented on the best-seller lists.

  • KU titles make up 20% of the titles on Amazon’s Kindle Best Seller Lists and sub-lists.
  • KU titles make up 32% of all daily unit downloads. (These are a mix of sales and borrows. From the baseline of 50/50 borrows/sales split, it is estimated that KU borrows alone make up 16% of all non-free downloads on Amazon).
  • KU titles generate 30.5% of all daily author earnings on Amazon’s Kindle store, using the baseline 50/50 borrows/sales split.

Howey’s survey estimates that KU borrows alone are generating 14% of all daily author earnings on Amazon, but also points out that authors are giving up income from other outlets, which must be taken into account and could mean a fall in earning potential.

The figures show almost half (49%) of the KU titles on the Amazon Best Seller lists are indie-published titles, while Amazon Publishing imprints make up 2% of KU Best Sellers (but only 1% of all Amazon Best Sellers) and the Big Five Publishers have 0% as they have no ebooks in KU.

The figures for daily KU downloads (KU borrows and regular sales combined) show indies holding their own on units moved, with 47% of KU titles borrowed or sold each day. But Amazon Publishing imprints power ahead of other publishing types on KU on a per-title basis by a factor of 13, as Amazon imprints’ 2% of Best-Selling KU Titles accounts for 26% of downloads, as the imprints represent far fewer titles and so their per-title averages are not brought down by a low-performing long tail.

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Author earnings from KU titles (including both KU borrows and regular sales) show indie KU titles seem to benefit from higher visibility through KU downloads and higher revenue share earned on regular sales of those titles. 56% of the author earnings on all KU titles goes to indie authors, with Amazon Publishing authors getting 28%, and 13% going to authors with Small and Medium Publishers.

Howey says there is no easy answer for indie authors on whether or not to put (or keep) titles in Amazon Select to qualify for KU inclusion and it may depend on whether you are starting out and want the extra visibility, or if you are being sought out by readers on other platforms and need to diversify.

The Author Earnings’ July report captured comprehensive data on Amazon best-selling titles a few days before the launch of Kindle Unlimited, so Howey’s team have been able to divide the bestsellers from July into two cohorts – those that were placed into the KU program before October, and those that were not, which means performance trends can be compared.

From the July dataset, there were around 120,000 titles on various Kindle Best Sellers lists and sub-lists. Comparing this dataset with the October dataset, shows:

  • 8,784 of those July best-sellers appear in the latest October dataset as KU titles, while 31,681 appear in the latest October dataset as non-KU titles.
  • 79,627 of those July best-sellers do not appear in the October dataset at all (they have fallen off the bestseller lists).

The research looked at how KU has affected the July best-sellers that can be tracked across both snapshots and this reveals:

  • 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, the same effect is seen:

  • Daily unit sales of the 31,681 non-KU titles in both data sets declined, on average, by 21%
  • Daily unit downloads (sales + borrows) of the 8,784 KU titles in both data sets declined, on average, 11.4%

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.

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However, indie titles receive on average less compensation per borrow than per sale, so the question remains of whether indie authors in KU are giving up author earnings for broader readership and longer bestseller list visibility. The survey shows:

  • 33% of the KU indie titles increased significantly in author earnings between July and October, compared with 19% of the non-KU titles.
  • 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, the same effect is seen:

  • Daily author earnings of the 4,234 KU indie titles on average dropped 26%
  • Daily author earnings of the 3,073 non-KU indie titles on average dropped 34%

Once again, being in KU has had a significant mitigating effect on the average three-month decline in author earnings seen by titles that were on the bestseller lists in July.

Howey says the research shows 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.

But he adds that if Amazon is reckoned to have 70% of the market for indie ebook sales, authors may be giving up 30% of potential earnings to get 13% more from a single outlet, and if Amazon’s indie share is lower, then a possibly higher percentage could be being lost.

There is also the Kindle Select All-Star bonuses to take into account, with over $600,000 month awarded to the most-read KDP Select authors and titles on a basis of borrows combined with sales).

Howey concludes it may be those just starting out and those at the top are most rewarded by taking part in KU, with the former gaining visibility, and the latter getting more money.

But he points out that the flexibility of self-publishing means none of these decisions has to be permanent as authors are free to opt in and out of agreements as conditions and terms change.

The Author Earnings’ report is a very exhaustive analysis which contains a wealth of information for authors. You can read the whole report complete with charts at Author Earnings.

Amazon tops up KDP Select Fund for September to $5 million