Home » Amazon, Smashwords » Amazon Lowers Kindle Unlimited Payouts

Amazon Lowers Kindle Unlimited Payouts

4 November 2015

From the Smashwords blog:

Last Friday in a bit of news that was missed by most indie authors, Amazon quietly announced that because they’re pricing their Kindle Unlimited ebook subscription service at $3.00 per month in India, authors will now earn less.

I’m sorry to say I predicted such a devaluation back in March in an interview with the International Publishers Association titled, Not all Subscription Services are Created Equal. In that interview I warned there was nothing stopping Amazon from waking up one day and deciding that their $9.99 subscription service should be priced at $3.00 instead.  So now it’s happening in India.  Amazon hints it will happen in other countries too.

Was I prophetic?  Not really.  None of this should come as a surprise, yet thousands of authors will be surprised once they realize the slippery slope that is KDP Select.  It’s an inevitable outcome when authors surrender full pricing and compensation control (via their KDP Select enrollment) to a company whose entire business model is predicated upon commoditizing and devaluing products by stripping suppliers of pricing control.  Amazon does this in the name of offering customers the lowest possible prices.

There’s another potentially more insidious form of devaluation taking place, and sadly the indie author community (which supplies the bulk of KU titles) is Amazon’s unwitting accomplice.

Kindle Unlimited is training readers to think that single-copy ebook purchases are too expensive.

. . . .

Kindle Unlimited is crucifying single copy sales upon the altar of greed and gluttony.

Link to the rest at Smashwords and thanks to Toni for the tip.

PG doesn’t understand how gluttony plays into ebook subscriptions, but he’s not too enamored with Mark’s view that indie authors are “unwitting accomplices” or otherwise unable to look out for their own welfare without Smashwords’ help.

If Smashwords wants to effectively compete with Amazon, providing an excellent online environment where indie authors earn a lot of money because readers can easily discover books they like on something better than a Tinkertoy website would be a more effective strategy than trashing Amazon.

In PG’s unfailingly humble opinion, any hint of sore losership in a company’s marketing communications is a terrible idea. In that respect, a comparison between the content and tone of this Smashwords post and the Draft2Digital blog is illuminating.

Amazon, Smashwords

53 Comments to “Amazon Lowers Kindle Unlimited Payouts”

  1. I don’t like the use of the term “crucify”.

  2. I’m not entirely sure what the problem is here. It sounds like Amazon has realized some countries have a lower standard of living than others, so people in them can’t afford to pay the amounts people elsewhere can. What’s so new and unexpected about that? It’s not as if publishers charge the same everywhere for paper books, or what was the Kirtsaeng decision about?

    • Surely not the same as paying the going rate for a product in each country. Let Amazon absorb the cost to do business in India.

    • Chris, no problem with them recognizing that lower prices work better in India. Broader issues I see for India:

      1. They just pretty much guaranteed that no other viable ebook retailer will take root in India. I realize some people don’t care about this. Someone on my blog made an apt reference to dumping. When China dumped subsided solar panels on the US market at below their true manufacturing cost, everyone was up in arms. Amazon is dumping 1 million+ exclusive books on the Indian market for which Amazon decides their per unit cost after the fact and authors have no say. They can dump these books on any market at any price, which leads to…

      2. Devaluation. They just arbitrarily decided that KU authors will earn (we can only guess), about 1/3 in India what they’re earning now per page in the US. Nothing to stop them from deciding that books are worth less in other countries too. They hinted at that in their announcement. This is what happens with authors can’t set their prices.

  3. Considering I’ve had no pages-read nor even sales in Amazon India (and I don’t know anyone else who has?) I didn’t even care when I got this email. Lol. Still, pages-read is better than nothing! At least, that’s my philosophy at the current moment.

    • I do get a few reads in India, about 3000 KENP last month, tendency rising. There actually have been a few sales there, at full price, in the summer.

      While I understand and don’t mind lower KENP payment for India, given the lower subscription price there, I am a bit worried because the Amazon notification did not say the varied payout would only apply to India.

      Since my reads come from all over, and preponderantly from the UK, a more country-specific approach will make everything even more complex to navigate. That said, I like KU and don’t plan to pull my books any time soon.

    • I had one page read last week in India. Hoping the reader carries on :).

      • I get sales in Amazon India, and I charge a lower amount there. Which is fair, because I would rather charge according to the going Indian bookprice.

  4. “Kindle Unlimited is training readers to think that single-copy ebook purchases are too expensive.”

    P.G.

    LOL..

    I forayed into Kindle to examine prices on a few books I rather fancied.

    Sure, the blast from the pubbers is hyper and the price is commensurate with all that blarney. $16.00, which after tax gets close to $17.00

    Walks away, keeps money in pocket.

    Tighfist Tung, AKA Brendan

    • $16.00, which after tax gets close to $17.00

      Exactly. Anyone who thinks Kindle Unlimited is to blame for readers *recognizing* that some ebooks are too expensive is just a first class idiot.

      A businessman who can’t be bothered to keep up with the news of his own industry deserves to fail. There is no excuse for being so invincibly ignorant of the fact that publishers fought tooth and nail to overcharge readers, and that any decline they experience is solely and absolutely their own fault. Coker has no business feigning that ignorance. Worse, he’s counting on his audience being too ignorant to know he’s deliberately misleading them.

      It’s despicable.

      Just out of curiosity: Are there a lot of people who want to do business with someone whose rhetorical strategy depends on the ignorance of the audience? Whose rhetoric flat out states that the people he does business with are too clueless to know what’s best for them?

      I’ve seen people who ignore the flagrant disrespect of those they’ve partnered up with. What I have not seen is a happy ending for those people.

      • The contunued growth of Amazon Select and KU indicates he doesn’t have many followers for his ideas on economics.

      • Depending on the ignorance/naivete of authors is the lifeblood of Author Solutions. I’d hate to see that approach spread to other sectors.

      • Ignorance? 🙂 If you read the post, I talked about how KU is training customers to view even 99 cent books as too expensive when the same book can be had for free with a KU or Prime subscription. And then check out the link in the post from the author who’s getting hate mail from KU subscribers who refuse to purchase his $2.99 and $3.99 books because they’re not in KU.

        This is happening for people who care to see the writing on the wall.

        I don’t disagree that trad pub books are too expensive. We all know that. KU is training readers to think that standalone copies at *any* price are too expensive. That’s why indies should care, if they care be informed.

        • Mark, how would this differ from Oyster in terms of reader expectation?

          • Good question, Andrew. Here’s the difference between the KU model and the Oyster/Scribd model. Under the Oyster/Scribd model, the author sets the retail price of their book, and Oyster/Scribd pay retail-level rates based on the list price, so 60% list for Smashwords-distributed authors, the same as our authors earn at iBooks, B&N and others. This means the author controls what they’ll be paid if the reader reads past a certain threshold.

            If Oyster/Scribd allows their subscribers to over-consume, O/S lose money and their business becomes unsustainable and they go out of business. The O/S business models create a natural system of checks and balances so that readers get good value, but not too much value otherwise O/S lose money. A couple months back we saw Scribd gut their romance catalog for this very reason. Romance readers were overconsuming. To make this work, Scribd will either need to raise prices, limit consumption or get the publishers to agree to lower payments. Publishers are reluctant to agree to lower payments, because that starts the slippery slope toward devaluation.

            With KU, there are fewer built-in checks to prevent overconsumption. Amazon has a lower cost of goods sold, which means it can allow more consumption than Oyster/Scribd for the same $9.99 a month. Amazon controls the cost of goods, which means it can allow more consumption by lowering author payments if it chooses, or it could lower the subscription price, or it could even bundle the entire service free within a Prime subscription.

            There are two type of devaluation I look at. 1. Perceived value of a book in the mind of the consumer. If all consumers some day wake up and believe that all books should be free, or 99 cents or whatever, that’s obviously not a good thing for authors who want to earn income. 2. Effective author royalty rates. What is the author paid for their book?

            KU pays out of a pool. Amazon decides the size of the pool, decides the number of pages of the book and then credits the book with it prorated shared of the pool based on pages read. Amazon can set the pool to equal whatever it wants. Let’s assume Amazon doesn’t want to lose money, so they set the pool at the level of aggregate subscription revenue minus some reasonable profit margin for Amazon. It’s a model that can always be profitable as long as Amazon can lower supplier payments at will.

        • Amazon isn’t training anyone. Consumers naturally look for the best deal. They do it with all kinds of goods. They are very good at it.

          Consumers decide if stand alone prices are too high.

          Books, publishers, and booksellers are not any more important than any other manufacturer or retailer.

          If consumers are getting more goods at lower prices, who cares if producers and middlemen like it?

        • I am very relieved to know that you are not in that cadre that pretends high e-book prices and sales decline are not related. Very relieved indeed; too many authors do business with Smashwords for me to want them to partner up with someone who didn’t see that connection. I’m so glad to be wrong there.

          I do not believe that the people complaining about $3.99 are a serious problem. They’re paying either $9 a month or $99 a year in the first place to access the “free” library. Prime members already know that some movies and TV shows are free, and some are paid; the books won’t be different in that regard.

          More to the point: Not enough desirable content is a reason to drop a subscription.

          I dropped cable years ago because of an unsatisfactory channel/to-program-I-want-to-watch ratio, especially with the price factored in. Amazon will not be immune to that reaction, either: If indies didn’t care for the payout of lending vs. selling, they can leave KU. Amazon would have to adjust accordingly.

          Previously, $.99 was a good price point for e-books. Then readers later decided that that price was where the dreck clustered. The same could happen to KU if authors aren’t happy with it.

          There is no reason to believe authors can’t do the math on this. There’s no reason to believe that the authors who are in KU are not carefully deciding what their goals are and whether or not KU best helps them reach those goals. You can see even on this thread that not every author is interested in joining KU (I’m not), and not every author is willing to put their eggs in one basket (I’m not).

          There’s no reason to believe that the authors who do sign up for KU are “unwittingly” doing anything that’s against their own interests. You may not see their reasoning or understand their reasoning, but that is no basis to assume they haven’t reasoned.

          • There’s no reason to believe that the authors who do sign up for KU are “unwittingly” doing anything that’s against their own interests.

            Agree. They are doing something that’s against Smashwords’ interests.

        • *scratches head*

          I’m a little puzzled here.

          How is it that Kindle Unlimited is training people to think individual books are too expensive…

          …and yet I don’t recall ever hearing anyone complain that Netflix, Hulu, and Amazon Prime are training people to think that individual movie purchases cost too much, or that Spotify, Amazon Prime Music, Apple Music, etc. are training people to think that individual music purchases cost too much?

          Why are all-you-can-eat subscriptions anathema to your medium and yet perfectly okay for all other media? Seems to me that if they’re a problem for one, they ought to be a problem for all—but where are studios complaining that their individual movies are being devalued and yanking their catalogs? If anything, more networks and channels out there are hastening to start streaming services of their very own instead.

      • I don’t think Mark is talking about the trad-pub prices when he says that Amazon is driving readers away from single-copy purchases, but indies who price around $2.99 and $3.99. He even says so in the full blog post. Also, Amazon has already stated that they are working to disrupt the self-publishing system that they themselves established (not sure when it showed up on this blog, but I know PG did an excerpt from it some months back).

        ETA: Ah, I see Mark showed up to clarify before I posted my comment!

  5. nothing stopping Amazon from waking up one day and deciding that their $9.99 subscription service should be priced at $3.00 instead.

    Oh, I anticipate that they’ll go much further than that: I think they’ll make KU free for Amazon Prime members. At their presentation at the NINC conference last month, Amazon offered up an interesting statistic: KU members spend 25% more at Amazon. Not 25% more on books — 25% more in the store. KU books make a great loss-leader to get customers to spend more on toasters, TVs, BMX bikes, you name it. So yes, of course Amazon wants to expand the program to more customers. I don’t think they’ll lower the subscription fee; I think they’ll eliminate the subscription fee.

    • They might do that, but if they cut the author compensation as well then I doubt anyone will stay in the program. It’s not like it’s compulsory for anyone who wants to sell books at Amazon.

      • Some authors focus only on the payment per page. Others concentrate on total revenue. The two groups may take different paths.

        Amazon doesn’t cut total compensation. It cuts the compensation per page. Total compensation can easily go up when rate per page goes down.

        • That’s a good point – compensation vs. rate per page.
          We don’t want to fall into the kind of pricing tunnel-vision that a lot of publishers get stuck in.

          I don’t think Amazon would squeeze writers too much. Books are a valuable tool for them. They bring new customers to a marketplace that sells just about anything.

          Kind of like how Chewbacca started out buying Ewok erotica (I think it was the ‘Shore Thing’ quadrillogy) and next thing you know, he’s ordering those Bothan square-dance videos (which is why Han shot down that delivery drone on Hoth).

          • The genius of KU is that it is structured to pay the most to the writers that consumers like the most. Those writers then have incentive to stay with KU when others might leave. As others leave, these writers make even more.

            It’s a self-curating system. It could easily lead to a smaller selection of KU books that is very popular with consumers.

            The KU rate doesn’t matter. Only the total pot matters. The popular writers will be dividing the pot among themselves. The rate per page is a derivative of that.

    • I found out that you can borrow MY book from KU, if you have the subscription – but that you can also borrow one book per month if you have Prime – which seems to apply to all the KU books, including mine.

      Weird to be taken seriously.

      I think they may also be monitoring how many pages of the borrowed books are read – and probably paying the authors on that basis. So no point in borrowing the book if you’re not also going to read it.

      Since at this point I want readers more than payment, this seems eminently fair.

  6. Haven’t read the Amazon bit from the horse’s mouth, but poor Mark from Smashwords sounds like he has a bad case of sour grapes he’s chewing on.

    Most ‘dumb, poor, and foolish to use Amazon’s KU2 rather than Smashwords’ indies would have already realized that from poorer countries they’d be getting less per read.

    As with all the moaning when Amazon changed KU to KU2, I think we’ll have to wait to see the true results — and whether Mark is truly a prophet — or just another snake oil salesman …

    ETChange

    I may be doing Mark a disservice with the snake oil salesman bit, but if not that then he may be another ‘chicken little’ with his sky falling on him …

  7. It could be argued that Amazon is also training the small subset of readers enrolled in KU to buy books from indie authors instead of legacy authors. For an author trying to create a following, that might be a business trend that can be successfully leveraged…

    • Yes, I’m sure that’s part of Amazon’s calculus. KU hits traditionally published authors the hardest because the price disparity of the “feels like free” of KU vs. the high trad pub prices is the greatest. Amazon wants to marginalize the power of the large publishers so their author separated from them, and once those authors migrate to KDP the collective bargaining power of the publishers is weakened. Big publishers don’t see this coming because they think KU is not their problem. They probably think KU is the indie community’s problem.

  8. They probably should have set KU India’s price at $3.00 or the equivalent right out of the starting gate. To the best of my knowledge, I’ve never sold word-one in India, so I’m okay with the change. Can they drop the price on the rest of the planet? Sure they can. If anyone from the other platforms thinks that indie authors are too dumb to realize this…well, that’s for stupid.

  9. He seems to have missed the reason for the price drop in India. Other subscription services there are at that price point. Who is going to pay $10 for something when you can get it elsewhere for $3? Isn’t some money/borrows better than no money/borrows?

    The problem with Smashwords is they are a middleman where none is needed anymore. When they started, B&N, Kobo, Apple, and others didn’t have their own publishing platforms. Smashwords was a gateway into those venues. Now that Indies can get into most places directly, many are choosing to forego the middleman.

    Smashwords is the traditional publishing of the ebook age. It’s time to innovate or become irrelevant.

  10. Fix your own business before your start trashing others. That’s my philosophy, anyway.

  11. I don’t like the tone of the smash article at all and don’t find most of the arguments compelling, I do have some worries about the adjustments and what they might mean.

    Amazon’s decision to open KU for India means that they saw a potential profit there. It isn’t humanitarian. It isn’t some charitable endeavor. It is another market that they want to tap into.

    That is their decision. As is the pricing they decide to set there.

    But given that all of KU appears to be a loss leader that draws people in who spend more money on a whole lot of things other than books, demanding that KU authors foot the bill for opening that market for them is a little insulting.

    Right now, it’s easy for me to say…pfft, I don’t get many reads in India and anything I make there is better than the nothing I get outside of KU in India. But it’s my own thoughts there that start the alarm bells ringing loud.

    It *is* easy for us to say that in the Indian market. Amazon knows this.

    So what about when they decide to roll it into prime? What about when they lower it for countries with currently struggling economic systems? What about in places…for free…because they are even less well-paid than India?

    If Amazon wants customers to spend 25% more in their store because they get their KU and therefore, spend more time browsing, then let’s ante up properly.

    Instead of lowering page reads even more, let’s pay the KU reads what they’re worth. And they’re worth more when you toss in the TV, the dyson vacuum and the subscription for doggie pee pads (those are just three of my browse related purchases over the recent months).

    • The answer to all “what if Amazon goes evil” scenarios has the save answer: walk away. Which is what Coker’s fear-mongering seeks. Anybody who buys that narrative is free to do so and probably should leave right away.

      Amazon isn’t a public utility or philanthropy nor are Indies forced to stay with Amazon come heck of high water. The relationship is two-way and temporary, 90-days at a time. It either works for you or it doesn’t. If it doesn’t, walk.

      • Uh…I’m in KU with more than half my catalog. I’m not in the Amazon is evil camp, so I’m not sure what that’s all about.

        Generally speaking, I’m very much a rah-rah Amazon sort of author. I shop there, put my books there…I love them.

        That doesn’t mean I have any contractual obligation never to have any concerns for myself when things change. And having a concern is not an invitation to charge out the door in a huff.

        I’m expressing a concern.

      • Felix,

        Some of us don’t have to walk because we were never on that side of the fence to begin with.

        Even with the low payments, I would love to enroll my books in KU / KDP Select, but the exclusivity requirement has always been a dealbreaker because I knew it would be a bad deal for my readers and myself.

    • Instead of lowering page reads even more, let’s pay the KU reads what they’re worth.

      Amazon needs a certain selection of goods in KU. KU page reads are worth the lowest rate authors will accept that still provides Amazon the selection it wants.

      That’s what the rest of the market’s suppliers deal with everyday. Authors are just another supplier in the market. Nothing special about them.

  12. Smart Debut Author

    Perhaps Mark should try puting a fraction of the effort he puts into badmouthing successful competitors into actually fixing Smashwords.

    Maybe then customers wouldn’t be abandoning Smashwords in droves for Woods’ customer-friendly Draft2Digital, which apparently nets them more sales, too.

    Amazon isn’t the reason Smashwords is losing customers, Mark…

    Smashwords is the reason Smashwords is losing customers.

    • Smart Debut Author

      Correction: Pogue’s Draft2Digital.

      Dan Wood is D2D’s Director of Operations and Author Relations

      My mistake.

  13. You know, when I read fear-driven words such as this, my first response anymore is to check the number of subscribers on my rapidly growing mailing list.

    Freedom from all of this is capturing your own market. Your buyers’ email addies are gold. They are also the only real insurance we have against the vagaries of an ever-changing market.

    Right now I’m adding 25-35 new subscribers a day. It isn’t cheap, but it’s deductible.

    • I hear ya! I’m trying to grow mine as well. I made some HUGE mistakes when I first started out (2.3 years ago is an age in digital, isn’t it) and one of those was not having a mailing list. Since my most popular books were my first ones (and their time has now passed), I missed a pretty huge window of opportunity there.

      Trying to correct it takes time, but it’s a far safer strategy in a world of uncertainty.

    • Best comment on the thread.

    • Suggestions for doing so? Do you have a book or blog posts about it?

      I’d like to increase my email list too, but I want them to be people who really want to hear from me. I recently sent out a newsletter with a bitly link, and only got about ten percent of the subscribers even clicking on it.

      • Don’t get discouraged. My newspaper does newsletters, too. It’s been ages since I was responsible for tracking the analytics, but open rates aren’t all that high in general, and clickthrough rates were lower still. I was told by our analytics guru that the rates were normal. Ten percent sounds good.

        MailChimp has a table of averages for various industries, including arts and the media, here:
        http://mailchimp.com/resources/research/email-marketing-benchmarks/

        The averages are congruent with what I’ve seen. If you scroll down they link to examples of the top performing vs. worst performing subject lines for open rates.

        Poynter.org, which centers on the journalism industry, backs up MailChimp’s advice on subject lines. They did a quick case study on how the NYT got a 40% open rate (this is not typical) and the subject lines played a role. See it here:

        http://www.poynter.org/news/media-innovation/277009/how-times-email-newsletter-achieves-a-40-percent-open-rate/

        Although the writer mentions CheetahMail, which the NYT uses for their emails, I suspect it’s very expensive. The real usefulness of it is that it offers robust ways to test the effectiveness of various techniques.

        I’d love to know what techniques work best for novelists; please report back, John 🙂

  14. A year ago we were bemoaning the falling payouts of KU. Most seem to be pretty happy with KU 2.0.

    Despite this, there’s nothing wrong with asking questions, nothing wrong with wondering if payouts are sustainable, or if you’re losing sales in a subscription model.

    I for one have had sales cut in half on one book and the pages read haven’t kept pace to match the previous income, even though the book’s ranking has improved.

    So I wonder about these things.

    At the same I time, I agree with the earlier comment and the comments by PG – Smashwords needs to get its house in order. Lots of authors have been saying that for some time now, at least a year.

    I also feel that D2D digging into Smashwords’ profits may be some of the reason Coker is ‘lashing out.’ Still, he’s never been afraid to say what he thinks about Amazon.

    I’m glad we have him around.

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