From Kristine Kathryn Rusch:
[Note on 5/5/23: As most of my regular readers know, I’m dyslexic. I have a first reader to catch errors, but this post–which was late–went live without the assistance of that first reader. As a result, I made two typical errors for me, which have been discussed in the comments. Normally, I leave my mistakes and let the comments speak for themselves, but because the KU people are here, these two small errors have grown all out of proportion. At the request of a few folks, I’ve removed the mistaken passage and corrected a math error, but I’m leaving all the comments, which I think are valuable. If you want to read the actual removed section, download the audio version. The errors remain there.]
I’m writing this on the last day of April. I’ve been planning this post for months now, as the drumbeat of bad news out of Amazon escalated from rumors to asset sales to major layoffs. The reason I’m posting the date in this blog is because by the time you read this, there might be even more news that has somehow affected writers.
I’ve been worrying about this year since at least 2011. Maybe longer. I knew at some point, the world’s largest retailer would mess with their ebook program(s). Amazon is not a book retailer. They’re no longer a bookstore, and haven’t been one since the last century.
They’re an online retailer, currently the largest in the world by most measures, but they might not be number one by the end of 2023. Others are rapidly climbing the list, and aren’t suffering from the same kind of missteps that Amazon made during the past few years.
When big companies have bad earnings reports, the people running the big company must make changes—even if changes aren’t warranted. The CEO answers to the stockholders, not to the customers, and stockholders generally demand some kind of change…or the CEO gets fired.
In the past two years, Amazon has had bad earnings reports. 2022 was terrible.
. . . .
Keeping an eye on earnings reports, both expected and actual, are important for writers to do with any business they’re tied up in, because then the writer isn’t blindsided by changes that come from above.
The losses started in mid-2021, but they were small. Year over year, though, which is how most publicly traded companies now look at earnings, were devastating in 2021. After all, 2020 was filled with phenomenal growth. A year later, the growth was slowing, and by 2022, reversing.
Amazon made a lot of money during the pandemic and, like many tech companies, seemed to think that the gravy train would continue. Apparently no one in the company thought it through: what we were going through was a true Black Swan event. It happened worldwide at the same time, and no one alive had gone through anything remotely similar.
Rather than seeing the event as something unique, with its own set of rules, the people in charge of the tech companies decided the future had arrived. We would all be shopping online forever now, talking to friends and family on Zoom, and never leaving our homes. Apparently, these starry-eyed CEOs and prognosticators weren’t listening to their own friends and family, who were probably chomping at the bit as much as everyone else, waiting for the day when they could burst out of their little bubble and return to “living” again.
When living returned, the tech companies saw quarter to quarter losses, and many of those losses were major. Some companies are doing just fine because they didn’t expand during the pandemic. But others are doing poorly.
Like Amazon.
Amazon spent the newfound wealth like it was a growing start-up again. They bought or rented warehouse space all over the country, and added a huge number of employees.
And now, with the financial losses, Amazon is reversing a lot of those decisions.
Most writers wonder why that’s important. After all, big companies are just big companies, right? They have money. They’ll continue.
But they don’t always continue. Take a look at Bed, Bath, And Beyond. In fact, take a look at this article in Business Insider, which is illustrated with large bold subheads. It gives a quick overview of how a company can go from a juggernaut 20 years ago to bankruptcy and possible closure today.
For more than a decade now, I have fought with writers old and new about relying solely upon Amazon. I’ve written blog after blog recommending that writers go wide, and yet many writers never listen.
. . . .
I kept saying that someday Amazon will change, and that change will hurt writers, particularly those who tie their entire writing career to Amazon. The writers who have gone exclusive through Amazon via Select are really going to be in trouble.
And the trouble has already started.
Some of that trouble was built in from the start. What actually got me taking notes for this blog post was a Facebook post from one of the best-known Kindle Unlimited writers who claimed that writers never have a passive income off their work. Writers must constantly write and release to be successful.
Um…what? Really? News to me and most writers who have gone wide. One of the best things about writing is the passive income. If Dean and I quit tomorrow, we will continue earning for years to come. Sure, some of the revenue will go down a bit if we don’t put out new product, but mostly, the income will plateau.
Apparently, goosing payment through new releases is one of the few ways that K.U. writers survive. And if they don’t do it, they don’t get paid as much or as well. Or maybe not at all, given what he (and all of the people in the comments) said.
Link to the rest at Kristine Kathryn Rusch
Here’s a link to Kris Rusch’s books. If you like the thoughts Kris shares, you can show your appreciation by checking out her books.
PG acknowledges that Amazon is far from perfect. However, at the present time, it’s still the best friend indie authors have.
A handful of stats from a TPV post a few days ago:
- Amazon sells over 487 million ebooks through Kindle every year.
- The company’s market share in ebook sales stands at least 67%, climbing to 83% when Kindle Unlimited is included.
- Amazon is estimated to control over 87.9% of yearly ebook sales in the UK.
PG prognosticates that ebooks are the future of publishing, indie or otherwise. Compared with the dead-tree side of publishing, ebooks have a much higher margin. All you need is a website, the ability to process credit card purchases and enough cheap online disk space to hold a bunch of electrons in one or more ebook formats.
Amazon’s management decisions have definitely gone downhill since the Bezos era, but even less-talented management has definitely established the best way to sell ebooks at a profit. It’s a reliable cash generator. However, the book business as a whole, traditional or indie, is not a huge money-maker on either the gross or net column in a giant company’s annual report.
Amazon’s huge overhead numbers and sunk costs are in the bricks and mortar side of things. Lots of physical warehouses being stocked with lots of physical products which are then sold and shipped all over the place, mostly on trucks, but also on planes. Amazon has certainly modernized the way physical warehouses are operated, but physical warehouses and physical shipping is a very expensive way to distribute goods compared to a bunch of spinning disks hooked up to the internet. Bits are always more efficient than atoms.
PG would like to see more than a few upstart competitors to Amazon’s book business pop up. It’s not difficult for PG to envision a much better internet bookselling platform than Amazon’s.
However, while he doesn’t have definitive inside information, PG suspects that trying to fund a company to compete with Amazon in ebook sales is a very, very hard sale to any venture capitalist.
With respect to ebooks, The Zon has fallen into the same pit that has claimed or almost claimed a whole bunch of tech companies – keep the servers running, collect the easy profits, but send a lot of money and a great many smart people in the organization off pursuing this or that flavor-of-the-month in the start-up world.
The hollowing out of once-successful stores has been called “Vampire Finance”. It involves loading up a store with massive amounts of debt, selling off the more profitable parts of it, and cashing out before it all crashes.
Amazon is not going away.
Full stop.
Anybody who thinks/fears/hopes that it is, is laughably out of touch with the world they live in.
Mind you, “laughably out of touch” describes the vast majority of people all over but it particularly applies to the perception of large, dominant tech companies.
– People have been clicking their heels and wishing MICROSOFT would vanish in a puff of smoke and brimstone for 40 years now. MS has and will continue to outlive the deluded. If anything, they are on the ascendancy.
– Entire fortunes have been lost by people shorting TESLA stock yet they not only survive, they are growing EV profits faster than all their competitors combined. (Many of which are bleeding on EV supply chains.)
– And then there is Amazon. By now you could write an entire book on Amszon misconceptions and urban legends. Starting with the biggest myth: that Amazon is a retailer. Riiighttt…
Amazon is no more a retailer than it is a bookstore.
It isn’t even a true tech company.
What Amazon is, is an old fashioned conglomerate akin to GE under Jack Welch (or Matsushita, Hyundai, Samsung, etc). A corporate chimera with over 100 different arms, ranging from retail (yes) to movie studios to satellite manufacturing (Project Kuiper in Kirkland, WA). They even own a big chunk of an electric vehicle manufacturer. Which is in some trouble (93% valuation drop). Would not count out Amazon buying Rivian out. They not only offer the Prime On-Demand Video streaming service, they also own the ad-supported FREEVEE On-demand video streaming service that is currently adding 400 ad-supported linear (cable style) niche channels. This to a $37B advertising business.
Which is to say, they are aggressively expanding into new businesses, not shrinking or collapsing. And historically, when Amazon goes into expansion mode, they report losses, which appears to be where all the “Amazon is dying” misinformation is coming from.
So, what is happening?
Well, here’s Bing’s summary:
“Amazon’s gross profit for 2022 was $225.152B, a 14.01% increase from 2021. However, Amazon’s net income for the twelve months ending December 31, 2022 was $-2.722B, a 108.16% decline year-over-year. During the fourth quarter of 2022, Amazon generated total net sales of approximately 149.2 billion U.S. dollars, surpassing the 137.4 billion U.S. dollars in the same quarter of 2021. Amazon’s retail ecommerce sales worldwide are forecasted to reach $746.22 billion in 20234. In the second quarter of 2022, Amazon’s net sales increased 7% to $121.2 billion compared to the same quarter in 2021. However, Amazon’s operating income decreased to $3.3 billion in the second quarter of 2022, compared with $7.7 billion in the second quarter of 20215.
Summarized from 5 sources and the web
—–
In other words, they’re making money hand over fist but spending more than they’re taking in.
(Building and launching 3226 satellites isn’t going to be cheap. But satellite internet is projected to hit $18B by 2030. Of which SpaceX is in line to take 90%. Amazon intends to contest that.Nobody else can.)
Amazon does have problems, mostly related to the pandemic and inflation.
The first forced them to grow their retail sector beyond sustainability to meet 2020/21 demand, the second is shrinking consumer spending to 2018/19 levels.
Also, current projections call for 5-7% inflation indefinitely though 2030. Which means that after 15 years of zero-interest loans, capital is getting tight. For demographic and geopolitical reasons, for *everybody*.
Finally, pre-pandemic the ongoing meme was that millenials and zoomers were going to migrate en-masse to the mega cities. Then the pandemic (and a certain breed of anticop politician) showed the downside of beehive living. Plus the millenials grew up, got married (contrary to wishful thinkers), and discovered the virtues of remote work, backyards, and the virtues of suburbs and exurbs (cheap housing!).
So Amazon is shedding personnel no longer needed and shutting down distribution centers serving areas that are no longer booming and even shrinking. (Walking out of NYC is looking like a big win, now. So is setting shop up in NorthEast Virginia and Nashville.)
In the meantime, their true heart, the cash cow that is AWS keeps rolling merrily along, providing 75% of the profits funding the new businesses:
https://www.statista.com/statistics/233725/development-of-amazon-web-services-revenue/
Of note, while Amazon is (wisely) sitting out the chatbot war, they do have a big “AI” service under the AWS menu of services. AZURE is crowding AWS but the two are still growing at a 20-30% for 2023. And the profit margins are eye-opening: 35% for AWS, 42% for AZURE.
Also neglected by the anti-Amazon crowd: while the pure tech companies have 12-digit cash stashes ranging from $100B for Google to Apple, at $200B, Amazon is no pauper with $83B of a back up. In other words, even before the current slimming, Amazon could keep on going at 2022 levels indefinitely.
My personal take is that nobody over 21 will live long enough to see the end of Amazon, Microsoft, or even Apple. Barring a nuclear war, of course. 😉
Whether to go wide or not is truly a personal choice, based on factors that have *nothing* to do with Amazon’s health and projections. If you’re a legacy author with a deep fanbase in the pbook world your ROI from going wide will be vastly different from an indie newcomer starting to ramp up a brand from scratch, going digital first and enjoying a presence on KU without having to compete with trabpub brands.
In other words, the only rational answer to the question is: “It depends.” There is no absolute, one size fits all answer.
PS: If anybody truly wants to see Amazon sweat, make a KFC chicken sacrifice to Jobú, hoping the upcoming ULA VULCAN rocket launch fails because of its BLUE ORIGIN engines. 😀
But, she said some guy posted something on Facebook…
And they reported…wait for it…2022 losses of…two Billion dollars. On Revenue of $514B.
(No mention of how much they spent on KUIPER or other businesses nor how much of those losses were on their RIVIAN investment. That is, one-offs.)
Doomed, they are doomed.
The $82B stash doesn’t matter.
Or this:
https://www.statista.com/statistics/233725/development-of-amazon-web-services-revenue/
Inflation and recession notwithstanding, AWS is still on track to hit $100B in 2023. Which is to say, $35B pure profit.
“If wishes were fishes, nobody would swim in riches.” 😉
Profit of $35B? That would be sure sign authors should head for the lifeboats. Because Amazon isn’t a real bookstore.
Yes, 35% of $100B.
Or about double the reported US publishing sector.
https://www.protocol.com/newsletters/protocol-enterprise/aws-operating-profit-intel-servers
Between the cash stash and AWS Amazon isn’t going anywhere.
As Mulder used to say “The truth is out there.” And you don’t need GoogleFu or a chatbot to find it. But too many people prefer comforting delusions to unwelcome facts.
I’d say twelve years is sufficient time to dispel the notion that an Amazon-centered strategy will lead to doom.
I’ve always wondered what percentage of the eBook consumer market does not buy eBooks from Amazon, but does buy them from B&N or Kobo.
A second question would be what percent of the eBook market uses Amazon for other items, but goes to B&N or Kobo for eBooks.
It would be interesting to know the assumptions about consumer behavior held by the critics of the Amazon-centered approach. Most of what I have seen is based on their personal experience and predictions that Amazon will go out of business or turn off KDP on Tuesday.
That, or they are legacy authors with a *preexisting* fanbase in the pbook arena from the gatekept days so that a significant portion of their income comes from non-Amazon print channels. And while it is posible to be wide in print and still be in KU for digital (IIRC) it doesn’t look well.
Going wide is not an untenable position. What is untenable is basing it solely on the pipe dream that Amazon is going to go away on a whim. If nothing else, Amazon makes anywhere between one and two billion in net off ebooks.
Nobody drops that on a whim. And since the conglomerate is strong and healthy…
My understanding is that the non-Amazon channels are stronger in certain niches/genres OR geographical areas. So if your writing fits, going wide can be a very good strategy, but if it doesn’t you can leave a lot of $$$ on the table. Or you can try a hybrid strategy, e.g. some books Amazon-exclusive (and in KU), and some books wide, and maybe migrate some books from Amazon-only to wide — BUT make sure you follow Amazon’s TOS.
Tony
thanks!
You answered the question I had for Kristine. I was surprised that she basically banned my question outright (she didn’t allow it to be posted on her thread at all).
All I asked was if a hybrid strategy as you call it wasn’t the answer to going either KU or wide .
I was confused why she was making it sound as if its one or the other.
I even thought perhaps when you go to KU Amazon expects you not to go wide with any other writing. But I see now its with individual books only. I am completely new to all this.
Well if that is the case then the hybrid strategy is the best tactic. Unless you have like one book it makes good sense to follow what you said depending on how it fits your writing. I have only stand alone novels so it would not interfere with a series release.
I have several books already done but never published (let’s just say over ten stand alone novels) .
I couldn’t find the reference for e-book market strengths, but if you search (e.g. “going wide” or “kobo”) on MadGeniusClub you’ll find some interesting posts such as:
https://madgeniusclub.com/2021/06/01/going-wide-pt-2/
https://madgeniusclub.com/2023/02/08/how-to-reward-your-faithful-fans-by-m-c-a-hogarth/
Ever since KU first appeared I have been repeatedly warned that it was bad to become part of that eco system. It couldn’t last, it was bad for writers. Amazon was running a scam. It was best to go wide and not risk it all crashing and being left out in the cold.
If I had followed that advice I would have left $600k on the floor. My business model revolves around KU. If it goes away, I will get a new business model. But in the meantime, I am going to use what makes me the most money. Period.
I have repeatedly tried the wide system on a few books and never come close to what I take home using KU.
Why would I walk away from a money maker? Because someday it might fail? The same could be said about any system. I say, use what works and what is going to make you the most money over the long run. For me, that is KU.
I went wide from the start (2012) with indie publishing — every distributor I could reach. There’s no reason not to, of course, (if you’re not seduced by the notion of Kindle Unlimited) and every little bit helps. I am, of course, an extremely… obscure… author.
But we are very much talking “little bit”. Two key factors are buyer choice and integrated advertising. There’s no simple way to usefully advertise on, for example, Kobo or Barnes&Noble, and most buyers (by very far) prefer Amazon. Given all options (such as purchasing from my website), buyers overwhelmingly choose the Amazon link. Certainly I could create explicit advertising (via Facebook, say) for every platform, but I highly doubt it could be cost-effective. I certainly don’t have the audience or volume for kickstarters, etc.
So, Kris’s remarks for the everyman author are appropriate re: business continuity (don’t put all your eggs in one basket), but the “attracting readers on all platforms” generic recommendation is a game of numbers, and I can’t imagine those numbers justifying targeted advertising, which is where the cost is. Good to be available everywhere, for a one-time cost/nuisance, of course, but the business numbers are all on Amazon’s side.
Keep in mind, too, that some buyers not only “prefer” the ‘zon to Kobo/B&N, but they are facially or more locked in to the ‘zon’s tech ecosystem. Yes, it’s possible for many varieties of e-readers to have both ‘zon-format-materials and other-format-materials with easy access to both. However, it takes a level of software sophistication that is slightly beyond that of some users — not extreme, by any means, but requires a conscious choice, a conscious software installation. At least it’s not Wormyfruit… which, although it claims (for once!) to be following a software standard by using the epub format, has a screwy implementation requiring nonstandard, nonsupported-elsewhere extensions in an epub to be more-than-plaintext-readable on a Wormyfruit-branded device.
(As a separate issue, for Reasons I won’t patronize Kobo until it gets new owners, a new and effective privacy policy, and an online bookstore that doesn’t violate the GDPR. That’s admittedly an unusual outlier attitude, but it’s nonzero.)
Good points, K.
However, Amazon is way, way, way, way more than a bookstore. It’s a very popular place to buy all sorts of stuff. Throw in Prime for free shipping and, depending on your geographic location, Amazon is a substitute for more than a few trips to non-electronic stores.
Walmart, for a long time, the largest physical retailer in the US with stores everywhere, launched Walmart + with free shipping a few months ago and I’ve signed up for that as well. I use it for large orders and small orders. Since there’s a physical Walmart a few miles away, I often receive items I order online the next day. Walmart will break up orders for a larger number of items and deliver items available in their local store (sometimes in the afternoon if I order in the morning or the night before) and deliver items not available at the local store in a separate shipment that typically arrives in 2-3 days.
I haven’t checked Walmart’s book selection because I read almost everything in ebook format and have done so for 7-8 years. I buy ebooks on Amazon if they’re priced reasonably and borrow ebooks from NYC publishers through my local library.
A quick search shows that Walmart has/had a deal with Kobo. I don’t think I’ve seen it advertised much, so not a big deal.
I’ve bought one book on Kobo, largely because it wasn’t even available from Amazon (print or e-book; Amazon only had the 1st Edition); it check it periodically, but so far have seen no compelling reason to buy another.
A family friend works at a local Target, and I have found out that there are two types of stores “small” and “super”. Super targets have back room areas where items are boxed and shipped just like Amazon does, apparently leveraging the physical footprint of their store network without having to build warehouses. Target has also apparently become smart enough to do this from anywhere, to anywhere, so a doll in New Jersey is pulled from stock and sent to a consumer in another state depending on demand and supply. My wife often buys from Target online receiving good service, good if not better prices, and a more consistent quality of goods compared to Amazon’s sometimes overwhelming stock.
Target’s search can also be MUCH better than Amazon – like when I was searching for curtains, I could select all kinds of useful options, like material type. Amazon’s search is crap, to put it mildly.
if you’re not seduced by the notion of Kindle Unlimited
I’d say there are lots of reasons to choose an Amazon-centered strategy other than seduction. The OP gives one very good one. “buyers overwhelmingly choose the Amazon link.” Add the benefits of KDP Select, and seduction isn’t much of a consideration.
People with their roots in tradpub seem unaware that Amazon’s primar KU sales pitch ks based on *discoverability*. In the olden days, ebook authors had to rely on ads, sales campaigns, and permafree as reach new readers’ attention.
KU not only has a (mostly) tradpub-free catalog for readers to find new to them voices, they *pay* for delivering new readers.
The subscription model obviously annoys old school “pay full freight” publishers but there is a real value in these kinds of subscription services for newcomers. And not just in ebooks:
https://www.windowscentral.com/gaming/ravenlok-developers-praise-xbox-game-pass-following-games-launch
Signature quote:
“With hindsight, I am happy to report that Game Pass has been 100% worth it for us. It allows us access to so many players for the Voxel Trilogy — Riverbond, Echo Generation and Ravenlok,” Chia wrote. “As indie devs, visibility is always a struggle, and knowing that there is a low barrier of entry for players to get hands-on playing the game is solving a big challenge for us.”
—-
The biggest challenge to newcomers has always been obscurity.
KU helps.
And pays while it helps.
As a reader, I started initially with baens ebooks, then mainly moved on to iBooks/zon.
Ibooks lost its library a few times/ The Zon decided to not sell books to Australia without international rights for a few years.
my only dalliance with Australian book publishers lead to my spending an hour trying to understand French instructions for a German conversion program to read a book on a Ipad ie epub format. Time to google and read from a pirate site for a book I already owned 5 minutes….. Around that point the zon removed the limits on selling books internationally. 1000 or so ebooks later almost all through the zon.
Bookbub has a pay-per-click/pay-per-thousand advertising component similar to Amazon advertising, and I use that for promoing my wide works (basically, you feed it the links for the other publishers and it recognizes them.) Successfully? That part’s debatable, but how much of that is my limitations versus Bookbub’s I couldn’t tell you.
The reason I’m posting the date in this blog is because by the time you read this, there might be even more news that has somehow affected writers.
Somehow? How? How has the news specifically affected writers?
The writers who have gone exclusive through Amazon via Select are really going to be in trouble.
She has been saying the same thing for twelve years. It’s likely to happen some day, just as any strategy is likely to eventually fail. But, twelve years is a long time.
Yes, it is a song that has been on constant repeat.
As I’ve said here many, many times, don’t take KKR’s thoughts as gospel. ALSO don’t take KKR’s thoughts as bunkum.
Make YOUR decisions based on YOUR situation – YOUR resources (money, time, customer base, product inventory), and also the business environment – as it is right now, and as it can rationally be predicted.
KKR is a smart businesswoman – for HER situation. For others in approximately the same situation, an approximately identical strategy would also be smart business. For those in many (probably most) other situations, it would be rank business foolishness.