In July 2014 Amazon announced the launch of Kindle Unlimited (KU), a pay monthly plan for Kindle eBooks that took aim at nascent eBook subscription services such as Oyster and Scribd in the US. We blogged at the time about whether its creation was a good or bad thing for authors and publishers. Now that the service is almost two months old and has begun to make payments to participating authors some interesting evidence has started to emerge of Kindle Unlimited's effects on general eBook prices and individual author earnings.
At the moment, Kindle Unlimited's effects are being most keenly felt by indie or self-published authors. Presently, self-published content represents 85% of the books available via the service. This is because before it launched Kindle Unlimited, Amazon took the decision to auto-enrol all content from authors who had published their eBooks using the Kindle Direct Publishing platform and agreed to Amazon exclusivity in return for higher royalties. The decision stirred up some controversy at the time, notably from indie publishing evangelist Hugh Howey, but did allow Kindle Unlimited to launch with sufficient titles to be an interesting proposition to consumers.
Nearly two months on and the service seems to have been well received by readers. So much so that Amazon issued a bulletin to KDP authors announcing it was adding a launch bonus of $500,000 to the $2,000,000 monthly pool of money from which enrolled authors are paid every time a user downloads one of their books and read more than 10% of the content. It also announced that for July it would waive the stipulation that authors only get paid if a reader gets past the 10% point and added a further $285,000 to the fund to pay royalties on books that had been downloaded and opened.
At this point it's also worth pointing out that this $2,000,000 pot of money also includes the $1,200,000 that was set aside for Amazon's older lending scheme the Kindle Owners Lending Library. The fact that Amazon launched Kindle Unlimited with a fairly modest bonus pool (only an additional $800,000) and then chose to up its size not just once but twice suggests the service has so far exceeded expectations.
But what does this mean for authors? How does participating in Kindle's lending schemes affect the reach of their books and the money they ultimately receive? While Amazon tries not to release hard numbers about the scheme into the wild, enough KDP authors blog openly about how much they earn from the programme for us to make a few guesses.
Total monthly pool = $1,200,000
Estimated payment per borrow = $2.25
Estimated total number of books borrowed in June = 533,333
Total monthly pool = $2,785,000
Estimated payment per borrow = $1.80
Estimated total number of books borrowed in July = 1,547,222
Assuming these numbers are accurate, the launch of Kindle Unlimited resulted in Kindle users downloading an extra million books in July 2014. Remember that the numbers above represent self-published titles only, as traditionally published titles receive payments on a different basis. It is unclear, however, if Amazon takes payments for traditionally published titles from the $2,785,000 monthly pool or from a separate fund. For the purpose of these calculations, however, we'll assume there are separate pools, as Amazon's reported terms of paying 60% of list price to publishers when a reader gets past the 10% mark would deplete the fund very quickly. Interestingly, Amazon also chooses to pay a royalty to authors who are published by its own conventional publishing arms.
As we might expect when authors are paid from a fixed pool of money rather than conventional royalties, if the number of borrows goes up the value of the per borrow payment goes down. According to reports from KDP authors, per borrow payments in July were $0.45 lower than in June. They would have been lower still at around $1.30 if Amazon had not put the extra $785,000 into the fund. Currently, indie authors and publishers who participate in the scheme are expressing quiet optimism on the basis that Amazon seems to be taking action to keep the per borrow rate from falling too far. An average payment of $2 per borrow makes it very good value for those authors who sell their books in the Kindle store for $2 or less, given that they receive only a proportion of the sale price. And those who sell their books at higher prices presently seem satisfied that the increase in volume that Kindle Unlimited compensates for the hit they take on individual sales. Indeed, even before the launch of Kindle Unlimited it appears that borrowing could contribute a sizeable amount towards an author's income from writing. For example, this author, who has blogged frankly and openly about how much she has earned from self-publishing her eBooks between May 2013 and 2014, made nearly 16% of her annual income from writing by enrolling her books in the Kindle Owners Lending Library.
Looking forward, Amazon has already set the size of the borrowing pool for August 2014 at $2,000,000. This suggests that Amazon expects a proportion of July's borrowing to have come from people trialling the service but then choosing not to continue. If we see further bonus payments in August it would therefore be safe to assume that Kindle Unlimited is continuing to exceed Amazon's own expectations.