My Experiment with KU

(Note to readers: I try to keep this blog a place for readers, but occasionally I’ll do a writing or business related post intended for other writers. This will be one of those posts. I hope you’ll find it of interest too, but if not, rest assured, we’ll be back to regularly scheduled programming shortly:)

 

Disclaimer — What follows are numbers and results of my experience with KU.  The rest is my opinion only. YMMV 🙂

 

I’m an Amazon fan, and I believe they’ve done more for writers than anyone in the past half century — perhaps ever. That said, as much as I like Amazon, I like writers even more — and I want to make sure writers know what they’re potentially getting into when it comes to KDP Select, and specifically, Kindle Unlimited (KU).

As an experiment, I put a standalone novelette, and a five part serial into KU for Q4 2014. I also had to pull the full novel of the serial from other retailers since the serial installments (which share the same text as what’s in the novel) were going into KU. This latter factor would prove to be huge.

So, one standalone, and five serial installments went into KU, plus the serial’s novelization that had to go Amazon only. What was the verdict?

I believe KU is a bad idea for many writers. I’ll explain why below.

Now, there are all kinds of exogenous factors that can skew results somewhat (e.g. sales cycles, promos, too much time since last release, etc), but a quarter/quarter comparison is a good start. I compared Q4 results of the experiment with Q3 when I had no titles in KU. Q3 is typically my slowest quarter for sales, so I felt this would give the most “benefit of the doubt” to KU. As you’ll see below, it still didn’t help make the case for going with KU.

I’ve reached several conclusions based on the data from my own experiment, the consequences of pulling titles from other retailers, and my observations of the market/industry as a whole.

 

1.  In my KU experiment, most meaningful metrics were worse.

Based upon my data, for the titles involved only:

Total Revenues were 59% lower
Total Units sold were 66% lower
Average revenues per unit were 53% lower

A few metrics were better.

Ranking was better. The problem is that ranking is virtually meaningless when we’re discussing things that matter — unit sales, unit average revenue, and aggregate revenues. What’s worse is the “ghost borrow” effect that KU has on ranking. A borrow of a KU title immediately gives a bump to ranking… but the writer won’t see any borrow revenue unless/until that reader reads at least 10% of the book.

This phenomenon renders ranking even less meaningful vis-à-vis revenues.

The standalone novelette moved 50% more total copies in KU. However due to the much lower borrow rate, it actually brought in much less aggregate revenue. It’s a tiny part of the revenue picture though.

I moved significantly more copies of the serial installments when they were in KU, enough to make up for the reduction in unit average revenues those installments suffered due to the much lower borrow payout rate. Isolated out of the overall revenue picture, the serial installments made more money, in aggregate, when they were in KU. Great, right?

Not so fast.

Since the installments were exclusive to KU, and since Select rules requires that the text in the serial installments not appear anywhere else (including the novelization that collected all five installments into a single work), then that meant I had to yank the novel from all the other retailers for the duration of Q4. At $4.99 list, that novel was one of my primary revenue generators as the installments funneled readers into it; at the time, parts II-V were $2.99 list, so the novel was a big savings over buying each installment on its own.

So, since the installments had gone into KU, during Q4 that novel was gone from everywhere but Amazon. The result was disastrous: unit sales for the novel declined nearly 75%.

Brutal.

Not only was the novel simply not available at other retailers, but KU also cannibalized sales of the novel at Amazon itself since KU removed any incentive for readers to buy the novel rather than the five separate installments. That decline in sales of the novel is responsible for most of the huge drop in total revenues for the titles involved.

Based on my data, I’d say that if people want to write ONLY serials, and not also sell them as a higher priced collection/novelization, then KU makes sense.

But in my opinion, that’s really the only way KU makes sense.

 

2. KU is effectively a reduction in retail split…unless you’re charging $0.99 list price.

I refuse to call sales from e-books “royalties”, because they aren’t — they’re a retail split of product sales. So what KU is, in effect, is a change in the usual 70/30 retail split we see from Amazon. For novels priced at $4.99, that means you’ve gone from a nominal $3.45 profit on each sale to — depending upon what Amazon decides it wants to pay per borrow that month — less than $1.50/borrow.

Even if Amazon decides to peg the borrow rate at $1.50, that’s almost 57% less revenues per unit sold for a book that lists at $4.99. At that rate, your borrows need to be 2.3 times your sales volume in order to make the same money. Will some make up that difference in volume? Sure, some might. I did.

But as you saw in point #1 above, even though I made up that difference in volume on the serial installments themselves, I still experienced a sharp decline in total revenues.

All that said, if you’re slinging words at $0.99 per title, KU seems quite viable. For now. However, I think the exclusivity requirement hurts writers in the long run, regardless of how they price, as it stops cold any potential sales and readership growth at other retailers, and restricts revenue to a single source.

 

3. KU may not result in an expanded readership.

One of the benefits of KU promulgated by its fans is that KU increases total readership by helping us sell more total books. Based on my experiment, I moved (sales and borrows) significantly less total copies than I had before KU. Perhaps over 12 months that trend might change? Who knows? I’m not sticking around to find out though.

 

4. KU can potentially hurt sales and readership growth at other retailers.

My sales were growing at all the major retailers for months until I moved those titles into KU. They weren’t huge sales by any means, but the trend was definitely going in the right direction. Once I put the serial into KU and pulled both the serial and the collection from the other retailers, my sales at those retailers collapsed. This despite the fact that approximately half of my catalog was still available at those retailers.

This withering of sales at Amazon’s competitors is, in my opinion, one of the primary functions of KU. I believe Amazon may have been spooked by the success of Scribd and Oyster as subscription platforms. Perhaps Amazon didn’t like the long term trend of erosion of their own market share in e-books? I see KU as Amazon’s effort — through its exclusivity requirement — to starve its competitors of content. Maybe I’m wrong?

When e-books really first took off in 2009, Amazon had something approaching 90% of the e-book market. Now? It was 65% last year, and I wouldn’t be surprised if it was closer to 60% by the end of 2015. To me, KU was Amazon’s most obvious effort to date to really take it to their competition. That’s fine. That’s business; I’d do it too, if I were Amazon:)

But just as Amazon can be expected to “look out for number one,” writers need to do the same, regardless of any warm feelings we may have for the retailer. Writers need to understand what’s really going on here… and what’s going on here is, in my opinion, not good for many writers, especially writers who go exclusive with Amazon.

 

5. KU seems to be a direct challenge to the concept of “free” as a loss leader within the Amazon ecosystem … but maybe that was an accident?

It’s become fairly clear now that KU has rendered permafree significantly less effective than it used to be. Nobody knows if that was part of the purpose of KU, but no matter what, it has made the permafree loss leader a less viable tactic on Amazon. However, the concept of free or $0.99 as a loss leader in a series is still very much alive on other retailers, and it shows no signs of stopping either. I didn’t realize how true this was until I pulled my serial (and its permafree Book 1) from all the other retailers in order to experiment with KU. Practically overnight, my sales went POOF at all the other retailers. They’re recovering now though… because I pulled the serial out of KU:)

I tend to believe KU was more a bid to starve Oyster and Scribd of content than anything else. But KU showed signs of trouble (e.g. the roll-out was seemingly hasty and haphazard, and the program is shockingly vulnerable to gaming by scammers) from the very beginning, trouble that might have been prevented had the program been allowed to “bake” a little longer. What’s more, I wonder if Amazon didn’t fully think through the sales implications on their own ecosystem once KU took hold. All conjecture of course, but it’s something worth thinking about.

 

6. KU may not be a good choice for “backlist” novels/novellas.

Some writers have postulated that putting low-performing “backlist” novels or novellas into KU is a good tactic “since they really aren’t selling anywhere anyway.” On the surface, this seems logical, but when you take a step back, and realize how dramatically “backlist” has changed, you see that KU can be counterproductive.

The reason for this is because the entire concept of “backlist” is a relic of traditional publishing and brick & mortar retailing. In digital publishing the concept of “backlist” no longer really applies. Take any book — with a very few exceptions — and the vast majority of readers will have never read it. Nearly as many readers will never have even seen the book before. What may be “backlist” to the author, and to some extent, the retailers, is brand new to the vast majority of potential readers. What does that mean? That means that a “backlist” book (assuming it’s a quality book) should, with consistent, competent marketing, continue to sell as new readers are exposed to it. I’ve watched some very savvy writers selling the same book for years and years, far beyond the time when said book would’ve been relegated to “backlist” in the old days of publishing.

A book only truly fits the old definition of “backlist”, when the writer and/or publisher ceases marketing it. And for those writers or publishers who no longer want to market that particular book, then perhaps throwing it in KU might indeed be attractive:)

 

Which writers MIGHT benefit from KU?

Writers who can produce serials fast and publish them regularly, stand to make seriously good money in KU. My own small experiment bore out the viability of the “serials only” route in KU.

Perhaps writers of short stories might see some success, provided they have a huge number of short stories in their catalog.

Brand new writers might as well try KU, at least for a single 90 day term. They’re starting from zero, so it probably won’t hurt.

…and that’s about it.

All of the above options are completely dependent upon Amazon throwing enough money into the KU kitty each month to keep the borrow payouts even in the same zip code as “reasonable.”

As more and more internet marketer types get the ghost farms really cranking out the scamlets and randomly generated stories, along with the obvious gaming going on (large borrow rings are almost certainly in play), KU is in danger of becoming a cesspool. Sure, it’s going to have a ton of content, but more and more readers are likely to pass it by when they can’t find any of their favorite writers there. Most importantly, readers talk, and when the word increasingly becomes that KU is filled with low quality content, it’s going to have a long term negative effect on subscription levels, and only further dissuade writers and publishers from putting any of their content in KU to begin with.

 

Conclusion

I think writers should look at KU as one of many possible tactics in their overall strategy. Nobody is forcing you to use KU, it’s simply one of many available options. Perhaps other writers will try it and have results completely different from mine. Entirely possible, of course:)

I’m largely a novelist, so for me, KU in its current form just isn’t a good fit. I think Amazon could make KU into a valuable tool for almost all writers though, if some changes were made to the program.

The fluid payout level is absurd, as it makes revenue planning much more difficult for writers — and introduces a level of uncertainty into any cost-benefit analysis that makes it difficult to determine whether or not a given product might be successful in the program. What other supplier (and that’s exactly what indie authors are — suppliers) would be okay with a retailer saying to them: “Hey, sign up for this cool new service, but we won’t tell you how much you’ll make per unit sale until the month following the sale. Oh, and the amount per unit sale will be determined entirely at our whim.”

The exclusivity requirement is the worst feature though. All roads seem to lead back to this — and it alone is the single biggest reason why I think KU is a bad idea for many writers. If Amazon were to drop this exclusivity requirement, I think KU would see a flood of new quality content on a Biblical scale. What would be even better (from Amazon’s point of view), is that I think dropping exclusivity would actually be more of a challenge to competing services like Oyster and Scribd.

Right now, those two services are doing just fine — and growing — despite the presence of KU. Why? Well, it’s tough to know for sure, but we do know a few things. Those services don’t have an exclusivity requirement, and they make it clear how much writers and publishers will make on each transaction. Since publishers and writers know how much they’ll be paid per sale, and because there is no exclusivity requirement, perhaps plenty of said publishers and writers are trying out the services?

If big name trad and indie writers avoid KU due to the low payouts and business-strangling exclusivity requirement, and readers mostly want to read same big name trad and indie writers, then it doesn’t take a rocket scientist to see what kind of future that potentially spells out for KU. I’m guessing these other competing subscription based companies are actually benefiting from KU’s exclusivity requirement, rather than being hurt by it — because they’re increasingly going to have the quality content readers want.

I really hope Amazon fixes the payout amounts, and drops the exclusivity requirement. If they did those two things, I’d put everything I have into KU, like yesterday.

But until that day, for writers looking to increase sales and revenues… KU in its current form looks like a mirage.