Netflix for Books

Over the past few days Amazon has once again shaken up the world of ebook publishing by announcing its Kindle Unlimited (KU) program, a subscription service which allows members (currently in the US only) access to a more or less unlimited number of ebooks and audiobooks for the payment of a $9.99 monthly fee.

This is being touted as a Netflix for Ebooks in some corners and it has caused controversy and much fevered discussion among indie authors. Lots of people have expressed opinions about the upsides, downsides and possible strategies for indie authors. For what it’s worth these are mine.

Of course, KU is not the first attempt at such a subscription model. Oyster and Scribd are attempting something similar although neither of those seemed to have a sustainable business model on their current terms.

The deal both those services offered indie authors was great. Basically each read of more than 10% of a book was counted as a sale and was rewarded as such. If your price was $4.99, you got paid as if you had made a $4.99 sale. Since the subscription fees were $9.99 per month, you can see how there might be a problem. Most of the people to sign up for an all-you-can-eat buffet of ebooks are likely to be heavy readers. Simple math says those rates of pay were unsustainable when the company is only collecting $9.99 a month and would need to go down. Getting your book read on one of those subscription service would in the long run most likely earn you way less than selling it. Think of Spotify and musicians and you could see where that ends up.

Amazon has chosen a different payment model, essentially the same as the one it already uses for its Kindle Lending Library. It allocates a fixed pool of money for the purposes of payment and this pool is divvied up among all the eligible recipients based on the number of downloads their books get. If things follow the Kindle Lending Library model, this payment will likely work out at somewhere around $2 per reading but at least Amazon has (sensibly from its point of view) capped its potential liability for payments here. $2 is around what anyone enrolled in KDP (Amazon’s self-publishing program) gets for the sale of a $2.99 ebook.

This seems like a more sustainable model for a subscription service but it still has the net effect of probably paying authors less than they would get from making a sale unless their books are priced at $2.99 or under. On the upside, people who price their books at under three bucks are going to make more.

Of course, the main difference between Amazon and Oyster/Scribd is not their payment model. It is the fact that Amazon is a dominant player in the e-reader/ebook space, not a startup with an unsustainable/unproven business model. Amazon has very deep pockets, has shown itself willing to lose money for long periods of time to gain market share and has already capped its potential financial liability anyway. Amazon’s entrance into this space means subscription services for ebooks have just gone mainstream. They are here to stay. Writers are going to have to live with the consequences of that.

These don’t just take the form of potentially lowered royalty payments for those who price their books at higher than $2.99. The subscription service model has other ramifications. Based on my extremely unscientific survey of one person (myself) and taking Netflix as the model, here’s what I see happening:

  • Binge reading becomes a distinct possibility. When I find a series I like on Netflix. I watch it until I run out of episodes. I tend to do the same thing with books (I’m looking at you Matt Scudder and Harry Dresden) and I can’t see taking price out of the equation will intefere with that. This is good news for prolific authors with series.
  • Purchase price will no longer a consideration so people may well be tempted to sample authors unknown to them. If Amazon’s recommendations engines are anything like as good as Netflix’s (and I strongly suspect they are) then people may well find their way to lots of new authors. There’s no financial risk in it. I’ve started watching a few series I had never heard of based on Netflix’s recommendations.

Those are the upsides that I can think of, and I am sure there must be a few more. Here are the downsides I can foresee.

  • People may become less willing to spend on new e-books. I know I have bought far, far fewer DVD boxed sets than I once did since I joined Netflix. These days I am only likely to purchase something that is not available on Netflix.
  • Those things that I do buy tend to be things I already really, really like. I am far less likely to risk money on a DVD set for a series that’s unknown to me. Why cough up the cash when there’s plenty of alternative viewing that I have already paid for with my subscription fee? I’ve become risk tolerant within the system and risk averse outside it.

Of course, films and TV programs are not books and we should be wary of making too exact a comparison between them, but these things don’t sound too far-fetched.

If we have moved into a new world, what can indie authors do to adapt to it?

Well, we can start by looking at Netflix and seeing what happens there. One thing that’s immediately obvious is that Netflix is not the place the film and TV companies put their front list. It’s where the deep backlist goes. The studios stripmine their content before sticking it on Netflix– movies go into cinemas and DVD before they get released on Netflix a year or two later. The same thing seems to happen with most TV programs.

This suggests to me that the studios see Netflix as a revenue generator for backlist stuff and a way of developing audiences for the new stuff. This would perhaps be a reasonable way of looking at Kindle Unlimited.

Except of course for one thing– in order for an indie to be in KU, they need to be exclusive to Amazon. Their books can’t be available anywhere else. This means that in order to get access to one source of revenue, they need to cut themselves off from others. For many this will be a no-brainer. I am not one of them. I earn a significant portion of my income outside Amazon– around 20% and that’s been rising over the past few months.

I confess I am troubled by Kindle Unlimited. All-you-can-read subscription services are a very good deal for readers, but not such a great deal for authors. The first part of that sentence means that I think they are here to stay. The second part means I suspect that life as an indie author is about to get a lot more difficult.

(This is my immediate emotional response to the KU announcement. For an alternative and considerably more upbeat view on the subject, complete with a lot more math, take a look at what the always interesting Rachel Aaron has to say.)

If anybody has any other thoughts on the matter I would be happy to hear them.


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Comments

  1. Since I use Netflix and Kindle, this was a useful analogy for me. In particular, I was interested in the idea of KU as the home for the backlist, and wonder if it won’t also be the place for that fast disappearing beast, the mid-list. I know I’m pushing the comparison pretty far, but there might also be a case for KU-only prestige books – a new Stephen King or Hilary Mantel or even Sadie Smith. Something to pull subscribers on to the platform the way House of Cards has for Netflix.

    Also, and it might just be the old lawyer in me, I wonder how water-tight that exclusivity clause is, and how it will be implemented in different markets. It sounds like a contract in restraint of trade to me, but then time has moved on since I studied contract law. The obvious question to ask is if it covers pseudonyms – would you be able to write under a different name (William M. King, for instance) and market those books elsewhere?

    • The exclusivity thing is on a case by case, Michael. It only applies to individual books. They can either be in or out.

      I am sure Amazon would love the sort of prestige projects you are talking about and it would not surprise me to learn they are working on them.

      Not so sure about KU being a home for the midlist. I’ve been very happy with the present system. It does have a kind of mid-list and even, to coin a phrase, a niche list feel to it. My Kormak books are a good example of the latter. They are very definitely aimed at a limited audience (hardcore old school Sword and Sorcery) but the higher royalty rate and the price ($4.99) makes them worthwhile to me. I get to write something I love and earn a living doing it. I’m an not sure how well this model will translate to KU and I guess what makes me uneasy is the thought that Amazon may well cut the payment rate on KU way down once they establish market dominance. I know this is exactly the argument Amazon haters always use when talking about the ebook market but it seemed to me that the subscription model is the first time they have a real financial incentive to try it.

      The subscription model means their upside as well as their downside is limited. Positing a model of a limited pool of money being divvied out among a growing pool of authors, it’s difficult for me to see how author incomes can go any way but down. That said, Rachel Aaron had a much more optimistic take on the subject which I find reassuring.

  2. I suspect in the long run that KU will be another variable in the ebook landscape, like KDP Select or Kobo Writing Life, but that it won’t be revolutionary. I think the bald fact is that the time investment for books is a lot higher than movies – it took me five or six days to read STEALER OF FLESH, for instance. There are of course people who can read a 150,000 word novel in a day, but there are not all that many of them, and people vary with their reading level throughout their lives. Eight or nine years ago I would have read STEALER OF FLESH in a day, and I used to stay up until three in the morning reading the new DRESDEN FILES when it came out, but nowadays I have too many irons in the fire to take six or seven hours to read a book in a single sitting, and if I live long enough likely I will have more time to read at some point.

    There is also the human impulse to hoard. I have at least a thousand books on my Kindle I haven’t read, and my to-be-read pile of paper books takes up half a room, and yet I keep adding to both. I fully intend to read every book in both piles. Someday. Really!

    For myself, I only have some short stories in Select, and I don’t think KU will change that. In June 19.5% of my sales came from non-Amazon sources, and while I could give that up if I had to (like if B&N and Apple and Google Play all go bankrupt at once, which seems unlikely), I don’t think I would make enough up on KU loans and Prime borrows to cover the loss.

    That said, if I was just starting out now, I would probably start with KDP Select, and then expand to the other platforms once the books were established on Amazon.

    • Thanks for the long and thoughtful response, Jonathan. I find what you’re saying reassuring :). Very good point about the time investment with books and movies. It also fits very well with what Rachel Aaron was saying over on her blog about the way most people read and what Amazon’s real overall strategy here is.

      I know exactly what you mean about rates of reading. I used to be a book a day reader myself– I am down to two books a week on average now and often those are quite short. I still stay up to 3 in the morning to finish Harry Dresden books but I have run out of new ones now.

      If you don’t mind me asking, have non-Amazon sales that been trending up for you or have they been stable for a long period? Over the past few months, my non-Amazon sales have more than doubled and I am trying to put my finger on why.

      • They’ve been pretty stable. For 2014, my non-Amazon sales have moved between 17% to 21% of the total. In 2013 and 2012 they were usually between 25% and 35%. The actual sales numbers haven’t shrank since then, but the non-Amazon percentage is down because I’ve seen a lot of growth on Amazon UK in the last year. In 2013 Amazon UK tended to be around 15% of my monthly total, but lately it’s been closer to 35%. My newest book came out this month, and it’s actually sold about double the copies on Amazon UK over Amazon US, which is the first time that has ever happened! (Which is quite amusing, since until 2011 I didn’t even know Amazon UK existed.)

        July is also the first month I’ve seen more than a hundred sales on Google Play, so I will be interested to see if that continues to grow or not.

        • That’s excellent news about your UK sales, Jonathan. Congratulations! There was a time when the UK made up about 75% of my Amazon sales but those days are long gone. I have noticed a pickup in UK sales the past few months though. Right now they are running almost neck and neck with my US sales for the first time in a long time. I wonder what is going on.

          Thanks for the reminder about Google Play. I really must get round to putting my books up there soon.

          • Thanks!

            If you do decide to go Google Play, this Kboards post is the most helpful resource I have found on the topic:

            http://www.kboards.com/index.php?topic=167655.0

            The biggest mistake I made when I started Google Play was that under the Payment Center section of the web dashboard I neglected to enable Currency Conversion, which meant that my books were only available in the US. It was only after I switched Currency Conversion that I started to see any traction.

          • Good to know :). Thanks Jonathan.

      • Amusingly enough, for July 2014 my non-Amazon sales were once again exactly 20% of the total. 10% went to Barnes and Noble, 5% to Apple, 2.5% to Google Play, 1.1% to Kobo, and the rest to Oyster, Scribd, and Smashwords.

        • Aside from the Google Play that sounds a lot like what my sales breakdown would normally be like Jonathan but July got weird. Non-Amazon sales went up to about 24% of my sales. D2D (Apple and B&N) continued its surge and most surprising of all courtesy of last months Kobo sale I actually have sold a few books there as well. Haven’t had the time or data to load into Trackerbox so I can’t give an exact breakdown as yet.

  3. Tony Graham says:

    I suspect the only real constant for the book trade in the next decade will be continued change. The consensus so far overwhelmingly seems to be the change has been positive for writers. In the long term, I don’t see that changing – there is simply too much access to low-cost distribution (the internet). The only real downside will probably be the requirement to keep experimenting with new mechanisms and platforms.

    I’ve been watching for digital subscription models to emerge since 2009. KU is a big one, far beyond the classic pulp era (ala Weird Tales) or Harlequin model I’ve been expecting from a small publisher or group of writers.

    The exclusivity clause in KU is the real bugger in the woodwork.That said, it seems to follow the terms and conditions of KDP Select, which allows an author to freely move a title in and out of the program.

    A primary upside for KU might be the opportunity to be discovered by new readers – a tool to be used by writers for titles experiencing slow sales in the on-going battle against obscurity. A correlation could be made for making titles available to public libraries – it usually seemed to help sales – and KU pays, albeit lower than an actual sale for most.

    I’d be very interested to hear how it goes if you choose to experiment. Of course, it’s easy for me to babble about experimenting as I don’t currently have an immediate stake in the game. Still, I want to see writers whose work I enjoy do well so they can work in comfort.

    • I think you are correct about the only constant being change, Tony. And I agree that the changes so far have been very positive for writers (or at least for this particular writer).

      The subscription model disturbed me because I based my analysis on the way I use Netflix. If everybody used KU in that fashion and the subscription free remained the same, payments to authors would have to drop. Fortunately, the chances are that I am not the typical reader Amazon is aiming for.

      I am not sure about KU aiding discoverability though. The basic problem remains getting noticed in the first place.

      The exclusivity thing is likely to keep my out of KU. I don’t like being locked into one vendor and I like to be able to do things like giveaways on my mailing list.

      All that said, I am very curious to see how things turn out with KU.

  4. Tony Graham says:

    On a consumer level, I’m not sure how much a value KU would be for me. I would seem to be the target audience – reading an average of at least 2 books a week and occasionally going on a binge with a newly discovered author/series. However, I suspect the KU list will be a duplicate of the KDP Select offerings – at least in the beginning.

    I don’t find many titles/authors on that KDP Select that interest me enough to invest the time (time being a bigger regulator than money these days). With the birth of my son a few years back, I find I’m not as forgiving a reader. When it comes to new authors, if my attention isn’t grabbed within a few thousand words, I don’t hesitate to put the title aside.

    On the gripping hand, I do give free titles a look when I encounter a subject matter, setting or genre that has my interest, even if only for a thousand word test run. I’ve discovered several authors this way. I’ve always ended up buying titles from their backlist or new releases.

    In the long term, I worry about Amazon becoming the only game in town as the major ebook publisher. I’d really like to see other publishers up their digital game. For now, I’ll be very curious to see what the KU numbers reveal about usage & author $ shares by the end of this year.

    Always remember to take a deep breath and praise the gods you’re a one-person creative content producer and not working in movies or television. Those poor bastards refuse to think about the evolving digital landscape and its effect on their business models. They tend to handle Netflix, Amazon, Apple, and Co. as just another distribution channel – like cable TV and Blockbuster video. Nothing in their business models encompasses concepts like subscriptions. Fingers go into ears, humming commences and hoping the future doesn’t happen, until they have a big bag of money and can run, continues.

    We are cursed to live in interesting times, my friend.

    • Amazon is a weird situation right now. In many ways they are, if not the only game in town, certainly the biggest. I would not at all be surprised if they were 80% of most indie’s sales. I also think they are the fairest and easiest of the big distributors to deal with. They’ve never done anything to make me mistrust their intentions either. It’s just that I dislike one player having such a huge market share and I wish the others would raise their game. No one really seems to be stepping up though. In some ways I think its because most of the other distributors are still wedded to the old model of publishing. They want to be a simple distribution channel, not a potential rival to the publishers. I think Amazon is the only one of them that thinks outside the box.

      Interesting times indeed, mate :).

  5. As I have read through all of your thoughtful posts and would like to make a simple addition. From a reader’s perspective. I have found a reader called Moon+ that I think is fantastic to use and a pleasure read with. Unfortunately I can’t use it with kindle books or Google books. So I tend to stay with smashwords and it’s variants. Through the sample downloads I have found many new authors including William King. I have ended up purchasing the full Kormak series as well as the Terrarch Chronicles (please note Wife not happy 😉 ). I also do not like the subscription model for anything really not just books, I hate paying even when I am not using the services. But perhaps I am on the fringes, part of a select group, more commonly knows as “nuts”. At any rate I will continue to resist subscription models as long as I have options to do so.

    Thank you for using Smashwords

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