Thursday, January 12, 2012

Amazon Reveals Library Loan Royalties

In a somewhat unprecedented move, Amazon has publicly revealed some very specific financial figures in a press release today. These concern the Kindle Library Lending Program and its fledgling counterpart, Kindle Select, in which authors are given a share of a half million dollar pot each month for every ebook they have enrolled in the program that is borrowed, based on the total number of loans that month.

December was the inaugural launch of the Kindle Select program, and until today no one knew how much to expect each loan to earn, as there were too many unknown variables, such as how many total loans there would be, how many titles would be enrolled in the program, and how those loans would be distributed among the current offerings. Would the top ten ebooks get the lion's share? Would everybody get a little? And how would anybody really know if Amazon never offered up the numbers? I floated some estimates in a post last month, but made no predictions. Amazon used the figure of 100,000 ebooks borrowed for their example.

The actual figure was 295,000. Thus, dividing the $500,000 pot by 295,000 loans results in a payout of $1.70 per ebook borrowed. And thus ends the speculation.

Now let me put that in perspective a bit. On a $2.99 ebook with a 70% royalty, an author receives $2.09 for each book sold, minus the download fee, which is .10 cents per megabyte. My "Complete Edition" ebook is 2.31 Mb, so .35 cents is taken out, leaving me with $1.74 - only four cents more than I now make when the book is loaned instead of purchased. This effectively increases my revenue, and brings new readers to my work. It's a win-win situation.

Let me put it in even more perspective. On a .99 cent book with a 35% royalty (the only royalty allowed for that price point), the author receives .35 cents. Total. But for each time that same ebook was borrowed in December, they will receive... yep, $1.70. More than the cost of the ebook. Nearly five times the royalty paid out for asale of that same ebook. Thus, rather than having to sell 100 books you can now loan out just 20 and make the same amount of money.

Now let me put this in another light. The average royalty for a traditionally published author is 10% on hardback sales up to 250,000 copies (12-15% for higher sales volume), and 6% for paperbacks. Minus 15% taken by the agent. Thus, for a $25 hardback the author receives $2.13 per copy sold ($2.50 minus 15%), but only when and if their advance has earned out (a $20,000 advance, for example, would require sales of over 9390 copies to start paying royalties; until then the author receives nothing beyond the advance). For a hardback book sold to a library to loan out innumerable times, that author receives... yep, $2.13. Total. Regardless of how many times that book is taped back together and checked out of that library. And that hardback is only available for sale for a short period of time, giving them a small window of opportunity to make that advance. After the paperback comes out our same author receives an average royalty of 6%, which on the average $6.50 title is just .39 cents... $1.31 less than our ebook author has just received for loaning out their title via Amazon.

For anyone that doesn't understand what Amazon is doing here, let me spell it out: they are buying authors. They are drawing authors in and stocking their shelves with exclusive content by paying out the best royalties in the business, giving them the best terms, the best tools, and the best distribution platform you could ever want: instant access, everywhere. Because of this, 75,000 titles are now enrolled in the Kindle Select program, up from 5000 available on launch. Exclusively. Meaning, you can't get those ebooks elsewhere. That is a requirement of the program.

And, just to make it more enticing, they have now just sweetened the deal: $200,000 more has been added to the pot for January, bringing the total to $700,000 that will go out to authors enrolled in the Kindle loan program this month. That would bring the royalty for those same 295,000 borrows to $2.38 instead of $1.70, more than the average traditionally published authors earns for selling hardbacks.

Of course, the more hardbacks an author sells, the more they earn. In this case, the more ebooks are loaned out the less each one earns. But for those that are loaned out in large numbers, the paycheck can be quite nice. Today's press release offered a few examples:
  • The top ten borrowed authors earned a total of $70,000 in December
  • Paranormal romance author Carolyn McCray received $8250
  • Romance writer Amber Scott's paycheck will be $7650
  • 16 year old children's book author Rachel Yu will get $6200
  • Plus, sales for KDP Select authors have risen by an average of 26%
Other publishers and book distributors are going to have a really tough time competing with this kind of stuff. Complain all you like about the megalithic empire that is Amazon, I defy you to name a single other entity that has done so much to get so many books in front of so many readers, and pay those authors for it.

Oh, and by the way, my payday will come to just a little over twenty dollars.