Monday, June 15, 2015

Amazon Changes Kindle Unlimited Payout Method

Amazon has just announced a critically important change to the way authors are paid for titles borrowed through both the Kindle Unlimited and Kindle Online Lending Library programs. The former is Amazon's successful $9.99/month ebook subscription service, while the latter is the one-book-per-month benefit Prime subscription members receive, but both reward the authors of the borrowed books with royalties paid on a monthly basis.

In either case, the authors of the borrowed titles have previously been paid a percentage of a "global" fund each month, divided equally between the total number of titles borrowed, regardless of their length, or whether those books were ever read. This is a crucially important distinction, as it has given and enormous financial advantage to authors of shorter works, since the payout has always been the same for, say, a 20-page children's ebook as it is for a 600-page historical novel: they each count as one borrow, and thus impart the same payment.

This, along with the general downward push of ebook pricing by consumers who feel ebooks should be cheap due to their lack of physical substance (as if the content does not matter), has lent great emphasis to the proliferation of shorter works which can be produced (and consumed) much faster. The continuing trend of children's ebooks to top the sales charts in percent of growth year-on-year bears witness to this trend. And while I am not an advocate of exclusivity in general, there has been very little incentive for authors of longer works to enroll their titles in Kindle Select, Amazon's exclusive distribution program that is required for all titles to be included in the lending programs.

However, today Amazon announced that beginning on July 1st, they will radically change the way that payouts are distributed to authors of borrowed content. Rather than dividing the funds on a per borrow basis, the payments will now be allotted on a per page read calculation. That is, the total global fund for each month will be divided by the total number of pages read of each author's work during that period, and doled out accordingly.

This has significant implications, both with regard to the benefit of enrolling in the lending programs, as well as to the creation of new content. It will now be vastly more advantageous to add pages to your work (as far as Amazon's program is concerned, at any rate), rather than releasing shorter pieces in order to get more titles borrowed. And while we all would like to think that book content is produced solely by authors who care only about the work itself and not the monetary benefits, one truth I've learned during my years of successes and failures as an author is that writing books is a business, and the authors who are most successful approach it that way, producing content calculated to bring the greatest return on their investment of time and energy. The Kindle lending programs have become a pivotal part of that return for many, dispensing tens of millions of dollars to authors every year - many of whom have been utterly ignored by the traditional publishing machine.

The key factor in this change is that a single ebook that is borrowed now returns an investment more in line with the amount of work it took to create it. A short novella of 100 pages will be paid a rate one third of that received by the author of a full length 300-page novel, and 1/6th the royalty allotted to the author of a 600 page book that likely took an equally longer time to write - assuming, of course, the whole book is read from start to finish.

And that is the other crucial component of this change.

Just borrowing and sampling a book is now no longer enough to trigger a full payment to the author of that work; instead, Amazon's "Big Brother" ability to monitor the status of all content on the Whispersync web (created ostensibly to allow a user's account to sync a title across all of their devices and reading apps) gives them the data required to make this change, since they know exactly how many pages have been read in every ebook ever bought or borrowed from them (assuming it has not been hacked and side-loaded by the reader, which at best is a small percentage of the total number). This is one case in which this admittedly creepy surveillance capacity turns out to work in the content creator's favor. If a reader borrows five books, say, but only reads 10% of each (the minimum required to trigger the payout previously), while another reader borrows just one book but reads the whole thing, the authors of those works will receive due compensation equal to what the readers actually consumed.

And as far as I can see, that is as it should be.

One factor that I will be highly interested to see as a result of this is how it affects the per-unit payout. That is, given an equal number of total ebook borrows month to month, with at least some of these now receiving less compensation due not being read completely, logically speaking the remaining titles that are read clear through will receive a higher payout overall than they would have otherwise, since it is based on a total pool of funds that is established by Amazon each month (and drawn at least in part from subscription fees for Prime and Unlimited membership).

This amount has always varied month-to-month, due to seasonal trends in reading, but has ranged anywhere between $1-10 million, give or take, generally averaging something like $2-3 million (this month's being $10.8 million due to a huge $7.8 million bonus). With the establishment of Kindle Unlimited in July of 2014, the per-unit payouts have rapidly declined - dropping from $2.20 per borrow in June of last year (just prior to the KU rollout) to a low of $1.33 in October - due to the increasing number of borrows among which the pool must be shared. My guess is that this is Amazon's attempt to rectify that problem, as well as the dilemma presented by the steadily increasing number of subscription members overall.

The ultimate question is: Will Amazon increase or decrease the monthly payout based on these factors? And more importantly, will authors feel they are being compensated more fairly as a result, or less, and how will they respond?