Taking a Closer Look at Amazon’s Kindle Unlimited

Screen Shot 2014-07-23 at 3.39.28 PMThere has been a lot of buzz lately around Kindle Unlimited, the latest service to enter the ebook subscription game. But what out of all the subscription services  I’d say that this one is the biggest game changer, and that’s because it’s an Amazon service.

After recently finishing Brad Stone’s The Everything Store, I have a feeling that right now, Kindle Unlimited is more of an experiment for Amazon, to test the waters of ebook subscriptions. They’ve probably been thinking about it for at least a year or two, when the phrase “Netflix for ebooks” started becoming popular. But like the other business models out there, I’m not sure it’s yet clear how profitable or successful subscriptions for ebooks are.

Amazon already has tried a few varieties of subscriptions, such as Kindle FreeTime Unlimited and even with the Kindle Owners Lending Library (KOLL). Kindle Prime users have access to KOLL, which allows them to borrow, for free, one ebook per month. The selection is fairly large, and it includes all ebooks authors have enrolled in the KDP Select Program. For those who may not know, authors who choose to upload and sell their ebooks on Amazon’s platform have the option to also enroll those books in KDP Select. KDP Select requires that the ebook be exclusive to Amazon for 90 day periods at a time, though that strategy no longer works as well for authors as it used to.

Features of Kindle Unlimited (KU)

With Kindle Unlimited, users pay $9.99 per month for access to 600,000 Kindle books and 2,000 audiobooks.

Or more specifically, as Digital Book World wrote, there are 2,769,500+ ebooks on Amazon. Only about 23%, or 645,790, of those are available on Kindle Unlimited. And 0.3% of the books on KU, or 2,157, are audiobooks. Also, 2,773 books in Kindle Unlimited are free, even for those who are not KU subscribers.

Digital Book World also reported that about 500,000 titles on KU come from KDP Select.

The rest of the books come from Amazon’s imprints, Kindle Singles, and a handful of medium publishers, such as Scholastic, Wiley, WW Norton, and HMH (meaning not the Big 5). According to CNET, the reasons books from those publishers are included in KU is because Amazon’s current contract with them allowed Amazon to put them there, and Amazon did not have to renegotiate any contracts.

Some of the bigger titles on KU include the Harry Potter series, the Lord of the Rings trilogy, Hunger Games, and Diary of a Wimpy Kid. However, Amazon’s Kindle Owner Lending Library (KOLL) also started with a smaller selection of titles, so things may change in the future–though some publishers are currently not happy with Amazon.

According to The Verge, having only about 2,000 books from Audible makes sense. Audible already charges $14.95 per month for access to its library, so why would they offer a large selection of titles for cheaper? (Also keep in mind that Amazon owns Audible.)

Subscribers can try out KU for 30 days for free, read or listen to 10 books at a time, and get a free three-month membership to Audible. Users can access Kindle Unlimited via Kindle devices and Kindle apps, which will make it easy to use.

Other Ebook Subscription Services

The two main competitors to KU are Scribd and Oyster. Scribd and Oyster are both startups, and they have a similar number of titles to choose from as well as similar prices. Scribd has 400,000+ books and charges $8.99 per month, while Oyster has 500,000+ books and charges $9.95 per month.

Additionally, while Kindle Unlimited currently offers no titles from the five biggest publishers, Scribd has 10,000 Simon & Schuster books and Oyster has books from HarperCollins.

Why Launch a Subscription Service Now?

According to a Forbes article, Kindle Unlimited competes with Amazon’s ebook business as a retailer. But Amazon is acting like a startup and chose to launch it anyway, because it’s betting on the eventual success of the subscription model and wants to gain market share. That way, it won’t lose revenue to competitors, only to itself.

Along those lines, KU is available on Kindle devices and apps, and is open to all, probably to make it easier to gain marketshare quickly.

However, according to David Pierce at The Verge, although Kindle Unlimited is touted as the “Netflix of ebooks,” it may not be as successful as Netflix because people do not spend as much time reading as they do watching TV.

“The average 25- to 34-year old spends exactly six minutes reading every day, and younger age groups are somehow even worse,” Pierce wrote.

But Amazon still has an edge over its competitors. According to Pierce, GIRP, a research firm, found that “Kindle owners spend $443 more per year at Amazon than those without a device.”

This means Amazon may be banking Kindle Unlimited’s success on the voracious readers, who may also already be locked into Amazon’s content via all their Amazon devices. And, as Amazon launches more services and offers more devices, they become more and more dependent upon Amazon.

Like many others, Joe Wikert at Book Business said that Kindle Unlimited legitimized the ebook subscription model–though some think the business model is still a work-in-progress. He also said there are five things to know about unlimited subscriptions, including the fact that startups such as Oyster and Scribd are now on borrowed time to prove their worth (about 18 months), and publishers have options, which means they can help the startups by choosing to enroll their books in those services.

This reminds me of what I read in The Everything Store. Amazon sometimes puts pressure on successful startups by entering their market, dropping prices to levels that put the competition almost out of business, and then offer to acquire those companies at fairly low prices. In addition to Scribd and Oyster, I could see this being the case with Amazon’s Zocalo, which is now competing with Dropbox and Box for cloud storage.

As Andrew Roskill has said on LinkedIn, and what many people already know, is that Amazon is in the game for the long-haul, but more than that, Amazon is willing to lose money that its startup competitors can’t afford to lose, all in the name of growing marketshare.

Kindle Unlimited Author Payments

KU offers two ways to pay authors and publishers. Digital Book World has called it the 2-tier payment system. Basically, tier-1 consists of publishers and creators of books that were added to KU without their consent. These books are non-exclusive, meaning they can be found on other platforms, and these authors and publishers are paid each time someone checks out their book, as if they bought the book. In other words, they are paid as if it’s a regular sale.

In Tier-2 are the authors who opted in to KDP Select. This requires an exclusivity agreement, where their books can only be found on Amazon. Additionally, these authors are only paid when someone reads at least 10% of the book (the same amount readers can sample for free), and only out of the same funds Amazon uses for KOLL. I’ll go into more detail later on how this may affect the quality of books found on KU.

Contrary to what DBW claims, The Digital Reader wrote that this does not necessarily make indie authors second-class citizens. Self-published authors have the option of taking their books out of Kindle Unlimited, while traditionally published authors do not.

Also, according to The Digital Reader, “Do you know the absolutely crazy part about the idea of indie authors being second-class citizens? It’s that traditional publishers would have treated those authors worse, including shutting out the majority of authors.”

But back to the payment structure. The KOLL/KDP Select fund is a monthly amount of money that Amazon has set aside to pay authors each time an Amazon Prime user borrows one of their books (via the KOLL program). According to Slash Gear, Amazon increased the KOLL fund by $800,000, bringing the total fund each month to $2 million. However, though Kindle Unlimited is currently only available in the U.S., the KOLL fund is shared globally among authors in the U.S., U.K., Germany, France, and Japan. Before KU, KOLL paid out about $2 per borrowed book.

According to Tech Crunch, writers may feel wary of subscription services because it drives down the cost of their work. People in publishing also look closely to the music industry, which went through the digital change about a decade earlier. However, artists still continue to thrive because of their tours and merchandise sales. Writers, on the other hand, do not have these other revenue options. But, John Biggs points out that other options popping up, such as Patreon, “which allow producers to build audiences directly and develop their own direct subscription model with their most fervent fans.”

What Authors Should Consider About Kindle Unlimited

First, the negatives. Amazon cares about Amazon, just like all other companies care about themselves. Therefore, indie authors and traditionally published authors may never be treated the same. It takes a lot more effort to negotiate with publishers than to roll out a new program and get indie authors to sign up.

Also, KU is good for gathering data (such as how often people read books, how much time they spend, how far into a book they get, etc.), but that data will unfortunately probably never be shared with authors. (*UPDATE: There may be hope. The Digital Reader has reported that KDP is now offering data on price points for ebooks: “The service draws on Amazon’s vast database of past sales data and analyzes the relationship between price changes and number of copies sold. KDP Pricing Support factors in each title’s length, category, rank, reviews, price history, and its author’s related sales in order to provide a suggested price range for a newly listed ebook.”)

According to The Bookseller, indie authors and indie author advocates have mixed feelings about Kindle Unlimited. Founder and CEO of Smashwords Mark Coker is against Amazon’s exclusivity agreements, saying “every book enrolled in KDP Select is a vote to put Amazon’s competitors out of business.”

Indie author and often Amazon advocate Hugh Howey admitted to being conflicted about KU. “We are going to have to make a decision with out books on a case-by-case level, to leave KU or go all-in,” he wrote.

According to The Bookseller, Howey is watching warily and closely monitoring his sales rankings. He’s also said this is not the first time Amazon has treated indie authors worse than traditionally published authors (for example, most indie authors cannot do pre-orders on their books on Amazon).

Also according to The Bookseller, indie author David Gaughran has said he is against KU’s exclusivity requirements. He said he doesn’t like the payment system but he thinks it is more sustainable than Oyster and Scribd’s payment system.

The Digital Reader also offers six different points of view regarding KU, which are mostly mixed and seem to point towards experimenting and seeing what happens (though at least one person thinks the pricing structure could devalue books).

The Bookseller said Amazon reserves the right to change the 10% threshold payment, though it’s hard to know if it will change. KU could also dilute author earnings, and it affects the Kindle bestseller lists.

Publishers Lunch reported that KU checkouts are counted as “sales” for the bestseller rankings. On Monday, July 21, 42 of the top 100 books were KU titles, according to Publishers Lunch. Of those 42, 28 were exclusive to Amazon, with 15 being published by Amazon’s imprints and 13 coming from KDP Select. In the week ending July 13, there were 25 non-exclusive self-published titles in the top 100, and now that number is down to 12.

Digital Book World wrote that the reason for this change in the bestseller lists is the “clever way in which Amazon is marketing the service to readers. For ebooks available in Kindle Unlimited, the title landing page has a call to read the ebook for ‘free’ with the service.”

According to Publishers Lunch, “Self-published books and bundles that are not exclusive look to be losing the most bestseller list positions as an immediate result of Kindle Unlimited.”

On the flip side, this could be great news for authors enrolled in KDP Select and KU. As The Digital Reader pointed out, these kinds of rankings are similar to what happened to books in KDP Select when that program started. And many of the free books in KDP Select led to an increase in sales, though it’s not yet clear if KU is leading to an increase in sales.

One thing to consider is the KU system could be gamed. For example, someone could potentially pay people to open free 30-day accounts, read their books (or at least 10% of their books), and propel those books to the bestseller lists.

On a positive note, there are some authors who are excited by the opportunities KU brings, such as helping to build an audience, gain name recognition, get more reviews, climb sales rankings, and more.

I’m on a few affiliate marketing lists, run by internet marketers who also publish books on Amazon. A couple of them in particular have advocated KU, saying that authors will bail on KU if the payment amount per book becomes to low, so Amazon will be motivated to pay authors enough to keep the number of books in the service high. They also encourage authors to write short 5,000 to 10,000 word books, and telling readers they can read their books for free, so long as those readers have a KU account. That way, authors no longer have to worry about promoting freebie days.

What Readers Should Consider About Kindle Unlimited

One Twitter user, @LuckySimms, said she thinks KU is especially great for readers, because there may be book rankings based on reader experience and a Netflix-style recommendation system.

And while KU does have a decent number of titles to select from, it’s hard to know right away whether most of those titles are high-quality. The rankings will help, but it’s still early days.

The way the KU system is set up may make the quality of writing go down, or at least encourage writers to write a lot of short books. It’s a lot easier and more likely someone will read 10% of a 20-page book than a 300- or more page book.

Having audiobooks also gives Kindle Unlimited an advantage, but right now there’s not enough selection to make it worthwhile for people who really like audiobooks.

The Future of Subscriptions

Oyster and Scribd have said KU launching legitimizes the idea of subscription ebooks, and I agree. But at the same time, it will be interesting to see how many people actually subscribe to the service. Many avid, or power readers, may be excited and sign up, but in order to be profitable, these services probably want to be more like the “gym membership” model, where people sign up, pay monthly, but rarely actually use the gym. This would mean the services collect the monthly fee, but wouldn’t have to use all of it to pay back authors and publishers.

I have heard that Scribd and Oyster pay all authors and publishers based on the percentage a book is read (which can also give some insights into how well a book is received). Other subscription sites, such as Epic! and FarFaria I have heard run on a profit-sharing model (though I know FarFaria also does work-for-hire for original content). However, some people think this may underpay the writers.

Maybe someday Amazon will turn KU into something like it’s instant streaming service. Members get unlimited access to books on the platform, but for books not available on the platform, they can pay to rent the book, for a lower price than purchasing the book (I imagine this for more expensive books, or potentially books from the Big 5 publishers).

Or maybe eventually Amazon will consider rolling Kindle Unlimited into Kindle Prime. Paying a premium for unlimited access to the video streaming, books, and other media, plus the shipping perks could be enough to make Amazon dominant in the ebook subscription space. Books may not be enough. People consume content in all kinds of ways.

More Questions About Kindle Unlimited

There is a lot to consider, and since KU just launched and ebook subscriptions in general are still in the early stages, I’d like to pose a few questions. If you have any ideas of the answer, please share in the comments!

  1. For KU, are authors only paid once when someone selects (and reads 10%) of their book? What if the book is reread?
  2. Will vertically focused subscription services end up being more successful than general all-you-can-eat services? (For example, Safari Books Online is very niche, for technical and business)
  3. What about sites like Wattpad, where writers can also build a community of readers, use social networks, and add additional content?
  4. What does this mean for libraries? For some people, they may be less convenient (though many have digital access), but they are still free
Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s