The May 2015 Author Earnings Report

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Three years ago, I was faced with a decision. A very difficult decision. The WOOL OMNIBUS was selling well enough for me to quit my day job and make a go of it as a full-time author, while at the same time, major publishers were making incredible offers for the rights to my book. Six-figure offers became seven-figure offers. In the end, I turned those offers down.

The retelling of that decision often makes it sound like I knew what I was doing, or that I was confident in my position. I wasn’t. All I had were educated guesses. I had years of working as a bookseller, of watching ebooks gain ground, and seeing how readers reacted to having ebooks delayed, and how they reacted when the price of an ebook was higher than the paperback. I watched 1-star reviews pile up on my favorite authors’ works, and I saw that publishers often reacted out of fear of change rather than out of a desire to please their customers.

Their customers — I learned from working at that bookstore — was in fact us, the retailer. Not the reader. The checks to publishers came from us. We were the ones — as booksellers — who worked to please the readers.

This realization helped guide my decision. I knew if I made a deal, that the price of my ebooks would shoot up. And so during negotiations, I pushed for guarantees on price caps. Numbers were bandied about. Those numbers were very far apart. At the same time, I saw from foreign publishers that as soon as I signed overseas deals, emails would trickle in through my agent asking if I could raise the price on the English editions in their countries.

I learned a lot over the next few years, as I published with 40 traditional publishers around the world, including some of the largest publishers in operation today. I heard about pressure from physical bookstores to increase ebook prices, or they would refuse to stock the titles in their stores. I watched readers complain about VAT taxes and the price of ebooks in other countries. And I saw from my own pricing experiments that lower prices meant greater sales, happier readers, more word-of-mouth, and more income for me.

Even better, lower prices didn’t seem to be hurting my fellow authors. The number of titles we needed to sell to hit the same ranking crept up and up, which meant we were all selling more books. Avid readers could now afford to shop for more books, and the ease of access was driving up the amount of reading they were doing. The entire pie was growing right before our very eyes.

Was it suddenly easy to make a living as a writer? No way. But for many, it was at least possible to try. And the chances were far greater than ever before.

When my partner and I started Author Earnings.com, we did it because of the many sleepless nights we had while wrestling with how best to publish our works. We had a choice, and we wanted to make a good one. Many authors face this difficult decision, whether they just finished their first manuscript or their tenth. On the one hand, you have the promise of bookstore distribution, marketing muscle, and the validation of your work. On the other hand, you’ve got the readers — who end up providing the only validation an author ever needs.

It’s easy to say now that I made a smart decision. But I wish I’d known then what I know now, so I wouldn’t have stressed so much about that choice. We started Author Earnings.com because we want authors to have visual insights into what’s happening on the largest ebook retail store in the world. I wish this data had been available for me three years ago. I wouldn’t have done anything differently; I just would’ve felt less anxiety about making that choice.

So what does this report show? Higher ebook prices from publishers continues to erode their market share of ebook sales. Drastically. When you read industry reports on the health of ebook sales, keep in mind that these reports are discussing a mere 14% of the ebooks that show up on Amazon’s bestseller lists. That’s it. Indie ebooks account for 26%. Daily unit sales of self-published titles are now greater than the Big 5 publishers, combined. And indie authors are taking home more earnings from readers every day than those same authors, combined.

That’s more people writing what they love, more readers finding great works at fair prices, and more opportunities for artists to supplement incomes or make a living. This is great news for those of us who value reading and literature. And this data is invaluable to those wrestling with how best to express themselves through prose. What I assumed years ago, and what is borne out by this report, is that there’s no greater tool in your sales arsenal than control over pricing. None.

But that should be common sense. Value your readers, and they will reward you in return.

Here’s the May 2015 Author Earnings Report.

COMMENTS (28)

Thanks for the stats. I’ve been hearing readers complain about rising ebook prices and spotted more than a few at $12.99, $17.99, even $29.99, but I hadn’t yet seen the numbers on how this affects sales. If the cost of buying a used paperback (including shipping) is lower than the price of the ebook, that’s what I’ll buy, and I don’t imagine I’m alone in this. I’m surprised publishers don’t take the existence of the resale market into account when calculating their prices.

They don’t see the used market in their spreadsheets, just as they don’t see growing indie ebook sales there, so they have no idea how their decisions are playing out in consumer behavior.

Retailers like Amazon have all that data by the terabyte. They have price performance data. You’d think publishers would be eager to let Amazon discount to the price that generates maximum revenue, but that’s not what we’re seeing. Instead, publishers think they can drive readers to new paper releases by driving up the cost of ebooks, but consumers are having different ideas.

What I think tradpub just doesn’t get is the fact that with the supply of books increasing rapidly due to self-publishing, consumers are becoming much more price sensitive. The number of people willing to pay $10+ for a book is decreasing, simply because so many equally good or better books are being published in the $4-6 range. Add to that the fact that checking a book out from the public library is still free, as well as inexpensive used books, and there is a lot of downward pressure on book prices, a fact that tradpub seems to be trying their best to ignore.

I’d be interested to know how many authors (as opposed to books) the sample represents. Big 5 and Indie. My guess is it would show an enormous disparity between the “haves and have nots”, much like what we see in the overall economy today. I think it would further illustrate the Big 5’s reliance on a handful of authors which support their largess. I’d also like to see if the Indie portion of the pie followed that same trend. Do we have very few huge selling authors propping up our numbers or is the curve more evenly distributed?

We looked at this in a report last year. Can’t remember which quarter. And our data set is free to download and toy with. We have a lot of the variables set up so that tinkering is easy.

What we can’t do is repeat all the explorations every quarter, or these reports would run on for a mile and a half.

Ah, of course you’re right! I’ll have to see if I can make some comparisons over time with that.

Thanks to you and Data Guy for your continued work on this. You deserve every minute of joy and happiness on that new boat of yours for all the time and effort you put in to giving back to the writing community.

> What I assumed years ago, and what is borne out by this report, is that there’s no greater tool in your sales arsenal than control over pricing. None.

Agreed wholeheartedly. And yet would you believe I couldn’t get Google to understand this simple fact when I discussed their mystery pricing policies with them?

Oh-kay…

Step back to this sentence for me: “At the same time, I saw from foreign publishers that as soon as I signed overseas deals, emails would trickle in through my agent asking if I could raise the price on the English editions in their countries.”

WHAT!?

Ferran, BCN, Spain

Yeah.

Well… I’d love to recover my old account to know that precisely, but this explains why I’ve been an Amazon customer since the late 90s. It was still way cheaper to pay S&H than local prices of either translated or import.

Some days I just would like to nuke publishers…

Take care.

Do publishers get better rates than we do when ebooks are priced over $9.99?

Yes. They get 70% no matter what.

Great text Hugh! As I said to you when you came to Bienal do Livro de São Paulo in Brazil last year, you are a great person and author because of that thought. It’s shocking the devaluation they have with the readers, wanting to push high prices, when we know that we can sell the e-book for a more affordable price without depreciate the author’s work.

From: Brazil

One thing that would surprise most readers of our reports is how far we lean toward overstating traditionally-published market share and understating indie market share, wherever there is any uncertainty in the calculations.

For example, most of the “Uncategorized Single-Author Publisher” category is also Indie, but we keep it separate from Indie because we didn’t verify book by book that those were known Indie authors.
We also calculate publishers getting the full 70% for all agency-priced Big Five books, even those priced above $9.99.

So our estimates here are extremely conservative. The real numbers, if they are ever released by Amazon, will show that indies comprise even more of the market than we are showing.

@Data Guy

You live with these data and know them far better than I. Tell me if I am wrong.

It looks to me like Amazon imprints are outperforming all others. With 1% of the bestseller titles they pull down 10% of the dollars.

From where I sit, it looks like Amazon has found the sweet spot on pricing. Can you calculate what that is? Care to share?

We mentioned this in our very first report, I believe. Amazon punches way above their weight. Pricing is certainly part of that, but the bigger part is marketing. Daily Deals, email blasts, also-bought recommendations, and the like.

What’s amazing about the way the Big 5 have blundered the digital transition is that they basically forced Amazon to get into publishing. When they resisted providing ebooks at all (windowing), then resisted fair prices (charging $20 for a new release), and then threatening to take their ebooks away from Amazon unless they switched to agency pricing . . . Amazon had little choice.

Amazon saw early on that the change to digital was inevitable. Their market was selling physical books. Instead of being outdone by a competitor (it probably would’ve been Apple or Google, or maybe an upstart like Kobo), they disrupted themselves by developing the Kindle. When publishers made content difficult to attain, they realized they needed another source. KDP was part of this answer, but the Amazon imprints were the next step.

Had publishers treated Amazon like a retailer out to sell as many of their works as possible, rather than seeing this business partner as a threat to the bookstores they already worked with, they could have kept Amazon (or delayed them) from getting into publishing.

Pricing is certainly part of that, but the bigger part is marketing. Daily Deals, email blasts, also-bought recommendations, and the like.

I recall that one Author Earning Report addressed price points v. revenue. I remember that report showed $4.99/ebook maximized revenue. At least I think I remember that.

I spent a few minutes perusing 47North and Thomas&Mercer offerings. Found some priced at $1.99, some at $3.99, but the majority were offered at $4.99. My survey was not scientific and likely suffered from confirmation bias, but it smelled good.

As for mimicking the actions of the Amazon imprints, I do not know how I can match their “Daily Deals, email blasts, also-bought recommendations, and the like.” But I can match their pricing.

@Antares:

FWIW, here are the (non-volume-weighted) average prices of Amazon Imprint-published books (the graph is from the May 2015 report):

But as Hugh says, pricing is only one piece of the equation. The Amazon imprints have far fewer individual books and authors, compared to the other publishing sectors. So Amazon Publishing can focus a much larger share of their massive promotional power upon each book they publish. Compare that to a Big Five publisher, with tens or hundreds of thousands of titles. It’s actually surprising to me that ALL of the Amazon publishing titles don’t hold Best Seller slots.

Nice.

I must have mangled the HTML when trying to include the image. :)

@Antares: the image I tried to embed is: here.

@Data Guy

Thank you. I am grateful for the numbers. These stats tell me the smell I got from my quick look was not false.

Mr. Howey,
Do you think it’s possible that the reason Amazon agreed to allow publishers to set prices is because Amazon knew that, in the end, the publishers would end up making less money? In other words, give them enough rope and they’ll hang themselves? The pricing regulations Amazon requires for indies and even their own imprints support the company’s belief that lower prices mean more money through higher volumes of sales. So, by letting Hachette and others overprice, they’re actually pushing the big five out of ebooks? Maybe that’s too conspiratorial, but if that was not Amazon’s plan, it may produce the same result.

No. Amazon doesn’t hate publishers. They get frustrated with them, but that’s normal with retailers and wholesalers. Amazon wants publishers to make a lot of money. Because that means readers are buying and enjoying a lot of books.

If Amazon was content with publishers learning the hard way, they would’ve avoided a PR war last year and let Hachette jack up prices. And they would’ve shrugged when publishers colluded with one another in 2009 to jack up prices.

To understand Amazon, understand this: They are OBSESSED with the customer. Obsessed. This is still a company run by one man. Granted, it’s now publicly owned, and they have a board of directors, but Jeff Bezos is the guiding hand, and his philosophy is to ignore shareholders and do what he thinks is right. Not what will maximize profits.

Many industry observers don’t believe people like this exist. But look at Bill Gates and Elon Musk. There is a new breed of billionaire geek who doesn’t need any more money (have in fact committed to giving away most of their money), and they are interested in changing the world. In exploring space. Curing disease. Affecting our lives in positive ways.

Jeff is one of those sorts. He also knows the way to make profits and sleep well at night is through this focus on customer service. Watching publishers go out of business will not help the health of literature, or the experience of readers and Amazon shoppers. Amazon is full of people who are a lot smarter than those at publishing houses, especially when it comes to the new economy, disruption, pricing, and all things digital. For them to sit by and watch the Big 5 harm themselves would be like us watching a friend smoke 3 packs a day without telling them about the dangers posed by cancer.

You really can’t understand Amazon without seeing everything from their perspective, which is: “What’s best for our customers?” It starts there, and it ends there.

I’m not saying Amazon hates publishers, but it doesn’t love them either. This is business. Books are a shrinking percentage of Amazon’s profits and I’m not sure the overall health of the Big 5 is as important to Amazon as it might have been only a few years ago. Amazon is clearly focused on exclusivity, which means it may not be in Amazon’s interests over the long term to encourage robust alternatives. Amazon is a retailer, but where books are concerned, indies have made it more than just that. Don’t get me wrong, I am not an Amazon hater–as an aspiring indie author, I think Amazon’s business model is very strong and makes writing as a career possible. I get that. But while Amazon always has the customer in mind, it also wants those customers to be Amazon customers in equal measure. Ask any indie who has dealt with price matching or KU. With the alternative of indie books that Amazon has helped to cultivate, your numbers show a growing indie presence and likely, a shrinking one for the Big 5. If that trend continues, I don’t see how Amazon would see that as a bad thing, because it makes Amazon a growing focus of book sales.

Thanks, Hugh Howey for distinguishing the customer chains for traditional publishers and Indy authors. Your insight gives a new perspective to the actions of the publishers. Even though their pricing decisions are short-sighted, they are focused on customer service. It makes our decisions as authors much easier. Do we want to be providers to the ultimate customer, or to intermediaries whose policies may actually hurt those we hope to serve?

Exactly. Signing away ownership of our art to people who might have different plans for it than we do is a scary proposition. Especially when we will likely never get the rights to that art back. And the people making those decisions will change several times over.

I’ve been through three editors at one publisher, and two editors at another. In just three years! You think you’re forming liftetime relationships, but it’s with a bean counter you’ll never meet, not with one of the salaried editors.

When a home computer was thousands of dollars, very few people had one. Now that computers are affordable, everyone has one, or more, of them. Sell cheaper and you sell more, it goes the same for books.
I would rather sell a million books at 99 cents than one book at a million dollars, because i have found a million potential future customers.