Read All You Want!
Now readers can, using Amazon’s new Kindle Unlimited. For $9.99 a month, customers in the United States can download and read as many Kindle Direct Publishing (KDP) Select books as they want. There are presently 600,000 titles from which to choose.
The two-million dollar question is: How much money will authors make when a customer downloads their book?
The first part of this answer is ZERO, unless the customer reads past 10% of the book. This is an important point, as many customers will think they are supporting authors they know just by downloading their books. But if they don’t read more than 10% of those books, the author won’t earn any royalty for the trouble.
What about when customers pass the 10% mark—how much will authors make then?
Well, nobody knows for sure. Amazon can’t tell us up front. Amazon is telling us how they will determine this. And we have some data to judge by, such as prior experience with Amazon Prime borrows.
Update: The results are in now. Kindle Unlimited paid $1.81 per borrow/download in July, 2014, much higher than I was expecting.
Amazon Prime Borrows
Let’s take Amazon Prime as a starting point:
- Historically, KDP Select authors have received about $2 per borrow.
- The first month of KDP Select was closer to $1.50, and the same for the following holiday season. Amazon created a lot of buzz for Amazon Prime and KDP Select for the first two holiday seasons, and as a result there were more downloads than usual.
- However, when the per-borrow royalty was low, Amazon increased the KDP Select Global Fund for other months to bring the per-borrow royalty above $2.
- Thus, for most months, authors have received $2 and change for KDP Select borrows in the Amazon Prime program.
Extrapolating to Kindle Unlimited
Based on this, here is what I expect with Kindle Unlimited:
- The first month or two of Kindle Unlimited will feature an incredible number of downloads. There will be many new memberships. Customers will be exploring the program. They will want to get their money’s worth. Authors will be helping to promote the program, hoping to get their share of the $2,000,000 KDP Select Global Fund.
- Thus, I won’t be surprised if, for the first month or two, the per-download royalty is significantly lower than the $2 per-borrow royalty KDP Select authors are accustomed to with Amazon Prime.
- However, it’s in Amazon’s interest to monitor this closely. If it looks like the per-download royalty will be too low, Amazon may add additional money to the KDP Select Global Fund. Otherwise, many authors may opt out of the program at their earliest opportunity. (Current KDP Select authors can opt out immediately, regardless of when their current 90-day enrollment period ends. Go to your KDP bookshelf, click Learn More, then Learn More again to find a form specifically for this purpose.)
- So I will be surprised if the per-download royalty gets too low (whatever that may be). Maybe it will be somewhat low the first month, but, if so, I suspect that Amazon would greatly increase the KDP Select Global Fund, trying to reassure authors that it will be much higher in the future. Time will tell.
- Keep in mind that Amazon has already added $800,000 to the KDP Select Global Fund for July, 2014. This will help to compensate for the additional downloads coming through the new Kindle Unlimited program. The big question is: Will it be enough? My feeling is: Probably not enough to reach $2 per book, but the overall royalties could be higher than usual, depending. (In a moment, we’ll get into the math.)
- I think it was wise of Amazon to introduce Kindle Unlimited about halfway through July. This first month will be limited in downloads, as half the month was already gone when this began. It also gives Amazon some valuable data to help project the KDP Select Global Fund for August.
- There is another big difference. With Amazon Prime, customers can only borrow one book per month. Now, with Kindle Unlimited, each customer will be downloading multiple books per month. This will have a profound influence on the total number of downloads.
Kindle Unlimited Math
Now we’ll have some fun with numbers. 🙂
First off, the July, 2014 KDP Select Global Fund was originally $1.2 million. Amazon added $800,000 to the fund to make it $2,000,000. There will be many more downloads through Kindle Unlimited than there have ever been borrows through KDP Select, but the global fund is also larger, which helps to compensate to some extent.
Here is how Amazon will figure the per-borrow (or per-download) royalty:
Note that borrows (through Prime) and downloads (through Kindle Unlimited) are treated equally, so we can use these words interchangeably in the math.
Note also that what I’m calling a ‘download’ is really a download where the customer reads more than 10% of the book. If the customer doesn’t reach 10%, that doesn’t qualify.
Example: The KDP Select Global Fund for July, 2014 is $2,000,000. If there are 1,000,000 downloads in July (including both Kindle Unlimited downloads and Amazon Prime borrows), then the per-download royalty will be $2.00. But if there are 4,000,000 downloads in July, the per-download royalty will be 50 cents (unless Amazon chooses to increase the global fund as a result of more downloads than anticipated).
Amazon is receiving $9.99 per customer per month through Kindle Unlimited. Each additional member provides $10 more that Amazon could use, potentially, to increase the KDP Select Global Fund. So if Kindle Unlimited turns out to be incredibly popular among buyers, all these customers will be providing additional revenue, and Amazon could choose to share some of that revenue with the global fund. If the per-download royalty is too low, many authors will be thinking about opting out. Amazon has good incentive to make the per-download enticing to authors, and Amazon knows that authors are used to making about $2 per borrow through KDP Select.
On the other hand, if an author receives many more downloads than usual, the per-download royalty could be somewhat lower than the traditional $2 and the author could still be earning more royalties overall. Amazon may consider this, so it’s possible for the per-download royalty to be significantly less than $2. Amazon may choose to look at the cumulative royalties that the average KDP Select author is earning, rather than what the per-download royalty is.
Many authors would be okay with having more readers, but making a smaller royalty per book, especially if the overall royalties are greater than normal.
Another important figure is what Amazon is making. Amazon is charging $9.99 per month per customer. The following equation will be highly important to Amazon, and so it will also impact authors:
Again, by ‘download,’ I mean a download where the customer reads more than 10% of the book. Amazon only pays a royalty through Kindle Unlimited when the customer passes the 10% mark.
Example: If the average customer downloads 4 books per month through Kindle Unlimited, Amazon is essentially charging $2.50 per book. In this case, Amazon could afford to pay authors $2 per download and still make a profit of 50 cents per download. But if the average customer downloads 20 books per month, Amazon is effectively charging just 50 cents per book. Amazon isn’t likely to pay authors $2 per download, while only receiving 50 cents per book; they would be losing money.
Amazon might be willing to suffer a short-term loss for long-term gain. But my feeling is, the greater the average number of downloads by customers, the less money authors will make per download.
But at the same time, the greater the average number of downloads by customers, the more each author’s book is likely to be downloaded. It works both ways.
It Really Comes Down to Percentages
More downloads means Amazon will likely pay less money per download.
But more downloads also means that most authors will have more customers than normal.
These two effects will compensate somewhat.
What really matters to an author is each book’s percentage of downloads:
Remember, the download only counts when the reader gets beyond 10% of the content.
Example: Suppose there are 1,000,000 downloads in the month of July (including Amazon Prime borrows), and suppose your book is downloaded 50 times. Then you would get 0.005% of the July global fund. Since the July, 2014 global fund is presently set at $2,000,000, this book would earn a total royalty of $100 for downloads for the month. (Note that this agrees with a $2.00 per-download royalty.)
Update: The results are in now. Kindle Unlimited paid $1.81 per borrow/download in July, 2014, much higher than I was expecting.
Good for Indie Authors?
Looking at this from the perspective of percentages, this may be good for indie authors who are enrolled in KDP Select.
Probably not all indie authors, but many may benefit from this.
Kindle Unlimited customers may be more willing to try an indie book, since it won’t cost extra money to do so. The $9.99 monthly fee has already been paid, so if the book doesn’t turn out to suit the reader, the customer can easily find another book.
Through Amazon Prime, customers could only borrow one book per month, so they had to choose wisely. Many have favored a book with a higher list price and more pages, and an author they were already familiar with.
Now Kindle Unlimited customers don’t need to choose just one book. This could be a game-changer for some indie authors.
What About Good, Old-Fashioned Sales?
The more customers who join Kindle Unlimited, the fewer customers will be buying books the old-fashioned way.
Once a customer invests $9.99 for monthly reading, the customer may feel less inclined to spend additional money on books that aren’t in the program. Why do that when you can choose from 600,000 books without spending an extra penny? Kindle Unlimited subscribers may occasionally buy a book that’s not in the program, but it will take a compelling reason.
Thus, as more customers join Kindle Unlimited, authors may be receiving more of their revenue through downloads and less revenue through good, old-fashioned purchases. If so, the numbers may compensate. Kindle Unlimited could potentially make up for any lack of sales and then some. The only way to know for sure will be to wait and see.
The number of traditional sales might not even diminish. First, not everyone will join Kindle Unlimited. $120 per year is more than many readers want to commit to for reading.
Also, if Kindle Unlimited succeeds in getting a book more downloads, this may actually lead to improved sales, too. There is such a thing as word-of-mouth publicity. More readers, even with lower royalties, sometimes leads to greater success in the long run. The potential is there.
Another consideration is list price. A higher list price may actually make the book more enticing to Kindle Unlimited, and downloads through Kindle Unlimited will improve the sales rank. This might lead to more ‘sales’ at a higher list price, earning a higher royalty than usual.
It will sure be interesting to see how Kindle Unlimited turns out.
Copyright © 2014 Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers
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Intriguing, Chris! Thanks for the analysis! Wish I was in Kdp select so I could try it out. On the other hand, maybe its best to sit tight and wait and see. Amazon has certainly cooked up a storm… everyone’s talking about this!
I’ve noticed a few authors trying it both ways, i.e. enrolling only a few of their books. It’s intriguing, at least. 🙂
Thanks Chris. A very thorough analysis.
You’re welcome. I’m glad you think so. 🙂
Chris, how does Amazon know if a reader has read 10 percent of the book?
Amazon knows where the Look Inside (free sample ends), so it knows that the reader has passed the 10% mark.
Hi Chris. Here’s my problem, as an Indie author and from the UK, we weren’t told about this in advance, it was just dropped in our laps. Now, I have forty novella’s in KDP, I charge $1. a book and usually sell 15.000 books a month across the board. My KDP downloads average 300+ per month. In the few days since this has been launched I’ve had close to 1000 books downloaded- that scares the hell out of me when I have no idea how much I’m earning.
I have to admit that KDP has worked out good for me giving me $2+ per book, but what of unlimited? I have to admit I have shaky fingers over the ‘pull my books out’ button every time I look at the downloads. I’ll be biting my nails until I see the KOLL total on the 15th.
It’s an anxiously awaited figure, that’s for sure.
Amazon was probably figuring on about 600,000 Amazon Prime borrows for July, to give the usual $2 per borrow, as the original global fund was $1.2 million. They added $800,000 for Kindle Unlimited, which would only affect the last two weeks of the months.
If there are 400,000 downloads, KOLL would pay $2 per borrow, but it seems quite likely that it will exceed this number (that’s just about 30,000 downloads per day, and each customer will be downloading several books). I’m seeing about 4x the usual borrow rate, which would give me about 2.5 times the usual number of borrows for July. These figures probably vary widely from one author to another, but based on my download rate, that would yield about $1.33 per download. I wouldn’t put any faith at all into this number. It would take 1.4 million downloads (where customers reach 10%), about an average of 100,000 per day, to drop the KOLL payment to $1 per borrow.
It seems impossible to make an confident prediction, but it’s fascinating nonetheless. 🙂
It seems that it’s possible for authors to get paid both for KU borrows and outright purchases on the same book. In other words, if I read over 10% of a book, the author gets paid for a borrow; then, if I decide to buy the book, the author gets paid the royalty for the sale.
Added benefit for wonderful books. 🙂
Hi, where did Amazon officially announce it being $1.81 per Unlimited read in the first month? I can’t seem to find it…
They didn’t. Authors learned this by checking their July royalty reports. You can search the KDP community forum to find posts that mention this number.
Nice, thanks for that Chris. That’s done nothing but positive things for that month! We’ll see how much future royalties are though before I get too excited…