New Writers: This is What’s Going on With “Author Earnings Report”

We wrote about how Barnes & Noble is a lonely, frightening place for a young book: and it is. Any retail consultant would be appalled by what goes on in most B & N stores. Crowded aisles, merchandise on the floor, dusty shelves, merchandise used as decoration, uninspiring displays, and we did not even go into the stockroom, where we have heard some book shipments are simply stored until it’s time to return the unopened boxes. Those books (midlist, usually) aren’t ever even shelved since clerks don’t think any customers will want them. That’s some broken sales pipeline. Much like the troubled businesses on Bar Rescue, Restaurant: Impossible, The Profit and the late, lamented Gordon Ramsay’s Kitchen Nightmares: nothing about the business itself could possibly contribute to flat or declining sales and profit. Barnes & Noble is in trouble because “no one reads any longer” and “young people don’t read” and a million other excuses.

So, a lot of people who love reading and writing think Amazon is the solution. The Amazon Kindle is an amazing device, and I personally use it extensively: I am right in the middle of that device’s sweet spot demographic. I’m a college-educated woman who appreciates the ability to make the e-book type any size and shape I like. I know how to quickly find books I’m interested in.

When we first started our four-part series on the Business of Books, responding to our first market validation survey (among writers), we caught some blowback because we supported Ursula Le Guin’s contention that Amazon’s system is causing a problem for books and readership by focusing on quick-selling, short-term books.

The blowback was from Hugh Howey adherents and enthusiasts. We were informed we should look at Author Earnings Report to find out what was really going on with books and readers. Some commenters suggested we were not aware of such options as Amazon KDP (Kindle Direct Publishing) or quality print on demand options like Amazon’s CreateSpace. Those were the nice folks. The other ones were getting a kick out of slagging on a National Book Award winner (Ursula Le Guin) and calling me names.

So, here’s the deal, new writers. To you, this report means exactly nothing. This is heat, light, smoke, almost totally wasted time and effort. It covers Amazon Kindle book sales and nothing else. It covers pricing information and what it presents is pretty dubious. The report has simply proven that non-traditionally published e-books sell in the Kindle format on the Kindle device. It refers to a “shadow industry” of books without ISBNs — i.e. books with ASINs only, the Kindle identifier. Similarly, books can be sold via Smashwords without an ISBN.

About two years ago we started our business with a cookie analogy, because the value of a book isn’t its sales price, nor is it even its total volume sales. We talked about how there were various qualities associated with cookies that food manufacturers used to develop, test and market them. This concept inspired Chameleon’s “bookfeel” elements to be used in book marketing, development (YES WRITING AND EDITING AND PRODUCTION) and sales/promotion.

With recent developments in Amazon’s pricing and payment structure (Kindle Unlimited, payment per amount of book read) and today’s announcement that the book subscription service Scribd is eliminating 80 to 90 percent of its romance titles because romance readers were downloading and reading “too much” to make it economically feasible, new writers might be inspired to think they need to work even harder, and market their books even more, to be a success. “Oh, my gosh,” some writers may think. “What if Amazon decides to give only 5% royalties? What if they decide to pay only if the person finishes the book and gives a good review?”

When people talk about the large share of the book market that Amazon has, they are referring to their print sales plus their e-book sales. No one really knows what Amazon’s aggregate total really represents in terms of market share, except the overall trade publishing industry is a $27 billion industry in the U.S. and we recently determined that Amazon’s maximum revenue for books was about $7 billion last year and we’re being very generous about it: 26% of the market. That is a whole lot. But if e-books just overtook the paper book sales via Amazon less than a year ago (they did), that’s 13% of the book buying market — and that is stretching it.

If I deal with the numbers that “Author Earnings Report” is trying to use to represent the market opportunity for indy-published writers, I’ll just extrapolate the “1 day earnings” for indy-published writers it estimates for May 1 sales: $1.1 million USD x 365 days = $401.5 million. That is 1.4% of the total market. Amazon’s practices mean little good news for Amazon-only authors, that’s for certain. And Amazon does not seem to be growing readership.

It’s about who can and does buy books on the Kindle. I am too cheap to download this report. But it indicates that the same market research firm (Simba) that correctly projected slowing growth in e-book sales in general in 2012 also showed that Kindle users are older (55+), female (55%) and that there are very few — 2.3% — younger Kindle owners and users.

In contrast, tablet ownership is broadening, with over 34 percent of Americans owning or using a tablet computer. The Kindle Fire is counted among tablets, but its demographics do not match overall tablet ownership and usage.

All you have to do is walk into any tech/electronics store like Best Buy or mobile provider store like ATT or Verizon and talk to customer service reps about who is buying what. The Kindle Fire, despite all of Amazon’s efforts, isn’t being adopted at the high rate of Apple, Samsung or other products. Marcus Lemonis, the Profit, could easily tell you why; and Amazon’s policies regarding its book content and acquisition aren’t going to help the situation much. Right now, the Kindle is a tablet, but it didn’t start out that way and Amazon’s business was built on getting books — paper books — into the hands of 1995′s readers. Now it’s 2015.

People don’t read books much on tablets so far (overall), but they are starting to do it more and more. Students definitely want textbooks and resources on their mobile devices. They do, consistently, when questioned, say they prefer paper books.

E-readers basically make it easier for older folks such as me to read. When I got my Kindle, I found myself reading more: for practical reasons! But for reasons of information and quality, I do turn to paper books. Or, I download books that I also have in paper form.

That’s because a book isn’t just text dumped onto a screen. People who think it’s cool to make fun of and insult a National Book Award winner, and who think there’s much, if any, benefit in the extensive, ongoing, repetitive “Author Earnings Report” probably aren’t going to understand that.

The Kindle serves people who already liked to read before they got one and who were a particular type of book buyer and reader. It’s a secondary, downstream device and market. It will never be an upstream, introductory device and market unless it changes a vast number of things about how it acquires content.

Let’s try another analogy. Many people hate WalMart for a variety of reasons, but it remains the world’s largest retailer. WalMart is notorious for squeezing its vendors in a way that makes its employee policies look like the best in the world. As one example, Hormel was forced to sell some of its cured meats to WalMart at less than cost so it would not have all Hormel products taken off their shelves. This doesn’t make for a better ham. Customers are not better served by having NO ham or substandard ham — and in the long run, neither is WalMart. About 3.5% of WalMart’s sales were from books in 2014.

Given WalMart’s reported $288 billion in US sales in 2014, 3.5% of that is $10.8 billion. Smart people reading here might be surprised this cash total is more than half the revenue done by their games and electronics departments: considering the price differences, this means they are selling a lot of books. This statistic alone provides somewhat of an indication of the problem in wrapping one’s head around the total book market. Barnes & Noble reported year-end sales of $6.7 billion in January 2015, which is probably similar to Amazon’s total (again, Amazon’s figures are so siloed, firewalled and distorted it’s very difficult to get a strong picture). These are some of WalMart’s current books and they absolutely do the same type of discounting and murderous vendor activities common with their food, furnishings and electronics suppliers ($5.31 for Chris Kyle’s American Sniper trade paperback).

Boy is there a misunderstanding about “profits” and “earnings.” Trade publishers do well to run a 2% profit. Author Earnings readers might think “gee this is terrible.” They’re reading nonsense following statements like “protecting the paper book trade will not help publishers.” Nonsense like this:

  • Reduced publisher profits (only cents of profit on each dollar versus cents on ebooks). <– which publishers would that be? None of those we comped; I wonder why Hachette, Simon & Schuster, Penguin Random House and Macmillan didn’t report that type of profit to their shareholders! I’m thinking only medical and specialty publishers might be able to report such figures.
  • Reduced author earnings (only cents of each dollar goes to the author versus cents on ebooks). <– nah, well, it’s really more like 3–7 cents overall, Author Earnings Report, which you’d know if you could read financial statements.

Now, let’s just say you’re a (formerly) self-published author like Lisa Genova, author of Still Alice and other bestselling books. Lisa herself reported that she paid $40,000 to publicize Still Alice prior to signing with Simon & Schuster to conventionally publish the book. There are now more than 2 million copies in print; it has been translated into 31 languages. Lisa, a Harvard Neuroscience Ph.D. is an expert in Alzheimers disease and other cognitive disorders. In addition to the time spent writing and the money she paid for editing and book production, she initially sold the book directly to people in the Alzheimer community. When accumulated interest and in-person direct sales combined with Lisa’s expertise and the high-quality nature of the book itself, she initiated her relationship with Simon & Schuster, enabling her to publish additional bestselling books. I doubt that Lisa realized any profit per book when her time, efforts, direct funds paid for editing and that $40,000 PR payment were accounted for. Say what you like about publishers like Simon & Schuster: they made it possible for the 2.1 million copies to be in print, and for the book to be translated into 31 languages.

When we started out, we audited and analyzed a number of self-published bestsellers and successes. Most of these authors and books went on to achieve traditionally-published success, and Still Alice was one of them. Each of the books and authors fit into the “bookfeel” criteria that we were simultaneously developing. Another hallmark of these books and authors was the connection with readers. 50 Shades of Gray, for example, wasn’t just a “self-published” (paperback — small press) book. It started out as an online serial told to a huge Twilight fan community. Publicity being what it is, there are some reports that 50 Shades‘ series has outsold Twilight, but that’s probably unlikely. Even though Christian Grey’s story is now the #1 bestseller, Twilight overall is likely the more successful series. Both series satisfy their readers in the basics: plot, characters, pacing, “intellectual content.” And in particular, 50 Shades stands out because it had numerous readers suggesting improvements and giving feedback at every step of the way. So right now as it stands, even though it feels as though the entire situation consists of established trade publishers exploiting authors who had already done all the hard work of building an audience and interacting with readers, that’s not precisely the case.

What needs to happen is there to be a stronger way to include successful practices in the larger publishing industry: especially a connection with audience and reader. E.L. James was really into the Twilight fan community and had that connection right off. Lisa Genova is a Harvard neuroscientist who knew people affected by Alzheimers and who was committed to the community of families and individuals impacted by the devastating disease: she wrote Still Alice for them. Lifelong “space nerd” Andy Weir was devoted to all things space before he wrote The Martian.

I’m sorry to say, Author Earnings Readers: nobody ever did anything good based in insulting a National Book Award winner. It really is about what goes between the covers of a book or on a screen and those things are not best-made by individuals working alone, in isolation. There’s nothing easy or miraculous about it. It’s hard. If you can interact with readers as you write, if you have the funds to pay for professional editing and book design, and you can bankroll a print run and distribution, and you can pay for sales teams and work with all the vendors, then there ya go: instant book success. If you have the sense not to denigrate a great, fine author for no reason, then this has to help as well, as writing is about communication and respect for the reader.

* * * * XTRA * * * *

I used this chart to work with the “indy-published author earnings” one-day figure, to give it some context in terms of all books sold. Then I thought, “You know what . . . that just doesn’t . . .”

A lot of people have written VOLUMES about this report and people go over it like crazy. But I’m going to go with what it says and accept these figures here as they stand. If this is “55% of all Amazon e-book sales” on this one day, May 1, and I multiply the total on the chart by 365, then I get: $19.345 billion.

Go to this page: Amazon.com Investor Relations. Download the 2014 Year End Report. Go to page 27. Read the number directly under “2014″ at the top of the chart representing North American media sales. It says “11,567.” That means $11,567 billion for all media sales (e-books, movies, music, downloads, everything). It is quite unlikely that “55% of all e-book sales” would be almost twice as much as the company reports selling to its shareholders. So either May 1 was a monster, banner day for sales or.

Well, you know. You’re going to get rich tomorrow, selling your books on Kindle and insulting Ursula LeGuin.

Originally published at www.amysterlingcasil.com on July 2, 2015.

According to Harlan Ellison and my grandmother, “You’ll go far Amy, because you have heart.” Author of 40 books, former exec., Nebula Award nominee, Poor.

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