Forty-year-old Hugh Howey is undoubtedly a brilliant mind and something of a seer as well. Prolific and successful young author, in 2012 he refused to transfer the digital rights of his works to Simon & Schuster which had to limit itself to distributing the paper editions of Howey's books to bookstores. He recently struck a similar deal with Random House Century UK to distribute his books in the UK. With the digital rights firmly in his possession, Hugh has managed to create one of the best known and most established brands on Amazon's Kindle Store. In 2015 he moved from Florida to South Africa to follow the construction of a catamaran that will allow him to sail around the globe and write his own stories while sailing.
Author Earnings, which aims to collect, process and share data and information on the world of new publishing and self-publishing, is the brainchild of Hugh Howey. Author Earnings quarterly reports are something he really needed. No one outside Amazon's top management, which keeps its mouth shut, knows the quantitative dimensions of the ebook market that passes through the Kindle Store, where two-thirds of the new publishing business takes place. Amazon merely says that ebooks are growing in unit sales and turnover. Publishers' associations in both the USA and the UK (the two countries with the most developed digital market) instead state that ebook sales are stagnant and, since 2016, in decline. Who is right? Both, because each takes into consideration a segment of the market which has in the meantime split into two masses: the traditional publishing market and the new publishing market.
The detachment of new publishing from traditional publishing
In the traditional publishing market, the ebook (and digital in general) for large publishing houses is simply an additional channel to the already existing ones (bookstores, large retailers, online platforms) for selling content to the public who want to read about mobile devices. It is a channel which, however, carries threats because it is beyond the control of the publishers as are not the others. Hence the need to keep it at bay, especially through the price of ebooks, a point on which publishers have managed to get the last word recognized, even in contracts with Amazon, thus returning to the agency model in which it is the publisher to set the price and not the reseller/platform. In Germany, they passed a law imposing a fixed price for ebooks so as to reduce the room for maneuver of online platforms to zero, in a word Amazon. We can be sure that France, Spain and perhaps Italy, where there is however a "digital" prime minister, will follow suit.
On the traditional publishing market, we have all the surveys we want to satisfy every minute curiosity (provided by Nielsen Bookscan, publishers' associations and a plethora of other organizations). In fact, ebooks are declining in this area; naturally we are talking about the ebooks of the publishers surveyed. For example, in the United States there are 1200 publishers who are members of the American Association of Publishers. But the story does not end here. There is also the other market.
In this new market the roles are reversed: it is the book, essentially conceived as a print-on-demand product for those readers who cannot be reached otherwise, that is totally ancillary to the ebook. The great marketplace for new publishing is Amazon and its Kindle Store. This platform is reached by small and medium-sized publishing, by independent and experimental publishers and authors and also by self-publishers, i.e. by those authors who have consciously made this choice and by those who, not finding an outlet in traditional publishing, have fallen back on " do it yourself” also as a possible showcase for the major publishing industry which, like the big football teams, sees this pool as a place to recruit talent.
How much weight does this new market have, what are its revenues and performances, how much does it make for publishers and platforms, what are the genres that work the most? It is precisely these questions that the quarterly report by Author Earnings tries to answer, which for two years has been producing data and statistics based on the performance of hundreds of thousands of titles published on the Kindle Store. Overall, 58% of the titles published on the Kindle Store are monitored, i.e. the almost 200 titles that have entered the Kindle Store charts. It is precisely on the ranking mechanism in relation to sales that the Author Earnings algorithm works to obtain the data
The methodology of Author Earnings
How does Author Earnings collect, process, and disseminate data on Kindle Store.com titles if Amazon doesn't circulate any information that could lead to any reliable processing? Author Earnings processes the sales data shared by authors and communicated daily by Amazon to interested parties. Dozens of authors, who have free access to their sales data and real-time bestseller charts, have recorded their results in spreadsheets which they then shared collectively.
An algorithm developed by the Author Earnings team compares this sales data with the daily rankings published on the Kindle Store.com in order to obtain a more refined and more truthful data. In fact, Amazon's sales rankings are not based only on the total number of daily sales but take into consideration other parameters such as sales trends developed in the short to medium term. This refinement produces a conversion formula that translates a title's chart position into estimated sales amount.
It is interesting to see this chart developed by the Author Earnings team which shows how many daily sales are needed to reach a certain position in the ranking of best-selling titles on the Kindle Store.com.
Considering that the Italian Kindle Store is one fifteenth of the Kindle Store.com, the necessary proportions can be made.
Below we publish the Italian translation of the most interesting parts of the February 2016 Author Earnings report which analyzes the data collected on the Kindle Store.com on January 10, 2016. The translation is by Ilaria Amurri. Although the report tends to be boring and rather repetitive, the data are a veritable mine of surprises and also a guide for those who operate in this market. Anyone who does not have the patience to follow all the reasoning can immediately jump to conclusions.
The ebook market on Amazon.com: trend over 23 months
In just two years, the percentage of sales by independents and those by the Big 5 have flipped. Today, the publishing establishment accounts for less than a quarter of ebook sales on Amazon, while independents are close to 45%.
Ebook market share by units sold and type of publisher. 23-month trend: February 2014-March 2016
Publishers gain ebook market share. 23-month trend: February 2014-March 2016
The big 5 are the five major publishers of the global trade market: Penguin Random House, Simon & Schuster, Harper Collins, Macmillan, Hachette. Amazon Publishing is the publishing arm of Amazon and includes 14 publishing brands specializing in various genres.
The purple line shows the decline in units sold and revenues of the Big 5. Although ebooks are potentially more profitable than paper, some of these publishing houses have welcomed the decline in sales of ebooks in favor of the book. At the same time, our data (which we will discuss later) and Amazon's statements reveal that revenues from ebook sales in the United States have generally increased. The blue line, on the other hand, shows where the increased economic value produced by ebooks is going: it is entering the pockets of independents, precisely a quarter of the value of the ebook market in the United States is ending up there.
The graph, the most important one for authors, shows a rapid divergence in the revenues of ebook authors according to the type of publisher. Currently, authors published by the Big 5 make up less than a quarter of all ebook sales, while independents make up nearly half. As we have explained in previous reports, price hikes and other 'missteps' are likely to have helped accelerate this trend, although it may simply be that the big publishing houses are struggling to match the independents on diversification. the competitiveness, quality and frequency of publications. This situation has been dragging on for two years now, that is, long before the Big 5 stopped making discounts to return to agency pricing, but certainly, as we can see, the reversal of the amount of earnings between traditional publishing and independent it got louder in 2015, when the Big 5 reinstated agency pricing on ebooks.
Ebook market share by authors' revenue. 23-month trend: February 2014-March 2016
Ebook sales on the Kindle Store.com
The first graph shows the distribution of best-selling ebooks by type of publication. Keep in mind that this is a real calculation based on thousands of Amazon bestseller lists, all automated with the Author Earnings spider. This isn't about the math, it's just about viewing the number of titles in the rankings by publisher type.
Number of ebooks on the Kindle Store best seller charts. 195 titles which make up 58% of the titles published
The number of self-published independent titles on Amazon's bestseller lists, 27% of the total, has remained unchanged since September 2015, but is still more than double the number of ebooks published by the Big 5. The real news is that the Top Amazon's top 20 bestsellers, as well as the Top 10, are now dominated by self-published titles by independent authors, nearly half of which are not $0,99, but full-price, ie between $2,99 and $5,99.
On January 10, when we activated the spider the situation was as follows:
– 4 Amazon Top 10 ebooks were self-published independent titles;
– 10 Amazon Top 20 ebooks were self-published independent titles;
More than half of 56 Amazon Top 100 ebooks were self-published independent titles;
– 20 of Amazon's Top 100 ebooks were indie titles ranging from $2,99 to $5,99.
– We are not alone in observing this trend, which has apparently become the norm.
These independent bestsellers cover a wide range of genres. Surely the romance novel and paranormal are well represented, but among the self-published independent titles of the Top 100 there is no shortage of science fiction novels, thrillers / suspense, urban fiction and even the so-called "cozy mysteries", i.e. bland yellows.
But the distribution of the different publications within the ranking is much less interesting than the amount of daily sales of ebooks, for which we have introduced our new daily sales classification curve
Number of ebooks sold daily in the Kindle Store best seller charts. 195 titles which make up 58% of the titles published
As for daily ebook sales, the market share of self-published independent titles has grown significantly since September last year, while that of traditional publishing has shrunk. Now independent books make up 42% of all ebooks purchased on Amazon.com each day.
Their growth is partly linked to Kindle Unlimited, whose monthly revenues have reached $13 million paid directly to independent authors (of which at least 8,5 million in the United States alone) and for all of 2015 the figure rises to $140 million. But this success isn't just down to KU, which can be credited with about half of the overall growth, as retail has also seen a sharp increase.
On the day we collected the data, 20 ebooks in Amazon's Top 125 were self-published independent books that didn't qualify for Kindle Unlimited.
Once again our data has shown how simplistic and misleading it is to limit the analysis of ebook sales to traditional publishing:
Less than 45% of ebooks purchased on Amazon.com each day are traditionally published titles;
– only 29% of the titles purchased each day on Amazon.com are actually considered in the monthly statistics of the American Association of Publishers (AAP);
– 43% of ebooks purchased every day on Amazon, almost half, are not included in any of the industry statistics, such as those of Nielsen or Bowker, since they are books without an ISBN code.
So how many books are actually sold each day on Amazon.com?
As of mid-January 2016, Amazon's ebook sales in the United States were running at a rate of 1.064.000 paid downloads per day. Of these, 155.000, or 14%, were downloaded as KENPC, Kindle Unlimited's pay-per-page-view scheme for independent authors, while the remaining 909.000, or 86%, were purchased normally. Here is the detail:
Daily Ebook Sales on Amazon (January 2016)
Let us now analyze the revenues generated by the daily sales of the 195 titles that have entered the rankings of the best-selling ebooks on the Kindle Store.
Kindle Store Best Seller Charts Ebook Gross Sales. 195 titles which make up 58% of the titles published
Despite the rising prices of most traditionally published ebooks, self-published independent authors account for about a quarter of the dollars spent each day on ebooks on Amazon. Across all publication types, consumers spent approximately $5.755.000 a day in January, of $2.1 billion annually, of which more than 1 billion was spent on ebooks not covered by APP statistics. That's a lot of money, money that nobody counts except us and Amazon.
But let's get to the graph that interests us the most.
Daily earnings of authors on Kindle Store Best Seller charts. 195 titles which make up 58% of the titles published
If we set publishers aside and focus on author earnings, we realize that ebook sales on Amazon.com are generating $1.756.000 per day in earnings for authors, less than 45% of which (at the largest bookstore) largest in the world) belongs to independents and less than a quarter to those published by the Big 5. Is it any wonder that publishers and their authors observe a decline in eBook sales and their profits?
We humbly suggest that perhaps these organizations are looking for revenue in the wrong places.
$140 million a year goes straight into authors' pockets thanks to Kindle Unlimited, yet such a figure is not even considered by traditional publishing analysts. Moreover, as we are now able to detect, this figure is only the tip of the iceberg. Then there is a large segment of the market that is not calculated at all, as well as an army of authors who do not pay a fee to the trade associations and who simply earn what they can with their art.
The publishing industry continues to change rapidly and no one can say what will happen in the future, but we suspect that large publishing houses do not want to withdraw from the digital market, as they chose to do in 2015, a strategy that could prove to be a loser long-term. As for authors, they certainly don't want to sit back while harmful pricing policies destroy their profits.
Books and print-on-demand
Why stop at ebooks? Seriously, why? After all, Amazon sells at least one-quarter of the paper books bought in the United States each year, and about two-thirds of those bought online. The percentage of audiobooks is even higher and Audible.com, a subsidiary of Amazon, is the first supplier of iTunes.
Using the same technique we used for ebooks, we were able to calculate Amazon's print sales curve, thanks to months and months of data on CreateSpace's daily sales for dozens of print-on-demand paperbacks from various authors. Our data includes Amazon's overall Top 50 print titles, which CreateSpace estimates are selling more than XNUMX copies per day, as well as millions of titles selling less than one copy per month.
We weren't satisfied. Based on the daily sales of dozens of audiobooks created with ACX (Audiobook Creation Exchange) for Audible and their rating on Amazon, we did the same for downloadable audiobooks.
When we used our spider, in addition to accumulating data on the 200.000 best-selling Kindle ebooks, we also considered 250.000 of the best-selling paper books on Amazon and 25.000 of their audio books.
For daily book sales we have adopted the same criterion and the same graphical representation format that we have used for ebooks. Therefore the graphs will look quite similar.
Number of titles on Amazon.com's best-seller book charts. 150 titles which make up about 43% of the titles published
Interestingly in these graphs, the Big 5 have less than half the market share of bestselling books on Amazon.com. In any case, that of the Big 5 is the highest share compared to the other types of publishers and authors examined. However it must be considered that, while in bookshops the share of the big 5 reaches almost 80% of sales, in the largest online bookshop in the world it does not even reach 50%. Interestingly, self-publishers accounted for 14% of book sales on Amazon.com.
The audiobooks
Downloadable audiobooks are one of the fastest growing segments of the market, and not just for independent authors. On Amazon.com, downloadable audiobooks, distributed through Audible, make up the vast majority of audiobook purchases. CD editions represent a small percentage of the total and account for just 5%-6% of sales.
As of January 2016, Amazon was selling approximately 119.000 audiobooks a day, worth $2.100.000 and $204.000 in revenue for authors.
Here are the now familiar pie charts showing the distribution of this data by publication type.
Number of titles on Amazon.com's Audiobook Best Seller charts. 25 titles which make up around 43% of the titles published
A few factors arise to complicate the picture when it comes to evaluating audiobook sales and earnings.
Many audiobooks from the red slice, that of small / medium publishers, especially those published with Brilliance, Blackstone, Tantor and other specialized audiobook companies, are audio editions of ebooks published by the Big 5 or Amazon Publishing and even by independent self-published authors who have sold the publishing rights in audio format.
Green, the percentage of Amazon, represents audiobooks published by Audible Studios, although in reality some are ebook audio formats published by the Big 5 or self-published and independent, etc.
A large proportion (more than half) of the publications in blue, i.e. those by individual authors who do not fall into any of the other categories, are covered by Harry Potter audiobooks, published by the publishing company founded by JK Rowling (Pottermore). Many would tend to classify them as self-published, but we thought it less objectionable to place them in the individual author category.
As with print sales, it would be interesting to observe the evolution of the audiobook market in the coming quarters. We believe this area has huge growth potential for self-published independent authors in 2016, and we can't wait to see what those same charts will look like a year later.
Conclusions
In 2016, the possibilities of independent self-published authors go far beyond ebooks. These authors would do well to seriously consider publishing paperback editions in print-on-demand and, as soon as they can afford a good speaker, the audio format of their books. Furthermore, it is important to underline that 2015 represented an important moment for online sales, given that, according to some analyses, a good half of the earnings would be made on Amazon.com. For the first time, Amazon's sales surpassed those of Walmart.
In practice we buy more and more often online and independent authors have access to this showcase just like all other authors. In fact, with lower prices, more creative freedom, the ability to publish and market books faster, and reach a broader spectrum of readers, independent authors are gaining major advantages online. As the market moves away from physical bookstores, which are forced to limit their selection and consequently the expression of ideas, we expect independent authors to be able to establish themselves more and more easily, finding their voice and always making money taller.
