The Kindle Killed the Book Star
Amazon’s Kindle will do to book authours what the internet has done to newspaper journalists. And I don’t mean in a good way, by broadening the reach and influence of the writer. It’ll only serve to reduce their numbers as digital economics are horrible for those who spend 18 months or more writing a hardcover book, only to see it sold for US$9.99 on Kindle.
The lyrics to The Buggles – Video Killed the Radio Star song seem so appropriate as as set-up:
I heard you on the wireless back in Fifty Two
Lying awake intent at tuning in on you.
If I was young it didn’t stop you coming through.Oh-a oh
They took the credit for your second symphony.
Rewritten by machine and new technology,
and now I understand the problems you can see.Oh-a oh
I met your children
Oh-a ohWhat did you tell them?
Video killed the radio star.
Video killed the radio star.Pictures came and broke your heart.
Oh-a-a-a oh—–
In my mind and in my car, we can’t rewind we’ve gone to far.
Pictures came and broke your heart, put the blame on VTR.—–
Video killed the radio star. (You are a radio star.)
I had a chance to play with the Kindle 2 for a few hours last week, until I realized that the only appropriate thing to do was to “lend” it to someone who seemed even more keen on it than I.
At first glance, you can’t but help be excited about the idea. Books and newspapers sitting on a small device, waiting to be brought to life at the push of a button. Pushed wirelessly. With 284.265 books available to download from Amazon.com, most of which sell for US$9.99, you’ll never run out of something to read. And the electronic library is growing by 500 books a day. Compared to lugging Warren Buffet’s 800-page Snowball around, it is quite convenient for consumers; particularly those of us who usually find time to read while travelling.
But the Kindle will financially ruin most authours. At least those who once thought they could make a living from their trade.
Here’s why. Book authours live off royalties, a portion of which they receive up front in the form of an advance. For most authours, their entire income is the result of these two fee streams; few ever hit the speaking circuit ala former U.S. President Bill Clinton. For a publisher, they try to determine how many books will sell of a certain title, apply 15% to that figure, add a buffer, and offer that as an advance for the right to publish a certain title. Once the book sells enough to cover the advance, the authour gets ~15% of the cover price of each book sold. If a book store has a sale on bestsellers and discounts it by 30%, the authour’s royalty is still based upon the cover price.
In the Kindle world, early murmurs are that authours are going to receive somewhere between 10-25% of the “net” that the publisher receives from the online book store; the topic is still so new that the rules are still being devised and negotiated, but this appears to be the current direction.
Let’s pick a few books and see what the Kindle will do to the livelihood of writers, assuming Amazon.com only takes 30% of the purchase price of a Kindle book as their markup:
Four Seasons by Isadore Sharp
In a U.S. book store, it will cost US$29.99
Authour commission: US$4.50
From the Kindle store, US$16.47
Authour commission: US$1.15 – US$2.88 (26%-64% of traditional)
The Black Swan: The Impact of the Highly Improbable by Nassim Nicholas Taleb
In a U.S. book store, it will cost US$27.00
Authour commission: US$4.05
From the Kindle store, US$9.99
Authour commission: US$0.70 – US$1.75 (17%-43% of traditional)
Soros: The Life, Ideas, and Impact of the World’s Most Influential Investor
In a U.S. book store, it will cost US$27.95
Authour commission: US$4.19
From the Kindle store, US$15.37
Authour commission: US$1.08 – US$2.69 (26%-64% of traditional)
First Family by David Baldacci
In a U.S. book store, it will cost US$27.99
Authour commission: US$4.20
From the Kindle store, US$9.99
Authour commission: US$0.70 – US$1.75 (17%-42% of traditional)
Saavy and best-selling authour Michael Lewis appears to have not yet released his Kindle rights on Panic, even though his most recent hardcover book was published last November. Yet Izzy Sharp’s Kindle version was released contemporaneously. Who has the right strategy?
Some will argue that Kindle book sales are all incremental, but I don’t buy that. If the 17% royalty figure is directionally correct, an authour would need to sell six Kindle books to earn the same as a hardcover sale. Certain online shoppers may add a title to their shopping cart based on the theory that “it’s only US$9.99”. But I don’t ever find myself shopping using a budget of “this is what I’m going to spend today on books”, and then spend that $40 on four Kindle books rather than one Canadian hardcover.
I can see how it might boost sales of older titles, such as the 2005 Charlie Johnson in the Flames by Michael Ignatieff. The economics here make some sense, with the Kindle version selling for US$8.00 and the hardcover being available for US$12.00 (plus shipping), both from Amazon.com.
But no authour ever made a living with a $12.00 hardcover book price.
Let’s consider the notion that Kindle buyers will download twice as many titles as they would otherwise buy in a book store. So long as they make up even 20% of the buyer universe for your book, the economics are worse for writers. Here’s the analysis:
25,000 hardcover sales generates commission of $105k
If you still sell 25,000 books, but 20% (5,000 sales) come via the Kindle, total royalty payments are $87k
For an authour to be flat royalty-wise on the 25,000 hardcover sale figure (having sold 20,000 hardcover books), Kindle sales may need to reach 30,018. Replacing 5,000 lost hardcover sales might require six time as many Kindle sales to earn a writer the same income.
The pricing for digital sales made sense for musicians, since Bearshare resulted in zero revenue. That problem doesn’t exist in book-land. Danielle Steele need not worry about the Kindle age, but most Canadian authours sell less than 10,000 hardcover titles; few will ever hit the best seller list. The economics of publishing are so poor right now, publishers aren’t in a strong bargaining position.
But selling new release books for $9.99 will eventually drive a majority of authours away from their trade.
MRM
Appreciate the thoughts and the math (convincing for sure), but at the end of the day is this not similar to the argument about digital music. Are there legitimate questions about lower cost, greater access to more content, potential control shift to authors (without the publishing overhead) and how about technology adoption and proliferation?
I think authors would need to negotiate higher or fixed royalties on electronic distribution in order for the model to work. It is the publisher margin that should be getting squeezed here with lower price, not the author/content owner. If authors are not being paid enough per book, they can try to bypass publisher by going direct digitally.
Mark, you seem to be under the mistaken impression that authors make a living on books today.
It is my impression that a majority of revenue in the publishing business is driven by only a handful of titles and than many, if not most, titles don’t pay back their advance, and that advances especially as you move down the list decline very rapidly to very minor sums.
Pretty much it’s business books, trade non-fiction and harry potter that are still keeping the industry alive.
The publishing industry is, sadly, long past it’s heyday and needs every tool in at it’s potential disposal to try and claw back any share it can of daily attention it has lost to the rich aray of newer, shinier, noisier, and internet-ier media that books never had to compete against, not back in the day.
The kindle and the kindle business model is still clearly, at an early stage of evolution.
Meanwhile whether publishing as an industry (esp. quality, edited, long form fiction) can survive at all as a mainstream medium is dangerously still in doubt.
Interesting arguement that has been around for a while, however the Science Finction publisher Baen books has been publishing many of their titles online, without copyright protection for several years.
They seem to be making money and show that after the initial publication of a "hard copy" the electronic version supports continued sales as people "discover" an item that is no longer on the shelf or people like myself buy books both in electronic and digital format.
Gerard
Thanks for the comment. I’m not worried about the publishers as much as I am the authours – that was the point of the blog post.
I did point out that electronic releases of older titles (not F. Scott Fitgerald types) is pure gravy for the writer in question; hardcovers have usually gone to the remainder bin by then.
I don’t know what the economics of a specific online science fiction publisher are; but as genres go I can see why that might work.
The issue is authours being able to earn enough to be able to afford to write that next book.
MRM
One wonders if the authors and publishers would change from Hardcover –> Softcover to Hardcover –> Kindle.
Pricing would seem to indiciate that prophet levels on Kindle are similar to softcover. Mother of a friend is a Harlequin author and if anything I see her making more money – can’t buy a trashy romance kindle copy at the flea market or borrow it at the library. IMO some authors will benefit from kindle.
If Kindle Editions become more popular than their print counterparts and established authors are only getting 10-25% of the take, couldn’t they just publish with Amazon directly and get 35%?