Kindle Unlimited: Good for customers, not so good for authors?

The terms of service for Amazon's new e-book subscription offering mean uncertainty for self-published Kindle authors, whose work is automatically rolled into the program.

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Amazon

Amazon's Kindle Unlimited e-book subscription service, unveiled Friday, raised new questions about how much the company pays its army of self-published authors and the methods it uses to do so.

Kindle Unlimited offers downloads on more than 600,000 e-books, as well as thousands of audiobooks, for $9.99 per month. But more than 500,000 of those titles are self-published works through Amazon's Kindle Direct Publishing Select program, according to industry newsletter Publishers Lunch. That program requires authors to restrict the availability of their title to Amazon's Kindle platform for up to 90 days at a time in exchange for higher royalties on e-book sales -- sales ostensibly undercut by the availability of these books on Amazon's growing number of e-book lending services.

Amazon by some estimates controls as much as 65 percent of the digital book market. That's given CEO Jeff Bezos the freedom to flex his muscles when dealing with the traditional publishing industry, evidenced by the running dispute with French publisher Hachette. Now the e-commerce company is trying to stave off competition from a growing number of e-book upstarts that are cozying up to those very same publishers, as well as to self-publishing authors, with subscription models that distribute the wealth more freely.

With Kindle Unlimited, Amazon is again going to great lengths to reel customers into its e-book platform, and to snuff out the competition. What's unclear is how authors will stay afloat in an Amazon system that may soon be dominated by a Spotify- and Netflix-style subscription structure.

Amazon and the power of its terms of service

Beyond the handful of notable series -- many trumpeted on the home page, like "Harry Potter," "The Hunger Games," and "The Lord of Rings" -- Kindle Unlimited is overwhelmingly self-published content. That means most of its titles are not carried on the backbone of special arrangements hammered out by publishers with Amazon, but are subject to the more arcane elements of Amazon's terms of service.

Publisher Scholastic, for instance, has a deal with Amazon for using the "The Hunger Games" e-books across its Kindle platform. That agreement translates downloads into direct payouts to the publisher, and the deal transferred over to Kindle Unlimited by way of the companies' contract, Scholastic spokesperson Kyle Good confirmed. (However, Amazon has refused to disclose the terms of deals it reaches with large publishing imprints that would outline how much Hunger Games author Suzanne Collins earns from subscription downloads.)

Self-published authors earn money depending on the amount of their book users actually read through. The money comes out of a pool set up by Amazon that's shared among both its new unlimited service as well as its Kindle lending library. That service contains many of the same titles as Kindle Unlimited and is available for free to any Amazon Prime member, though with a limit of one e-book per month. Analysts estimate the Prime program has as many as 25 million members.

Amazon says on its website that Kindle Direct Publishing Select "authors and publishers will earn a share of the KDP Select global fund each time a customer accesses their book from Kindle Unlimited and reads more than 10 percent of their book -- about the length of reading the free sample available in Kindle books -- as opposed to a payout when the book is simply downloaded." Offering payouts based on percentage is similar to how competing subscription services Oyster and Scribd operate, though both services offer a full list price payout, which the author dictates, once the threshold is reached.

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Amazon CEO Jeff Bezos Getty Images

Amazon's global fund was increased from $1.2 million to $2 million for the month of July but can be changed next month, as can the 10 percent threshold that determines whether an author racks up cash for a user's download.

"I think it's a bad deal for authors," Mark Coker, founder of Smashwords, the leading self-publishing platform for e-books, said in an email. Smashwords provides 250,000 e-books each to both Oyster and Scribd. "It requires them to make their books exclusive to Amazon, which means they can't distribute to Smashwords, Apple iBooks, Barnes & Noble, Kobo, Scribd, Oyster, and others."

Coker further laid out his thoughts in a blog post Friday, titled "Is Kindle Unlimited Bad for Authors?"

"Indies would do well to avoid Kindle Unlimited for one simple reason: it requires KDP Select exclusivity," Coker wrote. "Exclusivity is great for Amazon, but it's not necessarily great for authors and readers. Exclusivity starves competing retailers of books readers want to read, which motivates readers to move their reading to the Kindle platform. This is why Amazon has made exclusivity central to their ebook strategy. They're playing a long term game of attrition."

Why would an author not only restrict their e-book to Amazon's platform, but also let the company openly distribute it through services like Kindle Unlimited that do not result in direct sales? The simple answer is they were given no choice.

"All books enrolled in KDP Select with US rights will be automatically included in Kindle Unlimited," the company said in a statement. In other words, it moved its entire library of more than 500,000 self-published e-books over to Kindle Unlimited without the consent of the authors, which it doesn't need thanks to the terms of service for KDP Select.

You can opt out of KDP Select. Amazon is even letting authors terminate their contract before the 90-day runtime is up. To do so, authors must contact Amazon's Kindle support team.

An Amazon spokesperson steered CNET toward the company's press releases and did not respond to requests for further comment.

How much are authors really making?

Amazon lays out its Kindle Unlimited and lending library payout system like so:

For example, if the monthly global fund amount is $1,000,000, all participating KDP titles were read 300,000 times, and customers read your book 1,500 times, you will earn 0.5% (1,500/300,000 = 0.5%), or $5,000 for that month.

In other words, the price of your e-book doesn't matter -- what matters is your e-book's performance weighed against the performance of all self-published e-books as a whole. If the same author were to price their book on Smashwords at $10, then 1,500 reads in one month on Oyster's subscription service would equate to $15,000, with 60 percent going to the author (Oyster uses the same 10 percent threshold as Amazon). That's $9,000 or $4,500 at a $5 list price, independent of the performance of other authors' e-books.

That key difference is what has publishers warming up not to Amazon, but to Oyster and Scribd instead. In fact, Oyster has brokered deals with two of the big five US publishers, HarperCollins and Simon & Schuster. Kindle Unlimited contains no titles published by any of the big five.

"It's our strong belief that over the next three to five years, unlimited subscription will be an increasing part of the market in how people read," said Oyster co-founder and CEO Eric Stormberg in an interview with CNET. "For our publishers, Oyster represents a fast-growing, new distribution channel for their books. We're becoming an increasingly meaningful retailer every month, sending them more revenue."

"I was initially skeptical of the prospects for a 'Netflix of ebooks,' but I began to see the light as I examined the emerging business models of the subscription services," explained Smashwords' Coker. "I think Scribd and Oyster hit the nail on the head by creating services that balance the intersecting interests of readers, authors, the subscription service itself, and the publishing industry in which we all operate."

It's unclear exactly how services like Oyster and Scribd will be able to operate at higher volumes as a subscription service with such author-friendly payouts. That fact has skeptics worried that the entire model is based on the assumption that customers won't start binge-reading books like they binge-watch and binge-listen on Netflix and Spotify, which would completely upset the current publisher-friendly balance these companies have worked toward. Blogger Ian Lamont, founder of e-book publisher i30 Media, puts it succinctly:

"While authors should receive a payout for each read or partial read on the subscription services, a model based on free giveaways and binge reading is not sustainable. If readers come to expect unlimited books for $120 per year, it reduces the size of the digital books pie and will take sales away from digital downloads elsewhere -- just as Spotify takes away business from iTunes' digital music library."

Still, publishers are happy to sign on at the moment as subscription services for e-books begin to blossom.

"We have negotiated very hard, to the point where if the whole business went this way, we and our authors would be very pleased, because the economics are more favorable...[it's] the exact opposite of the music industry's subscriptions models. The revenues that go to our authors is up, somewhat significantly," HarperCollins CEO Brian Murray told Publishers Lunch about partnering with Scribd last fall.

Whatever the outcome of e-book subscription services down the line, Amazon's Kindle Unlimited offering is yet another complex, and seemingly less lucrative, avenue authors must consider when trying to gauge which retailer and publisher has their best interest in mind. For self-published writers, the e-book market is also quickly becoming enveloped by a deeper, more existential question: Is it worth living in Amazon's world, under Amazon's rules -- or trying to fight the company from the outside.

 

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