July 2014 Author Earnings Report
It has been nearly half a year since we first pulled data for nearly every ranked ebook on Amazon.com’s thousands of category bestseller lists. This is our third quarterly report, and every data set tells us something new. With enough reports, we should be able to spot emerging trends in the world of digital publishing in order to help authors make the best decisions with their manuscripts.
As before, we are dividing the ebooks up by publication path while looking at the following four measures: the number of ranked titles, the number of unit sales, gross earnings, and authors’ earnings. Our primary focus at AuthorEarnings.com is the writer, so we pay special attention to the last of these measures. Our methodology for determining publisher type is explained in detail here, and as always, our data has been anonymized and is available for download under the creative commons license. The following graphs show the July quarterly snapshot along with the two previous snapshots from February and May:
Our first graph shows the number of titles on Amazon bestseller lists. With each of our quarterly reports, the number of ranked titles has grown, as Amazon keeps adding new categories, sub-categories, and sub-sub-categories. It’s like a bookstore adding more shelves and giving more titles visibility. Many of these titles have very low overall rank, so they don’t significantly impact the earnings graphs to follow, but you can see that the shelf space for Big 5 books has dropped by 4%, and these publishers now only account for 16% of the ebooks on Amazon’s category bestseller lists.
Unit sales are calculated by known rank to daily sales rates. To date, no one has discovered co-op or rank manipulation on Amazon’s bestseller lists. Such manipulation was quickly discovered at other sites, making their lists less useful both to shoppers and to our efforts to understand the digital book market. Of note here is that all of our graphs show remarkable consistency across data sets taken over the course of half a calendar year. And with our latest data set, we estimate that self-published authors now account for 31% of total daily ebook sales regardless of genre. This makes indie authors, as a cohort, the largest publisher of ebooks on Amazon.com in terms of market share.
Gross sales are where it begins to get interesting. Now we are factoring price into the equation. We know self-published ebooks cost less than ebooks from the Big 5, but how much less? Being able to see the combined effect of price and sales rank in a single graph for 120,000 ebooks is very powerful. A lot of small discrepancies begin to average out with such a massive sample size. And while indies have seen positive movement across all three quarters, it’s too soon to tell if this is a global or a seasonal trend. It could be that indies promote their books year-round while major publishers pull out all the stops around the Holidays. This time next year, we should be able to answer this question.
In February, we were able to announce that self-published authors are earning nearly as much as Big 5 authors combined when it comes to ebook sales on the Kindle Store. In the two quarters since, the earnings for Big 5 authors has shrunk while that for indies has grown. We can now say that self-published authors earn more in royalties than Big 5 authors, combined. This may reverse itself by the time February rolls around, but it adds weight to a recent story in The Guardian about the unsustainability of traditional publishing if authors continue to earn less while their publishers earn more.
It bears putting a number here and stressing what we are seeing: Self-published authors are now earning nearly 40% of all ebook royalties on the Kindle store. The days of looking at self-publishing as a last option are long gone. A lot has changed in six months.
DRM – A Bad Idea
In addition to our standard pie charts on sales and earnings, we always like to bring something new and interesting to each report. Last time, we looked at rates of churn on the bestseller lists. We have also previously looked at the vast income difference between tenured and debuting authors. This time, we pulled data for DRM, and what we found was very interesting.
Digital Rights Management, or DRM, is the encryption lock applied to electronic entertainment. The film, music, video game, and book industries all employ DRM. With ebooks, DRM poses little challenge to pirates, who can crack these locks with a few clicks. Meanwhile, for the paying customer, DRM makes it difficult to move ebooks between devices and traps readers into a single retail channel.
DRM is entirely optional on Amazon. Major publishers and self-published authors can opt out of DRM. We pulled DRM info on the 120,000 ebooks currently ranked on Amazon to see how often it was applied and if DRM had any effect on sales.
It wasn’t surprising to see that most Big 5 books employ DRM, but we were shocked to see that it is practically 100% of them. Indies, on the other hand, locked down roughly 50% of their titles. Since there isn’t any variation in the Big 5 books, we are forced to look at the self-published titles for any effect on sales, and indeed there is one. The 50% of non-DRM ebooks account for 64% of total unit sales.
Indie titles without DRM sell twice as many copies each, on average, as those with DRM.
To confirm that this finding didn’t simply reflect a correlation between ebook pricing and DRM election, rather than a consequence of DRM itself, we compared the average daily earnings of non-DRM titles to DRM titles at each pricing cohort.
At almost every price point, we see the thousands of titles without DRM significantly out-earning the thousands of titles with DRM. In fact, at the only two price points that appear to buck the general trend and which show DRM titles outselling non-DRM ones, we found that the reversal was due to 3 outlier DRM titles published by only two authors.
What our data strongly suggests is that DRM harms ebook sales at any price point. And it backs up a report from Tor, one of the few major publishers that gave up DRM two years ago. It also reinforces this report on DRM’s effect on music sales. Interestingly, one of the Big 5 publishers urged authors to push back on Tor’s decision to get rid of DRM. It shows how important data like this is for making sound business decisions. Operating according to myth or fear is far inferior to making decisions based on what’s best for the consumer or on what is proven to increase or decrease sales.
Bodice-Ripping Genre Myths
We have had numerous requests to look more deeply at genre on the Kindle store. Self-publishing was once decried as a foolish choice for authors. Now the common refrain is that self-publishing is only viable for writers of romance/erotica and sci-fi/fantasy. (Some even claim that self-publishing only works with “smut,” ignoring the fact that Romance ebooks include Christian Romance, Amish Romance, New Adult, and Romance for YA readers).
Is it true that self-publishing only works in one genre, perhaps two? We have the data, so we decided to find out.
We believe this is one of the most important graphs we have ever published. At a glance, we can see how each publishing path performs in the top genre categories, and we can also see how these genres compare to one another in both total revenue and market share by publishing path. This last distinction is crucial, because the old-time advice to “never self-publish” has now faded to the advice that “self-publishing only works in certain genres.”
The truth is that, regardless of which publishing path an author chooses, some genres of trade ebooks sell vastly better than others, period. Other genres languish. For Big 5 authors, Mystery, Thriller, & Suspense is by far the most lucrative genre. But you don’t hear many people assert that traditional publishing is only good for people writing sleuths. Another common refrain is that nonfiction and literary fiction are uncrackable genres for indies. But in non-fiction, self-published authors are earning 26% to the Big 5’s 35%.
It turns out that Big 5 publishers have nearly as small a portion of Romance earnings (18%) and Science Fiction & Fantasy earnings (29%) as indies have of Literary Fiction earnings (13%) and Nonfiction earnings (26%), respectively.
Self publishing isn’t just viable for Romance and Sci-Fi/Fantasy. While indie authors are absolutely dominating traditionally-published authors in those particular genres, indies have also taken significant market share in all genres, including Mystery/Thriller/Suspense and Non-fiction.
The data also disproves the oft-cited claim that “smut” makes up a significant portion of Indie revenue. Erotica titles represent only 1.2% of gross Kindle sales. Both Religious & Inspirational Fiction and Horror sell better than Erotica.
The market for literary fiction is anemic for indie authors simply because it is an anemic segment of publishing overall. In fact, Literary Fiction makes up only 2% of Amazon ebook unit sales and 3% of Amazon ebook dollar sales. More startling is the fact that 20% of that 3% belongs to a single aggressively-promoted title, The Goldfinch. Even including that title, literary fiction barely amounts to 2% of total author earnings. And indie authors earn 13% of that. That’s a not-insignificant portion of what turns out to be a pretty insignificant piece of the total publishing pie.
It’s too early to distinguish between global trends and seasonal trends, but the percentage of ebook dollars going to indie authors has crept up for two straight quarters. There could be movement in the opposite direction as the Holidays approach. While it should be a jolt to see that indies are earning nearly 40% of the ebook dollars going to authors, we are starting to take this reality for granted. That’s real progress. As it has proven to be in other fields of entertainment, the indie movement in literature is not a blip and not a gold rush. It appears to be here to stay.
We have also seen from this data set that DRM has a deleterious effect on ebook sales, which matches what other entertainment industries have learned. And we have seen that self-publishing is not just for a handful of genres; it dominates those genres and represents a significant share of all ebook sales. As always, our data is available for download below. We have more detailed pie charts for each genre for a follow-up report, and we look forward to seeing what another quarter and another year bring.