October 2016 Author Earnings Report: A Turning of the Tide…?
Two and a half years. Ten quarterly Author Earnings reports. With each one of them, we learned something new and unexpected about our rapidly changing industry.
But this October surprise flat-out blindsided us…
After two and a half years of quarter-over-quarter growth, Indie eBook market share shrinks significantly
- Indie ebook market share drops all the way back to early 2015 levels.
- Traditional publishers regain a little lost ebook ground.
- Amazon publishing imprints grow a lot.
To help put this sudden reversal into context, let’s look at the 32-month market share trendlines.
In unit sales terms, we have:
During the five short months since May, it seems that indies have somehow lost their market share gains of the preceding 18 months. This has been counterbalanced to a limited extent by a slight uptick in traditionally-published unit sales: both Big Five and Small/Medium Traditional Publishers have each gained roughly 1% in market share. But most of the lost indie market share seems to have instead gone to Amazon Imprints, who have gained a whopping 4% in market share.
A couple caveats apply when it comes to measuring the market share of Amazon Imprints (*1):
Due to their relatively small number of titles, Amazon Publishing’s sales are generally the most volatile from report to report. And this data snapshot was collected early in the month, when Amazon’s six KindleFirst titles held all 5 of the top 5 overall best-seller slots, and 6 of the top 7. But still, the KF titles made up only 2% of overall Amazon Kindle sales, or half of the increase we see in Amazon Imprint market share. The balance came from growing sales in the rest of their catalog.
Let’s next look at the 32-month trends in gross consumer dollar ebook spending:
In consumer spending terms, the May-to-October drop in indie title dollar market share parallels the drop in their share of unit sales. For the first time since Q1 2015, readers are spending more money on ebooks by Small/Medium Publishers than they are spending on indie ebooks. Despite the Big Five’s slight uptick in unit-sales market share, their share of consumer ebook dollars has continued to drop–albeit less steeply than in previous quarters.
The share of overall Kindle author earnings going to the Big Five has finally gone up a little. Although at 23% it still remains below its January 2016 level, Big Five authors have regained a little of the ground they lost between January and May. But the biggest recent winners seem to be the Small/Medium publisher authors, whose share of total Kindle author earnings has surpassed 20% for the first time.
Amazingly, when it comes to author earnings, Small/Medium Publisher authors as a cohort are now running neck-to-neck with the Big Five. Even a year or two ago, such a thing would have been unthinkable: back in early 2014, Big Five authors were outearning Small/Medium Publisher authors by a factor of more than 2.5x, and only a year ago–in September 2015–total Big Five author earnings in the Kindle store were still 2x those of all Small/Medium publisher authors.
But for us, it’s the drop in indie author earnings that triggers the most questions.
In May 2016, verified self-published indie authors were taking home nearly 50% of all US Kindle author earnings. Now, as of early October 2016, the indie share has fallen below 40%. What happened?
Our first question was whether traditional publishers had dropped their prices and were now selling their digital editions at prices more in line with consumer ebook price norms.
So we checked.
May to October change in author earnings by price point and publisher type
Here’s what the distribution of ebook author earnings by consumer price point looked like, for each type of publisher, back in May 2016, the time of our last report:
Contrast the above with what the breakdown of sales by price point looks like today, in early October 2016:
If anything, compared to May, traditional publishers are now making a smaller share of their consumer ebook sales at sub-$10 price points. The prices at which the majority of traditionally published ebooks are being purchased today has moved up, not down.
More attractive consumer pricing by traditional publishers clearly wasn’t the cause of the shift.
If not ebook prices, what else might have caused this sudden reversal?
After a consistent 27-month trend in the opposite direction, it’s hard to fathom why there would be such a big single-quarter shift in indie market share.
This reversal is far too abrupt to reflect changing consumer reading preferences or purchasing behavior: such a change would have been far more gradual.
A far more likely reason would be some kind of underlying structural alteration in the modern bookselling ecosystem: a recent change in the relative discoverability of ebooks by different categories of publisher, that has tilted the digital-sales playing field.
But what kind of change would impact ebook discoverability? We can think of three possibilities:
Perhaps traditional publishers, sobered by their mounting digital losses and fast-evaporating market share, have finally decided to more aggressively market their ebook editions.
We have seen definite anecdotal signs that the savvier and more agile smaller traditional publishers (such as Bookouture, Open Road Media, Sourcebooks, and the like) are increasingly adopting bookselling strategies and tactics that were first pioneered by indie authors. We’ve seen them adopt retailer-specific Amazon ebook metadata, hold more frequent $0.99 and $1.99 sales advertised through BookBub and similar discount newsletters, run Facebook ad campaigns for their books, and the like. Perhaps the largest publishers are also beginning to do the same, too, albeit more slowly.
Or… the shift could be due to a change on the retailer side.
Amazon tweaks and optimizes their retail website, merchandising algorithms, and nightly recommendation emails on a continuous basis. Perhaps they’ve recently adjusted one or more of those in a direction that gives higher visibility to paid-for publisher featuring of traditionally-published ebooks?
Such changes to retailer merchandising prioritization of books would not be unprecedented (*2). And they would be largely invisible; at Author Earnings, we would only be able to observe their downstream effect on sales and market share. For example, if Amazon’s nightly email recommendations to ebook consumers had recently been tweaked to given more emphasis to paid-for publisher featured books, that could very well drive this type of shift. But we have no real way of knowing.
Still, at this point for Amazon, lending a helping hand to traditional ebook sales might be a logical strategic move–one intended to provide a digital carrot for the largest traditional publishers, in the hopes of forestalling their ongoing deliberate and self-damaging retreat from ebooks.
Or… the shift could be due, at least in part, to the gradual reduction in average Amazon.com print book discounts on traditionally-published Hardcovers and Paperbacks–a factor which could be driving format-agnostic fans of those authors back toward ebook editions.
When we look at 2 years worth of quarterly trends in average Amazon print discounts, it seems to lend support to that theory:
The average Amazon discount for sales of traditionally-published titles–both for Big Five and Small/Medium publishers–spiked up sharply between May 2015 and September 2015. But ever since, Amazon has been slowly lowering those discounts. And sometimes not so slowly: between May 2016 and October 2016, the average discount on print editions from Small/Medium publishers plunged by almost 5%. Perhaps it’s no coincidence that ebook editions from Small/Medium publishers saw the biggest jump in consumer dollar sales this quarter.
But again, while the above correlation of ebook sales with print prices is suggestive, it’s still speculation.
UPDATED October 13: A look at the “Bookbub Effect”
Many savvy authors in the comments below have brought up as a potential cause the declining share of indie books featured in BookBub newsletters. BookBub is a major influencer in the modern bookselling ecosystem: in particular, when it comes to the discoverability of ebooks, BookBub is without a doubt the single most significant third-party player, outside of the retailers themselves.
To quantify the effect of the changing deal mix at BookBub, AuthorEarnings extracted data from two years worth BookBub newsletters–ending up with over 16,000 discounted-price BookBub deals on Amazon Kindle titles to analyze. Then we correlated that daily history of discounted BookBub deals against the listed publishers for each title from the AuthorEarnings database.
Here’s what the two year trend in the share of BookBub deals by publisher type looks like, quarter by quarter:
(For clarity I’ve combined Indie Self-Published & Uncategorized Single-Author Publisher, as nearly all of the latter are unverified Indie authors as well).
It gets even more interesting when, instead of looking at the relative number of BookBub deals going to indies, we consider what list categories those deals are in, too.
Not all BookBub deals are equal.
Getting a listing in Crime Fiction, Mysteries, Thrillers, or Contemporary Romance, for example, means a lot more resultant sales on average than a listing in Science Fiction, Paranormal Romance, or Horror. (Average discounted sales for a listing in each category can be found on BookBub’s “Featured Deals Pricing” page — they vary from 260 sales to 3,970 sales, depending on the BookBub category.)
So if the mix of BookBub categories where indies are featured has also changed substantially over time, the impact on indie ebook sales and earnings could be less than or greater than what deal count alone would indicate. Using the average sales numbers for each BookBub category, here’s how the ratio of actual BookBub-attributable sales by publisher type has changed over time:
When we incorporate the average sales per BookBub listing category, rather than just looking at pure deal count, we see that the indie share of those Bookbub-generated sales has declined even more steeply than the indie share of BookBub deals.
It appears that not only are indies receiving an ever-decreasing share of BookBub deals, but also that indie deals are now more likely to be in the less popular BookBub categories, and less likely to be featured in BookBub’s heavier hitting categories that drive thousands of sales.
As a cohort, Indies are being accepted for less than half as many discounted BookBub deals as they were 2 years ago… and because of the categories those indie deals now mostly end up in, selling only a third as many BookBub-listed books.
However, the 40-50 daily discounted BookBub deals across all categories combined lead to an average of at most 50,000 – 60,000 attributable unit sales at the very most, and that’s across all retailers, a total that can be readily projected from BookBub’s “Featured Deals Pricing” page.
Which means that even if all those units sold were Kindle units, BookBub deals could potentially account for at most 5–6% of ALL Amazon Kindle unit sales total, of which 1-2% are BookBub-attributable indie sales… and these are very conservative upper bounds.
The real BookBub impact on Amazon might well be half of that.
In other words, even if BookBub were to cease accepting any indie titles period, the maximum drop in Indie market share would be at most 1-2%.
The 2016 decline in indie BookBub deals that we measure here isn’t the explanation–it could have shifted Kindle market shares by 0.5% at most.
We still don’t have a definitive answer
It will be interesting to see what happens next quarter.
We have no idea whether this reversal represents the new normal–no clue at all whether what we’re seeing is a single-quarter blip before the previous relentless market-share shift toward non-traditional ebooks resumes; or whether we are seeing the true beginning of a turn in the digital book tide.
But regardless, if you’re a traditionally published author of longstanding tenure, this change is probably good news.
On the other hand, if you’re a relatively new traditionally published author or traditional publishing aspirant, the news is a whole lot less exciting. Because it seems the benefits of this recent increase in traditional ebook market share are not being felt equally by all authors…
Failure to Launch: the worsening plight of recent traditionally-published debuts
Let’s revisit the distribution of author earnings by publisher type and price point that we looked at above. But this time, let’s ignore the earnings of the longer-tenured authors, greying out and eliminating any author whose first title was published 2 years ago or more. This gives us a look at only the earnings of the more recent debuts along each publishing path.
For these newer author cohorts, who published within the last 2 years, the discrepancy in ebook author earnings by chosen publishing path remains very stark.
Blue shows us the earnings of indies who first published in the last 2 years. Green is author debuts by Amazon imprints. For the Big Five–and for Small/Medium publishers–you really have to squint to spot any purple or red. With traditional publishers sticking more than ever to higher prices for their recent debuts, it seems that with few exceptions nearly all of the Big Five’s ebook sales are going to their longer tenured authors.
To even be able to see the earnings of more recent traditionally published authors on this chart, we need to zoom the vertical scale:
After zooming in, we can now see finally a little bit of purple Big Five earnings. But nearly none at prices below $9.99.
Back in our May 2016 sidebar special report on Big Five ebook pricing, we pointed out some troubling differences between the prices of recent backlist ebooks by long-tenured Big Five authors and those by more recent Big Five debuts. We showed that this discrepancy has effectively crippled the digital sales, earnings, and discoverability of more recent Big Five authors. Between early 2014 and early 2016, compared to all authors of the same vintage, newer Big Five authors saw their relative share of the pie drop the most dramatically–falling from 22% of the total to 9% of the total.
Today? Those recent Big Five debuts–represented by the slivers of purple in the above graph–are taking home less than 7% of the new-author total.
But it’s not just their author earnings that higher ebook prices damage.
The impact of high prices upon the discoverability of these more recent authors, who are now trying to launch their careers and build up a base of new readers and fans, is even greater. We can see that by looking at unit sales:
For every reader discovering a new Big Five author, there are literally dozens of readers finding brand new indie authors and Amazon-imprint authors they enjoy.
If you’re a recent Big Five debut–or a new author considering signing a traditional Big Five deal–when it comes time to negotiate ebook price ceilings for your books, the above two charts are worth taking to heart.
High ebook prices make newer authors invisible to the vast majority of avid readers, who don’t care how a book is published.
$10-$15 ebook prices are the kiss of death for most new Big Five debuts.
But aren’t these recent Big Five debut authors making up for those lost ebook sales by selling more print books instead?
Let’s take a look.
Here’s what the mix of earnings by format looks like for all authors:
When we view all traditionally published authors as a cohort (Small/Medium publisher in red, Big Five in purple), total Amazon print earnings are quite substantial. It can be a little misleading if you mistakenly interpret the above as the median earnings mix for individual authors, because the majority of those print sales for both traditionally published authors and indie authors are nonfiction–generally written by a different set of authors than their fiction counterparts who make the majority of ebook and audiobook earnings in each category. But at a macro level, for different categories of publisher, it captures the total mix accurately. And it’s especially interesting when we compare it to what the same mix looks like for just recent debuts in each publisher category.
Again, let’s eliminate all of the longer tenured authors and their earnings, and look at just the earnings of authors who first published–either traditionally or indie–sometime in the last 2 years.
Surprisingly, when we look at just the more recent debut authors along each publishing path, the indie cohort of new authors is selling nearly as many print books online as the Big Five, and as Small/Medium publishers. (Back in February 2016, we weren’t at all surprised to find out that 11 of the top 35 best-selling print books in the Amazon US store were coloring books. But we were surprised to find out that 5 of them were self-published POD coloring book titles… by indies.)
CreateSpace and IngramSpark/LightningSource have now made it extremely easy and inexpensive–often even free–for indie authors to create and distribute Print-On-Demand paperback editions of their books. And selling those print books online is even easier. At the click of a button, indie authors–as well as the smallest boutique publishers and micropresses–can now sell their books through the same online retail storefronts that today account for roughly 50% of total US print sales.
The print playing field has become far more level than it used to be. And when comparing the online print sales of the most recent Big Five debut authors, who don’t yet have name-brand recognition, against those of their indie counterparts… it shows. When it comes to selling print books online, the gap between the most recent traditionally published authors and the most recent indie authors has narrowed substantially.
But that’s only online print… what about sales at brick and mortar bookstores? Haven’t they gone up? Aren’t bookstores across the US once again thriving, like the media has been reporting?
The reality is a little more complicated.
US bookstore sales: the real story. It’s not what you’ve been hearing…
Blurry Nielsen Bookcan categories confuse skyrocketing online Amazon print sales with “bookstore” growth, fueling false physical-bookstore recovery narrative
Over the last 12-18 months, publishing industry news–and often mainstream media as well–have been telling us that “bookstores are back!”
These articles mostly point to two pieces of data in support of their conclusions:
- The $50 million a year total increase in print sales reported by ABA-tracked independent bookstores.
- The 5% overall YTD uptick in reported US print unit sales, due solely to strong growth in Nielsen Bookscan’s “Retail & Club” sector.
At the same time, these articles carefully ignore many other crucial pieces of data:
- Namely, they ignore the fact that during the same time period as the $50 million uptick at at independent bookstores, print book sales at Barnes & Noble, which were already down $190 million in fiscal 2015, fell by at least another $80 million in fiscal 2016 —a loss of 1.5 times as many print sales as the ABA independents have gained. They ignore the fact that sales at Books-A-Million–the second largest national bookstore chain (and a very distant second to B&N)–had, as of their most recent public report, stayed at best flat. And they ignore the recent report that, for the first quarter of fiscal 2017, B&N’s losses are only accelerating.
- And they also ignore the fact that also during the same time period, print book sales at mass merchandisers like Walmart, Target, and the like, which appear in Nielsen Bookscan’s “Mass Merchandisers & Other” category and collectively make up a far larger share of US book sales than the ABA’s independent bookstores do, shrank almost 9% in 2015. And in 2016, those mass merchandiser sales have thus far fallen a further 4%.
So, with print sales at independent ABA bookstores up a tiny bit, but book sales at all major US bookstore chains and mass merchandisers down by almost an order of magnitude more, then why does Nielsen Bookscan’s “Retail & Club” sector still report that US print book sales are up 5% overall?
The answer’s pretty simple.
- Nielsen Bookscan’s “Retail & Club” sector doesn’t primarily track US physical bookstore sales anymore–it also includes online print sales, including Amazon’s.
- Nowadays, more than 50% of the total sales reported in Bookscan’s “Retail & Club” category are Amazon.com online print sales; US physical bookstore sales now make up the minority.
- In the past 12 months, fueled by deeper Amazon print discounts, Amazon’s online print sales have exploded–growing by a double digit percentage year-on-year.
- Those fast-growing Amazon online print sales have more than offset the collapsing sales at physical bookstores, leaving us with a 5% overall net print-sales gain for the US.
- When Bookscan lumps both together into one reporting category, it completely obscures this rapid shift in where those books are being bought, letting us see only the net 5% overall print-sales gain.
- The media mistakenly reports that net 5% gain as a nationwide increase in sales at “bookstores.”
How do we know this?
By looking at 2016 sales data & corresponding sales ranks for Amazon.com print books, the same methodology we use to measure ebook sales. And here is what Q1-Q3 2016 Amazon print-sales data looks like, overlaid on top of data from 2015.
In the chart below, the underlying gray data points are from Q1-Q3 2015, and the overlaid green ones were collected during Q1-Q3 2016. When we compute log-quadratic curve-fits separately for each set of data to yield rank-to-sales curves, for 2015 it yields the purple curve, and for 2016 the blue curve.
Even on a log-log plot such as the above, the year-on-year growth in Amazon’s print sales is visibly obvious. If we zoom in to the top quarter of the range in the chart below, we don’t even need to fit curves to see Amazon’s 2016 print-sales growth: it’s visible to the naked eye. The green 2016 data points for each sales rank correspond to a significantly higher number of total sales than their gray 2015 counterparts do:
The distance between the blue and purple sales curves tells the whole story:
Amazon’s 2016 online print book sales are nearly 18% higher than they were in 2015.
When we integrate the area under the two curves, we find that:
- Amazon sold over 255 million print books in the US in 2015.
- Amazon is on track to sell well over 300 million print books in the US in 2016.
The above totals include at least 13 million annual print sales of non-expanded-distribution CreateSpace POD books by self-published authors, which Amazon does not include in the numbers they report to Nielsen Bookscan.
The implications are numerous:
In 2015, more than 40% of Nielsen Bookscan’s 652 million total reported annual US print sales–and the majority of Nielsen’s Retail & Club sector–were online print sales from Amazon.com, rather than brick-and-mortar bookstore sales.
The fact that Nielsen Bookscan reports only 5% growth in the “Retail & Club” sector, when Amazon’s half of those “Retail & Club” numbers is up 18%, can only mean one thing:
The other half of the Bookscan Retail & Club sector, US physical bookstore sales, must be down by at least 8%.
The math is inescapable.
For traditionally-published authors, especially those whose books are not receiving front-table co-op in bookstores and airport outlets, Amazon is not only the source of most of their digital sales, it accounts for an increasing percentage of their print sales, too. In most cases, Amazon will make up the majority of them. And as we’ve seen in the data for newer traditionally-published authors, high ebook prices mean those authors are far less likely to find an audience and build a word-of-mouth fanbase. Which is probably why newer traditionally-published debuts, saddled with those sky-high ebook prices, nowadays aren’t really selling all that many print books, either.
Will indie ebook market share rebound in Q4?
Or will it continue to shrink?
At this point, the answer is anybody’s guess. But we’re intensely curious to see what further changes the end of the year will bring. Either way, this remains a golden age for authors willing to take control of their careers, and we don’t expect that to change any time soon.
(*1) – For KindleFirst title preorders, the price at which most sales occur should be the $1.99 preorder price, not the $4.99 release price. But the net effect would be to reduce Amazon Imprint market share by about 1%, while increasing the market share of other publishing categories by a fraction of a percent.
(*2) As an illustrative example that many indies have pointed out, consider last year’s change to Amazon keyword search results for books. Amazon eliminated the option to sort results by “Best Selling”… leaving the “Featured” sort order as the closest default alternative. That particular Amazon change happened to be a plainly visible site modification… but behind-the-scenes changes to book prioritization algorithms are far less easy to spot.