A lot of ink is being spilled over the ongoing negotiations between Amazon and Hachette. Neither company has said anything publicly to indicate what exactly is being negotiated, though Hachette has said they are fulfilling orders in a timely manner, and Amazon has issued a statement that indicates there is no end in sight… and offered to fund 50% of an author pool to mitigate the impact of this dispute on author royalties, if Hachette funds the other 50%. Without more knowledge of the terms being offered by both sides, it’s impossible to say if one is being more unreasonable than the other. What we can say is that authors are being severely affected.
At AuthorEarnings.com, we find ourselves in the rather unique position of having taken two data sets of e-book sales from the time period of these negotiations, so we thought it might be interesting to look at what effect the standoff has had on Hachette e-book sales. It’s worth noting that this dispute between Amazon and Hachette goes back at least to November, so we may only be capturing a portion of the overall drop in sales.
Several authors have already reported a drop in sales of their Hachette-published titles – both print and e-book. Our data set on the 85,000 best-selling Kindle e-books includes 1,363 titles from Hachette. A comparison of our February and April data bears out what these authors are reporting: Hachette-published e-books are on average slipping in Amazon sales rank and falling off the charts much faster than works published by the other Big-5 publishers.
Hachette’s total estimated unit sales dropped from 47,000 in the February dataset (5.9% of the total pie) to 38,000 in the April dataset (4.4% of the total pie), despite the latter dataset capturing more books overall (85,000 vs 54,000).
Between February and April, Hachette’s Kindle e-book unit sales have fallen 20% – 25%, depending on whether we are looking at relative market share or at absolute numbers.
Hachette’s share of gross earnings dropped from 8.2% of the overall pie to 7.7% of the pie.
Correlation is not causation, and there are many factors potentially at play here, but unquestionably the average price of a Hachette e-book is playing a role. Between February 8th and April 24th, the average price of a Hachette e-book on Amazon went up 5.5% (versus an average of 2.8% for the rest of the Big-5). That’s twice the increase, which must be partly due to Amazon no longer discounting Hachette’s e-books as steeply as before.
The difference in price increase becomes even more apparent when we look at only those books earning $10/day or more across the Big 5 publishers:
|PUBLISHER||Average Kindle e-Book Sale Price||Change (Feb-Apr)|
|Penguin Random House||$9.13||-0.2%|
|Simon & Shuster||$9.24||-2.0%|
Hachette has the highest average e-book retail price and by far the biggest Feb-Apr increase in price among the Big-5. (The price of the average Penguin Random-House and Simon & Shuster e-books actually trended down.)
Which naturally led us to wonder if there was a correlation between higher e-book prices and title churn (a measure how individual titles move on the bestseller lists over time.)
Below, you can see a “stoplight” chart that compares title churn among different Big-5 publishers (and different publishing types). For each publisher, the green portion of the bar captures the percentage of their bestselling titles where title revenue climbed 25%+ between February and late April. The yellow portion captures the percentage of that publisher’s bestselling titles where title revenue stayed relatively stable–within 25%. And the red portion of each bar captures the percentage of that publisher’s bestselling titles where, between February and April, title revenue fell more than 25%. (Naturally, for each publisher the green, yellow, and red portions of their bar add up to 100%.)
To provide a direct visual comparison of their title churn, we aligned each publisher’s yellow band (representing their stable-earning titles) along the centerline of the graph.
At first glance, we can immediately see that Hachette’s entire bar sits 10% lower on the chart than any of the other Big-5 publishers. The green portion of Hachette’s bar, showing what percentage of Hachette’s bestselling titles climbed significantly in revenue, is far smaller than that of any other publisher (or publishing category). The red portion of Hachette’s bar, showing what percentage of Hachette’s bestselling titles fell significantly in revenue, is far larger — in fact, more than 60% of Hachette’s bestselling Kindle titles fell 25% or more in revenue.
The graph shows us at a glance what the comparison of churn rates means: Hachette appears to be sliding off the charts.
Our focus on Amazon Kindle sales prevents us from seeing any possible corresponding increase of Hachette sales at other digital retailers to offset these declines, but we can say that the increase in the average price of Hachette’s e-books is having an effect on sales. It could also be that various Amazon algorithms and recommendation tweaks are contributing to the decreased sales. The big lesson is this: Across the Big-5 publishers, lowering average e-book prices correlated with higher per-title revenue. Increasing e-book prices correlated with lower per-title revenue.
This bears repeating, and it’s a lesson publishers could take from self-published authors: Lower prices means earning more money. We understand that this is counter-intuitive, but our data bears this out. And it’s a truth that many authors have seen for themselves as they experiment with prices. Which raises the question of whether or not publishers would even benefit from control over e-book prices. It could be that the worst thing for Hachette’s bottom line would be to get what they’re asking for in these negotiations.
The Impact of Price Changes on”New” Authors vs “Old” Authors
In our previous report, we also compared how “New” authors (those whose debut on Kindle was after 2009) were faring under each type of publishing. It’s only natural that we would ask the same question regarding the impact of Big-5 pricing changes. We were curious to see if those who could least afford the hit to their incomes were the ones most affected.
So we ran the same report as above but this time for only “New” authors. Roll over (or tap) the chart below to see how things change when we only consider these “New” authors from each publisher.
Unsurprisingly, given our findings from the last report, “New” Big-5 authors, with Kindle debuts after 2009, are bearing the brunt of the churn. When we roll over the chart, all of the Big-5 bars drop lower. This neatly shows the greater impact of title churn on “New” authors, as when only they are considered, green and yellow percentages shrink and red percentages grow.
Hachette’s bar drops farther than the others, indicating titles by Hachette’s more recent authors have been hit harder than those with longer tenure. Again, correlation isn’t causation, but this makes intuitive sense: Higher e-book prices will have a greater negative impact on a newer author, who has had less time to establish a large readership and loyal fanbase than his or her longer-established peers.
Side Note: Why are newer Macmillan authors faring so poorly, relative to their Big-5 peers?
As we looked at these churn charts for “New” authors versus “Old” authors, we were primarily focused on Hachette. But one other peculiarity jumped out at us from the chart and begged for a deeper examination.
When we compare the churn of bestselling titles from all Macmillan authors to those from other Big-5 publishers, on average the Macmillan’s titles perform in the middle of the Big-5 pack — better than Hachette & HC, but slightly worse than PRH and S&S. However, looking at only “New” authors, with Kindle debuts after 2009, reveals a very different story. (To see, roll over the comparative churn graph again, paying special attention to the bar for Macmillan.) For titles from “New” Macmillan authors, the bar drops precipitously — almost as far as Hachette’s.
On average, titles by Macmillan’s more recent authors are churning down and off the Kindle bestseller charts significantly faster than those of their Big-5 peers.
We don’t know what this means, but do wonder if e-book pricing is a factor yet again. Among the Big-5, Macmillan showed the greatest discrepancy between average price increases for “New” and “Old” authors — almost 3% more for “New” authors. Macmillan seems to be charging a premium for the very authors who can least afford to lose the resulting sales.
Back to Hachette
It is unfortunate that Hachette authors are caught in the crossfire and losing sales in Hachette’s negotiation with Amazon. While Hachette’s margins will no doubt rebound rapidly once the negotiation ends, the impact on their individual author’s careers might be longer lasting, especially as Hachette won’t hesitate to drop many authors for failing to meet sales expectations. Perhaps this look at correlation between price and sales will also prove useful those those publishers negotiating with Amazon. If part of those negotiations are for higher e-book prices, that might be a disservice not only to their authors, but to the publishers themselves. Hopefully, the two corporations will come to an agreement. In the meantime, we hope the proposed author pool designed to assist affected writers comes to fruition.