Thoughts on the new Amazon Kindle Unlimited Subscription Service and The Long Tail

Amazon has just come out (July 18, 2014) with a program known as “Kindle Unlimited”.  As of now, it only applies to the U.S. site (Amazon.com), but if successful it will no doubt be rolled out to other Amazon sites around the world.  It is not clear to me if the program applies to non-Americans who have accounts on Amazon.com.  The basic idea is that for $9.99 per month, the subscriber gets unlimited access to all of the books in the KDP Select pool, about 600,000 titles at this time.   They can download up to ten titles at a time, but have to read or delete one or more of these titles before they can download another one.

Note that any Amazon book can still be purchased outside the Kindle Unlimited program, in the “regular” Kindle ebook store.  This could be the case for people who want to “own” a copy of the book rather than rent it or who simply don’t want to sign up for a monthly subscription fee.  Amazon Kindle Unlimited subscribers can still purchase books at full price, if they prefer.

The writer or publisher gets paid a fee every time one of his or her books is downloaded and read up to the 10% mark.  That’s the point at which a customer is assumed to have committed to the book, similar to the 10% sample available on the regular Amazon kindle website.  This ensures that readers don’t load up their kindles with books that they never get around to reading, and thus don’t drive down the unit price per download unnecessarily. 

The writer’s cut is based on dividing his or her downloads into overall  pool of money  e.g. if the pool of money was $2 million, and there were 1 million downloads, each download would be worth $2.  If an author had 10 downloads that month, he or she would receive $20.  Presumably, the pool will be based on the number of subscribers to the program.  The details of that are still unclear, but for this July the pool is set at $2 million.

To be eligible for the program, books must be enrolled in a program called KDP Select – that program requires the writer/publisher to be exclusive to Amazon.  Any book that is in that program is also automatically enrolled in Kindle Unlimited.  So, for example, if one wants to enrol a book in Kindle Unlimited that is currently published on Kobo or iBooks, that book would first have to be “unpublished” on the competing site.  By the letter of the contract, you shouldn’t even have the story available for free on your own blog or website.  It’s up to the writer/publisher, whether or not to enrol a book in the program.  On the one hand, it is another revenue stream from within Amazon; on the other hand, it means you can’t make any money on other ebook retail sites and can’t make your book available to people who use those sites.  In our case, for example, it would mean taking books off Kobo, where we know we have some loyal readers.

One interesting wrinkle of the program is that any book downloaded and “read” would be worth the same amount of money to the author/publisher, regardless of length.  So, a 25 page (10,000 word) $0.99 short story ebook would pay the writer as much as a 500 page (200,000 word) $3.99 epic length novel.  In the non-subscription part of the Amazon store, the 99 cent short story would pay the writer/publisher about 35 cents, while the $3.99 novel would pay about $2.80.  So, depending on what the fee per download of the subscription service ends up calculating out to, it would probably be more profitable for the writer/publisher to have short books downloaded by subscribers, but have longer books purchased by non-subscribers.  But, that’s clearly something outside of the writer/publisher’s control.  Readers will do what is best for them, depending on whether they think they will save money in the long run by going subscription, or whether they think they would be better off buying books on a one-off basis (including downloading free promotion copies, when available). 

One wonders how long Amazon will maintain the 5 days out of each 90 days that a writer/publisher can offer books for free, if enrolled in KDP Select.  The free days obviously represent no value to Kindle Unlimited subscribers – they can get as many books as they like for “free” anyway, as long as they pony up $9.99 per month.  Free still has value for non-subscribers, though.  It seems to me that it would be to Amazon’s advantage to drop “free” in the near future, as that would encourage cost-sensitive voracious readers to sign up for Kindle Unlimited.  As long as “free” is a possibility, voracious readers may want to stay out of the new program, and just read free books as they come up.  Note that if Amazon does abandon “free”, it will probably be done incrementally, in stages over a year or two.

Putting on my strategic thinking cap, it seems to me that Kindle Unlimited is an effort to further monetize the “long tail” in the ebook market.  The long tail constitutes that vast majority of books that are not hits or best-sellers (i.e. that don’t sell in the hundreds of thousands to tens of millions).  That’s anything from the solid mid-list books, purchased in the tens of thousands to the niche books that are only purchased by a few dozen people.  Amazon has already been quite successful at making money from the long tail – they basically created that market via the development of the kindle and their independent publishing outlet KDP and they have made a lot of money doing that.  But I suspect that they think that there is a lot of value left in that long tail market, that is currently being siphoned off by free books.  I think they want to turn that into cash.

The other strategic consideration for Amazon is to get writers to commit to being solely available on their store.  That would put the other retailers at a competitive disadvantage, being unable to offer a selection as large as Amazon’s.  And in a long tail world, large selection and an effective user-generated referral system (like Amazon reviews and Also-Boughts) are the keys to success.  That’s why the big box print bookstores (like Chapters or Barnes and Noble) beat the small scale shopping mall book stores during the 90’s and 2000’s, and that’s why the ebook retailers are prevailing over the big box print stores in the 2010’s, in their turn.

Another interesting aspect of Kindle Unlimited is that, as of the date of the writing of this blog (July 21, 2014), none of the “big five” publishers have signed on to the program (Penguin/Random House, Harper-Collins, Hachette, MacMillan, and Simon and Schuster).  That primarily leaves books produced by the mid-size publishers to independent/self-published writers.  Will that stifle the program?  My guess is that Amazon thinks not.  The kind of “long tail” consumers that they are after are often voracious, experimental readers who are content with Indies – indeed they may even prefer them to the safety of the big publishing houses.  Plus, not all of the biggest best-sellers are published by the big five.  For example, Hunger Games is published by Scholastic and it will be in the program, as will the Harry Potter books.  So, the new program will have some big name draws, even without the Big Five.

Some Indie writers have worried that Amazon and other retailers may eventually push them into an Indie and self-published ghetto, where they will languish, since they assume that most readers will automatically go to the part of the store dominated by the big name publishers and writers.  Other Indies have expressed what amounts to a “bring it on” attitude.  They think consumers don’t care about the publisher, and only want good books at a good price.  Since Indies have far lower overhead costs than big publishers, they think a lower priced Indie section would attract plenty of readers, especially their coveted loyal, voracious readers.

Indeed some of the big publishers have lobbied for just such a development. They may be getting their wish.  At this moment, it looks like Kindle Unlimited may be a de facto Indie section.  How that plays out is yet to be seen, however.  It may be that it is the big publishers who will be forced to cry uncle and sign up with Kindle Unlimited, if a significant part of the Amazon book buying public chooses to sign up with the subscription service.

So, there are a lot of interesting possibilities for readers, writers, publishers and retailers coming up.  Everyone will be trying to figure out what this new Amazon program portends for them.  Readers will be trying to calculate whether it will save them money, or cost them money to enroll.  Writer/publishers will be trying to estimate whether they will gain more from downloads than they lose in sales, on Amazon and other sites such as Kobo and Nook.  Other big ebook retailers, such as Kobo, will be trying to determine how they can best respond, in a strategic business sense.  And Amazon, as always, will be watching their data carefully, refining their algorithms and adjusting their business strategies in the manner that they feel best advantages them.

As for our little venture, Dodecahedron Books will enrol some of our shorter fiction in Kindle Unlimited, hoping it gets some downloads and drives some business to the longer books, like the Kati of Terra series and the Witches’ Stones series.  Other than that, it is a matter of observe, write, publish and try to enjoy the ride, which is all that anyone can do in the long run or the long tail J.