A week or two ago I published an expanded graph of the Amazon royalty to Kindle publishers who participate in the Select program, which provides for a pot of money each month to be divided amongst all Select publishers in proportion to the number of times their books are borrowed by Prime Members. Amazon just announced that the Select pot for December will be $1.1 million, which is a $300,000 drop from December of 2012 and could result in a royalty as low as 99 cents.
Let’s do a simple approximation of the expected Select royalty for November and December 2013 based on the previous trend, keeping in mind that part of the October to November drop in 2012 could have been due to the opening of the Kindle Owner’s Lending Library program to international Amazon stores. If that wasn’t the case, the trend would put the November 2013 Select royalty at $2.02.
The Select pot in 2012 was doubled from November to December and the royalty still fell a couple pennies. Since the Select pot is unadjusted from November to December this year, the trend would predict that the December 2013 Select royalty will come in at just 99 cents!
Kindle publishers have long assumed that the whole aim of the ever changing Select pot was to keep the royalty around $2.00, where publishers using the 70% royalty structure will earn as much on the borrow of a $2.99 book as on the sale, motivating them to get with the program. As with last year, there was a sort of a structural change to the program in the Fall, in mid-September in this case, when Amazon stopped displaying a $0.00 alternative price for books in the KOLL program. This probably contributed to the record high royalty in October as the proportion of new Kindle device owners with a 30 day Prime trial weren’t tempted into borrowing a book.
Until the November numbers are released in two weeks, there’s no way of knowing if simple straight line approximation will be accurate. I can think of a few factors that could depress the relative number of books borrowed through KOLL, which would prevent the royalty from falling so drastically in December.
- Amazon may be seeing that the majority of Kindle sales at this point are upgrades, or replacement devices, for customers who are already Prime members. So their purchase of a new device wouldn’t result in more books borrowed through KOLL.
- The Select program is only for small presses and self publishers who use Kindle Direct Publishing (KDP), and Amazon may be predicting that Prime Members will be borrowing a much larger proportion of trade titles this Christmas season. Perhaps they have acquired the rights to some recent blockbusters that will be added to the Lending Library in December.
- Amazon may be seeing that the majority of new Kindle device purchasers are buying Fires for consumption of video rather than books, and these customers may not use their monthly book borrow perk even if they become Prime Members.
- Amazon may be using a simple month-to-month approximation without reference to history, and if the November royalty falls as predicted, they may wake up and increase the December royalty even though it’s already been announced.
Of course, another possibility is that they just aren’t that worried about the royalty amount falling because they are satisfied with the rate of expansion of the Kindle platform and don’t feel that the cost of the book perk for Prime Members is justified by the increased membership. Amazon is very, very good at big data, and they may have concluded that the free monthly book borrow has run its course as a recruitment tool and should be allowed to fade.
My guess is that a royalty under $1.00 would be a psychological shock for Kindle publishers, leading a rush to the exits by some of those who no longer value the Select program’s option to run a 5 day free promotion once every three months. Of course, the Select program locks in titles for a 90 day period, so any stampede to remove books from KOLL would be tempered by while publisher wait for the time limits to expire.
I’ll say this, it’s always interesting with Amazon.