Level Playing Fields And The Evolution Of Free

Before I get started on the evolution of free, I’m pasting in the February graph for the Amazon payment per borrow for self publishers who participate in the Select program. The payment for February at $2.31 is back near the previous high of $2.48 last April, with only the $2.36 paid last October keeping this month out of second place.

Along with many other writers, I’m often guilty of using the term “level playing field” when what I really mean is “good for self publishers.” For example, back before Google rigged their search results, I often wrote about the Internet being a level playing field where posting quality book content online in simple HTML pages let a self publisher dip into the same stream of visitors as a larger trade publisher, with a minor caveat for the time required to build a good reputation.

Yet from the standpoint of a major trade publisher with an established business model, publishing books or large excerpts online for free was seen as a playing field that was badly tilted to new publishers with nothing to lose. Trade publishers were contractually prohibited from giving away an author’s works for free, and given their sunk costs and limited profits, couldn’t justify the business model of free in any case. And in retrospect, this wasn’t a simple case of fear or lack of innovation on their part.

I don’t believe the data exists to make a good argument as to whether self publishers expand the book market or simply take sales that would otherwise have gone to trade publishers. In the latter case, free becomes a marketing weapon that the up-and-coming publisher uses against the established trades to erode their market share in return for sales that wouldn’t even be on a large publisher’s radar screen. A self publisher like myself with nothing to lose from the free model happily gave away around half of the chapters from my books without worrying that the vast majority of readers would never buy the book. And if they found what they were looking for, they probably didn’t buy anybody else’s book on the subject either.

Take the time frame of 2003 through 2011, when my computer related web pages averaged well over 5,000 unique visitors a day, the majority of them first timers. Call it a million unique visitors a year to allow for return visits. Fewer than one percent of those visitors ever bought a book from me (though some bought all of my computer books), but with my net profit margin near 50% on POD books and over 90% on eBooks, I made a good living selling fewer than ten thousand copies a year in all formats.

But how many of my site visitors found what they were looking for and didn’t go to Barnes&Noble, Borders or Amazon to buy any book off the shelves? In a rapidly shrinking field like computer hardware books, the free material on my website, not to mention the pirated copies of my books sold as PDFs without DRM, wouldn’t have looked like a level playing field to an acquisitions editor for a trade paying five figure advances to technical authors, whose offset printed books were being returned unsold from stores.

And it goes without saying that free help of all sorts exploded on the Internet during this time period, even though little of it was “book quality.”  Even those websites that had nothing to offer but which managed to capture visitors and sell them worthless “information products” were sucking up dollars that may otherwise have been spent on books. So “Free” didn’t level the playing field for publishers in marginal nonfiction categories, it pulled the rug out from under them.

Now let’s consider the free model on Amazon, the original level playing field of self publishing, due to their “shelving” self published books right alongside established trade books, and basing their search visibility on customer choice. Amazon remains a fairly level playing field for paper books, at least from the self publisher’s perspective, though as I wrote a few weeks ago, the trade publishers may be coming to see Amazon as a destructive force to their brand equity and good will. But most new self publishers, especially fiction publishers, are abandoning print for Kindle and other eBooks.

Due to their digital nature with zero replication cost, it’s in the eBook field that the evolution of free takes on all the trappings of natural selection, with sharp claws and big pointy teeth. In fact, the attraction of free is so great in the eBook realm that Amazon has dialed back the visibility of free books, starting with their own collection of classics from Project Gutenberg and extending the weighting penalty to all free eBooks, which limits the effectiveness of free promotions for building the visibility of a title.

And there’s another type of free playing into the Kindle equation. The Kindle platform also attracted a flood of experienced Internet spammers who found the opportunity cost of publishing Kindle eBooks was no higher than adding another website to their stable, free. To be fair, Amazon has since made some effort to crack down on spammers recycling public domain content into Kindle eBooks, but it hasn’t done much to reduce the level of junk titles on Kindle aimed at micro niches, in which the “author’s” investment in the title can be measured in minutes or hours rather than in weeks and months.

Last month there was quite a buzz among Amazon Associates when Amazon announced they would stop paying commission on products purchased when a customer entered their store by way of a link to a free Kindle eBook. This changes the economics for sites that promote free Kindle eBooks during their Select promotion period, at least those sites whose primary monetization was through Associates and not through advertising.

Free on Kindle is at its best as a promotional tool to drive discovery for genre authors, everything from romance to mystery to SciFi, but the books have to be real crowd pleasers and the author must have written a number of similar titles or sequels to derive a financial benefit from the boost. I browsed through the Top 100 Free list on Kindle just now, and it’s still full of self published and small press titles, the vast majority of which are by authors who have a number of other Kindle titles that are generating significant income, if not necessarily paying the bills. And most of these titles by the same authors are priced at $2.99, so the $2.31 Select payment for those in Select will earn these authors more when the book is borrowed than when they make a sale.

Only one of the authors with a top 10 free eBook didn’t have any titles in the KOLL library (free for Prime members) when I checked. This is a major change from a little over a year ago when the Kindle Select program didn’t exist and the only way for a self publisher to get a book promoted free on Amazon was to have it offered free through another major retailer so that Amazon would price match. It looks to me like most authors have abandoned the price matching strategy, which resulted in the title being permanently free, in favor of Select.

I can think of several forces driving this shift to Select, despite the seeming advantage of having at least the lead title of a series included permanently in Amazon’s free collection.

• The goal for a free title is to rise high on the bestseller lists and generate publicity to sell other books by the author. These days, most of that exposure is driven by the third-party websites, newsletters, blogs and Twitter feeds promoting “new” free titles, so it’s harder and harder for a title with permanent free status to hold onto a spot near the top of bestseller lists.
• The change in visibility weighting for free titles means that giving away books for a long period of time and then shifting back to paid status won’t do a lot for the title’s search and Also Bought visibility on Amazon. A five day Select promotion can reach a lot of potential new fans, and then cash in on “oops,  too-late” sales once the promotion is finished, which will generate more “promotional weight” than all the free copies given away.
• It takes a bit of work to get an eBook published elsewhere at a price of zero and Amazon isn’t guaranteed to match that price. For most self publishers, it’s simply easier to work with Amazon, and the exclusivity demanded by the Select program doesn’t cost the author any income when promotion is the goal, since to get there by price matching would have required setting the price to zero.
• Authors make real money from Prime members borrowing their books in the Select program, and many of those borrows are from new readers who wouldn’t have paid $2.99 for the book.

Comparing titles on Kindle and Nook, it’s obvious that some authors who used to go for maximum distribution are either pulling back titles to go exclusive with Amazon or publishing their latest titles exclusively with Amazon. This is good news for Amazon, since for a low monthly cost (a million dollars is budgeted for March) they get a stable of titles exclusive to Amazon, which helps to drive both Prime membership and Kindle lock-in. It’s bad news for Barnes&Noble’s Nook and other eReaders, and ironically, it’s also bad news for the business model known as “Free.”

What Amazon has done with Prime is to change customer’s perception of free to something that has to be paid for by subscription, currently $79/year. What Amazon has done with the Select program is to change customer’s perception of free to mean “free five days out of ninety, so you better keep your eyes open.”

I wonder if Amazon (or some other company) will ever reach the logical conclusion of free, and simply give away eReaders locked into their retail stores and permanently attached to a customer’s account by programming. Surely Amazon has enough data to predict who would make a “good” Kindle customer but hasn’t bought a Kindle yet because they either don’t want to spend the money or believe they’ll hate eReading.

Maybe if I send this suggestion in to Jeff Bezos, he’ll give me a reward, like a free Kindle. Though I’d prefer is he made good my losses gambling on B&N stock last year:-)