My Hype Is Better Than Your Hype
Sometimes it seems that almost no one in the publishing industry can deliver a message without a sticky gloss of agenda-laden hype on it.
The latest AuthorEarnings report, prepared by the author Hugh Howey and his technologist colleague known as “Data Guy,” is a good case in point.
Rather than opening with the interesting news of what this highly respected pair have found in their most recent quarter of evaluation, they lead with a sarcastic recitation of ways they assert that the Association of American Publishers (AAP) and the traditional industry have incorrectly characterized the ebook market in the past 18 months or so.
The first thing you see is a World War III headline at the top: “AAP Reports Own Shrinking Market Share, Media Mistakes It for Flat US Ebook Market.”
I have a lot respect for Howey and Data Guy, as they know. They’ve done the industry a lot of good by offering another consistently generated and interpreted set of reports, an alternative view (not without detractors) to that produced by the publishing establishment and research companies that use publishing’s numbers, mainly Nielsen.
The problem, however — and they made this the first factor here, I didn’t — is that AuthorEarnings reports now are being delivered as our-hype-vs.-their-hype. That’s a mistake.
The original AuthorEarnings mission, which you can read on the About page is this:
Our purpose is to gather and share information so that writers can make informed decisions. Our secondary mission is to call for change within the publishing community for better pay and fairer terms in all contracts. This is a website by authors and for authors.
What that perfectly rightful goal somehow means today is a quarterly report deeply marinated in industry politics.
When you put your hype before the horse, the value of what’s in the cart is tainted and maybe completely missed. Many readers won’t make it to what these good guys have to report.
They won’t thank me for saying this, and I wish I didn’t have to. But I think that Data Guy and Howey deserve a better presentation than they’re giving themselves.
September 2015 AuthorEarnings Report
The Media Did It
Howey and Data Guy contend—and they’ll get no argument here—that major publishers are inflating ebook prices, and then announcing that ebooks aren’t selling as well as they were. Welcome to the party. This has been a topic of wide conversation for many weeks. This price was set by the publisher. We all know the line on Amazon sales pages. Agency pricing is widely understood to be holding established houses’ ebooks at prices the readership may consider too high. From commentator Mike Shatzkin in The Publishing World Is Changing, But There Is One Big Dog That Has Not Yet Barked (Mike likes those long headlines) to Thad McIlroy in Why Are Ebook Sales Falling?, there’s an understanding at least of the fact that $12.99, $13.99, and $14.99 ebook prices are being pinned on the majors’ books by their own publishers in full knowledge (if not admission) that these are not “popular prices” for digital reads.
It’s thought that traditional publishing, then, is ceding—either deliberately or through a miscalculation—some of the market share they had, or could have had, in ebooks.
The rationale behind this trend in pricing is where there’s some debate.
Are publishers hoping to quell the rise of ebooks? McIlroy thinks that’s it. He writes that he thinks publishers are jacking up their ebook prices:
Because the overall success of any new title is significantly influenced by its presence in retail outlets. Depending on how you define “book retail outlets,” and how popular the title, there are some 5,000 locations in the U.S. that will prominently display proven and potential bestsellers. Within the current publishing business model this exposure is an essential part of the sales ecosystem. If ebooks had continued to capture market share at the rate they were doing until a few years ago the book retail structure would now be in tatters. And established (mid- to large-size) U.S. publishers do not have a business model for dominating online sales in the same way that they can dominate total product sales with the existing retail component.
In short, he believes that publishers are protecting print by pricing their own ebooks out of the market because they can’t compete effectively in an ebook environment. He’s not alone in that analysis. He offers and disposes of three other possibilities, too, on the way to choosing the one about print-protectiveness. Here he is raising and rejecting those possibilities:
- The supply is insufficient for the demand: this is not a possible scenario with a digital product.
- Legal considerations/government requirements: the agency agreement does not address price levels, only the enforceability of retail price choices.
- Price elasticity: publishers are finding that their overall ebook revenue is higher at current price points that it had been at lower price points: this is clearly a possibility, although common sense seems to suggest ‘nay’.
Choose your reason. The fact of higher prices “set by the publisher” is on the sales pages, we all see it.
For his part, Shatzkin, an “influential industry veteran” indeed, as the AuthorEarnings fellows name him, makes the interesting observation that lower Big Five ebook prices could be a challenge for indies:
If publishers lower their prices to compete more effectively with indie-published books and the subscription offers, their revenue will go down but so will the indies’, who will lose some of the benefits they now gain from their pricing advantage.
September 2015 AuthorEarnings Report
‘Breathlessly Repeating…Completely Oblivious’
Howey and Data Guy contend that we in the various media (still a plural word) are too breathless to discern that the AAP’s numbers are generated from the reports of 1,200 traditional publishers. They seem to feel that in the hands of us dizzy news people, the industry’s numbers:
…are being conflated with the overall sales of the entire US ebook market. The substitution is so automatic, that most of the journalists breathlessly repeating stories about a “shrinking US ebook market” are completely oblivious to the difference.
Sorry, just give me a minute there. No I’m okay now, it’s fine. I’ll just lean up against the keyboard.
It might have been us breathless journalists who first informed you that the largest sellers of ebooks, chief among them Amazon, don’t release ebook sales figures. That’s why tracking ebook sales is so hard. Oblivious as we are, you probably also know from our reportage that this is the very same reason that Mssrs. Howey and Guy have to scrape sales pages at Amazon for the estimates they use: there’s no reportage of sales data from the biggest outlet of all, Amazon. So our two spider-men crawl the pages.
Benighted and gasping as we are, we nevertheless look surprisingly good to Hugh and Data when they want us to report their quarterly findings to you. Isn’t that a remarkable thing?
On the other side of the September report’s invocation, we find something so interesting that a good editor—I’m smiling—would have suggested it go right up at the top. Data Guy and Howey write:
We went through the thousands of publishers and publishing imprints appearing in each of our seven quarterly AE datasets. We looked up each book’s publisher against the list of 1200 AAP-reporting participants. To make sure we got it right, we received off-the-record help from some of the savviest experts reporting on the traditional side of the industry.
In delineating in their own observations what they determined to be the reporting baselines for the AAP’s 1,200-publisher analyses, they write:
Every book in each AE dataset, and all of its sales, had been tagged as either AAP-reported . . . or not. So now, finally, Author Earnings could do a true apples-to-apples comparison with the AAP’s numbers. We charted the AAP’s true share of the US Kindle ebook market over the last 18 months, in each of our seven AE data sets.
September 2015 AuthorEarnings Report
Now, That’s Good: Head-To-Head Comparison
About 990 words into the tirade, AuthorEarnings findings assert that:
- In 2014, Kindle ebook sales by the AAP’s 1200 reporting publishers (shown in purple) made up less than 45 percent of all Kindle books purchased in the US.
- Nielsen PubTrack’s ebook market statistics, based on self-reported unit sales data from only 30 of those 1200 publishers, account for an even smaller share—less than half of the “85 percent of the nation’s ebook sales” that Nielsen boldly claims.
- Traditionally published ebooks as a whole only made up 55 percent of all Kindle ebooks purchased in the US in 2014.
So where did the other 45 percent of the ebooks purchased by consumers in 2014 come from? The data also answers that very clearly.
They were published by Amazon imprints and self-published by indie authors.
What I’ll do here, by way of recommending you read through the report, yourself, is bullet out some more highlights of what Data Guy and Howey get in their latest interpretation of their data. Yes, their methodology is controversial, but this is interesting material, nonetheless. Quoting them here:
- The AAP’s share of Kindle ebooks purchased by consumers has fallen from 45 percent of all Kindle ebooks sold in February 2014 to less than 32 percent of all Kindle ebooks selling in September 2015.
- Over the past 18 months, Amazon imprints have nearly doubled their market share, from 7 percent of all Amazon ebook purchases in February 2014 to 13 percent of all Amazon ebook purchases now.
What they term “a jaw-dropping fact”—not a bit breathless, are they?—has to do with the so-called “shadow industry.” This is their construct of ebooks without ISBNs, the industry-standard identifier:
- Indie ebooks without ISBNs have grown from 30 percent of all Kindle ebooks purchased in January 2015 to now account for 37 percent of all Kindle ebooks being purchased in September.
- When indie ebooks that do have ISBNs are included, then indie self-published books, which made up 36 percent of all Kindle ebooks purchased in February 2014, now make up 42 percent of all Kindle ebooks being purchased on Amazon right now.
Howey and Data Guy use these and their other indicators to make the case that they can see a “rapid rise of the untracked ebook ‘shadow industry,’ right alongside the rapid decline in market share held by traditionally-published ebooks.”
- “Nontraditionally-published” ebooks from indie self-publishers and Amazon publishing imprints make up 58 percent of all Kindle ebooks purchased in the US.
- Traditionally-published ebooks make up 42 percent of Kindle ebooks purchased in the US.
- When the AAP reports “declining ebook sales”, they are describing the shrinking portion of the US ebook market held by their 1200 participating traditional publishers, whose share of the broader US ebook market has fallen in the last 18 months from 46 percent of all Kindle ebook purchases to less than 32 percent.
This, then, is this new quarterly report’s validation of the AuthorEarnings message. In terms of the money:
The market-share shift in unit sales, away from traditional publishers and toward indie ebooks and Amazon imprints, has been mirrored by a similar shift in publisher gross revenue. Today, indie self-publishers are taking home 24 percent of the gross publisher revenue coming out of the Amazon ebook store. Amazon Publishing imprints and their authors are taking home another 13 percent. The AAP’s 1200 publishers account for no more than 50 percent of publisher ebook dollar revenue.
September 2015 AuthorEarnings Report
Howey and Data Guy cite a “steep” decline in traditional industry ebook revenue from May to now, which, they write, “may very well be due to Penguin Random House’s return to agency pricing in early September,” already discussed. They reflect Shatzkin’s thinking on how earlier agency pricing effects might have been cloaked by the rising popularity of e-reading, the happy days of fast adoption and soaring ebook growth figures.
They also cite Kindle Unlimited (KU) as as a possible element in a decline of traditional-industry ebook market share.
Here is a very interesting assertion about KU’s impact:
- Today, 34 percent of indie author earnings from the Amazon store—over a third of indie Kindle revenue—takes the form of KU payments for pages read: in July, KU accounted for 2 billion pages (KENP) and $11.5 million dollars in direct author compensation.
And in terms of dollars, Howey and Data Guy estimate that “traditionally-published authors are barely earning 40 percent of all Kindle ebook royalties paid, while self-published indie authors and those published by Amazon’s imprints are taking home almost 60 percent.” This, they write, is a reversal from their February 2014 start point, when traditionally published authors were making 60 percent.
As always, the AuthorEarnings interpretation is worthwhile for the counter-balance of opinion it brings to a table long presided over by only the methodologies and viewpoints of a traditional industry that didn’t stand alongside an independent one. It is good to have this input.
We owe Hugh Howey and Data Guy our thanks. And we can hope that at some point, the start-up insecurity that’s maybe understandable in so young a sector of the industry will ease, so that these helpful insights and propositions—which represent a lot of work on these fellows’ part—can speak, free of hype, for themselves.