Tue, 23 Apr 13 at 14:44   | comment 12 Comments

Average E-Book Earned Just $297 Last Year


The Long Tail

The long tail

 
In 2012, the average e-book earned its author less than 300 dollars.

And that’s the average, pushed higher by a small number of very, very successful books. The median result is likely even lower.

Now, this figure is an estimate. Though the 800-pound gorilla — that would be Amazon — sells the vast majority of e-books, the company is extremely secretive about actual numbers. Individual authors can see their results, but aggregate figures? You might as well ask for the President’s nuclear launch codes.

Now and then Jeff Bezos lets slip a small, isolated data point. The most recent was in January, when he noted that ebook sales had risen 70% — but was that unit sales or revenue? And what was the total? No further details.

Nonetheless, we can use a range of data from disparate sources to come up with a good guess. I’ve detailed these sources, assumptions and calculations below. If you’re interested, take a look and see what you think.

Of course, many ebooks aren’t intended to make much money. Forget free books, which are left out of these calculations entirely (include them, and the average would drop even lower). But other types of books will never see big sales: assembly-line reprints of out-of-copyright “classics,” auto-generated Kindle spam, vanity publications, one-offs intended as lecture-circuit lagniappes, and so forth.

Still, at $300 each, you’d have to publish 48 books per year just to make minimum wage — if you could write them in all in your waking hours.

Amazon, by the way, is doing just great in this model. A couple dollars per book isn’t much for the individual author, but with two million titles out there, the money adds right up for them.

And maybe that’s why they’re so closed-mouthed about the numbers.

Methodology & Sources

Amazon dominates, so we’re going to look at just Amazon ebooks. Given the fungible nature of the marketplace, however, there’s little reason to think results would vary with B&N, Apple and the others included.

This is complicated, so I’m including the spreadsheet here, if you’d like to follow along.

First, we calculate the US share of worldwide book sales. 2012 global figures aren’t out yet, but 2011 is good enough; it probably hasn’t changed enough to affect the proportion substantially. So: 2011 book sales were $27.2bn (Association of American Publishers, AAP) and US sales were $6.7bn (also AAP), for a US share of 24.6%.

2012 US book sales were $7.1bn (AAP), and we can extrapolate for a 2012 worldwide number of $28.8bn.

Key assumption: The problem with all “official” statistics is that they miss independent, self-published books. AAP’s figures rely on reporting from approximately 1,000 publishers; Bowker tracks ISBNs, which many self-publishers don’t bother registering (they use Amazon’s ASIN number instead). However, I’m going to assume that the significant difference is in e-books — ie, that self-published printed books are an immaterial part of the total.

So let’s figure out how much money Amazon made from “officially counted” printed books. Bowker Market Research reports that AMZN has a 27% market share, of a total pie that is 78% printed (non-ebook). Applying these percentages to the total $28.8bn above, we estimate Amazon’s total (worldwide) 2012 revenue from printed books at $6.07bn.

Now, one of the very few statistics Amazon actually reports is “total media sales,” and in 2012 they amounted to $19.9bn. However, this figure includes DVDs, CDs, music and streaming media. To determine what all this non-book stuff adds up to, we need …

Another Assumption: That the ratio of “home entertainment” (as this category is known) to “books” revenue is the same nationally and at Amazon. After all, why not? Amazon is probably the biggest player in both anyway — except for streaming, which is dominated by Netflix. So let’s remove the streaming revenue. According to the Digital Entertainment Group, total US home entertainment sales were $18bn in 2012. Of that, “almost 30%” was digital distribution, or $5.4bn, leaving $12.6bn net.

Separately, Netflix streaming revenue in 2012 was $3.6bn. Removing that from total streaming — the $5.4bn we just just calculated — leaves $1.8bn for everyone else. How much of that did Amazon have? Let’s call it 1/3, assuming that Hulu, a larger player, makes twice as much as Amazon [see Note]. That leaves AMZN with $0.5bn. Could be a few hundred million more or less, but that won’t make much difference to the final results.

OK, so total media sales for all companies (less streaming) is $12.6bn. That’s 1.77 times US book sales (of $7.1bn), or expressed another way, 63.9% of the of media sales (including books but not streaming). Applying this ratio to AMZN’s $19.4 (media sales less streaming), we find that everything in Amazon’s figure that isn’t books equals $12.4bn.

Thus total Amazon book sales in 2012 are estimated at the difference, or $6.98 billion.

Meanwhile, remember that we determined Amazon’s printed-book revenue to be $6.07bn. Subtract that from total book revenue of $6.98bn, and we’re left with their 2012 Kindle book revenue: $910 million.

Take a second to marvel at the number. Once more:

2012 Amazon ebook revenue: $910 million

Amazon NEVER even hints at this, and we figured it out! Amazing! (if I say so myself.)

Moving on, there are currently 1,933,163 ebooks in the Kindle store. Limit the search to “free ebooks” and we find 59,720. For the purposes of this analysis we need to ignore the free books, so that means a total of 1,873,443. Divide this into total revenue (again, $910m) and we get an average revenue per Amazon ebook in 2012 of $484.

The last step is to estimate out how much the authors are making from these sales. What we need to know is how many of those 1.87m titles are priced under $2.99 (35% royalty) vs. $2.99 and up (70% royalty). I just counted the number of <$2.99 books in the Kindle Top 100: 28. This is higher than last year (21) which makes sense, given increased downward pressure on prices; let's call it 25 percent. Do a little arithmetic, and we see that of that average $484, the author is getting $297.
 

Note: If book sales are tricky, determining Amazon’s streaming revenues is even harder. Many (most?) customers watch streaming video under their Prime membership, rather than pay-per-view. Proper cost accounting would allocate the appropriate portion of Prime membership fees to media sales. Does Amazon do this? Who the hell knows? That’s waa-a-ay more detail than is available in their public financials. Fortunately, as mentioned, the exact figure doesn’t matter much. You can run your own sensitivity analysis on the spreadsheet if you want.

Tweet Tweet

comment Add A Comment

Comments

  • Hor says:

    Print books are not doing impressively well either, but by dividing revenue with the books that are on the market and a 10% royalty, I get for 2011 in EUR:

    sweden 17456
    germany 9973
    austria 9312
    denmark 7714
    greece 6840
    italy 5793
    france 5643
    netherlands 5474
    spain 3960
    brazil 3320
    poland 3206
    china 2865
    uk 2499
    slovenia 1601
    russia 1220

    I didn’t have USA data. It’s not a precise calculation because there are many parameters involved in the book business, new books sell a lot more, there are different royalty rates, non-fiction books are in the data, etc, but I can see that if I were a writer I would like to be in a country that protects the book price and in a book market with gate-keeping. There are a lot of books out there and the market is not getting bigger.

    The low self-published ebook price is a problem. A print novel is 5 to 10 hours of entertainment that is produced with blood and tears, and can be enjoyed many times, even by different people, for decades to come. You don’t get the same from an ebook, but still it’s creative work. It shouldn’t cost less than a cup of coffee. I see a lot of Americans complaining about their lost “$0.99″ on a self-published ebook. That’s a serious problem. I don’t see anyone complaining about their lost 17 euro ($22) on a novel in Greece, and that’s on a country where university degrees only get you a 600-800 euro per month job. The perceived value of creative writing in USA is beyond repair.

    If I were (or is it was?) a writer, I would hope for fierce gate-keeping that will keep my good work isolated from the low quality noise coming from hacks and competing on equal terms. I don’t want to be on the same shelves with novels that average from mediocre to horrible. I don’t mind 20 or 30 rejections until I get the right publisher at the time he needs a book like mine. That time always comes for good books. For genre fiction it comes must faster. That will keep the consumer confident about purchasing in higher prices and allow more writers to survive as professionals.

    Imagine a world where anyone can get a gig in a theater to produce his play. The ticket will cost $3, but my time is not free. I don’t like being THAT disappointed on a regular basis. I wouldn’t want to do the gate-keeping at my cost in time and money. Most plays are bad as it is today:)

    I guess anyone happy about 1millions fiction books per year is either uninformed, totally incapable of passing the gate-keeper’s test, or in a hurry to get published. The last is not a bad thing, but quick success has always been rare.

    If I decide the produce frozen pizza, I can make a deal with a local supermarket and make good profit while competing with only 3 other companies. That’s manageable. They will do some sampling to make sure the quality is ok, and they will make sure I can deliver on time. My pizza will stand out if it’s good and the supermarket chain can carry it in all their stores because they only carry 4 types of pizza. But who would want to compete with 20,000 types of pizza, most of them bad, and all of them in similar packages? The customer would eventually stop buying pizza and require far lower pricing for the junk he will perceive the pizza to be.

    The book market is limited. In most countries it has reached a maximum. The public will simply not spend more for books per person per year. They will spend the same money on more books. They will read more if its costs the same. They will read a lot more on an all-you-can-read deal. But how would higher production and lack of gate-keeping help the good writer? The market can only support a few thousand professional fiction writers. The higher demand will simply make them quit to find another profession and write only as a hobby.

    The more we flood the market with bad fiction and the more we lower the average quality as it is perceived by the customer, the more the customer will concentrate on the best sellers. And since the market is limited, small publishers and writers will lose a lot of money. The money can only come from them. The median will move farther away from the average and the tail will get so long, 10 published genre novels per year will not be able to support a small family.

    The only ones gaining from turning creativity into a commodity and lowering the perceived value of creative writing are very large companies. The ones that will eventually offer all-you-can-read subscriptions for $5 a month. They will get a part of the book market (or all of it) from publishers and retail, and they will be happy with that. At such an environment, only best-sellers will survive, because the reader would rather spend his time with a best-seller and best-sellers will be far more visible. Any system that ever used customer preference to recommend something to customers ended up in making the best-sellers sell a lot more and everything else facing unfair competition. The smaller writers and publishers will receive less and less exposure, and less and less money, until they are out of the deal or making zero revenue. This is what best-seller lists do. This is what number of reviews and any sorting based on user preference does. This is what review sites do. That has always been the case since the press conceived the best-seller list. The publishers loved it because they could concentrate on less books, and make more money by spending less.

    Self-publishing and second-hand ebook market are interesting concepts. They are not Amazon’s tools for growth. They are not real markets. They are only weapons for preparing the all-you-can-read deals by stealing power from publishers and mid-level writers.

    And who gave Amazon the power to turn the market over? We did. Just like we gave power to Youtube and Facebook with our free content. Somebody has to put in work when something is made out of nothing. We wouldn’t publish content for a TV station for free but we do it for Youtube, hoping to make money from ads or build a career. We review and comment on Amazon for free. We think we go to Amazon for the price, but we were even going to Amazon when we had alternatives, because the alternatives have no reviews. We still buy prices from Amazon even though there are cheaper alternatives. Now we can even read reviews while hearing the audio book version. Nobody else does that. Amazon now own the greatest review site, goodreads. The power is in us, in the reviews, in the information we provide. If we write, we also help with the sales of Amazon’s reading devices by giving away the books we write in its programs.

    Anyway, let’s see what comes out of it. 3 years from now. Mike is doing a great job in showing the reality, beyond the smoke screen of the big self-published hits and the hope. Hope is a fierce monster they say. New writers should know that writing is not a real career, even when you are published by a big publisher in print. It never was. I know a few best-selling authors. The receive great respect, they sometimes make money by speaking. But the truth is they are barely making ends meet and they can’t afford expensive dental work. A plumber is better off. If kids want money from writing, they should look elsewhere. There is money in writing self-help nonsense with religious and even tired new age philosophy themes. Hope sells. Packaged “knowledge” in methods, in a N-day/week/month plan, these do sell, and make 10 times more money that genre novels. They sometimes even make Ferrari money, not genre-writer-who-can-afford-to-fix-his-teeth money.

    Sorry for the rant:)

    • coop says:

      It is certainly true the the market is concentrating in an unexpected way. The long tail turned out to have a very fat head, as the theorists say: an ever-smaller number of bestsellers do extremely well, while everyone else struggles. Ultimately, readers seems to value familiarity and safety above all — there’s a reason that James Patterson sells millions of copies of what is effectively the same book, several times every year (and the reason is not that his publishers are gleefully forcing it on an unenthusiastic public).

      Breakout novels (and authors) do exist, of course. There just aren’t that many of them.

      But we can always hope :)

      • Hor says:

        We can hope. But it’s not very realistic:)

        Any new market is just a new outlet. It does not really create a lot of new revenue. Yes, we will buy CDs, but that will come off the vinyl revenue, the enthusiasm will settle, and the digital online sales will come out of CD revenue. Inflation aside, there is no real growth:

        http://static6.businessinsider.com/image/4d5ea211cadcbb0b052b0000/music-industry.jpg

        But content creators and, even worse, the professional marketers, the publishers themselves, do not seem to be aware of the fact. The new outlet makes $ signs light up in their eyes.

        Publishers always have high expectations about making more money. It’s a bad business to be a publisher. High cost, low profit, lots of risk. That’s are even after the pirates. They spend a lot of money fighting piracy, but in Switzerland downloading for personal use is legal, and they do not really make less money. Piracy costs nothing, and in most situations, it helps increase revenue. Think of the most pirated software companies, Microsoft and Adobe. They got to their high market shares in some product categories by making piracy easy.

        In the long term, the concentration of power will not only reduce the creator/publisher revenue, but also put them under the control of the monopolies or oligopolies that put their content in the computers of the customer.

        There are signs in the price department. Consumers are getting used to content packages that are designed to barely cover the costs. When the content retailer gets enough power, the retailers will want to cash in on their market share. They might increase the retail prices, but they probably won’t, They will just pay less to the content creators and publishers. That’s what powerful retailers do. They can keep the profit and the customers, and exploit the creator/publisher/producer instead.

        They will have the power to do it. When people stop going to cinemas, your only outlet will be the 3 or 4 online streaming companies. The same thing happened in the film distribution business. The consumer went to the multiplex, and the small cinema died, and with it, the indie film was hit, because it cannot book the multiplex, and it cannot compete against the 100 mil film with the Hollywood actors anyway.

        Amazon just want us to go to Amazon without even thinking. We must choose the retailer before the content. The multiplex wants the same. They are happy when we go to see the “best” of the films they screen, not the best film that is out. They are about shaping habitual behavior and exploiting it for profit. They don’t really care about the content or the consequences. If the market dies, they will just move to something else.

        So, these new distribution circuits will increase the power of the few, reduce the quality and the options regarding content, and in the process, some people will become billionaires. There is no reason the book market will be different. The retailer will decide the retail price AND the wholesale price, and everyone else will try to adjust. Films, books, potatoes, it doesn’t make any differences.

  • Hor says:

    My estimate is about $85 a year or about $7 a month median for a self-published novel. That’s 3.5x lower than your estimate (but that was average). I attempted to include pricing info for non-fiction and fiction from big publishers, and some useful ebook sales data from the publishers. I believe your average is actually closer to what a book would make with some marketing effort behind it, a couple of hours a day spend on marketing perhaps.

    Amazon will never provide accurate info. They will just rave about the number of ebooks published. Amway do the same. In the case of Amway we can do the calculation and get an average, because we have revenue and number of “business-owners” or whatever they call them. With Amazon we have expensive big publisher fiction and very expensive non-fiction in the mix, so we will have to settle for estimates.

    • coop says:

      Hard to say – as you note, AMZN is intensely close-mouthed. My average includes all Kindle books, including the biggest sellers; a median (the “midpoint,” which therefore strips out the tiny number of huge performers) would almost certainly be lower, even over the same dataset.

      Electronic publishing is certainly the future, and as far as the eye can see, Kindle is going to be a (the?) dominant platform. It would be nice if Amazon made more information available, so authors and publishers could rationally evaluate their business plans.

  • Keren says:

    Must say, it is very interesting information,
    though, must say that amazon always says that they are selling more ebooks than printed books,but than again, printed books usually priced at 15 – 25$ vs ebooks which are priced usually in less than 9.99$…
    Thanks!

    • coop says:

      That’s one of the points Amazon elides; I think they often say “sell” but include ebooks distributed for free. Unit counts for free ebooks can be very, very high indeed. As usual Amazon could clear all this up by simply providing the information :)

  • Wow. Great post, Mike. Very interesting to see how big the pie really is. Though, as you said, each author is getting only a very, very tiny slice. Especially since we can be certain that the median author income is likely to be significantly less than the average, since some of the top earners claim to be bringing in substantial sales. My own e-books are not too out of line with your average figures.

Add Your Comment

Your email address will not be published.