The May 2015 Author Earnings Report, Hugh Howey and team‘s “sixth quarterly look at Amazon’s ebook sales,” has just hit the web, and I’m going to precis some of its most important conclusions, while recommending that any writer in particular digest the whole thing. And as in the past, this carries the caveat that it is a biased report from a crew with an agenda, and that there will be a grab-bag of by now customary criticisms of its methodology, conclusions, etc. All the same, it’s an important milestone document, not least as it’s the first Author Earnings Report to show the impact of Amazon’s recent renegotiation with some major publishers on price setting and discounting terms. And the figures do rather speak for themselves – imposing a huge onus on the Big Five and their allies to get competing data out there, if they want to head off the inevitable criticisms.
As the Report states, “after a contentious and drawn-out negotiation with Hachette Book Group last year, Amazon relinquished the ability to discount ebooks with several publishers. Prices with these publishers are now set firmly by them. Soon after these agreements went into place, industry observers noted an upward move in average ebook prices. Freed from Amazon’s discounting, and with complete control over pricing, the publishers made a decision to push the price of many of their books above $9.99.”
The most telling representation of the results is in the two charts above and below. According to Author Earnings, Big Five published titles across the sample have gone from handing over ZERO revenue to Amazon (who was busily discounting them at its own expense) to a massive chunk, under the new pricing terms.
“Publishers fought hard to take back control of ebook pricing from Amazon. This was a stated intent by Hachette to its investors in 2014, and it was touted as the end result of their lengthy negotiations. What has that control brought?” argues the Report. “By our data, which matches industry reports, this control has brought higher prices to consumers, lower sales for publishers, and less earnings for their authors. It has also brought greater market share for self-published authors.” And buried in there are other nuggets like: “Any report showing a decline in ebooks and an increase in print means a net loss for the Big 5 and their authors.”
And while these charts show only a minor impact on the share going to authors, the bigger picture is not even that attractive. The Report finds that: “for authors, we can see here a huge loss in daily earnings from Big 5 publishers of 20%. Their higher prices aren’t just hurting readers; they haven’t been good for their authors either.” So much for Hachette & co.’s pretensions to be acting in the interests of authors, and literature.
The Report’s conclusion about the motivation for this self-destructive – and author-destructive – strategy is “that control over pricing is enormously powerful. The largest retailers and the largest publishers are willing to do great harm to one another in a fight for this power.” All the analysts and critics complaining about Amazon’s tactics of pursuing platform predominance at the expense of profit ought to reflect on that.
Once again, I recommend any writer to read the entire Report in detail, digest, and execute your publishing and pricing options accordingly.