Paid by the book or paid by the page -- which is better?

I've read a lot of articles over the last few weeks that explored this question. Now it's possible to answer it definitively, at least from my personal perspective. Until Amazon announced what they would pay per page for the month of July, writers could only speculate, and speculation and suspicion were everywhere. Now we have some firm data.

Most of us recognized that the effect of this new scheme by Amazon would vary from writer to writer, depending on the kind of books we published. It was clear early on that the writers who had been gaming the system by writing very short books with sensational titles and covers would suffer. Under the old scheme, if a reader borrowed a "book" of ten pages and spent a few minutes reading only the first page or two, the author got paid roughly $1.30. If a reader borrowed a best-selling, can't-put-it-down, 450 page novel and read it cover to cover over the course of ten days, the author got paid the same $1.30.

That has changed. In July, the author of the ten-page book that held the reader's interest for two pages earned 1.2 cents, and the author who wrote the 450 page page-turner earned $2.60. Is that good, or is it bad?

The answer depends on who you ask. From Amazon's perspective, it's most likely good. A reader who paid $9.99 per month for Kindle Unlimited and "read" 100 of those 10 page books cost Amazon $130 under the old system. Under the new system, even if the borrower reads 100 of the ten-page books cover to cover, Amazon's cost is under $6.00. The other borrower, the one who read the 450 page novel in ten days, might have read three of them during the month. That would have cost Amazon $3.90 under the old scheme. Under the new scheme, that borrower cost Amazon $7.80, but they still made money on the longer book.

There was speculation that authors of those short books would remove their books from Kindle Unlimited. Amazon won't suffer from that. The people who were reading those ten-page books may have to pay more for them, and they may leave Kindle Unlimited. That won't hurt Amazon, either. Amazon was losing money on those people -- both the borrowers and the authors.

There was speculation that if those borrowers of many short books dropped out of the program, the Kindle Unlimited pot that got divided among the remaining authors would be smaller. That may be the case, but the remaining authors are now making roughly twice as much per book borrowed.

I'm one of those authors, and I would gladly accept some erosion of the payout for borrows as a result of people who don't read my books dropping out of the program. Until half of the participants drop out, I'll be earning more money than I did under the old system.

In July, I made about the same amount of money on a borrowed book as I did on an outright purchase of the same book. I like that, but what about Amazon? Does that make sense to them?

Let's go back to that person who borrowed and read three 450 page books in July. She paid Amazon $9.99, and she cost them $7.80 in payments to the authors. Amazon made $2.19 on those three books that were borrowed. If those books had sold for $3.99, Amazon would have made $3.60 instead of $2.19.

Only Amazon can determine whether the tradeoff between a borrow and a sale makes sense. Remember that I assumed the borrower would read three books during the month. If the borrower borrows only one 450 page book, Amazon makes $9.99 - $2.60, or $7.39 from that borrower.

Keeping in mind that the author makes about the same amount either way under the new system, Amazon is probably better off, especially since they've eliminated those 'books' and borrowers that were costing Amazon over ten times what they paid Amazon.

There are some other effects on authors that may be less obvious. We all want our books to rank well in the Kindle Store. That increases our visibility and our sales. Those short books with their seductive titles and covers that got borrowed heavily probably distorted the rankings. They took up virtual shelf space, and if some of them were in fact of little value to the reader, they may have poisoned the well for the rest of us.

In case you haven't guessed by now, I like Kindle Unlimited. Under the old plan, I think I suffered a slight decrease in outright sales, but I picked up a lot of new readers through borrows.  Borrows are a low risk way for a reader to sample a new author, so my income from Kindle Select went up significantly even at the lower payout per borrow. Under the new system, I've seen an increase in my total revenue from Kindle Select of roughly 20 percent on the same equivalent unit volume.

I'm interested in your reactions, now that we have some real numbers.

Posted with Blogsy