Posted On August 14, 2015 by Print This Post

Understanding the New Kindle Unlimited Pricing Model with Pat Haggerty

pat_haggertyAre you a writer wondering about the joining the Kindle Unlimited Program? Well, here’s Pat Haggerty to tell us what the new pricing model means to you!

So what is Kindle Unlimited?

Do you listen to music?

It used to be when you wanted to get some new tunes, you’d head on down to the local mall and buy a record/8-track/cassette/CD. You’d take the physical media home and listen away. Then, along came digital media and the “death of music CDs”. You’d log into iTunes/Amazon/etc., buy your songs, and listen away on your player.

But what’s happening in the music industry right now? Today the trend is all about streaming audio. Thanks to streaming iTunes, iHeartRadio, Pandora, Spotify, etc. CD sales dropped a further 15% from 2013 to 2014, and the purchasing of digital tracks (mp3, iTunes, etc) dropped 14%. So if CD’s are dead, then buying individual songs from iTunes is about to receive its last rights.

A funny side note, sales of vinyl records were up 51% last year. Yea baby, hipsters unite.

So why am I talking about music?

Don’t you see? The book industry is going through the exact same changes only a few (close to 5) years behind. It used to be that you went to the mall and bought a real book at Walden’s (remember them?). Now don’t get me wrong, a lot of people are still buying physical books, but the real growth has been in e-book sales. According to Amazon, out of every 25 romance novels purchased through Amazon.com, 24 are eBooks and 1 is a paper.

So what’s the next for the book industry? Why streaming of course.

Kindle Unlimited, which rolled out almost exactly a year ago, is Amazon’s answer to streaming for books. The consumer pays $9.99 a month and gets unlimited access to all the books in the Kindle Unlimited program. Today, that’s somewhere between 800,000 and a cool million titles. When the user finds a book that’s participating in KU then they end up with a product page that looks like:

Image2

 

Yes, they still have the option to buy the book, in paper or for Kindle, but they can also “Read for Free” through their KU subscription.

How do authors participate in Kindle Unlimited?

From the author’s perspective, Kindle Unlimited is part of the entire KDP Select program. KDP Select is a deal you make with Amazon whereby you agree, for a period of time, to only sell your eBooks through Amazon. This commitment then provides you, the author, with higher royalties, some extra promotional tools, and membership into both Kindle Unlimited as well as the Kindle Owners Lending Library (KOLL). KOLL is a perk for members of the Amazon Prime subscription plan and they might not belong to KU. You may opt out of KU and KOLL but by default, they are included with KDP Select.

If you’d like more info on KDP Select, or if you’re ready to enroll then take a look at:

https://kdp.amazon.com/select

They also have some good FAQs over at:

https://kdp.amazon.com/help?topicId=A6KILDRNSCOBA

If you’d like to sign up for KDP Unlimited once your part of KDP Select, you can do that here:

https://kdp.amazon.com/help?topicId=A3M9JQJV7RDER9

How do KU authors get paid?

So now let’s talk about the important stuff: money. How are authors compensated for books which they place into the KU program?

And, isn’t that an interesting question =)

First, you need to understand that streaming media compensation works on a different model then the traditional per unit price. In other words, you the author have no control over how much you’re going to get paid when a KU member checks out your book. That’s right, this isn’t like your eBook where you can set a price for each title. In KU, every book in the program makes the exact same amount in a given month for each page read.

You ever read The Count of Monte Cristo? Did you know that Dumas got paid by the word? Well everything old is new again because when you’re in KU you’re getting paid the exact same way.

Here’s the way it works. Each month, Amazon sets aside a sum of money to be used to pay all the KU and KOLL authors. They call this the KDP Select Global Fund. To find the current value of the Global Fund you can head on over to:

https://kdp.amazon.com/community/index.jspa

On the right-hand side there is a list of announcements and up towards the top will be the message containing the current fund value. At the time of this writing the August 2015 Global Fund is at $11 million.

Next, Amazon takes each book in KU and they calculate the number of pages it contains. Amazon calls this the Kindle Edition Normalized Page Count (KENPC). Essentially, they take the book, strip out any extra formatting, set standard fonts, sizes, indents, etc., and then they use industry words per page estimations to come up with a number of pages in the book. FYI, this page count may not exactly match what shows in the Kindle reader or on the book’s Amazon page.

Finally, Amazon figures out the total number of pages read for each book, and the total number of pages read across all books for the given month. How? Have you ever been reading on your phone (because what else are you going to do while stuck in that huge line), then later you pick up your tablet and the Kindle reader asks you if you’d like to jump to the last page read? Yea, every time the Kindle reader synchronizes with Amazon, it’s reporting which page you’re on and indirectly, how many pages you’ve read.

Now it’s math time. Take the global fund value, divide it by the total number of KU pages read by all subscribers across the program and you’ll come up with the amount authors get paid per page. So if the fund is $11,000,000 and the KU subscribers read 1,900,000,000 (1.9 billion) pages, which is about what they read last month, then 11,000,000/1,900,000,000 = $.0058 per page.

  • If you have a 100 page book and 1 person borrows it and reads it to the end, then make 100 * .0058 = $.58
  • If you have a 250 page book and 1 person borrows it and reads it to the end, then you make 250 * .0058 = $1.45
  • If you have a 400 page book with a huge info dump up front which bores the reader to tears so they give up 10 pages in? Then they read 10 pages and you make 10 * .0058 = $.058 (yea, six cents)
  • If you have a 250 page book and 100 readers read the whole thing then you make 250 * 100 * .0058 = $145
  • If you have a 250 page book and 99 readers read the whole thing and 1 reader loves it so much that they read it 10 times in one month? Sorry, you only get paid for the first read through, so you still make 250 * 100 * .0058 = $145
  • I think you get the idea

And that’s the story of how Kindle Unlimited authors get paid.

Let me know if you have any questions and remember folks, keep those stories tight, your readers reading, and your titles coming.

Cheers.

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OK, RU writers! I KNOW you have questions – let’s get them answered!

Join us on Monday for Lauren Monroe!

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Bio: After four years in the USMC, Patrick Haggerty studied Actuarial Science and Computers at Georgia State University. He has spent the past 15+ years developing and delivering technical training courses for Learning Tree International. On the side he has a successful consulting practice doing web application development for clients ranging from the United State Marines to Delta Airlines.

Seven years ago, stuck reading a mediocre book in yet another hotel, Patrick decided to try his hand at fiction. He may not be published, but these days you are much more likely to find him spending his evenings writing romance, than code. Patrick is an active member of RWA, RWAustralia, RW New Zealand, and is VP of Membership for Gulf Coast Romance Writers of America, and VP of OIRWA.

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Discussion

6 Responses to “Understanding the New Kindle Unlimited Pricing Model with Pat Haggerty”

  1. Morning Pat!

    What a great post – super informative!

    If you read for free, with kindle unlimited, does the book expire from your device? Or is it there forever after?

    thanks again for joining us Pat!

    carrie

    Posted by Carrie Spencer | August 14, 2015, 9:53 am
    • Hey Carrie,

      No the book never expires but you can only have a max of 10 KU books out at any one time. So you can’t subscribe, add 100 books to your device and then drop the subscription or something.

      Cheers.

      Posted by Pat Haggerty | August 14, 2015, 12:24 pm
  2. Pat,

    Thanks for taking the time to break this down. As an author preparing to go indie, I appreciate it!

    Posted by Reese Ryan | August 14, 2015, 1:00 pm
  3. I think I understand the program, but it remains to be seen if Amazon will let us know how many times a book has been borrowed. It’s impossible to tell from the page count of a book whether two people read it through once, or if maybe one person read it through once and say ten other people read only the first ten pages. I admit, math is not my strong suit.

    Posted by Heatherly Bell | August 14, 2015, 7:30 pm

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