Why does Amazon want to hide figures on the growth of Free Kindle Books?

There’s one part of the ‘DoJ vs Apple & Publishers’ trial that is really interesting. Jeff Roberts at Paid Content points out that Amazon has requested the Judge to not reveal information on the growth rate of free kindle books –

Wednesday also saw Google and Amazon file new petitions asking that Cote require Apple to redact sales information from the public exhibits that Apple will put on the court record.

Amazon wants to redact certain of its print sales as well as the growth rate of free ebooks between 2009 and 2011.

That’s very interesting, isn’t it.

Why would Amazon want to hide figures on the growth rate of Free Kindle Books?

Obviously, something happened to free kindle books between 2009 and 2011. There’s something in the growth rate of free kindle books that scares Amazon – something that will cause problems if it becomes common knowledge.

Here’s my guess as to why Amazon is scared –

  1. In 2007 (November and December) and 2008, Amazon didn’t focus on free kindle books AT ALL. There were just a few free books a month in 2008. It was Amazon’s competitors that would talk about 1 million free public domain books.
  2. Some time in 2009 Amazon realized that free books were a big problem. It was losing market share due to all the people choosing its competitors’ devices and stores because they offered free books. That’s when Amazon turned on the Free Kindle Books switch.
  3. Free Kindle Books became a monster. Between 2009 and 2011 free books took off in a way that Amazon never anticipated. The good part for Amazon – It began to dominate ebooks thanks to free kindle books and its competitors’ missteps. The bad part for Amazon – free kindle books began to destroy the value perception of books.

If you doubt that Free Kindle Books are a problem now, consider two recent moves Amazon has made –

  1. Amazon told its associate partners (websites and blogs and such) that any website that is primarily a free kindle book website will not be given any sales commissions … on anything. Talk about being desperate to stop the growth of free kindle books.
  2. Amazon hid the Top 100 Free Kindle Books list behind the Top 100 Paid. Over time it might even remove that list entirely.

This suggests that Amazon has seen way too many free kindle book downloads. There are sites that report that the ratio of free to paid books downloaded they were seeing was 60 to 1. Some even report 100 to 1.

Imagine that – 60 to 100 free kindle books downloaded for each paid book. It gets worse – Amazon delivers all these free kindle books FOR FREE to 3G Kindles. So it covers the download costs.

Amazon was using free kindle books to gain an advantage (and continue a race to zero its competitors had started with free public domain books). However, it became a monster that threatened to engulf and destroy the entire paid book revenue stream.

If it becomes common knowledge that –

  1. The ratio of paid to free book downloads went from 1:1 or something similar in 2009, to 1:50 in 2011.
  2. Amazon and B&N and other ebook companies’ aggressive push of Free Kindle Books might be the culprit.

It’s going to look really bad for Amazon and B&N. Basically, it’ll appear that, in the pursuit of growing ebooks and dominating ebooks, Amazon and B&N effectively turned free kindle books into a monster that is threatening to destroy the ebook market.

All of this is just conjecture. It does seem to be a good guess at why Amazon is trying to hide the growth rate of free kindle books between 2009 and 2011.

The Relentless Fall of eBook Prices – 55% of Top 100 below $5, 25% below $2

We are in the midst of a relentless fall in both the value perception of books and in the actual prices of books in the Top 100 Bestsellers List.

It’s easy to get distracted by the Big 5 Publishers’ $13.99 new releases and assume nothing has changed. However, the hard facts indicate a massive upheaval is going on.

Let’s take a quick look at prices of the Top 100 Bestselling books in the two top ebook stores – Kindle Store, Nook.

Kindle Store – 55% of the Top 100 are below $5, 24% are below $2

  1. Kindle Store Top 20 – 11 books below $5 and 4 books below $2 in the Top 20. That’s 55% below $5 and 20% below $2.
  2. Kindle Store Top 40 – 24 books below $5 and 11 books below $2 in the Top 40. That’s 48% below $5 and 27.5% below $2.
  3. Kindle Store Top 100 – 55 books below $5 and 24 books below $2 in the Top 100. That’s 55% below $5 and 24% below $2.
  4. Kindle Store Summary – 1 out of every 2 books in the Top 100 is $5 or less. 1 out of every 4 books in the top 100 is $2 or less.
  5. To put that in perspective – In 2008, there were just 2-3 books below $5 in the Top 100. Additionally, at that time there were hardly any free kindle books from indie authors and small publishers.

This is really quite stunning. Keep in mind that Amazon uses weighted algorithms to try and keep cheaper books out of the Top 100. It obviously isn’t working.

Perhaps having 55% of the Top 100 below $5 means that we are, in effect, approaching a world where the best-selling books will be in the $3 to $5 range. Of course, we then look at the fact that 24% of the Top 100 books are below $2 and a scary thought strikes – perhaps the end result will be a world where best-selling books are all in the $1 to $2 range.

Nook Store – 56% of the Top 100 are below $5, 25% are below $2

  1. Nook Store Top 20 – 11 books below $5 and 8 books below $2 in the Top 20. That’s 55% below $5 and a massive 40% below $2.
  2. Nook Store Top 40 – 21 books below $5 and 14 books below $2 in the Top 40. That’s 52.5% below $5 and 35% below $2.
  3. Nook Store Top 100 – 56 books below $5 and 25 books below $2 in the Top 100. That’s 56% below $5 and 25% below $2.
  4. Nook Store Summary – 1 out of every 2 books in the Top 100 is $5 or less. 1 out of every 4 books in the top 100 is $2 or less.
  5. I don’t have figures from 2009 for the Nook Store. However, in 2009 and 2010 there used to be just 3-6 books below $2 in the Top 100 in the Nook Store. Now there are 25.

This is even more stunning.

B&N doesn’t have weighing algorithms to hide cheaper books – so you would expect cheap books to have more of a shot. However, most people who want lots of free books flock to Kindle. Amazon has focused on free kindle books for the last few years and it has attracted most of the free-seeking crowd. B&N has always had a less price-sensitive crowd. If you don’t believe me, think about it for yourself – Everyone knows Amazon has cheaper ebook prices. What does that say about people who choose Nook? That they are probably less sensitive to price.

How on Earth are the figures so similar for Kindle Store and Nook Store?

What’s uncanny is how close the figures are –

  1. Kindle Store has 55 books below $5 in the Top 100 while Nook Store has 56.
  2. Kindle Store has 24 books below $2 in the Top 100 while Nook Store has 25.
  3. This might just be a coincidence or it might mean that the two top ebook stores are seeing the exact same trends. That they are evolving in the exact same manner as far as the value perception of books and the price of bestselling books are concerned.

I really don’t know what to say.

It’s quite stunning that 25% of the Top 100 are $2 or below. It’s even more stunning that 55% of the Top 100 are $5 or below.

We’ve talked about how books might settle in the $3 to $7 range in the long-term. Well, the change is already happening. Furthermore, the prices seem to be shifting to two bands – Below $2, between $3 and $5.

Are we going to continue to see ebook prices drop in the Top 100 Lists?

My assumption would be – Yes, definitely.

  1. There are obviously two price bands that are gaining traction. The first is $2.99 to $5. This is already 25% of the Top 100. The second is $1 to $2. This is also 25% of the Top 100.
  2. The first possibility is that we reach an equilibrium with both bands present. 30% to 40% of the Top 100 will be books in the $2.99 to $5 range. Another 35% to 45% will be in the $1 to $2 range.
  3. The second possibility is that we keep seeing a drop in prices and stabilize only in the $1 to $2 range. Imagine that – a world where 80% of the books in the Top 100 are $1 or $2. For $100 to $200 you could buy all 100 books in the Top 100 Bestsellers List.
  4. The third possibility is that the stores try extreme measures. B&N has tried to hide prices of Books in the Top 100 in the past (this is on the Top 100 List). Amazon does algorithm manipulations and handicaps cheap books. I doubt these will work – you can take a horse to the water but it might just kick you if you try to force it to drink.
  5. 55% of books below $5 means a lot of the change has already happened. This isn’t a blip or a temporary thing. It’s obvious that something big is going on. Something so big the stores are powerless to stop it (trust me, they have tried and are still trying).

The more you think about it, the more it seems that an irreversible change is taking place.

An unstoppable wave driving ebook prices to $1 and $2?

Everything I have seen and read over the past 5 and a half years is screaming to me that the end point is going to be a world where 80% of the books in the Top 100 are at $1 or $2.


Because there is infinite competition.

The world we’ve been sold is a world manufactured by Publishers and Booksellers. That there are a select few authors who are worth reading and their books are worth $10 to $25. After that there is a massive and steep fall. All the other authors aren’t even worth reading. So say Publishers.

  1. What if instead of a cliff there is a slope? What if the Authors who just missed the cut with Publishers are only 5% worse? What if there are thousands of such authors – good enough to be read and willing to sell their books for $1 and $2?
  2. What if instead of a cliff there is a slope rising upwards? What if Publishers are terrible at picking winners and the Authors who missed the cut completely are actually better? What if there are tens of thousands of such authors – better than Published Authors and willing to sell their books for $1 or even give them away for free?
  3. What if there are an infinite number of authors and the separation between them is miniscule? What if Publishers are picking up only a fraction of the best ones?

My assertion would be that all three of these lines of thinking are true. Publishers are missing most of the best authors, the separation between authors is miniscule, and there are a very large number of authors who are good enough to be read. Far larger than what Publishers or Published Authors would have us believe.

The second myth is the polish and magic and fairy dust that Publishers supply.

  1. What if giving an author artistic freedom is worth more than Publisher spit and polish?
  2. What if authors writing what is in their hearts is worth more than what Publishers think will sell?
  3. What if Publishers are just chasing profits and not publishing the best books?

Publishers fail more than they succeed. Publishers often miss absolutely great authors. Publishers often make a hash of things.

It’s a crazy assumption that there would not be great books without Publishers. Even if it isn’t crazy, it’s still an assumption.

If the only people making this assertion are Publishers, their stable of Published Authors, and their partner stores and distributors – then we have to wonder what the truth is.

Free Market + Infinite Competition = Prices Fall to Zero or the Lowest Amount Possible

With the walls between authors and readers down to imaginary ‘Stores’ run by Amazon and B&N. With readers able to buy ebooks from anywhere. With anyone able to distribute and sell ebooks. We are rapidly moving towards a world of Books that is a Free Market.

Authors can sell to any Reader. Readers can buy from anywhere.

That’s the first part of the equation – A Free Market.

The second part is the ever-increasing number of books and authors that are worth reading.

With a near infinite supply of authors. With an ever-increasing number of good indie authors. With ever more carelessly published Publisher ebooks. With ever larger number of published authors going solo. We are rapidly approaching a world where there are a very large number of good authors – with very little to separate them.

That’s the second part of the equation – Infinite Competition.

If Author A is 93/100 and Author B is 94/100, guess who wins? The one who goes from $9.99 to $7.99. Except these are ebooks – Author B cuts prices, then Author A cuts prices more. Then this continues until they both hit $1.

Note: If Author A and Author B strike up a chat and agree to stick with $7.99, then Author C and D cut prices and steal sales.

Prices keep getting cut until we reach $1 and $2 and just can’t go any lower. Of course, some authors will go for free too. The vampire hunger to be read is not to be underestimated.

Free Market + Infinite Competition = Prices Fall to $1 and $2 (or worse, they fall to $0).

That’s the thought I’ll leave you with. 55% of the Top 100 Bestselling Books being below $5 and 25% of the Top 100 Books being below $2 are a sign of things to come. This isn’t equilibrium – this is the beginning of a wave. The end point is a world where either $1 and $2 books rule, or where $0 books rule.

10 Thoughts on Amazon’s handicapping of $1 Kindle Books

Update: Added some data points from 2011 to better explain why the disappearance of $1 Kindle books from the Bestsellers List is so strange.

First, let’s look at how many $1 books there are in the Kindle Store Top 100 right now –

  1. The highest selling one is at #17.
  2. The second highest selling one is at #28.
  3. A cluster of three at #34, #36, #38. Including one by Paulo Coelho.
  4. One at #48. That’s 6 $1 books in the Top 50.
  5. Another at #68.
  6. One at #95.
  7. One at #98. That’s 9 $1 books in the Top 100.

The highest selling $1 book is only at #17. There are only 9 $1 books in the entire Top 100.

This is very interesting for a few reasons:

  1. In 2011 $1 books were beginning to really take over. We had lots of independent authors releasing books at $1 and hitting the Top 100. We had indie authors who at various times had one or two or three $1 books in the Top 10 (Amanda Hocking, John Locke).
  2. In 2012 this suddenly grind to a halt. Lots of indie authors have covered this and talked about a shift to ‘Top Grossing’ instead of ‘Best Selling’. I didn’t know what to make of it, or how to write about it. Still don’t. But it’s something more people should be aware of.
  3. The natural progression would have been – A few $1 books in the Top 100 in 2008 and 2009, 10 to 20 in 2011, 30 to 40 $1 books in the Top 100 in 2012. To see how natural and inevitable this is in a digital store environment, consider this – 36 of the Top 40 bestselling iPhone Apps of all time are priced at $1. In a very competitive market, prices go to $1 or $0. The Kindle Store is that rare infinitely competitive market which has seen prices go UP instead of down?

It’s all very strange.

For what $1 kindle books were doing in 2011 please see:

  1. The Inevitable Rise of $1.

And this is what the Top 10 looked like on March 15th 2011:

  1. Saving Rachel by John Locke at $1.
  2. Scrabble by EA at $1.
  3. Mahjong Solitaire by Mobigloo at $1.
  4. A Girl Like You by John Locke at $1.
  5. Water for Elephants by Sara Gruen at $6.39.
  6. Unbroken by Laura Hillenbrand at $12.99.
  7. Love You More by Lisa Gardner at $12.99.
  8. Wish List by John Locke at $1.
  9. EA Solitaire at $1.
  10. Lethal People by John Locke at $1.

Since March 15th, 2011 Amazon has sold a TON of $79 and $99 and $139 Kindles. It’s added lots of Kindle Fires and reached casual readers. That should suggest a FURTHER drop in prices and a rise in the number of $1 Kindle Books in the Top 100.

But it didn’t happen. We had 4 $1 books in the Top 10 in March 2011. In July 2012 the highest selling $1 book is only at #18. We had 23 books priced at $1 in the Top 100 and 11 apps priced at $1. Now we have just 9 books priced at $1 and no apps.

As Amazon is adding more and more cost-conscious customers and more and more casual readers, it’s somehow managed to reverse the decline in ebook prices. Really?

Here is what Roger Knights suggested in March 2011:

If this continues, and Amazon still wants to encourage books being priced at $3 or more, it might set up a separate best-seller list for books under that level. That would give more higher-priced books visibility.

Amazon didn’t have to. Magically, the main bestsellers list automatically somehow kicked out all the $1 books.

10 thoughts on the ‘handicapping’ of $1 Kindle Books

  1. There is, in my mind, no doubt whatsoever that Amazon is using some weighing algorithm to promote $3 and $10 books over $1. It’s disconcerting that there is no public mention of this. There have been a few people who have floated the ludicrous idea that users have stopped buying $1 books because of ‘quality’ issues. No, people buy what they can see/find. The #1 place for that is the bestseller lists and Amazon’s recommendations. Amazon can choose to promote $10 and $3 books over $1 books. Those 9 books in the Top 100 are there DESPITE the weighing algorithm being against them.
  2. Amazon should rename the list ‘Top Grossing’ instead of ‘Bestselling’. It’s disingenuous to call it Best Selling when $1 books from indie authors are ‘handicapped’ by a weighing algorithm that factors price into the equation. It might be too much to ask Amazon for a separate ‘Bestselling’ List that gives $1 books a fair chance. That would defeat the whole purpose of this weighing down of $1 books.
  3. Amazon wants to have its cake and eat it too. It wants to promote free books to get people to subscribe to Prime, it wants to use free books to get people to buy Kindles and Kindle Fires. And then it wants to turn around and promote $10 and $3 books over $1 and make money from books too. It’s rather strange – you can’t have a loss leader double up as a profit maker.
  4. The bestseller lists are way too powerful. While this is true in any digital store, it’s even more so in books because the number of options is higher than in every other store. When people are presented with too many options, they are overwhelmed and go to the safe bets i.e. The Top 100 and the Genre Top 100s.
  5. The situation is the same in genre lists. The Science Fiction Top 20 used to be mostly $1 books. Now there are ZERO $1 books in the Top 20. How could really good indie Science Fiction books that were Top 20 for years suddenly have stopped selling?
  6. In a way it’s good. It’s an attempt to bring back the value of books. However, you can’t put the genie back in the bottle. Amazon either didn’t think things through, or it didn’t realize what impact allowing every single aspiring author to self-publish would have on ebook prices. There is no value of books any more. The Agency Model is about to die a death and that will accelerate things.
  7. It’s unfair to indie authors. With $1 they could compete. At $3 it’s not the same because lots of established authors bring in backlist books at $3 and $5.
  8. It reduces the incentive for Publishers to go down below $9.99 for new releases. If they see everything going to $1 and $2 they will eventually be forced to release new releases at $5 and $7. On the other hand, if they see 50% of the Top 20 at $9.99 and $12.99, they will feel they can get away with $12.99.
  9. It’s not sustainable. There is no way Amazon can continue to pull this off. It’s a short-sighted way to fight the inevitable.
  10. Thankfully, there is competition. Amazon needs B&N and Kobo and Apple iBooks to counter whatever ludicrous strategies it comes up with. This whole weighing down of $1 books and ‘unlevelling the playing field for indie authors’ thing really bothers me. Do we really need to give Publishers who gouge us for $12.99 one more advantage?

Coming back to the power of $1.

There is no Escape from $1

There just isn’t.

You create a very competitive market where everyone can compete and eventually people start competing on price. And then it either goes to ZERO or to $1.

The only way you can make money off that is by making money on the device, or by selling something else that is LIMITED and CONTROLLED. Apple doesn’t try to make money from apps. It’s paid out developers something like $5.5 billion. Which means it earned something like $2.357 billion. Take out the costs of running the store and credit card charges and other costs and it’s probably less than $1 billion in profits. Apple makes money from the devices – $8.8 billion profits in the last quarter alone.

That’s the way to do it. Let the developers and authors devalue their work. You make your money from the devices or from some other product (the supply of which you keep limited and whose value you do not destroy). Let all the value from books and apps flow to the device and profit from that.

Amazon is stuck because it’s made both the device and the content loss leaders. Perhaps people aren’t buying very many kitchen sinks and it’s decided to try to turn books back into profit machines. Not going to happen. You blew up the entire book market. You’re sending out thousands of free books every month. You’ve created a ‘Free Lending Library’. You’re completely devaluing books. How on Earth do you expect to also make huge profits from books?

Eventually, someone is going to figure out how to give authors and indie authors 70% of the take from $1 and $2 books. That ebook store is going to win out.

  1. We have hundreds of thousands of authors desperate for their books to be read. Most will take whatever they can get for their books. Some will even pay for people to read their books.
  2. We have readers who are increasingly realizing that any ebook priced over $4.99 is unfair to readers. The savings in ‘produce once, sell to everyone’ are not being carried over.
  3. We have such large numbers of sales that even $1 books can make large profits for authors.
  4. We have indie authors getting better and better. Indie authors who don’t have to support Dinosaur Publishing Companies with their archaic methods. Indie authors that can be nimble and can just destroy the Publishing Houses by using quality $1 books.
  5. We have smarter and smarter readers who can get information from a thousand different sources. So they KNOW that ebooks should not be $12.99.

There’s just no way you can go back to $9.99 and $12.99 books. It’s a testament to the stubbornness of Publishers and Amazon that they’ve managed to keep things going in such an unnatural direction for so long.

But it’s just a temporary blip. eBook companies will rise that aren’t afraid to both embrace $1 and $2 books and also give authors 70% of the cut. And they will, sooner or later, get enough awareness amongst customers that customers start switching.

$1 ebooks might be 9 out of the Top 100 right now. However, within a few years they will be at least 40% and probably 80% of the Top 100. Additionally, if the authors of those ebooks are self-published indie authors, then they will be making out like bandits. In most cases they will be making more than they would have from contracts with Publishers. If Rovio (Angry Birds) can make $100 million in a year selling $1 and $3 games, then it’s a given that there will be authors who will make tens of millions of dollars a year from $1 and $3 books.

One million ebooks sold in one year at $1 with a 70% cut translates to $700,000 a year. There are hundreds of authors who can hit that milestone. There are already 10+ indie authors who are on-track to sell a million ebooks in 2012. Despite all the obstacles (natural and man-made) in their path.

We just have to wait for one of the big stores to realize that $1 ebooks are inevitable, that $1 ebooks are a big, huge competitive differentiator (if you embrace them first), and that readers want $1 ebooks.