Business Musings: Amazon: Year in Review Part 5
I used to be quite dismissive of the usefulness of the 20Booksto50K conference. Pre-pandemic, 20Books was all about Amazon, Kindle, Kindle Select, and making money on page reads. Great money, for a few folks who learned to manipulate Amazon’s algorithms. Good money, for some who went exclusive to Amazon and manipulated the algorithms. Okay money, for many who did what they could when they were in Select, but who did not have the time or inclination to do the technical shenanigans to boost their books up Amazon’s vaunted bestseller lists.
A lot of people were making more money on Amazon than I was at that point, but I knew—because I’m older than dirt and I’ve seen this a million times—that any castles built on Amazon were being built on sand. I’d ask, What if Amazon goes away? No one could imagine that. Or What if they changed their algorithms? No one could imagine that either, until it happened.
I had a thousand what-ifs like that, and these Amazon-only folks had a thousand answers, which didn’t sound like answers to me.
So, I went to 20Books because it was in my hometown, and Dean and I could be lone voices in the wilderness, begging people to go wide.
Then—you know, pandemic. Changes. 20Books happened in 2021, but Dean and I had to cancel since the evil Covid was spreading like wildfire and even though we were vaccinated, the masking/Covid policies at the venue were awful (they’d been cited several times) and the conference relied on the hotel’s policy as their policy.
We decided that a couple of free talks weren’t worth the risk of getting the dread disease.
Fast forward to this year. To my surprise, we were invited back. We decided to attend, figuring it would be like it was pre-pandemic.
Nope. Things had changed dramatically.
20Books had become the indie conference. It tried to cover everything, not just Amazon and the algorithms. I asked a few folks if the conference was like that in 2021, and they said no. But I’m not sure my sources were the best, since their focus was other things.
It wouldn’t have surprised me, though. The Amazon changes were starting last year, but they hadn’t had an impact on most sellers. Or at least, a noticeable impact.
2022, on the other hand, proved to be a different story.
Talk throughout the conference was all about the problems with Amazon. Tricks that had worked in the past no longer worked. Even the folks who weren’t focusing on algorithms and ads were having trouble. Rules were changing, and income was down.
In some cases, income was waaaaay down.
The programming itself was very different. Many of the presenters were from Amazon’s competitors. Others had methods of making money outside of Amazon. And the talk of bestsellers and manipulating algorithms and making choices to write what the Kindle Select readers seemed to buy was mostly gone.
Yes, there was algorithm talk, but it wasn’t the focus. There was a lot more craft, and even more on audio and crowdfunding and new technologies that were not Amazon focused.
All of this made the conference the best it’s ever been. If it keeps going on this path, it will be the do-not-miss conference of the year. Dean and I learned a bunch, came home and changed a few things in our publishing plan for next year, things I will discuss in future posts.
But let’s start, as we did back in the beginning of indie, with Amazon.
During the pandemic, Amazon and other tech companies hit record high profit levels. We were all at home, after all, except folks whose jobs were considered essential, so we used our devices for entertainment. Then, in early 2022, the pandemic gravy train ended with a thud.
Most tech companies saw a decline in profits. In July, Amazon’s growth rate slowed to the lowest point in nearly two decades.
If you dig deep into the New York Times article about the losses, you’ll see that while subscription revenue grew 14% to over 8 billion dollars. Much of that was due to an increase in Prime fees. The retail portion of the business lost 2.4 billion dollars. This is for the second quarter of 2022. The third quarter numbers were better, but, Amazon cautioned, its growth could fall to levels not seen since 2001.
Judging by the company’s behavior, they’re planning for quite a bit of revenue loss. They’ve cut back on expansion, and cut tens of thousands of jobs, while announcing even more layoffs. They’ve been quietly closing parts of the business that aren’t performing to expectations.
The company faced high costs from decisions to overinvest and rapidly expand, while changes in shopping habits and high inflation dented sales.
Some of the cuts Amazon has made have been in their Devices and Books businesses. Amazon’s Books business “spans all of the e-tailer’s operations that deal with books, from its online stores to its Kindle operations.” This comes after the company announced in the summer that it would cut its book orders from publishers (trad, I’m assuming) because of the overflow of inventory it had acquired during the pandemic.
While Amazon is saying that it is still committed to its book business, that commitment will be tested strongly in the next few years. As long as Jeff Bezos was in charge, books were always considered a major portion of the business.
We remain as committed as ever to the book business and to working closely with authors, publishers, and sellers around the world to offer the best experience for readers.
I can’t tell you how many times over the decades I’ve seen that kind of corporate BS just before the ax falls. I’m not saying it will fall, but I think there’s a greater likelihood now than there was a few years ago.
Some of the quiet cuts have already had an impact on some publishing businesses. Just a few days ago, Publishers Weekly noted that Amazon will shutter its textbook rental program sometime in 2023. The digital textbook rental program will remain, and Amazon will continue to sell textbooks, but this particular program is going to be history probably by summer.
Amazon has also decided to shut down their Kindle Publishing for Periodicals Program. That will disappear in September of 2023. Some publications were offered the opportunity to remain in Kindle Unlimited Magazines, but not all.
This would operate just like any other Kindle Unlimited subscription. The payment will come out of the Kindle Select Global fund which I will get to in a minute.
Earnings from Amazon subscriptions provide a varying and sometimes significant portion of the revenue that these publications require to stay in business. If you don’t already know, genre magazines are subscription-driven, meaning that subscriptions make up the bulk of their income. Some people think advertising is a major source, but it actually represents a tiny fraction for us. (Advertising tends to be a leading source of revenue for glossy magazines, so it’s easy to see where they could get that impression.)
None of these magazines are entirely reliant on Amazon, but as the largest ebook retailer in the field, the cancelation of this program will hurt and in some cases, hurt badly. Badly enough to shutter a magazine? Maybe. It’s too soon to tell and there are a lot of variables, including you.
He then made a pitch for subscribers to support their favorite magazines directly.
Uncanny Magazine editor Lynne Thomas told Locus that Uncanny was not offered the opportunity to join Kindle Unlimited. The loss of the subscription program will have a huge impact on that magazine.
This is devastating and frustrating news for Uncanny Magazine, as well as our peer magazines in the Kindle Periodicals Program. While we maintain multiple revenue streams, especially Kickstarter and Patreon, this is a significant loss for us. We’re still in the process of talking to Amazon to encourage them to reverse this decision, or to provide us with tools to help our Amazon subscribers transition to other platforms. This could not have come at a worse time for SFF periodicals, since so many of us are also weathering the storms of reduced advertising revenue and the possible death of Twitter, which is vital for crowdfunding projects.
These are the canaries in the coal mine, Kindle Unlimited writers. As everyone was discussing at 20Books, the time to go wide is now. (Heck, the time to go wide was when you started publishing…or ten years ago, whichever came first.)
Mark Williams of New Publishing Standard offered a scenario in early November that should scare anyone who is relying solely on Amazon for revenue. He examined Amazon’s decision to add 98 million music titles, including ad-free podcasts, to its Prime membership, and noted that Amazon had probably not negotiated with the individual rights holders.
He asks this:
If Amazon will throw its music catalogue into Prime simply because it can, how long before audiobooks or ebooks are added too?
What will the publishers do then? Pull their titles? And then sell them where? For most publishers, the rival ebook and audiobook players in the US cannot begin to make up for the loss of the Amazon platform. Publishers long since handed Amazon the keys to the ebook gateway. The stubborn refusal of certain corporate giants to entertain all subscription options just makes Amazon all the stronger.
He’s talking about traditional publishers here, but the traditional publishers actually have more clout with Amazon than the indie folk. Amazon here is still acting like the behemoth it was, even though it’s desperate. Note from the New York Times stats above that Amazon’s subscription revenue grew due to an increase in Prime fees, when other revenue did not.
Amazon is throwing things into the Prime pie, while cutting programs that don’t make a boatload of revenue.
Writers need to pay attention to this, particularly writers who are Amazon only. Kindle Unlimited payments do not come from sales of books. They come from the Kindle Select Global Fund. From Daniel J. Tortora, who describes the system better than anyone I’ve seen:
The fund is based on the subscription fees paid by the total number of Kindle Unlimited members. As KU members join or drop off, the Global Fund changes.
I want you to look at that last sentence. The Fund changes. And if, in its annual cost-cutting assessment, KU no longer earns what Amazon thinks it should earn, the program will go on the chopping block.
That’s what’s happening with other Amazon programs above, including some high profile ones announced just a year or two ago.
Amazon was kind to the people in the Periodicals Program. They have some months to work their way out of the program and find other sources of revenue.
Most corporations announce cuts and implement them within a week or two. Amazon is currently giving six months or more on various programs.
Whether that will extend to other programs remains to be seen. If Amazon finds itself in more financial hot water, then they’ll revert to standard corporate behavior.
Right now, they’re cutting tens of thousands of jobs. They’re closing programs left and right. They’re not making any real promises to anyone.
This is a company dedicated to cutting what it considers to be things that do not add to the corporate bottom line.
Books rarely have the profit margins or the following that, say, TV shows have. Books don’t make a retailer a lot of money, especially at 30% of cover. Amazon would need a lot of volume to make money on books, and they might get that volume if they behave toward writers the way they just treated musicians.
Let me be clear here. I’m not saying it’s time to leave Amazon. I’m saying it’s time to go wide. To make Amazon part of your publishing portfolio, not all of your publishing portfolio.
As writer businesspeople, you need to ask yourself how you would do if your Amazon revenue vanished. What kind of changes would you have to make?
This is no longer theoretical for many magazine publishers. It might not be theoretical for book publishers in the future either.
Be prepared. In 2023, go wide. Expand your revenue base. We’ll talk about some of the good ways to do that in the next few posts.
Dean and I are finally getting to the point where we can look ahead. We started a Decade Ahead online class in January of 2020, and gosh, for some reason, our crystal ball broke.
Now, three years later, we are cautiously wandering into the breach. We’ve started the Decade Ahead class, and are offering 30% off on it for the next few days. Here’s the link. To get your 30% off, put this coupon code in when you’re checking out: Flash30.
Speaking of changes we’re making, we finally have a good, searchable website for all of our classes. Check that out here.
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“Business Musings: Amazon Year in Review Part 5,” copyright © 2022 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / artursz.