Business Musings: Go Wide or Run Away or Amazon Fail
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[Note on 5/5/23: As most of my regular readers know, I’m dyslexic. I have a first reader to catch errors, but this post–which was late–went live without the assistance of that first reader. As a result, I made two typical errors for me, which have been discussed in the comments. Normally, I leave my mistakes and let the comments speak for themselves, but because the KU people are here, these two small errors have grown all out of proportion. At the request of a few folks, I’ve removed the mistaken passage and corrected a math error, but I’m leaving all the comments, which I think are valuable. If you want to read the actual removed section, download the audio version. The errors remain there.]
I’m writing this on the last day of April. I’ve been planning this post for months now, as the drumbeat of bad news out of Amazon escalated from rumors to asset sales to major layoffs. The reason I’m posting the date in this blog is because by the time you read this, there might be even more news that has somehow affected writers.
I’ve been worrying about this year since at least 2011. Maybe longer. I knew at some point, the world’s largest retailer would mess with their ebook program(s). Amazon is not a book retailer. They’re no longer a bookstore, and haven’t been one since the last century.
They’re an online retailer, currently the largest in the world by most measures, but they might not be number one by the end of 2023. Others are rapidly climbing the list, and aren’t suffering from the same kind of missteps that Amazon made during the past few years.
When big companies have bad earnings reports, the people running the big company must make changes—even if changes aren’t warranted. The CEO answers to the stockholders, not to the customers, and stockholders generally demand some kind of change…or the CEO gets fired.
In the past two years, Amazon has had bad earnings reports. 2022 was terrible. The company lost all of the gains it made during the pandemic. CNBC reported this on December 19, 2022:
Shares of Amazon have tumbled 49% in 2022 and are on pace for their worst year since the dot-com crash of 2000, when the company lost 80% of its value. Among the highest-valued tech companies, Meta has had the worst year, down 66%, followed by Tesla at 57% and then Amazon.
Keeping an eye on earnings reports, both expected and actual, are important for writers to do with any business they’re tied up in, because then the writer isn’t blindsided by changes that come from above.
The losses started in mid-2021, but they were small. Year over year, though, which is how most publicly traded companies now look at earnings, were devastating in 2021. After all, 2020 was filled with phenomenal growth. A year later, the growth was slowing, and by 2022, reversing.
Amazon made a lot of money during the pandemic and, like many tech companies, seemed to think that the gravy train would continue. Apparently no one in the company thought it through: what we were going through was a true Black Swan event. It happened worldwide at the same time, and no one alive had gone through anything remotely similar.
Rather than seeing the event as something unique, with its own set of rules, the people in charge of the tech companies decided the future had arrived. We would all be shopping online forever now, talking to friends and family on Zoom, and never leaving our homes. Apparently, these starry-eyed CEOs and prognosticators weren’t listening to their own friends and family, who were probably chomping at the bit as much as everyone else, waiting for the day when they could burst out of their little bubble and return to “living” again.
When living returned, the tech companies saw quarter to quarter losses, and many of those losses were major. Some companies are doing just fine because they didn’t expand during the pandemic. But others are doing poorly.
Amazon spent the newfound wealth like it was a growing start-up again. They bought or rented warehouse space all over the country, and added a huge number of employees.
And now, with the financial losses, Amazon is reversing a lot of those decisions.
Most writers wonder why that’s important. After all, big companies are just big companies, right? They have money. They’ll continue.
But they don’t always continue. Take a look at Bed, Bath, And Beyond. In fact, take a look at this article in Business Insider, which is illustrated with large bold subheads. It gives a quick overview of how a company can go from a juggernaut 20 years ago to bankruptcy and possible closure today.
For more than a decade now, I have fought with writers old and new about relying solely upon Amazon. I’ve written blog after blog recommending that writers go wide, and yet many writers never listen.
Most of them give me the same song and dance: Amazon is the biggest retailer in the world. It’ll never go away.
I have not gone back in my blogs to see when I started writing about going wide. I do know that I actually used the picture of eggs in a basket several years ago to encourage writers to go wide. And if you look at any of those old blogs, particularly from 2011 or 2012, you’ll see the kinds of statements I mentioned above littering my comment field.
I kept saying that someday Amazon will change, and that change will hurt writers, particularly those who tie their entire writing career to Amazon. The writers who have gone exclusive through Amazon via Select are really going to be in trouble.
And the trouble has already started.
Some of that trouble was built in from the start. What actually got me taking notes for this blog post was a Facebook post from one of the best-known Kindle Unlimited writers who claimed that writers never have a passive income off their work. Writers must constantly write and release to be successful.
Um…what? Really? News to me and most writers who have gone wide. One of the best things about writing is the passive income. If Dean and I quit tomorrow, we will continue earning for years to come. Sure, some of the revenue will go down a bit if we don’t put out new product, but mostly, the income will plateau.
Apparently, goosing payment through new releases is one of the few ways that K.U. writers survive. And if they don’t do it, they don’t get paid as much or as well. Or maybe not at all, given what he (and all of the people in the comments) said.
But that’s built-in trouble. Add to that some significant changes in the way Amazon is doing business.
In March, writers who are in Kindle Unlimited reported that their earnings went down. Lindsay Buroker posted this on her Twitter feed to warn her fans that her books would soon be leaving Unlimited.
The amount Amazon is paying authors for Kindle Unlimited page reads is on a pretty noticeable downtrend this year. I’m going to take my Star Kingdom and Dragon Gate series out of the program in a few weeks.
— Lindsay Buroker (@GoblinWriter) April 14, 2023
Smart move. And very smart to warn her KU readers ahead that the books will no longer be available through the program.
The financial loss for writers was significant. And it’s worse if you look at a historic timeline for the KU payments.
First, though, let’s go over what Kindle Unlimited is, and, more importantly, where the money comes from.
Writers who have their books in Kindle Unlimited must be exclusive to Amazon through a program called Kindle Select. Those writers get paid in two ways: they get paid for “page reads” in Kindle Unlimited itself—the program of all-you-can-eat books that goes to subscribers. The writers also get what the rest of us get: a percentage of the sales price if their ebook gets purchased.
None of these writers can go wide. Their fortunes are tied 100% to Amazon itself.
The payment for their “page reads” comes out of something called The Kindle Select Global Fund. The fund is based on the subscription fees paid by Kindle Unlimited Subscribers.
And here’s how writers get their share of the fund, according to Amazon itself.
The share of fund allocated to each country varies based on a number of factors, such as exchange rates, customer reading behavior, and local subscription pricing. Author earnings are then determined by their share of total pages read. They are able to earn a maximum of 3,000 Kindle Edition Normalized Pages(KENPC) read per title per customer.
First, I’m not going to attempt to explain the Kindle Edition Normalized Pages.
The point of Kindle Unlimited is to bring readers into Amazon’s ecosystem, where they will then shop for other things. In other words, Kindle Unlimited is an advertising program, a loss leader if you will, to get people to spend money elsewhere on the platform.
The Global Fund’s payouts to individual writers have gone down dramatically in the past ten years. While the total amount paid by the fund has grown (because more and more authors/books are in it), the amount per title has decreased.
In 2015, the fund paid nearly 60 cents per every 100 pages read (which, to me, is a ridiculously small amount, on par with traditional publishing). By 2022, the fund was paying about 46 cents per 100 pages.
In March, the amount dropped to roughly 40 cents per 100 pages.
You can find the numbers on Written Word Media. If you want to see a chart, head to this chart that Daniel J. Tortora maintains.
The scary thing about the Global Fund—about KU in particular—is that it can be whatever Amazon wants it to be. They’ve already changed the terms of KU to exclude things that were once included, like magazines.
This a program that is Amazon-controlled. That’s important on the small scale—such as excluding things like magazines or dropping the rates—but it’s also important on the large scale.
Amazon can shut down Kindle Unlimited if it outlasts its usefulness or if it doesn’t earn to expectations. I’m not even sure what earning to expectations means. Maybe it’s not money. It might be a set number of subscribers.
Either way, Kindle Unlimited/Kindle Select exists at the whim of Amazon, which, in this fraught economic moment, is quite a risk for writers.
Amazon can and does shut down author accounts all the time for perceived and actual problems. Perceived? A writer friend of mine, award-winning and bestselling in both traditional and indie, had her account shut down for a reason that I can’t even remember right now. The reason was that minor. And terribly frustrating, because she hadn’t done anything wrong. But it took nearly a week of back and forths to get the account reinstated—and that wasn’t even in Kindle Unlimited. That was a straight Amazon account.
The problem is even worse for Kindle Unlimited authors who have pledged exclusivity to Amazon. As TorrentFreak reported in February, writers in Select have had their books pulled because the books were “freely available all over the web.” In other words, the books had been pirated.
Writers had their accounts suspended. If they could prove that their books were “freely available on the web” due to piracy, the accounts got reinstated. After a loss of revenue, however.
Amazon can remove books for any violation of their terms of service. It can be difficult for the writer to find a human to handle the complaint. It takes time.
Everything about Select smells of traditional publishing to me. The historically low payments, the take-it-or-leave it terms. The fact that a career can disappear virtually overnight.
This is why I repeatedly urge writers to go wide.
But it’s not the only reason. Amazon is clearly reevaluating their business model on all levels, and that includes books.
When Jeff Bezos was CEO, books and the book division were untouchable. Bezos started the company as a bookstore, and had a firm love for books. The new CEO does not have that love of books. He came from Amazon web services, and is proudly stating that he’s not going to run the business “the Bezos way.”
I’m not exactly sure what that means. Does that mean he won’t make the business as innovative? As profitable? (If so, he’s succeeding.) Or is that simply a matter of style?
Whatever the difference is, it is clear that the new CEO’s priorities are very different. In November of last year, Amazon announced that it would cut employees in its books and devices divisions. Shock resounded through the book world. Everyone thought books and Amazon were synonymous. Even if Amazon was having financial trouble, it wouldn’t touch the books.
Whoops. That’s no longer true.
Then the cost-cutting continued into 2023, and in every single department. 18,000 jobs in January, 9,000 in April.
All of these cuts have had an impact on customer service. The complaints about Amazon have only grown in the past six months, from both consumers and from writers. Nothing moves quickly at Amazon anymore and if there’s a problem, a robot deals with it first. I’ve heard more customer complaints about Amazon in the past year than I ever have.
I also don’t think it’s a coincidence that some vendors noted a glitch in the late April/early May payments. About the time that writers were fretting that they couldn’t get anyone to answer their complaints, an Amazon employee had uploaded a video of her firing on TikTok. She’d been chronicling her day, and happened to open her email account in front of a live video feed.
There, in her email, was notice that she had been fired. Her reaction went viral.
Employees aren’t the only part of the business being cut. In April, Amazon announced that it was closing Book Depository. Book Depository delivered paper books worldwide, using warehouses in strategic places all over the globe. The company was a boon to readers who preferred paper editions.
The fact that Book Depository disappeared was just further proof that Amazon is no longer giving special privileges to its book division. Readers no longer get special consideration. (Writers are only an appendage of readers, in Amazon’s view.)
What that means is that the book division now gets lumped into everything else. From the vantage of the people who run the company, the folks who answer only to profits and stockholders, everything at Amazon can be cut, altered and changed.
The new CEO came in and began cutting and retooling the company into his own image. He presided over the massive losses, which, to be fair, weren’t entirely his fault, and responded the way an average CEO would respond, with cuts that reduced pretty much everything that makes Amazon special.
The cuts did what they were supposed to do. The first quarter of 2023 actually was better than experts had predicted. But as Gizmodo noted in its April article about Amazon’s continued cost-cutting,
In the long-term layoffs are a time-tested bad strategy for a company’s sustainability. But in the short-term: big number go up, overhead go down.
Layoffs and cost-cutting also change the internal company dynamics. Amazon employees are claiming that the company’s culture has changed from a Day One company to a Day Two company. As Modern Retail explains the difference in an article titled “‘Day 2’: How cracks began to emerge in Amazon’s e-commerce empire in 2022”
The Day One mentality meant that, despite being 28 years old, Amazon still approached each day as if it were the first day of their brand-new startup. And Bezos often said that day two is death for companies.
Whether or not Amazon’s Day Two status will mean the demise of the company is far in the future. What it does mean is that Amazon’s position as an innovator and a company that prided itself on the customer experience is part of the past.
Amazon is a different company now, one that does not prioritize books over shoes. Both are widgets that the company sells. And if the book division is not making as much profit as expected, Amazon will retool it.
Retooling it might mean getting rid of Kindle Unlimited.
Writers who are exclusive to Amazon need to follow Lindsay Buroker’s lead. These writers need to let their readers know that they’re moving out of Kindle Unlimited. Then the writers need to go wide. The writers can and should stay on Amazon, but not exclusively.
Yes, it will take months, maybe years to replace the Kindle Select income, but that Select income has become unreliable at best. It will remain so. Or, it might disappear altogether.
Writers who are already wide still need to keep a weather eye on Amazon. They need to know what changes are coming to the company. Amazon is a behemoth, and even writers who are wide make a lot of their income in Amazon’s ecosystem.
Those writers need a plan for what they will do if Amazon changes its publishing program and cost-cuts at the expense of programs writers rely on.
I learned over many years that having a single client for your company is bad for business, even if client is a billionaire or, say, the biggest retailer in the world. Your business is inextricably tied to someone else’s business. If their business tanks through mismanagement or some unexpected surprise, yours will too.
The best way to run a business is to make sure your income comes from a variety of sources. At minimum, for writers, that means going wide. (There are other sources too, like Kickstarter.) This exclusivity thing? It only benefits Amazon. It doesn’t benefit the writers at all.
If writers stay exclusive with Amazon after the changes this past year, then those writers will get no sympathy from me when their businesses disappear one day, through no fault of their own. I’m really not all that sympathetic now. But I do understand that many writers are lazy opportunists. They put their books up exclusively on one site, did a handful of things that Amazon told them to do, and didn’t really learn business at all.
Because if people who are exclusive to Select understood business, they would understand the problems of exclusivity. They would understand that they were relying on a company that had no fellow feeling for them to make their living. They would understand that their writing careers were precarious and subject to the whim of an international conglomerate that can change its policies at will.
That’s not running a business. That’s covering your eyes and hoping for the best.
I too hope for the best for these writers. I hate watching careers get destroyed. For decades, I’ve watched traditional publishing shatter writers’ dreams. I have a hunch the next few years will be about watching writers’ dreams shatter as collateral damage in Amazon’s changes to its business model.
For those of you who can listen, please do. Go wide. Do it now.
Because you’re really and truly running out of time.
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“Business Musings: Go Wide or Run Away or Amazon Fail,” copyright © 2023 by Kristine Kathryn Rusch. Image at the top of the blog copyright © Can Stock Photo / studiostoks.