The Kindle ebook market is a fascinating topic for authors in every genre. Writers around the world are guessing about what’s hot and what’s not in 2020.
If you want to write in a genre that sells, it’s a great question to ask.
To find out, I interviewed Alex Newton. Alex is the CEO and founder of K-lytics.com, which is a leading Kindle market research resource for authors and publishers. He spent 20 years at a top management consulting company creating strategy guides and market analysis that cost millions of dollars for companies that would pay for it.
Now he uses that same expertise to analyze the Amazon marketplace. He knows what’s going on in the Kindle market because he has analyzed the data.
Thomas Umstattd Jr: Alex, what is K-lytics, and what does it do for authors?
Alex Newton: We are a market research company, and we provide data on the book market to authors, agents, and publishers. Our purpose is to provide more transparency in a market that has lacked transparency. We want to help authors make better and faster publishing decisions so they can sell more books.
Join us for our free K-lytics webinar.
Total Kindle Unlimited Sales Up 14% in 2019
Thomas: In the big picture of the 2020 Kindle market, is the ebook market growing or shrinking?
Alex: In order to tell, we must look at the facts and then extrapolate. The first thing to know is that it has always been a matter of perspective. Who do you ask about the data? From the traditional publisher’s view, the Association of American Publishers (AAP) reports the quarterly trade publishing numbers in the U.S.
The mainstream media picks up on the AAP numbers and quotes them and says, “Hey, ebooks are shrinking again.” We took an extrapolation of their Q3 numbers in 2019, and their ebook sales are shrinking, another 3.8% per year, roughly.
Once you dig into it, you find out their statistical sample—the companies they asked about ebook sales—was made up of 1,300 traditional publishers in the U.S. But the leading company in the ebook market, Amazon, was not included in their sample.
How can you discuss these market numbers if you are using a sample that represents probably less than 20% of the overall ebook market?
If you ask traditional publishers, ebooks are shrinking.
But if you ask me, with a view toward Amazon, I’m going to paint a much different picture.
Thomas: I talked with a representative from the NPD Group, which is a big publishing research firm. They collect their data by polling the top publishers, as you’ve said. Then they get retail data from the retailers. But they do not get data from Amazon, and so they have this big hole in their data.
I’ve spent enough time with publishing executives to know that they don’t consider the indie market to be producing many sales at all. But I know from having looked at your data, and Amazon’s data in general, that in a lot of categories, the bestselling authors for Kindle are indie authors.
Not only do they hold a big part of the market, but the number-one bestselling authors in certain categories are independent authors. That’s a huge chunk of sales that companies like NPD Group or AAP aren’t seeing. When they claim the market is shrinking, they’re not counting indie authors.
When you include the indie authors and their data, is the market shrinking or growing?
Alex: If you look at the U.S. ebook market, about 85%, if not more, of the ebook market is held by Amazon. When you look at the whole ebook market, and when you include the Amazon data, you get a much more representative view.
Amazon does not officially publish their ebook numbers. They are very restrictive on what they disclose when it comes to individual commodities. But if you look at their annual reports, one indicator of the ebook growth is the growth of the Kindle Global Select Fund. The Kindle Global Select Fund includes all the royalties that are paid out to authors who have signed up to the Kindle Unlimited program, which holds a significant share of this 85%.
That pot of money grew by another 13% last year to more than $300 million by now.
If you look at the payouts and what they now pay per page, you can extrapolate what that means for the ebook market. Our numbers suggest that growth since 2016 has been 19% per annum. Last year Kindle sales grew by 14%.
Whoever says ebooks are shrinking is, in my mind, completely missing the boat.
Traditional Publishers Continue to See Kindle Sales Declines
Thomas: It’s important to understand that when traditional publishers say ebooks are shrinking, they’re saying our sales are shrinking.
In contrast, overall Kindle sales are growing. That means all the growth in ebooks is coming to independent authors grabbing market share from traditional publishing companies.
Alex: And it’s no wonder because if you look at the trade revenues of traditional publishers, their priority is not ebooks. They make about $8 billion in the U.S. in trade revenues across all formats.
But of these $8 billion, about $3.1 billion are hardback, and about $2.7 billion are paperback and mass market. The famous ebook number is close to $1 billion, and then audio is over $600 million per annum.
Those are their trade numbers, and roughly $1 billion in their ebook numbers has been shrinking.
Indie Ebook Sales Continue to Grow
Alex: But the Amazon numbers have been growing. Where does that growth coming from? Who is truly earning the money?
We made an informed estimate based on looking at 50,000 books. We ran all those individual books against the names of Amazon imprints, Big Five imprints, and indies.
At the top of the mountain of that data, where all the money is being earned, we saw about 38% of all the top 100 rankings across all the bestseller lists being taken by indies. The next biggest shares, and steadily growing, were the Amazon imprints. And after that come the Big Five, and only then all the others.
So that is how we view the market. That’s the market picture for those who earn money on a monthly basis based on Kindle Publishing and other platforms.
Thomas: So, traditional publishers are making $8 billion dollars collectively, and only one billion of that is from ebooks. For them, ebooks are only a small piece of the financial pie. But for your typical indie author, maybe 80% of their money comes from ebooks. They care a lot more about ebooks and Kindle.
I’ve actually seen traditional publishers price their ebooks high to make them unappealing so it will drive people to buy the paperback. A well-known author with an ebook listed for $12.99 will not have a high rank in the Kindle store where most books are priced around $2.99.
Part of the reason traditional publishers aren’t doing as well in the ebook space is that they are not trying to. It’s not a priority for them like it is for independent publishers.
What are the new trends in the Kindle market?
Thomas: What are some of the new trends you see evolving? What’s changed over the last year on Amazon?
Alex: First and foremost is what we call ‘pay to play.’ Everyone is worried about visibility and wants their books showing up in the rankings. They want to know what they can do. The fact of the matter is that in 2019 Amazon changed some things in their interface, so fewer books are showing up.
For example, if you’re on a desktop, you’ll see a list of about 16 books per page plus one prominent book at the top. Of those 17 placements, about seven positions are sponsored results. That means that about 41% of the real estate on an Amazon page is now paid advertising. If you want to show up there, you have to pay.
So, one big factor is learning to manage your ads, and the way to get visibility on Amazon is with a paid advertising strategy. It will be a bit like the winner takes it all in the end because they can afford to reinvest their money into more ads. So that’s potentially one effect of the changes in their interface.
Thomas: I want to point out, though, this is how advertising has always been. You’re going to Amazon because you want to purchase something. It’s just like when you’re at the grocery store.
The placement of the products on the grocery store shelf is paid for by the vendors. If you see a big display for a particular brand of toilet paper, that toilet paper company paid to have a display put there, and that’s a form of advertising. It doesn’t feel like advertising because you may have gone to the store to buy toilet paper anyway.
What are the trends with Kindle Unlimited?
Thomas: What are some other trends that you’re seeing?
Alex: The other trend is the gain of Kindle Unlimited. Kindle Unlimited is where the author or publisher sells exclusively on Amazon. There have always been conspiracy theories that Amazon is giving particular weight in the rankings to Kindle Unlimited books.
I do not believe that is the case. But the fact of the matter is that Kindle Unlimited has gained significantly in share.
We looked back at the numbers in 2016, and out of all the top 100 rankings across the 30 main categories, only about 45% of these top-ranking positions were taken by Kindle Unlimited books.
At the end of 2019, we saw 62% of those top-ranking positions taken Kindle Unlimited books. That’s a huge jump.
But it does differ by genre. If you look at the Romance genre, about 80% of the ebooks are Kindle Unlimited. It’s the same in SciFi, Fantasy, and Teen Young Adult.
So, in some major genres, Kindle Unlimited is dominating the game. This causes people to think that Amazon is gaming the system and giving preference to Kindle Unlimited.
But I believe there is a simple explanation behind that phenomenon. If you are an end-customer and you sign up to Kindle Unlimited (K.U.), you pay a monthly subscription. But once you’ve paid, you go to the site to download a book it feels like it’s free because you’ve already paid your subscription fee.
But the irony is that the Kindle Unlimited download drives the sales rank of a book in exactly the same way as a paid purchase. So, it’s like a free ebook competing with a paid book. Over time, the relatively higher conversion that is baked into a virtually free ebook, like a K.U. download, will outpace and outperform the paid books.
That’s why we have seen this huge gain in Kindle Unlimited.
Thomas: That’s right because Amazon keeps two bestseller lists. They keep a bestseller list of free books, and they keep a bestseller list of paid books. You might think that Kindle Unlimited downloads go into that free category.
But that’s not the case because technically it’s not free. Readers pay a monthly $10 subscription for Kindle Unlimited, and that counts toward that paid list.
How are the Amazon imprints performing?
Thomas: Let’s talk about Amazon imprints. Amazon is trying to have their cake and eating it, too, because they’re not just a retailer. They’re also a publisher. They publish their own books.
I have often thought that they would just dominate the market because they have such useful data. Since they know who’s finishing which books, they can identify which authors are good from an objective perspective.
How are the Amazon imprints doing? Are they gaining or losing market share?
Alex: They’ve gained market share. By purchasing these publishers—there are three big ones and about 20 others—they have more than 26% in share. That is significant.
As an Amazon company, you will have some advantages. If you talk to individual authors of those imprints, they’ll tell you Amazon knows e-business, and their imprints thrive much better in the Amazon ecosystem. The Amazon imprints have become a major player.
How do audiobooks impact the Kindle market?
Thomas: Let’s talk about audio. I’m a big advocate for audiobooks. How is audio growing? How is the growth of audio impacting Kindle?
Alex: Again, there are two perspectives. There is the Amazon view, and then there’s a traditional publisher view. But this is probably the one item where both worlds agree.
Out of that $8 billion we mentioned earlier, more than $600 million a year in 2019 was audiobook sales for the traditional publishers. For them, that’s a growth of about 33% in 2019. That is significant.
Now, Amazon doesn’t publish its audio sales. But over the years we have monitored the overall book bestseller lists on the Amazon store by genre.
We looked at the penetration of the various formats across those bestseller lists. And although I cannot give you a percentage, if you look at it graphically, the area of audiobooks has grown significantly since 2017.
If you look at some of the top bestseller lists by genre, you’ll see that in SciFi and Fantasy, 35% of the top 100 books in SciFi have become audiobooks. In Literature and Fiction overall, 25% have become audiobooks.
Romance was surprisingly low at less than 5%. I found that surprising.
There is an interesting phenomenon in audiobooks.
Thomas: Part of the reason is a gender difference. Women make up the majority of readers of romance. Men make up the majority of listeners of audiobooks. The genres that tend to do well as audiobooks are male-reader targeted genres. The Business genre is really big for audiobooks as well as SciFi and Fantasy.
Audible has made some efforts to grow their female listenership, and I think it’s helped to a certain degree. But it’s still the one format where there are more men than women. Normally, women dominate the reading market. Women are more likely to be readers and bookstore visitors.
It’s a weird phenomenon, and I’ve never heard anyone explain the why behind it. But what’s interesting to me is how little of the money is going to traditional publishers from audiobook sales. You mentioned that $600 million is going to the actual publishers– that’s what they’re reporting as their profit.
But if you look at the Audio Publishers Association (those who narrate the audiobooks), they reported in 2018 that they had nearly $1 billion in revenue. What’s happened is that Amazon completely dominates or had previously dominated the audiobook space because Audible is just such a huge player.
What do traditional publishers think about Audible?
Thomas: Even when you buy an audiobook on iBooks, you’re purchasing it from Audible, which is owned by Amazon. Amazon can use that market position to create really unfair deals with the publishing companies. Very little of that $15 you spend for an Audible credit goes to the publisher, and even less goes to the author.
To offset that, publishers have teamed up with Book Bub and launched a new audiobook publishing service called Chirp. Chirp is a much better deal for publishers. And that’s why they’re there backing it so aggressively with a lot of their top content.
They have some indie books, but it’s a lot of top-name authors, and their books are aggressively discounted. It’s only $1 to $5 for a book on Chirp. The publishers are willing to give a big discount because they’re still potentially making more money selling the $5 book on Chirp than they are selling a $10 book on Audible.
Alex: That’s very interesting. I concur with the genre and gender domination. When I look at our emerging genre stats on the audio side, SciFi, Business, and Self-Help books are the types of things guys typically listen to. It’s going to be interesting to see how the Audible subscription model does against these new emerging platforms.
What is the future of audiobooks?
Thomas: My prediction is that over the next five years, the gender gap will even out. I base that prediction on what has happened with podcasting. Men dominated the first ten years of podcast listening. Most podcasts were made and consumed by men. But that has changed in the last two years.
There has been a flood of new female podcasters and listeners. I think podcasting is the “gateway drug” to audiobook listening. You listen to some free podcasts, and then you hear some commercials for an audiobook service, and suddenly you’re starting to buy audiobooks.
That’s why I think opportunities will open up in the audio space for books with a predominately female readership. Previously romance audiobooks have struggled to reach female readers. The romance audiobooks are not making the fortunes that they’re making on Kindle Unlimited. But I think that will change.
Alex: I got one fascinating hypothesis on that from a romance author. She said romance readers are so voracious, and they consume the books so fast, that the speed of the audio narrator is too slow for many consumers of romance novels. I found that interesting.
Thomas: Audible launched a special romance subscription program, and they have ways of speeding up the audio, but they still haven’t quite figured out how to solve that problem for romance.
What is happening in other genres in Kindle? Which genres have gained, and which have dropped off in the last year?
Alex: The overall trend has been surprisingly stable when it comes to the overall share that we see in the genres. Romance is still the number-one genre, and it is followed closely by Mystery Thriller and Suspense. SciFi is third and is often competing with Teen Young Adult. Then comes Nonfiction. Those are the big ones.
But once you dive deeper—which we’ll do extensively in the webinar we’ll host together—you find that within those main genres are subgenres where we can see trends of Paranormal Romance going up or down. We can see what the Dragon Shifter subgenre is doing. Those are the areas our data allows us to explore in endless granularity.
Where will the Kindle trends go in 2020?
Thomas: Your K-lytics reports inform authors of which genres and subgenres are currently the best space to be writing in. You can see the trends.
Where do you see the trends going in the future?
Alex: I think two things are going to happen.
I think we’re going to see a continued gain in share by Amazon imprints at the expense of traditional publishers.
And I think within the indie space we’re going to indies hanging in there, holding their share, and potentially slightly gaining. But we may see a bit of shift within the indie landscape.
Within the indie landscape, we are seeing authors move to more of a collaborator and publisher model. That allows those indie publishers and authors to invest in advertising in smarter ways collectively.
There is potential for authors to collaborate and potentially create trends.
Can authors create Kindle trends?
Alex: A couple of factors impact what readers want. If we look back in time, we saw the rise of Vampire Romance and Paranormal Romance. This year in Mystery Thriller and Suspense, there is huge growth in Psychological Thrillers that is way over the market average. So, there are these individual pockets where there are some underlying megatrends.
However, you also have factors where authors get together and ask what trend they want to create. I think there is a lot of potential there because since so much of the shelf space is paid, as we discussed earlier, then those who pay can create the trend.
You may suddenly see dragon urban fantasy novels all over the place because urban fantasy authors get together and decide this will be the year of the dragon. Maybe next year will be the year of the female superhero. That is how trends will be created in the time to come.
Thomas: It will be interesting to see if that works. So often trends happen because there’s some super big hit book. The Vampire Romance trend was kicked off by the epically successful Twilight books. Especially voracious romance readers, who read three to ten books per month, will get through the whole Twilight series in a month.
Indie authors are really good at letting those voracious readers know about books that are similar to Twilight. Suddenly you’re creating a genre and a category on Amazon that is very vibrant. It all started with a hit book.
But you never know what those big hits are going to be. It’s hard to predict. But I have noticed that indies are much more responsive to those trends.
Alex: Indies are agile. Sometimes the reactive game works, sometimes it doesn’t.
For example, long after the Twilight series had died down, we still had Bella Forrest writing more than 60 books in her Shades of Vampire series. There were probably 50 other authors who jumped on that bandwagon and made a living on it for over ten years. Twilight came out more than ten years ago, and the vampire still don’t die on the Amazon platform.
Other categories don’t seem to have the same longevity, though. In 2019 we did a superhero study to update our data. In 2019 we saw the highest number of superhero movies released in a year.
The iconic Stan Lee pass away end of 2018, and there was a lot of media attention surrounding his death. You would think that may have helped the Superhero Fiction genre, but in fact, it has not come out of niche status.
It was the same with Ready Player One, the lead RPG Game Lit book. The genre has grown significantly, but I don’t think it will ever be as big as the vampire thing. The market is just too niche.
Join us for our free K-lytics webinar.
Thomas: It’s important for authors to know where the market is heading. If you want to write the kinds of books people like, you need to write the types of books people already like. To do that, you must familiarize yourself with market data.
For authors who are wondering about trends in their subgenre, we have good news. Alex and I are hosting a free webinar to dive deeper into specific genres. It’s an exclusive event for our Novel Marketing listeners, and we’re going to answer listener questions.
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Last week during lunch, totally out of the blue, Mercy, my 15-month-old daughter, had a seizure. She had no previous events and no family history that we knew of. My wife called 9-1-1 while she held my seizing daughter. As you can imagine, it was incredibly scary. The EMTs, ambulance, and fire department all came to the house.
I was at an author event in the middle of a session when Margaret called. Normally Margaret messages me and rarely calls, so when I saw her calling, I knew it was a big deal. Thankfully I answered, and she said, “Mercy has had a seizure. I need you to come home right now.”
So, there I was, stuck in traffic, stuck at red lights, worrying about my daughter, and hoping that she was okay. Finally, I got home and saw an ambulance parked in front of our house. I rushed inside.
Nobody was downstairs. Nobody was upstairs. No one was outside in the back yard. I was calling out for my family, but no one was there. I couldn’t figure out what was going on.
Finally, I ran out to the ambulance, and when I opened the door, a paramedic was holding our newborn son. Mercy on the stretcher just shaking and weeping in a way I’ve never heard before. My wife and another paramedic were beside Mercy.
I got into the ambulance and were discussing whether we should go to the hospital. They said, “There’s a chance that this is a febrile seizure, which is common in toddlers. It’s not a very big deal. But there’s also a chance that it’s something else that’s far worse. We have to go to the children’s hospital to run tests.”
Our medical plan doesn’t cover ambulance rides, so we decided to take her ourselves. But as we were taking Mercy out of the ambulance, she got stiff and shaky again. I’m not sure if it was from the cold or another seizure, but I quickly changed my mind.
I decided to ride with Mercy in the ambulance because the baby was hungry. So, I told Margaret to follow us in the car after she had a chance to feed the baby.
But I was not thinking clearly.
A a children’s hospital in the middle of flu season is a terrible place to take a newborn.
On the way to the hospital, Mercy’s fever came down. While we were sitting in traffic in the ambulance, she started to feel better. By the time we get to the hospital, my wife and I both realized we didn’t my wife coming into the hospital with the baby. So, Margaret ended up sitting in the back of our in the parking lot of the hospital for hours while doctors did various tests on Mercy.
Inside the hospital, I played Baby Shark over and over for Mercy, hoping she’d feel better.
Eventually, the tests came back negative. Mercy didn’t have any of the scary things that it could have been. And it turns out that she had contracted a virus called Roseola, which is a very common virus that young children get.
We are thankful the tests came out negative, but the seizure was terrifying. The whole event was very disruptive.
Eventually, we all got home, and Mercy’s doing better.
One lesson that came from the whole event is something authors can apply to their writing. Normally, I feel like I’m pretty good at putting plans together and thinking through logistics. But in the heat of the moment, in terror and concern for my daughter, I felt like I was making nothing but sub-optimal decisions.
I felt terrible for my wife. We both decided it wasn’t a good idea for her to bring our five-week-old into the hospital during flu season. But neither of us had figured that out before we left. If we had, she could have stayed at home in a much more comfortable place for her and Baby Tommy.
Often our books are our book babies. It’s easy to get into that same frantic place where we’re so emotionally charged.
We get so excited or so scared that we make poor decisions.
There are a lot of con artists in this industry who are very greedy. They aim to scare writers so that they can take advantage of frightened people.
One nice thing about a book-baby, as opposed to a real-life baby, is that you’re never in a rush to decide. It’s never a life-or-death decision. You don’t have to decide immediately. Any time somebody pressures you to make a rushed decision that is a huge red flag. There’s no reason you can’t sleep on it. In fact, you should. You should Google it and take a deep breath.
In publishing, your book is not going to die because you wait.
So, the one takeaway I have for you is to avoid making decisions in a panicked state.