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.