The new Amazon KU payout program. How much will you win (or lose)?

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Now that we have some more info about the new KU payout program, I decided to write a follow up on my previous post, to see where I was right and where I was wrong.

In a recent message, Amazon announced that the fund in June 2015 will be at least  11 M$. Notice the “at least”. Because it hasn’t been uncommon in the previous months that Amazon raises the fund on the last moment by 30% or 40%. However, given the predicted KU fund it is unlikely that it will be much bigger (or less) than this figure.

I predicted $11,7 mln, so that one was pretty close. And we’re not at $700.000 close, are we ? :)

Furthermore, Amazon announced a total of 1.9 billion pages read as part of the KU/KOLL borrow program in June. This means that the payout per “page read” would have been 11 mln / 1.9 billion = $0.00578 if the new KU payout program would have been applied in July. If we round it of we get to 0,6 cts per page.

My prediction, which I thought was pessimistic, was somewhere between 0,9cts and 2.5 cts. Here is that table again.

 KU analysis V2

The green area is where I thought the payout would be. The orange area is where we are ending up. This means that the average nr of pages per book is much higher than the 100-200 pages I guestimated. We’re closer to the 400 pages.

The next table seems to confirm that. With a comparable KU payout of $1.4 (if the old program would have continued), and an average page count of 400 pages, we get into the 0,4-0,6cts per page.

KU analysis V2

Amazon introduced the KENPC. This is the “normalized” page that will be taken into account for the number of pages read by your borrow customers. No further detail has been given about this KENPC, but with some reverse engineering we can find what a KENPC looks like.

To start with, I analyzed my own books.

KU analysis V2

This table probably needs some explanation. The first thing is the rather confusing discussion about “What is a page”? So let me try to explain.

Often, when an author talks about his book, and he says “I have written a 400 page book”, what he refers to is the page count that appears on the bottom of his screen when he is writing his book with MS Word. Obviously, this page count may differ considerably between authors depending on the page size used, the font, point size etc. For example, when I hammer in my books, I use the standard European A4 format instead of the US format or a 6X9” format. In the rest of this article I will refer to this number as “Author pages”. (third column in the above table).

When you submit your book to Amazon a “print length” will show up on the detail page of your book. This number is calculated as follows : if your book also has a printed version (created on createspace), it’s the number of printed pages of your printed book, that will appear on your book detail page. If your book does NOT have a printed version, Amazon will estimate what the number of pages would be, if it was printed. For this, they will use a 6×9” 11 pt layout (I have no further details, like font, line spacing , etc. about this).

This is the number that appears in my table in column 2.

Next, we have the KENPC pages, which was recently introduced by Amazon. You can find this number for every book, by going to your bookshelf, click on the book and click on the TAB ‘KDP select’. This is in my table in column 5. The fourth column shows the number of pages as they appear on CreateSpace. Notice that books 7 and 8 don’t have a printed version.

For my printed books, they are all printed as 6×9”, Book Antiqua, 11pt.

This explains that the number of CS pages is, on a couple of pages close, similar to the print length on the detail page.

But how is the KENPC calculated? Because as you can see in my table , the KENPC is NOT the same as the “print length” on your detail page. So what can explain the difference between the “print length” and the KENPC pages? In my case, the difference is varying from -10% to +26% with an average of +11%.

All my books are printed with the same font, size , line spacing etc. So one might have expected that the difference between the “print length” and the KENPC pages ,in percentage, would be roughly the same. But they aren’t. Another criteria might be images. So I included an image count for all my books. But even that doesn’t give a clear indication. For example, my book 2 and book 3 both have 58 images. But one gains 4% KENPC and the other one loses 10%. I haven’t gone any further by analyzing the size of these images, but maybe the answer is somewhere in there. But overall, my books have only 11% more KENPC pages than their printed version. Which makes me conclude that the point size for a KENPC is probably an 11pt font, which seems to be also an industry standard.

Actually, when I started publishing my books in printed format, I looked up what the ‘most common’ practices where for paperbacks. And that was 6×9” 11pt. And then there are about a handful of  common fonts for print books.

Now how come that certain authors report 70%, 80% or even 100% more KENPC pages than their printed version? The reason is simple. They ‘crammed’ more characters on a page than the KENPC standard that Amazon is using. For example, an author that has published his book in 10 pt, with a small font, single line spacing, in 8×10”, will see a considerable increase in his KENPC pages compared with his printed book. And in the same way, an author who  has published his book in 5×8”, 14pt, 1.5 line spacing will see his KENPC count much lower than his printed pages.

 How many words are there on a KENPC page? On my own books it’s about 180 words per page. But I screened a couple of forums and this figure seems to vary from author to author from about 170 up to 240.  This is a rather big difference. What could explain those big differences? It cannot be the font, size, spacing or whatever, because those are set at the same “standard” size. And if we talk about novels only, there are no images, so that cannot explain it either. The only thing that may create a considerable difference between the two novels could be… the number of page breaks. Let’s compare two authors. One has written one 300 page story. And let’s assume that it gets exactly 300 KENPC pages and it also comes out at 300 printed pages. The second author has written 150 short stories, each one filling up just about more than one page. And every story starts on a new page, which makes sense.  His printed book is also 300 pages. But given that about half of the book is blank, his word count per page is also about half  the word count per page of the other author. Notice that in this example, both would earn the same because their KENPC pages would be the same. But this explains why the word count per page can vary considerably. But given the different figures I saw, it seems that most books turn around the 200 words per page, plus or minus 25.  So if we take 200 as a reasonable average, we can conclude that an ‘Amazon KENPC standardized novel’ has 20k words for a 100-pager. And 100k words would turn out as a 500 pager.

Who will be the winners and losers? In my previous post I already predicted that only the authors of long books would be winners, as compared with the previous KU payout system. All the others will lose. Now that wasn’t too difficult to predict. The only thing that we didn’t know at what page count you would belong to the winners or the losers. I guestimated that the break even point was around 100 pages. But now that the payout per page is much lower than I expected, the breakeven point gets to 233 pages. So if your book has less than 233 KENPC pages, you will lose out as compared with the old KU system. Assuming that all borrows will be read for 100%. And if we use the 200 words per page count this means that your book should have somewhere around 46k words or more, to belong to the winners.

Is this new system fair? With this new system, Amazon has decided to ‘pay for entertainment time’. The longer you can keep a reader busy, the more you get paid. Which isn’t unfair. Especially for novels where the major purpose is, to entertain your readers.  But it’s only one of the criteria that is taken into account. For non-fiction writers, the objective is  not entertainment time, but value. Or at least, that’s what I consider what it should be. An author who explains without the fluff in a 50 pager how to stop smoking, may bring great value to his readers. Actually, they might be more satisfied with this 50 pager, then the 100 pager from another author that contains the same information but who has filled it up with 50% fluff. Which will normally show in reviews. So in this case, the author of the 100 pager would get paid 2 times more than the 50 pager, although the performance of the second one is considerable better . He explained the same problem (and the solution) in half the space. For the non-fiction writer, his ideal objective should be : write the most informational book in the least number of words without the fluff. And this is actually counterproductive with this new KY payout system. But everyone should decide for himself what his first objectives are. For me, it is writing books that are valued by my readers. The overall review rate is close to 5 on my books and I like to keep it that way. They are to the point, with facts and figures, without the fluff. And I won’t change anything in the future to make a couple of cents more with unnecessary fluff.

But for the moment, Amazon has decided to not take into account ‘value’ and reviews. And I can understand why. Because how do you measure value? And how should they take into account reviews, knowing that the whole review system is pretty open for all kinds of scams.

To resume, and although I belong to the losers (as the far majority), I still think that this system is better than what we had before, where the author of 50 pages of crap would get paid the same as the author that wrote a great 500 page novel. And maybe in the future, Amazon will somehow tune their system, taking into account value and/or reviews.

How much will you win/lose as compared with the old KU system? To calculate this, you would have to know how much your borrows weigh in your total revenues. I did this calculation for my own books. And as you can see, my borrow revenue makes up about 42% of the total . Had I taken into account my CreateSpace revenues it would have been less. On average, I will lose 52% of my KU revenues, which turns out as 21% of my total book revenues. And if I had taken into account my CS revenue, it would have been somewhere around 15%. Not nice, but not a catastrophe either. And because I have multiple streams of revenues, other than my books, on the total of revenues it’s only a snippet. Which proves again that you shouldn’t put all your eggs in the same basket. .  Of course I cannot give an estimation for you who is reading this, because this depends a lot on your own personal data and situation.

How good are your books? Now that we get paid per page read, we can also get an idea how good our books are. Because the calculation is simple. Divide your number of pages read for every book, by the number of borrows (multiplied by the KENPC), and you have your % read. The only small problem is, that from 1st of July, in our reports from Amazon, we only get pages read and not the number of borrows anymore. But… you still have that data from the past. Now this will only be valid if

  1. You have at least 4-6 months of KU data
  2. Your borrows have been significant every month. I would say at least 50-100 per book.
  3. Your borrows have been rather steady over the past couple of months.

In this case, your average borrows over the past couple of months is a good indicator of the number of borrows in future months. As for the pages read, you should have some patience. Because your pages read (and their payout) will be smeared out over several days if not weeks. Which means that this calculation of your satisfaction rate, will only approach a more or less viable number after about 2 months of KU data. Which means that mid-November you can maybe draw some conclusions about your percentage read per book.

If you’re one of the losers, what can you do about it? The answer is simple : write more in a shorter time and increase your ‘customer entertainment’ time per borrow. For the non-fiction writers : publish more (good) books in a shorter timeframe. Or for those that want to take the easy way out: add fluff and BS to your books :(

Will there be a massive exodus from KDP? Now that certain books will get paid $0,10, $0,20 or $0,50 per borrow, will there be a massive departure from KDP? I don’t think so. But there may be a major shift. The low paid books may give it a try on other platforms and therefore leave KDP. Which is not a bad thing. And good authors that were not in KDP because they didn’t consider the payout decent, might be tempted to step in, now that their 500 pager will make a nice royalty on a borrow.

Let’s see how all this pans out mid August when we have the data available for the full month of July.

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Detailed Analysis of Amazon New KU Payout. Your revenues may triple !

Amazon KU analysis

On June 15th, Amazon announced that they will change the reward system of their KU borrows from 1st July onward. In short, in the past , 1 borrow of a book would earn the author a payout of the ‘KU pot’. So if the pot was $5.000.000 and there were 3.333.333 borrows, each borrow would earn 5.000.000/3.333.333=$1.5

With the new system, Amazon will count the ‘pages read per month’ and calculate the monthly Payment Per Page Read (which I will call PPP). Let’s assume as an example that the PPP is $0,02. If a customer borrows a 100 page book, the author will get paid 100x$0.02=$2 . This is, IF the customer reads all 100 pages that month. If he only reads 10 pages, the author will get only $0.20. Notice that if a customer reads the complete book but spread out over several months, the total $2 will be spread out over several months.

The complete announcement can be found here.

As we all know, ebooks don’t have pages. So Amazon had to come up with some kind of formula that determines how many pages a book has, taking into account all the different devices, font types, font sizes, line spacing etc. To make this as fair as possible, Amazon has defined a standard Kindle Edition Normalized Page Count (KENPC). The only thing that is known about it at this moment of writing is , that KENPC has been defined. The full text is here. Unfortunately, they haven’t specified in detail what the font size, font type, spacing etc is used for the KENPC. So we will have to guess that for the moment.

Another thing mentioned in the full text from Amazon, is that they will take images, graphs and charts into consideration in their KENPC formula. (without any further detail). I guess that this means : if an page has a chart on it , it will count as X lines of text in the calculation of the KENPC.

The whole purpose of the exercise seems to be, to reward the actual work of an author. As a quick example: With the “old” KU payment system, an author that gets 10 borrows a month for his 500 page novel, would earn the same as the scam artist who also gets 10 borrows of his 20 page scamphlet. With the new system, and if we assume a payout of $0,02 per page read, the successful author of the novel would now get paid 10x500x$0,02=$100 (assuming that the customers read his whole book in the same month), while the scam artist would only get 10x20x$0,02=$4 . And if the customer doesn’t get further than 50% in this scamphlet, it would even be reduced to $2 . Seems fair enough.

This indeed is a first step into the direction of ‘pay for performance’. But there remain a number of questions unanswered.

Before I get to these questions, let’s analyze a bit what may happen, using the data of the past that we have.

First , let’s see what the KU pot, KU payout and total number of borrows was from August 2014 onward.

Amazon KU analysis

(The numbers in yellow are future estimates. The nr of future borrows is calculated with the TREND function)

In graph form we get:

Amazon KU analysis

Amazon KU analysis

Amazon KU analysis

We see that the borrows are still growing every month. And to keep the payment to a ‘reasonable’ level, the KU pot is also growing every month. But the KU payout seems to stabilize somewhere around the $1.40 level. Notice that there is no reason why the nr of borrows in the future should change, because there is nothing that changes for the readers. So we may fairly assume, that IF the old KU payment system would have continued, the average KU payout would have been around $1.40 .

Now what will be the average payout per book in the new system? The first thing that we would have to know is what the number of pages are in the ‘average’ book. Is it 50 pages? 100? 200? 400? Of course Amazon knows this number, but I don’t. So how to get a feeling for that number? The best I’ve come up with, was to select totally random 50 books and look at the ‘page count’ that is shown for that book. I realize that there might be some flaws in this. First, the number of pages on the current detail page of a book is not necessarily similar to the new KENPC. Second, I assumed that sales will be completely random  over all books on Amazon. Which is probably not the case. Novels, which are typically a couple of hundred pages, sell more than non-fiction ‘how-to’ books which in general have much fewer pages. But since I don’t have these numbers, I decided to go for a complete random selection.

For these 50 books I calculated the average number of pages over all books, the average number of pages of all ‘short’ books, and the average number of pages of all ‘long’ books.  Short being, less than the overall total average and ‘long’ being above the overall average. The results were:

Overall average length : 225 pages
Average length of short books : 70 pages
Average length of long books : 400 pages

Now using an estimated KU payout we can make a 2 dimensional table with horizontally the number of pages per book and vertically the % of the book that will be read. This gives something like

Amazon KU analysis

How to interpret this data? For example, if in the old KU payment system the KU payout would have been $1.40 per borrow, the new PPP (Payout Per Page) for a book with 200 pages that is read for 80% would be $0,009 .

If we take the same table for a more realistic KU payout of $1.40, we get

Amazon KU analysis

And if we do the same for a more pessimistic payout of $1.35, we would get

Amazon KU analysis

The green areas are the areas of which I think that they are the most plausible. If we study the above a bit more in detail, we can conclude that the expected PPP will probably be somewhere between $0,005 and $0,05. Which is still a pretty large range.

There is another way to look at it. If we assume a certain number of pages per book, we can make a 2-dimensional table with horizontally the KU payout and vertically the % read. This gives for example for a 70 page book.

Amazon KU analysis

And for a 100 page book

Amazon KU analysis

And for a 200 page book

Amazon KU analysis

Now if we look at these 3 tables, we see that the average PPP is somewhere between $0,008 and $0,045. And even with an upper limit of $0,023 if we look at the 200 page book. So if I had to guess ONE number for the future PPP, I would set it at around $0,025.

Now how will this impact the average author? Well, first problem : what is the definition of an ‘average author’. I don’t know. But instead, we could define a couple of typical authors. For this exercise, I have imagined 5 typical profiles:

1. The short story writer. Writes books with less than average pages  (40-80 pages)
2. The long story writer. Writes books with more than average pages (200-300 pages)
3. The scam artist. Writes useless books. As short as possible. (20-30 pages)
4. The reference book writer. These authors write dictionaries, quote/joke collections, reference articles etc. These books are typically used only to lookup something from time to time.
5. The children books writer. These books have lots of images. This one is a bit tricky because we have no idea how the images will be counted for in the KENPC

For all 5 profiles, I have defined 3 levels: The successful one, the average one and the poor one. For example, the successful long writer, gets 1000 borrows a month and are read for 100%. The average long writer gets 100 borrows which are read 100% and the poor long writer gets 10 borrows which are read for 60%.  This gives 15 different profiles. Now we can plug in some figures for these profiles and compare their payment with the old KU payment system and the new one. For an estimated KU payout equivalent of 1.40 and an average PPP of $0,01 we would get the following table:

Amazon KU analysis

In this case, only the writers of long books and the writer of good reference books would benefit from the new system. Their revenues could almost double. The clear losers are the scam artists. Which is of course a good thing. But the short story writers would also get less.

If we assume a slightly higher PPP of $0,02 we get the following table :

Amazon KU analysis

In this scenario , almost everyone wins except for the scammers who lose up to 90% of their revenue. For the good long writers, their revenues may get multiplied by 4 !

We could make two more simulations , similar to the above, but with a more conservative page count per book.

Amazon KU analysis

The result is similar to the table above, but the gain for the long writers is more modest . But still 43%!

For the PPP of $0,02 we get

Amazon KU analysis

Again, similar as above , but now the increase for the good long writers is ‘only’ 180% . Or almost tripled by 3.

If we know the PPP and the corresponding KU payout in the ‘old’ system, we can calculate what the ‘number of pages read’ should be to break even. In other words, if your book has fewer pages than the break-even point, you will earn less than what you would have earned in the old KU system. And vice versa.  This gives us the following table :

In other words, if we assume that the payout will be equivalent to the old system ($1,4 per borrow) then depending on the PPP, we would get

Amazon KU analysis

which means that at a PPP of around $0,02 books with less than 70 pages would earn less in the new system as compared with the old one. Given the data above we could guestimate the break even point at around 70-100 pages.

To summarize , I would guess that the expected PPP would be around $0,02. The writers of good long books will be the big winners. Their revenue may increase anywhere from 50% to triple. The good short story writers will also benefit but their gain will not be as spectacular as the long story writers. Whatever the scenario, the scam artists will be the big losers.

As stated in the beginning of this article, there are still a number of questions that remain unanswered.

-How long will Amazon keep paying the author?

As we have seen, a customer may buy a 1000 jokes collection of 300 pages and read every month only a couple of pages. Will Amazon keep paying pages that are read 1 year, 2 years, 5 years from now?

-What is ‘a read page’?

That’s a pretty tricky question. It takes maybe 5 minutes to read a full page of a novel, but only 5 seconds to ‘read’ a page with an image. Now I cannot imagine that Amazon will go as far as measuring the time spend on a page. So my guess is : a page opened is a page read. Of course, because pages read will only be taken into account when that data is recorded on their servers, it means that pages read offline will only be accounted for whenever (and if), the device is connected again to the internet and gets synchronized. And of course, read pages will only be recorded once. Even if the customer rereads your book 10 times :)

-How will charts/images/graphs me counted?

I already addressed this question above. For the moment there is no information whatsoever how these images will be counted for in the KENPC.

Let’s see mid August, when we get the first KU/KOLL payment calculations ,how far I was off. :)

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