Last year I wrote a post entitled Amazon KOLL Turns One, describing the success of the Kindle Owners Lending Library. Since another year has passed, I decided to revisit the subject. At the end of that article, I noted that Amazon had doubled its $700,000 monthly investment to $1.4 million for December 2012. Based on what appeared to be a goal to put $2.00 per borrow into the hands of authors, I anticipated that 700,000 books would be borrowed. Looking backward, Amazon crushed that number, lending 744,000 books (the highest number loaned in a one month period during the entire two years of the program).
In its second year (Dec 2012- Nov 2013), Amazon has increased its investment significantly, adding another $13.4 million, an increase of 83% over the first year. The average royalty/book paid to authors also increased from $2.05 in the first year to $2.22 in the second.
The only potential hiccup in the “$2.00 per loan” assumption is Amazon’s December 2013 commitment of $1.1 million to the fund–21% lower than last December’s number. Holding the number flat in what has been historically a peak borrowing month offers us three scenarios:
- Amazon is expecting the number of borrowed books to drop from last year’s 744,000 to 550,000, thus holding the royalty per borrow at $2.00.
- Based on an estimated 25% growth rate, Amazon may be anticipating 940,000 books loaned in December, translating into authors’ royalties of $1.18 per book–26% lower than the lowest payout since the program started ($1.60).
- Perhaps a hybrid of the two. For example, if we see a 25% December over December increase to 940,000 books borrowed, a $1.87 million dollar investment would be required to hold royalties to about $2.00. Perhaps, Amazon is planning on covering the difference by adding another $780,000 retroactively?
Either way, the program and the business model seems strong. To date, Amazon has distributed $20.7 million to authors after lending 9.5 million of their books. It’ll be interesting to see what a third year brings.
|Update: In Amazon’s January 2014 Newsletter, they mentioned that 591,000 books were loaned and that authors got $1.86 per borrow. Therefore, it appears that the situation reflects scenario #1.|