Friday, July 03, 2015

Fisking John Scalzi

From the Department of My Horse is Too High, Someone Give Me a Boost...

I've been out of the loop for over six weeks. Massive computer failure, coupled with a long vacation, limited my Internet activity, which means I missed all the drama over the recent Amazon KDP announcement. TL;DR Amazon is now paying authors per page for ebook borrows, rather than paying based on borrowers reading 10% of a book. In both cases, payment comes from a fluctuating fund that Amazon sets, which is divvied up monthly.

Apparently there was some criticism from my peers. Hugh Howey, in typical level-headed fashion, wrote a great post about the situation. Passive Guy also did an enlightening comparison between the the KDP payout per page, and what legacy authors earn per page. Bob Mayer also waxed eloquently on the topic.

One of the more level-headed critiques came from author John Scalzi, who recently signed a 3.4 million dollar deal with Tor for 13 novels.

Scalzi's wrong on some things, so I thought I'd fisk him, which also is a good opportunity to offer my views on the subject since people have been asking me about it.

Scalzi: Now that I’ve returned to the US and have parked myself in front of the computer again, people are asking me what I think of Amazon’s plan to tweak the way its Kindle Unlimited system pays KDP Select authors. In the past, Amazon would designate a certain amount of cash ($3 million this June, according to this Verge article, although in the comments Annie Bellet quotes a higher figure) as a payment pot, and all KDP Select authors participating in Kindle Unlimited would get a small bit of the pot if someone who downloaded their book read more than 10% of it. This predictably led to authors making short books in order to get to the 10% mark as quickly as possible, and equally predictably diluted the effectiveness of the tactic.

Joe sez: I'm with you until the last phrase. Where is the evidence that a lot of people writing shorter books diluted the effectiveness of that particular tactic?

This reminds me of the tsunami of crap meme I've been debunking for years. I was under the impression that people are consuming more digital media than ever. On the surface, it seems reasonable to assume that more ebooks being released reduces everyone's share of the pie. But where is the evidence to support that? North America just ran out of IP addresses, something I believe is tied to our biggering obsession with digital consumption. With so much growth, so many current readers, and so may new readers joining the party, it's odd, and possibly wrong, to suggest that shorter works ceased to be effective ways to grab KU dollars.

Amazon certainly felt short books weren't good as a whole for authors and readers, which is why they changed to a page count reimbursement. They have the data to support the reasons they switched payment methods. Digital reams and reams of data.

Scalzi: It also made authors of longer works complain quite a lot, as they had to compete with bite-sized books for the same tiny bit of the pot.

As a result, Amazon is now tweaking its system so that instead of getting paid when one reaches that 10% marker, KDP select authors will get paid for each page read — a move that will, within the context of the KU system, at least, address the “small book vs. big book” disparity. The system will also define a standard “page” so fiddling with margins and type size won’t fool it, and somehow track how much time you spend on each page, so just clicking through all the pages as quickly as possible won’t do the trick (this makes me wonder what Amazon defines as a decent amount of time to read a page).

Joe sez: I'll posit that Amazon defines "decent amount" by plotting every bit of reader data they get--which is everyone reading Kindle ebooks--and making sense of it in the same way they make sense of all the data that allowed them to become what they are.

Amazon has thought long and hard about this change. They've been planning it for months. Data is king. This new move is all about the ends of the Bell Curve. Most of us shouldn't be affected either way.

Scalzi: The short version is: You get paid for what your readers read. If your readers don’t read the whole book, you don’t get paid for the whole book.

I have a lot of questions about how this will play out in theory — will an author get paid if you re-read a book? What about if you go back and re-read a page? Does that count? Doesn’t this mean that authors of “Choose Your Own Adventure” books get really screwed? Not to mention any author who is writing anything other than a page-turning narrative?

Joe sez: It's my understanding that Amazon has figured out a mathematical way to define average page lengths, and how much time readers spend on a page, and is going with that formula. Which means re-reading, a Choose Your Own Adventure, picture books, children's books, comic books, and anything readable on a Kindle, will result in read page counts for the author.

But since we're on this topic, let's compare it to paper. I've read Silence of the Lambs four times. I paid for it once. And I bought it used, so Thomas Harris didn't make a dime from me for the four times I read it. Conversely, I've bought a JK Rowling novel at full price and for whatever reason never got around to reading it. Which author deserves my media dollar?

The legacy ways of consuming media--buying stuff to own--were in place for a long time. But it's a mistake to believe that just because it was the only way to consume media, it's also the right or only way to consume media.

The Internet is making ownership obsolete. Enjoying digital media is free in many cases. Amazon trying to compensate authors for the time readers spend on their work is innovative and shows profound awareness. They know their customers. And they're trying to compensate their content-providers in a better way.

A much better way, in fact, than earning 8% on paperbacks that can be stripped and returned.

Scalzi: — but ultimately any objections or praise I might have for this new Amazon model is irrelevant, because of a simple fact: Amazon is still making KDP Select authors compete against each other for a limited, Amazon-defined pot of money, and no matter how you slice it, that sucks for the authors.

Joe sez: I've argued before that in a digital world, where there are no costs for replication and distribution, the regular rules of supply and demand don't apply. Ebooks aren't zero sum. I'm not in competition with other writers. It seems reasonable that a reader's limited time is a form of currency, but our books are going to be read by readers who haven't been born yet. Ebooks are forever, and while at any given time the system may appear closed, it is actually open and infinite because it has no end. And even if it is limited by my lifetime, I have the opportunity to make a ton of money while I'm still kicking.

But playing devil's advocate, weren't authors always competing for a limited amount of money? In 1970 there were X number of readers. They bought Y number of books. That resulted in Z amount of money generated. While it seems Z was limitless in 1970 but limited (by Amazon) in KU, in both cases there were many books competing for readers' time and money, and there was no barriers on how many readers an author could reach. That the Amazon model shrinks imperceptibly as page reads go up seems moot, especially since their pot changes monthly.

This doesn't suck. This is the future.

Legacy contracts that keep rights for life, hold reserves against returns, contain non-compete clauses, etc. Those suck. And I've supported that position at length.

Scalzi: Why? Because Amazon puts an arbitrary cap on the amount of money it’s possible to earn — and not just a cap on what you, as an author, can earn, but what every author in the KDP Select system participating in Kindle Unlimited can make. Every KDP Select author participating in Kindle Unlimited can not, among all of them totaled up, make more than what Amazon decides to put into the pot. Why? Because that’s the pot. That’s how much Amazon wants to splash out this month. And the more pages are read in the month, the smaller any bit of the pie that you might get for your pages read becomes. It’s a zero-sum game for every KDP Select author participating in Kindle Unlimited.

Joe sez: No, it isn't zero sum. If someone reads a page of my book, you don't subtract from your total page reads, and it doesn't prevent you from getting a page read. That's what zero sum means.

Also, when we're talking about numbers this large, the million page reads you had in June don't really do much to affect the ten trillion page reads total.

Amazon's fluctuating pot is based on whatever data Amazon has gathered, coupled with their strategy to be the most customer-centric company on the planet. If this pot attracts authors, KU will continue to have a large number of titles. If it repels authors, they'll leave, which will foster competition.

It isn't in Amazon's best interest to piss off authors. And trying to be reasonable with authors is one of the things that lead them to change KDP terms to this new model.

Amazon's big. Really big. If they wanted to squeeze authors (say, like legacy publishers do) they could. Or they could try to, until authors went elsewhere.

Blaming Amazon for a subscription service, no matter how they run it, is silly. Amazon is not holding a gun to any reader’s head and demanding they join Prime. Amazon is making Prime attractive, because it suits Amazon’s bottom line. As more customers join Prime, more readers will borrow ebooks rather than buy them. This is where the tech and industry and world is headed. Physical ownership of media just isn’t en vogue anymore. It’s what readers want (whether they knew they wanted it or not.)

Writers will NEVER win by going against what readers want. Ask the Big 5 how that worked out for them.

Scalzi: Next month, who knows what the size of the pot will be? You don’t — only Amazon does. But whatever amount it is, it’s an amount designed to benefit Amazon, not the individual authors.

Joe sez: And cue the alarmist nonsense. Next up: At any moment an asteroid could strike the earth and we're all dead! For god's sake, think of the children!

Of course Amazon is going to do things that benefit Amazon. Exactly like Tor does things to benefit Tor. Which is why Tor, and all publishers, will eventually capitulate and become part of KU. Which will mean Tor authors will earn a heckuva smaller share of that Amazon pot because they signed away their rights forever in return for terrible royalties.

I recently blogged about the ownership of media, and how I foresee it going the way of the dodo.

Here's a thought experiment:

Imagine if, by pressing a button, you can have anything you want to eat, perfectly prepared and instantly delivered to you.

Think about what that means. No more buying groceries. No need for a refrigerator or freezer, or a pantry. No more cooking (hobbyists aside), so no need for anything related to food prep: stove, microwave, mixer, chef's knives, etc. The restaurant industry would suffer. Grocery stores would suffer. This one concept, food on demand, would have huge ramifications for huge numbers of people involved in the food/cooking supply chain.

But someone still needs to supply to food.

We are writers. We supply digital media. And subscription ebook services are equivalent to pressing a button and getting food on demand. This is the present, and the future, and it's only going to get bigger. When you can have access to all media, there is no need to own media. Subscription services will become dominant. They're doing it with TV and music. They're doing it with books.

It's going to get really disruptive in the next few years. But farmers would survive push-button food, and we'll survive subscription services. Because what we do is wanted, and things that are wanted ultimately have some monetary value. It may not be the way we're used to being compensated for our work, but we'll get paid.

Scalzi: This is a bad situation for the authors participating — bad enough that ultimately the minutiae of how the money is allocated is sort of aside the point, because the relevant point is: You will never make more for your work than Amazon wants you to make. And yes, just Amazon, as the work KDP Select authors put on Amazon are exclusive to Amazon.

Joe sez: This argument just doesn't hold together, for several reasons.

1. No one is putting a cap on the number of pages of mine that readers can read.

2. Amazon's pot isn't static, it fluctuates.

3. Voluntary participation means authors can opt out after 90 days and they still keep their rights (unlike a contract with, say, Tor).

4. If enough authors don't find Amazon's methods of compensation satisfactory, Amazon will have to offer more or risk losing authors and market share.

5. Readers want this.

6. How else is a subscription service supposed to compensate suppliers?

Scalzi: I’m not one of those people who believes Amazon is glowy-red-eye evil — I remind people again that I’ve rather happily had a fruitful relationship with its Audible subsidiary for a number of years — but Amazon is looking out for Amazon first, and when it does, it’s not an author’s friend.

Joe sez: Unlike all those other publishers, who are BFFs with authors...

Scalzi: There is no possible way in this or any other timeline that I would ever, as a writer, participate in the sort of scheme that Amazon runs with its KDP Select authors on Kindle Prime.

Joe sez: You'll wind up in it anyway, when Tor joins. Kids are learning to read on digital devices. Blu Ray and CD sections in stores continue to shrink. When everything is in the cloud for a monthly fee, why buy anything?

Scalzi: I don’t approve of putting a cap on my own earnings (particularly one I have no say on),

Joe sez: Says the guy who just signed a 13 book deal, amounting to $260k per book. That's not a cap? If you do earn out (which will require you selling a whole lot more books than I need to to make an equivalent amount) you're stuck with terrible royalties, forever.

I can opt out of KU. You can't opt out of your Tor deal without lawyers getting involved. Yet you want to preach about putting a cap on earnings? Really?

I understand hedging bets and job security. But you took a guaranteed pay day, giving up higher royalties for lower risk. If the books do well (and I wish you huge sales) in the long term you did indeed cap your earnings. You're limiting the amount you earn per book, and you have to sell many more books to earn the same amount you would have by self-publishing.

Scalzi: and I don’t approve of being in a situation where my success as an author comes by disadvantaging other authors, or vice versa.

Joe sez: It's a simple argument. Either ebooks aren't zero sum. Or all books have always been zero sum because there have always been a set amount of readers and books and money spent and time spent.

You seem stuck on this "pot" concept. Let's make up a figure and say the publishing industry grossed 10 billion dollars in 2014. Your books earned a percentage of that amount. They were competing with other books, fighting for a percentage of that amount. Like Amazon's pot, the money shared by all authors is announced after the period has ended.

The only big difference I can see is that Amazon amount fluctuates, and Amazon announces the amount and pays monthly, whereas the publishing industry seems unable to even send out an accurate or comprehensible royalty statement and you get paid a year after a sale.

The small difference I can see is Amazon sets the amount paid, as opposed to writers accepting what publishers call sales. But, really, in both cases readers are the ones who decide what they want to read, and there is no cap on that. They can read as much as they want to, and no one is stopping them. And Amazon seems willing to throw more money into the pot when more reads occur.

Scalzi: In the system in which I currently participate (i.e., the open market), there is no limit to the amount I can make, and no limit to what any other author can make. It’s a great system! I support it, and so should you.

Joe sez: Please propose a subscription system (which is something that readers want) that makes better sense than what Amazon is currently doing.

The open market system you endorse has barriers to entry, and many writers can't get in. Your open market system exploits authors with one-sided contracts and unconscionable terms, and up until recently authors had no choice but to accept it. Your open market system was never equal for all writers, with some getting all the coop and marketing dollars and widespread distribution and others getting buttkiss.

There is no cap to what an author can make in KU. Like any market, there is an amount of money that you get a piece of depending on how well you sell. It doesn't have to be that way with subscription supplier compensation, but Amazon's giving it a shot.

Scalzi: So, yeah: By page, or by percentage, KDP Select authors on Kindle Unlimited still can’t make more than Amazon says they can. That sucks, and that’s the long and short of it.

Joe sez: And no author can make more than readers will buy, or that the market will bear. Your point?

Here's a different, perhaps clearer, way to explain this.

In the old world, readers indirectly paid authors when they bought books.

With a subscription service, readers don't pay authors. They pay a subscription host--in this case Amazon. Any correlation between subscriptions fees and payout amounts is up to that host, who figures it out by weighing the data against making customers happy against making sure suppliers keep supplying.

In other words, the readers are no longer paying us.

Reread that and let it sink in.

Amazon has replaced the reader as the entity responsible for paying authors. Amazon pays a certain amount, just like the sum total of readers paid 10 billion dollars in 2014 in my example above. Yes, the reader amount can be traced to sales. But there are no sales in a subscription service. If not a pot, then what?

It appears you don't like the idea of being at Amazon's mercy. But you were always at someone's mercy; agents, publishers, book stores, critics, readers. The only thing that changed is who is paying you.

I can foresee a point where writers aren't paid by reads, they're paid for time periods. Which is how cable TV (and I believe Netflix) works. If a company wants to offer my ebooks to their subscribers, they'll pay me a set amount for three months, or a year, or five years.

Which, ironically, sounds like an advance that will never earn out. Except for a big difference: I get my rights back.

Smart Debut Author, in Hugh Howey's comments, said something about this KDP change worth repeating:

When something seems too good to be true, it usually is.

And for short fiction writers, that was definitely the case under KU 1.0’s broken-ass rules.

Because when you can write ten short stories in far less time than it takes to write a 750-page epic novel, while getting paid 10X as much for your efforts, there’s a word for that.

It’s called an arbitrage opportunity.

When arbitrage opportunities arise, if you’re nimble you can exploit them for short term gains. But never, ever bank your livelihood on them, because by definition, they are temporary — brief bubbles that never last.

Market forces will iron any arbitrage opportunity out, sooner or later. So you make hay while the sun shines, and prepare for rainy day.

I’m genuinely sorry for the writers whose livelihoods were impacted by this change. Having your income drop suddenly sucks, and I sympathize. But if you look on the bright side, the folks who you were effectively taking money away from — writers of longer fiction — are finally getting their fair share of the KU “pot.”

For a brief time you made far more money as a writer than you would have under an equitable system, while we made far less. We don’t begrudge you that.

So don’t begrudge us writers of longer fiction our fair share, either, now that your arbitrage bubble has burst.

Joe sez: Nicely put. I'll add that having a sense of entitlement is a bad thing.

Amazon doesn't owe anyone a living. And lamenting this situation doesn’t facilitate change. If you want to survive, adapt and innovate. Don't rely on anyone.

What Amazon has done, and continues to do, is give readers and authors a choice.

Choice is power. How you use that power is up to you. You can curse the rain. Or you can start selling umbrellas.