Outside the Data Box:

a fresh look at ebook sales

Digital Book World 2016

Data Guy
AuthorEarnings.com
authorearnings@gmail.com
 An ebook sales “plateau”?

Month after month,

the AAP reports
shrinking ebook sales and revenue…
for 1200 of the largest
publishers
At the same time,
Amazon & other retailers
say ebook sales are still growing…
in both unit and
dollar terms

What if both are absolutely right?

 >95% of US ebook sales go through
only 5 major online retailers

US Retailer Market Share (of consumer $ spent on ebooks, Q3 2015 )

That should make tracking US ebook sales easy…

 So why can’t we measure our
US ebook market anymore…?
•  The largest online retailers don’t report ebook sales.
•  A large share of all daily ebook purchases are now
ebooks published by non-traditional sources.
•  They don’t report ebook sales, either.

•  Most don’t even use ISBN numbers.

•  Their share of consumer ebook dollars is rapidly growing.

Industry numbers from Nielsen, the AAP, and PubTrack

don’t include these sales… which they cannot track.
 “Not my circus, not my monkeys…”
(or: why should we care?)
•  After all, the largest publishers can still measure their
own piece of the digital market just fine.
•  Existing industry reports and statistics cover that part
(after a four month delay).
•  As publishers and agents, that’s the piece that matters
to us, right?

Sure, an accurate picture of the whole

US ebook market might be nice to have…

But how would it actually help us in our business?

What does an incomplete picture of the market tell us
about optimal ebook pricing…
 …versus
what a complete picture of the market says?
What does an incomplete picture of the market tell us
about consumer spending by genre…
 …versus
what a complete picture of the market says?
Invisible opportunities, invisible threats

•  Operating in an opaque digital marketplace puts

publishers at a serious business disadvantage.
•  An incomplete understanding of the broader US digital
market (or even whether it is shrinking or growing)
means:
–  missing out on big revenue
opportunities.
–  being blind to emerging
competitive threats.

Online retailers, however, have little reason to share key

competitive business intelligence with their suppliers…
Publishers in another media & entertainment industry
faced the same digital-market data challenge…
(and figured out how to solve it)
US Video Game Sales 2007-2015 :
70% of consumer dollars shifted
from game-DVD/BluRay purchases in stores
to digital app downloads for mobile devices
 AuthorEarnings Methodology
…was borrowed shamelessly from the
$90 Billion/year video game industry

It’s a standard But now applied

game-industry mobile-AppStore to ebooks instead of
market-analysis technique mobile app downloads
 The AuthorEarnings Methodology
under the magnifying glass

•  no “statistics” or fancy math needed

•  just straightforward accounting

•  not based on “surveys” or limited “samples”

•  instead, AE utilizes automated data collection
on a massive scale

•  doesn’t rely on sales “estimates” or “educated guesses”

•  AE’s numbers are calibrated in real-time against raw,
uncontestable, Amazon-reported daily sales
 AuthorEarnings Methodology

How to make an opaque digital marketplace

transparent

in 5 simple steps:
1.  Collect metadata & real-time rankings for hundreds of thousands
of best-selling books
2.  Convert each ranking to corresponding # of daily unit sales
3.  Multiply units by sale price (or list price) to get daily dollars
4.  Group books by publisher-type, genre, price, etc.…

5.  Add them all up

 AuthorEarnings Methodology

How to make an opaque digital marketplace

transparent

in 5 simple steps:
1.  Collect metadata & real-time rankings for hundreds of thousands
of best-selling books
Each ebook’s metadata and sales ranking
can be pulled directly
from its Amazon product page
Metadata:
Title
Author
Publisher
Price
Price set by publisher?
Publication Date
Preorder?
Page Length
Review Counts & Scores
Genre Categories
Other Editions & Prices

ASIN
Kindle Unlimited?
(and lots, lots more)
 AuthorEarnings Methodology

All the raw data you need is publicly available:

You can gather it with a web browser, a pencil, and a notepad.

But to do it for 200,000 books at a time,

it makes more sense to throw a little computing power at it…
 or...
a lot of
computing
power
AuthorEarnings Software Spider
Big Data Internet Technology
for the Digital Book Market

•  uses 250 high-powered

8-core compute servers

•  crawls 1.5 million retailer

product pages per hour

•  runs on any enterprise cloud

platform (AWS, GCE, Azure)

•  need to scale it up?

just add more servers…
AuthorEarnings Software Spider
Big Data Internet Technology
for the Digital Book Market

takes an X-Ray
of the entire ebook market

can show us
all of today’s sales, today

(instead of just
some of today’s sales,
four months from now)
AuthorEarnings Raw Data

all the anonymized raw AE data

can be downloaded (for free) at:
www.authorearnings.com
 AuthorEarnings Methodology

How to make an opaque digital marketplace

transparent

in 5 simple steps:
1.  Collect metadata & real-time rankings for hundreds of thousands
of best-selling books
2.  Convert each ranking to corresponding # of daily unit sales
Converting best seller rankings
to daily unit sales

It takes 2x as many first-day sales

Based on real-time
to hit a rank from a “cold” start
Amazon-reported daily
than to hold the same rank
sales from hundreds of books:
via steady daily sales
from Q4 2015 (gray) & January 2016 (green)

or
 How accurate are
AuthorEarnings numbers?
Comparing against Amazon-reported single-day sales
for random groups of 300 books at a time:
•  AE always matched to within 6%
•  AE usually matched to within 2%

A “blind” test of a recent Top-5 Amazon Best Seller :

•  AE matched 30 days of sales to within 4%

The larger the group of books, the more accurate…

…and AE is looking at 200,000 books at a time.

 AuthorEarnings Methodology

How to make an opaque digital marketplace

transparent

in 5 simple steps:
1.  Collect metadata & real-time rankings for hundreds of thousands
of best-selling books
2.  Convert each ranking to corresponding # of daily unit sales
3.  Multiply units by sale price (or list price) to get daily dollars
4.  Group books by publisher-type, genre, price, etc.…
5.  Add them all up
But wait… what about preorders?

How does
AuthorEarnings
factor in
preorders?
 So... what about those preorders?

•  Amazon ranking algorithms factor in daily preorders

on the day of the order, not on release day.
•  They affect title rankings just like any regular sale…

•  They all get counted in AuthorEarnings data & reports.

•  Preorders of upcoming Big Five titles :

–  made up 7-9% of the Big Five sales in our January AE reports
–  average roughly 10% of all Big Five sales, year-round
–  rose to nearly 14% of Big Five sales in November

•  Preorders are on the rise among other publishers, too:

–  2.5% of January 2016 self-published indie sales
–  1.5% of January 2016 small/medium publisher sales
–  24% of January 2016 Amazon-imprint sales (mostly KindleFirst)
 Preorders

AE’s methodology could be used to

track preorder sales for any title,
weeks or even months before that title
is actually released.
 Preorder Tracking Example:
a recent #1 NYT Big Five best seller

Release
Date

For this particular title,

We only had its best & worst
recorded sales rank for each month.
But even so, AE can get reasonably close by
splitting the difference each month:
180,000 Kindle US preorders
Jan-Sept 2015
Tracking Per-Title Cumulative Sales

AE’s methodology could also be used to

track ongoing cumulative sales,
over the lifetime of a title
 Tracking cumulative sales:
that recent #1 NYT Big Five best seller

Release
Date

Despite only having

this title’s ranking data for two days
each month (its best & worst), AE can also
give us its rough post-release sales to date:
150,000 additional Kindle US sales
(as of February 29, 2016)
 The AuthorEarnings Methodology

Making an opaque digital marketplace transparent

Why stop at just Amazon...?

We’ve used the same approach to analyze
ebook sales at other retailers:

•  Apple iBookstore
•  BarnesAndNoble.com (Nook)
•  Kobo US
•  GooglePlay Books
The AuthorEarnings Methodology

Making an opaque digital marketplace transparent

Why stop at just ebooks...?

We’ve been able to use the same
approach
to measure
audiobook sales...

…and online print sales, too.

 ebook Market Analysis

While we’re on the topic of

online print sales…
 Let’s look at average Amazon discounts
on Big Five hardcovers & paperbacks…

36.3% 35.9% 35.8%

33.7% 34.0% 32.8% 33.1%

Amazon’s discounting
of Big Five print books rose abruptly
by 2.5% - 3%
sometime in mid-2015
 …combined with
higher Big Five consumer ebook prices

At the same time

the last of the Big Five publishers
switched to agency, ending discounting
of all Big Five ebooks
 ebook Market Analysis

How do
steeper online print discounts
combined with
higher ebook prices
impact
sales of each format?
 Average per-title daily sales
of print edition & ebook edition
vs print-to-ebook price difference
print edition ebook edition
less expensive than less expensive than
ebook edition print edition
pretty much the opposite
of what intuition might predict for books whose
print edition costs less than the ebook :
sales of both print & ebook edition are higher.

but correlation does not equal causation.

we need to look deeper…
 Average per-title daily sales
of print edition & ebook edition
vs print-to-ebook price difference
...these happened
print edition to all be heavily-promoted
ebook edition
titles
less expensivew/print
than editions pricedless LESS
expensive than
than ebook:
ebook edition printMarie
J.K. Rowling, Anthony Doerr, edition
Kondo,
Andy Weir, James Patterson, David Baldacci,
Vince Flynn, Paulo Coelho,
Stephen King…
surprisingly, even with
print editions $4-$7 less than ebook,
rougly half of total $ sales for each
are still for the ebook edition
 Total daily sales
of Amazon print editions & ebook editions
vs print-to-ebook price difference
print edition ebook edition
less expensive than less expensive than
But those
ebook edition print edition
extra-heavily-discounted
big-brand titles whose print Let’s look at the
editions cost less than the ebook titles that make up the majority of
make up only a minority of both print and ebook sales,
total revenue. Instead.
 Average per-title daily sales
of print edition & ebook edition
vs print-to-ebook price difference
print edition ebook edition
less expensive than less expensive than
ebook edition print edition

Let’s look more closely at these

less-aggressively promoted print+ebook titles,
which make up the majority of both
print and ebook sales
 Average per-title daily sales
of print edition & ebook edition
vs print-to-ebook price difference
average ebook sales
look pretty consistent no matter the edition
ebook
relative print price, whetherless
printexpensive
costs than deeper print discounts
print edition do not appear to be cannibalizing
only $0.01 more… or $12.00 more
same-title Kindle $ sales…

…so where is this extra $ growth in Amazon’s

discounted print sales coming from?
ebook Market Analysis

How does ebook pricing

impact ebook sales?
Ebook gross consumer $ sales by sale price
a changing landscape: from early 2014…
Ebook gross consumer $ sales by sale price
a changing landscape: …thru early 2015…
Ebook gross consumer $ sales by sale price
a changing landscape: …to early 2016
ebook Market Analysis

How does ebook pricing

impact sales
for
debut authors?
Ebook gross consumer $ sales by sale price
(2012-and later-debut authors: early 2014)
Ebook gross consumer $ sales by sale price
(2013-and-later debut authors: early 2015)
 Ebook gross consumer $ sales by sale price
(2014-and-later debut authors: early 2016)
ebook Market Analysis

How does ebook pricing

impact
the discoverability
of debut authors?
 Ebook unit sales by sale price
(2012-and-later debut authors: early 2014)
 Ebook unit sales by sale price
(2013-and-later debut authors: early 2015)
 Ebook unit sales by sale price
(2014-and-later debut authors: early 2016)
 Final Thoughts
The AE methodology can be a useful complement to
existing industry data analytics approaches

At the macro industry level, it can:

•  fill in gaps that existing reports don’t cover
•  give real-time visibility into the market, rather than months-delayed
•  provide a comprehensive view of online sales

At an organizational level, it can be used for:

•  competitive market analysis •  trend analysis
•  dynamic pricing •  sensitivity analysis
•  product portfolio planning •  real-time sales projections
•  identifying takeover targets •  ad-hoc data mining
 We’ve barely scratched the surface…
When we have real-time data on the entire market,
the questions we can ask and answer with it
are endless…

Topics we didn’t have time to explore here:

•  the Kindle Unlimited market •  how smaller publishers are
using KU for visibility
•  Amazon imprints by the numbers
•  release cadence
•  frontlist vs backlist sales
•  sales trajectories
•  international vs domestic sales
•  optimal book lengths by genre
•  subcategory placement
•  DRM
•  audiobook sales
•  star ratings & review counts
•  genre breakouts
•  (and many more)
The answers are all in the data.
What questions will you ask?

industry &
publisher-related inquiries :
publisherearnings@gmail.com

info for authors :

www.authorearnings.com
authorearnings@gmail.com
 APPENDIX

Other interesting stuff

that there wasn’t time
to present in the keynote,
which instead got covered
in the afternoon Q&A session
Amazon’s daily unit sales
(~1,064,000 ebooks/day)
Amazon’s daily ebook $ sales
(~$5,750,000/day)
 Head or (long) tail:
where do all Amazon’s daily sales live…?
Distribution of
Daily Kindle Sales
Amazon Top 100 = 10%
Amazon Top 1000 = 25%
Amazon Top 10,000 = 49%
Amazon Top 100,000 = 75%
Daily Sales

Sales “Long Tail” = 25% Sales Ranks

Ranks 1,000,001 – 4,000,000+
Sales
1 - 10 Ranks 5%
Sales
Ranks
11 - 100 Sales
Ranks Sales Ranks
101 - 1,000 Sales Ranks
1,001 - 10,000 10,001 - 100,000
100,001 – 1,000,000

3% 7% 15% 24% 26% 20%

 Kindle Unlimited

What % of
US ebook consumer market $
do the
AAP
reports capture?
What % of Amazon consumer $ sales
do the monthly AAP reports cover?

AAP
=
49.3%
Kindle Unlimited

How does
AuthorEarnings
factor in
Kindle Unlimited?
 Kindle Unlimited
& AuthorEarnings methodology
A KU download affects a title’s Best Seller ranking
just the same as if that download were a paid sale.

Amazon doesn’t report to authors the # of KU downloads

of their titles… only their total KU page reads.

To compute the updated AE rank-to-sales curve, KU full-read

equivalents are used as a proxy for KU downloads:

KU readthru % = “ghost borrow” factor

What % of Amazon paid unit sales
are now KU reads?

KU
= 24%
 Online Print Sales

How is
online print
consumer $ spending
distributed by price point?
 Amazon online print $ sales
by consumer price point
(Amazon Best Sellers: January 2016)
 Amazon online hardcover $ sales
by consumer price point
(Amazon Best Sellers: January 2016)
Amazon online (trade) paperback $ sales
by consumer price point
(Amazon Best Sellers: January 2016)