Saturday, 28 July 2012

Our 99c experiment and why 99c will almost never produce a living wage

ENT - 99c promo
On our last blog post we reported that ENT were open for blog post adverts.
They've been booked up for many months now for their featured book of the day (which cost a set $ fee) although they still do banner adverts.

I'm not a big fan of pay per impression advertising as I detailed in another post. I've had days on twitter where, with retweets, my tweets have gone out to 2 million people. With no/ next to no sales. So impressions alone don't mean much. We're all apt to be a bit blasé about adverts; I know I haven't clicked on a banner advert for a while.

Recommendations on blog posts however are another story. I've picked up a few eBooks, both paid and free, on the back of a review or seeing it on a well known reader site. In this instance ENT are offering a no risk approach to authors based on a cut of the net income (25% of the pre tax value. So 99c x 35% x 25% or about 9c a sale).

ENT is one of the two big eReader sites (the other being Pixel of Ink). Being featured there can lead to a huge number of sales - just search the kindleboards writers cafe for dozens of threads detailing that.

What's the cost?
This new option is based on a 25% cut (of your net income calculated via their affilliate link) - but you have to price at 99c. They feature 4 books to a post with one post a day. Being hopeful, I submitted as soon as the email calling for submissions went out. I have a feeling quite a few other indies did the same. Unsurprisingly we didn't get picked (which could be bad luck, a surge of submissions or the fact most of our reviews are on UK rather than US).

As we weren't picked, we can't comment on how well ENT works for these new 99c promos. I think the authors picked so far have done well from the KindleBoards dicussions and their rankings but that isn't my story to tell.

Our own sale was pretty pointless. Without the exposure of ENT we made less than we normally do. With the need to sell 10 x as many copies to break even 99c isn't, on it's own, a magic bullet. Publicity might help, but then it should help at any price point. Part of this is probably the concern that, for unknown authors, readers are gambling not only their money but their time. Wasting 12 hours reading a rubbish book, or worse a DNF (did not finish) can really put readers off indie books/ cheap books. I do think 99c can help move you up in the rankings, and it does work if you are fluctuating at the bottom of a top 100 and want to hit the top end of that list, but it didn't do much for us.

Could 99c work as a permanant pricing strategy?
At 99c, the royalty is 35% rather than 70% (but no delivery fee) so per sale we got 35c which is about 22p. Some of that goes to tax (Those without an ITIN sorted would lose 30% to the US government as a withholding).

That leaves about 14p per sale split between two authors, or 7p each. So to make minimum wage equivalent to a 9-5 job would be £6.08 per hour for 37.5 hours per week or £222 per week which is a very modest amount to be attempting to live on in the capital.

I've used minimum wage as the example as it really is the lowest possible number anyone could earn. To get £222 per week on 7p per sale I'd need to sell 3172 copies a week or 164,914 copies per year.

Aren't you comparing pre and post tax here?
Those of you paying attention will spot the fallacy of comparing the post tax estimate of 7p with minimum wage pre-tax. The tax regime here isn't too complicated but at minimum wage an individual will pay very little tax. Even ignoring the fact that I personally will have to cough up tax the numbers are still mind boggling large. If I can sell 100,000 copies a year of a book, I think I deserve to be a little above the poverty line. I have blurred the line here looking at post tax eBook sales vs gross minimum wage but this would be a horrendous exercise in tax calculation to do in detail - volume of sales, other work done, home circumstances, benefits entitlements etc change it all rapidly. So instead of confusing myself I'm going to oversimplify and use the 30% ish estimate for tax on eBooks and ignore tax on minimum wage because the tax paid at that income level is almost nothing.

You can't expect to live on one book forever!
Of course, this is just one book. If I had ten out at 99c then I'd need a slightly more realistic 10,000 copies average.  Hit a DWS style system of 50 and that becomes 2000 copies each... Again, anyone with 50 books out isn't really going to be aiming for a minimum wage income.

What about the cost of producing an eBook?
We've also ignored the upfront costs of creating an eBook which are not negligible. If we spend a modest £250 on editing and £150 on art but sort marketing formatting etc ourselves then we wipe out the first £400 earned (or the proceeds of the first 5714 copies) so my theoretical '50 ebooks' seller would now need to sell 385,700 copies. Thrown in electricity, printing, etc and that cost increases again albeit not bny much.

Surely someone could make it work?
I can see how the number might work for an individual author, someone with a huge backlist or quickly churned out short stories but realistically 99c is NOT a long term strategy for anyone who wants to actually live off their work. Sure, John Locke and his million books might do it - but even then $350k post tax is not as much as you'd imagine for that volume (though I think he was pretty rich before becoming an author!).

But writing is a hobby, not a business!
No doubt a few readers will make the usual 'Don't treat it as a business, treat it as a hobby' comment but that really doesn't cut it. No-one makes my shoes, farms my food or generates my electricity for a hobby so I'm damned well not going to provide entertainment for a hobby either. Spending months or years perfecting art then agonising over edits, art, marketing and the inevitable post release time spent tweeting, blogging and all the rest of it... It's worth more than 7p.

What if the author needs more than minimum wage to live?
Any sensible analysis would actually go much further than minimum wage. No one could live comfortably on it in the South of England without state benefits or a wealthy family.
Lets rerun those numbers again at a more liveable £25,000 which is by no means an excessive lifestyle.

This time at 7p a pop to make £25,000 I'd need to sell 357,143 copies. That's after we've recouped our costs. Again looking at it from a 'Write loads of books' perspective that is often bandied about... and we need to sell:

1 book = 362,857
10 books = 414,283
50 books = 642,843

Yup, two thirds of a million books EVERY YEAR. Just to make me a net £25,000 ($40k ish).

For those without a co-author that would still be a third of a million books over 50 using reasonable editing and art. With an author with one book selling at 99c they'd need 181,429 books sold per annum.

That to me sounds like a best seller. Of course you might sell foreign translation rights. You might snag a movie deal. An audiobook might net a couple of thousand as might a paperback.

You might not. You also probably won't manage six figure sales. The book industry is characterised by an extreme cliff when it comes to total sales. Today's bestselling author might be on 5000 sales per day globally (1.5m per annum if they sustained it for the whole year consistently), but look down to bestseller rank to about 50,000 and you can be fairly confident that's dropped off to one sale per day. The number of authors that do manage six figure sales is fairly low. It isn't nonexistent which is incredibly encouraging, and there are a growing number of indies in that number.

If this kindleboards thread estimate is anything to go by just 32 authors have surpassed 200,000. Most of those have multiple titles (thus multiple costs for covers etc). Many of them have taken several years to hit that landmark. To make a fairly modest income at 99c you'd need to be one of these 32 AND do it EVERY year.

Plus you won't be getting employment perks such as a pension or company car and you will be paying a variable tax rate (National insurance is a cost I ignored for simplicity, other work might take you into the 40% or 50% tax bracket and student loan deductions could be another 9% off before you start).

These numbers are NOT accurate - they're merely illustrative. If we take someone who is a stay at home househusband/ housewife looking to make enough for a takeaway once a month then maybe 99c works. At the other end of the scale a professional on a good wage could well earn far in excess of £25k net (and have no investment costs AND employment benefits).

That said, 99c has its place. If you've got the exposure (e.g. via Greg at ENT) then this could be a good boost to your rankings. Several authors who were featured shot up the bestseller ranks, hit the movers and shakers and won't find they drop off a cliff after 28 days like going free (as the decay hits 0 for popularity rank at that time).
You pays your money, you takes your choice... but for me 99c is a definite no go. I tried it for a weekend, had a few sales and would have made much more had I kept my $4.99 pricing in place the whole time.

My gut is that no author could possibly approach e-publishing as a serious venture with a view to using 99c. There will be hobbyists who do stick things up for 99c permanently - in the same way you can buy art on DeviantArt for pocket money. It won't however be the same standard as professional publishing.

As a quick compare and contrast the $2.99 brigade get $2 a pop. That's about £1.30. Lose 40p for tax (I'm rounding to keep things simple of course). 

90p into minimum wage at £222 a week is still 247 copies a week for a single author with costs covered. That's still a pretty impressive sales rate - and would easily earn you a place in the top 10,000 bestseller list. For co-authors splitting it equally, that doubles to nearly 500 sales a week!

With 2 million eBooks up for grabs that's an awful lot of authors who aren't even hitting this minimal income level.  We're at $4.99 - or about £2.20 after Amazon's cut. Using the same approximate 30% tax level that's 80p each gross (remember, 2 co-authors).

We'd need to sell 31,250 copies to make our £25k liveable wage (each) - and that's at $4.99. That's 86 copies a day - and my gut says less than a thousand books are doing that. If we had half a dozen books done then maybe we would. I won't know until we get there!

It's going to be a little off as an estimate we've both got national insurance to pay on top of income tax, and one of us has a student loan that's not going anywhere fast but I think this paints a fairly bleak picture of the prospect of living off your writing as an e-publisher.

There is no magic gold rush, and 99c isn't sustainable for professional writers long term
EPublishing is great fun. Writing is awesome. It's not the gold rush some think it is. If you want to make a decent income then actually work out for your jurisdiction how many copies you'd need to sell to make your national average wage. For most that means hitting the top few thousand in terms of ranking.

Is your eBook going to hit the top 2000 out of 2 million (i.e. in the 99.99th percentile)? Or are you happy to invest now in coming up with titles so that in 10 years you've got 500 short stories out and might finally be able to pay the bills? Or is moving to a country like Thailand with lower living costs the right move for a starving author?

I can't see 99c sticking around forever among professionals. It simply doesn't pay the bills for most writers who try it.

I still want to be the next 99c eBook success. What should I do?
As I've said, I don't think 99c is the best strategy. There are three main reasons for this:
1. The royalty rate is too low. At 35% it increases the total spend on your books needed to make the same money. Ten readers can spend $10 with you getting $3.50 or two can buy at $4.99 netting the same income.
2. Production costs are high. Editing and covers cost alot of money to do well. At 35c the number of sales to cover this initial outlay increase.
3. You need a huge volume to make a real income.

Could it be done? Yes, possibly. If I were doing it I think I'd need to address these three concerns.
1. The royalty. Get into the Kindle Singles program and you can get 70% at any price. Not many will manage this, and doing it for a large number of titles seems unlikely.
2. You're going to have to self edit (or get free help from another writers/ critique group or friend) and you'll need to use bargain basement covers - either the $10-30 premades, or your own designs (Try, Poseur or powerpoint if you need to produce your own without paying for decent software or external hires).
3. There's no magic bullet here. Volume comes from wriitng stuff people want, probably in series, and in popular genres. Few will manage to hit the big volumes here - and luck is a major part.

So, lets take a hypothetical brilliant writer. He can knock out a story a week, writes cleanly and does his own covers (or lives in a jurisdiction that allows ALL of these expenses to be written off against tax).

That means 48 titles out in a year allowing 4 for holidays.
He prices these at 99c. Not all of them will be accepted as Kindle Singles. Lets say 1/4 of them make it to Single status (noone has 12 in Single yet btw).
12 x 99c x 70%
36 x 99x x 35%

Assuming equal average sales (which is a poor assumption, but this guy is hypothetically consistent)
25% of his income will be at 70c/ unit
75% will be at 35c/ unit.

That makes his average sale $1.75/4 = 43.75c (with an absurd number in Single).

To make $40,000 dollars (about £25k, our living wage) that's 91, 428 sales.
That puts him in the top 200 or so Kindle authors. That's 250 sales each and every day of the year.

Again, this guy might make a bit more doing bundles. If he were smart he'd take 5 99c stories at the lower royalty and sell the lot for $2.99 (which is $2 cheaper for the reader, and nets him $2 instead of $1.75, a $2.25 swing).
Some of them might net up to $500 for first publication rights in magazines, but this is not easy. There are a finite number of mags, and few mags like to have multiple items per author in each edition. That means psuedonyms. Psudeonyms means less cross selling.

Tax has to come off that $40k. So does provision for things you aren't getting from an employer. Then out of pocket expenses that aren't deduuctable.

Could it be done? Yes, but if you are this good then you'll make much more at $3+. It used to be that 99c was in and of itself a lure to buyers. Now some avoid it as a mark of the bargain basement low quality dross. I still think free/ $2.99+ will do you more good, but feel free to prove me wrong.


  1. As always an interesting post and valuable information. I zipped over for a quick read & am taking notes with pen and paper. Thanks Sean.

  2. Glad you found it interesting - I wouldn't bother noting the numbers. Without adjusting for jurisdiction/ personal tax etc they are rather out of context. I think the point is obvious though - we need huge volumes to make 99c work.

    As an aside, I have just heard back from Greg re 99c promo. We weren't picked as UK reviews don't count towards their requirement of 10. They need to see 10 in the USA with the average at 4.2* or better (which means 42 out of 50 stars - so that could be 8 4* reviews and 2 5* reviews, or 8 5* reviews and 2 1* reviews. It's an incredibly high standard - but perfectly understandable in the context of not wanting to advertise rubbish!).