23 January 2015 - 6:31 pm

Amazon vs Independent Authors: KDP Select Fund

Part of the Amazon is not your friend series. (Sorry for the delay – catching up on a backlog of posts here.)

I have already talked about the KDP Select program and why its exclusivity requirement is a problem for indie publishing. A big chunk of program incentive that is waved in front of an Amazon author is the KDP Select Fund, and it’s worth thinking about in its own right.

Every month, Amazon pumps hundreds of thousands of dollars into a fund, which is split amongst the KDP Select authors depending on their books’ performance (mostly linked to the lending library). This is a valuable source of income for some Amazon authors. Lately, the amount put aside in this Fund has reached up into the millions of dollars.

I chose not be part of that system and I didn’t give the Fund its own heading to complain about not getting a slice of this particular pie. That was my choice and I don’t regret it. I want to talk about the implications of this fund.

It’s a very nice incentive. I congratulate every author who has benefited from it, and it has been part of what has tempted me towards the KDP Select program.

The more I think about it, though, the more dubious I become. This Fund can’t last forever. Amazon is supplementing authors’ income, bulking out its ebook royalties and paying for borrowed books with this fund. Amazon is the only ebook venue I know of that does this (are there any others? Let me know!).

Recently, it has added the Kindle Unlimited book lending to the fund. However, there’s no indication that the subscription money earned by KU is going into this fund. It started out as just a chunk of money that Amazon offered up to authors and that’s what it still looks like.

There is no indication that the Fund is in any way self-supporting. Lending library fees don’t appear to be funding it, nor any other traceable revenue from Amazon’s ebook services. This, for me, is a big warning flag. Why? Why would they hamstring their bottom line like that? That’s a chunk of their profits they’re giving away, which seems strange for a business.

(A little side note: authors have always been paid by libraries for their books – this is a normal part of a traditional contract – so this doesn’t represent any kind of revolution. The libraries somehow figure out how to make that work, and other ebook library services (available through distributors like Smashwords) have figured out how to do it. It’s only right that authors should be paid for library lending of their work. My question is: why is Amazon supplementing it this way?)

Amazon is a business, not a charity, and don’t kid yourself that there’s anything altruistic about the Fund. It’s not a favour for its authors, nor for its readers. We need to think about it in terms of business goals. It’s clearly not there to make money, so what else is the company gaining?

You. Amazon authors. It’s an incentive to tie authors into the KDP Select program, which means more books going exclusive with Amazon, which means fewer books available in other stores. Which has knock-on effects into the book industry as a whole, all of which benefit Amazon. (See also the previous post and associated links about exclusivity.)

What happens when it no longer needs to entice authors into the program? When it has so much of the industry that the other stores can’t compete any more? That fund will dry up. When it has achieved its goal, it will have no reason to keep paying it out, so why would it?

But Amazon promised, it’s in the agreement. Right now, it is, yes, but that agreement also includes a clause that allows Amazon to change its terms at any time, with no notice or consultation. There is a clause allowing them to make a bait-and-switch.

Authors can withdraw from the program at specific, select intervals (currently, every 3 months), so they could just leave, right? But by the time Amazon no longer needs to pay for the Fund, there won’t be any/many alternatives available. We’ll have to wait until an alternative rises out of the ashes of the old, if it is still possible by that point (I’m sure there are plenty of people who have speculated on this).

I consider the Fund a temporary measure at best, a short-term tool. I can see it drying up, maybe slowly, maybe quickly, as Amazon cements its market domination and ceases to need it so much. I can see them using excuses like ‘market pressures’ or ‘business protection’ or ‘government/tax impositions’. What I am sure about is that once Amazon get the monopoly it’s pushing for and it’s no longer necessary to maintain that Fund, it’ll fall by the wayside. It just doesn’t make sense to maintain it: in business terms, that’s profit they’re giving away.

Perhaps this is a cynical view. Perhaps it won’t happen soon. And maybe it’s okay to milk the cow while the calf is young. But when someone offers me a juicy deal, I have to ask what’s in it for them, what their goals are, and what it’s going to cost me at some point.

Without the Fund, what is the KDP Select program is really giving you? Some promoted exposure? I think about the knock-on effects in the industry, the audience you’re not getting to and the bookstores that are struggling as a result, and I have to ask: is it truly worth it? Is it worth the cost down the track?