Bravo to Hugh Howey and to his collaborator, “Anonymous Data Guy,” for their recent series of articles at AuthorEarnings.com. (Note that this website is no longer online.)
Hugh and Data Guy have done a remarkable series of calculations that work as follows:
- Data Guy wrote a program to crawl through various best-seller lists on Amazon.
- Hugh already had data from many indie authors allowing him to correlate a sales-rank to an actual number of sales.
- Data Guy then used Hugh’s data to estimate author earnings.
You can read all the results at AuthorEarnings.com. We can summarize their results as follows:
- Indie authors as a group are selling about as many units as the group of authors published by the Big 5.
- Indie authors as a group are earning about as much money as the group of authors published by the Big 5.
Edward W. Robertson has also done some recent interesting work to see what percentage of indie authors are doing well in various genres.
The Tsunami of Cash
We have been warned for years that indie publishing was producing a “tsunami of crap.” Indie books were supposed to be a vast wasteland of drivel, with perhaps a few “outliers” who were earning a lot of money. But most indie authors were claimed to be struggling along, earning on average just a few hundred (or possibly a few thousand dollars) per year.
Instead, the facts are now clear. Indie publishing is producing a “tsunami of cash” for indie authors. Yes, there are plenty of bad indie books, but the good stuff is easily found by readers. And good writing gets rewarded with money.
What Amazon Really Said
In this blog post, I’d like to look at a single data point that Amazon gave us on December 26, 2013. You can find it buried in this post on Amazon.
Here’s the data point, which has been widely misinterpreted:
“150 Kindle Direct Publishing authors each sold more than 100,000 copies of their books in 2013.”
Virtually everybody has read this to mean that a good indie author is moving about 100,000 copies per year. Which is good, but not great. After all, a good trad-published author moves millions of copies per year. So what’s the fuss about 100k copies? This would mean a total of 15 million copies sold for those indie authors.
The answer is that the top indie authors are moving a lot more than 100k copies per year, and those 150 authors are probably moving nearly 4 times as many units—around 58.5 million copies.
How do I know? I’ll explain how I know in the rest of this article.
The 80-20 Rule and Amazon
Most people have heard of the 80-20 rule, which says that roughly 20% of the people earn roughly 80% of the money.
The 80-20 rule is an example of a “Pareto distribution,” which you can read about on Wikipedia if you’re mathematically adept. I have discussed the Pareto distribution on this blog and in my e-zine in the past. (For a summary, see my blog post Liars and Outliers In The Publishing World.)
In my previous posts and articles, I’ve made a slightly different set of assumptions. I’ve worked with the so-called “Zipf Distribution,” which is a very simple version of a Pareto distribution. In this article, I’m going to work with the 80-20 rule, a slightly different version of the Pareto distribution which I think is closer to the real world.
The 80-20 rule is a good approximation to a lot of situations.
Let’s apply the 80-20 rule to the single data point that Amazon gave us and see what we can learn.
Skip this section if you hate math.
We’ll make the following assumptions to create a very simple mathematical model, and then we’ll see what that model tells us. Please remember that we don’t claim this model represents reality perfectly. But if it approximates reality, then the model should give us valuable insights into the “Amazon economy” for writers. I am going to have to get a little mathematical here, so if you hate math, skip down just a bit.
- Assumption #1: Unit sales of books follow a Pareto distribution: sales of an author are inversely proportional to the author rank raised to a certain exponent. The equation for this is S = C/(R**E), where:
- S is the unit sales of a given author
- C is some unknown constant to be determined
- R is the rank of the author among all the other indie authors
- E is some unknown exponent to be determined
- The operation R**E means to raise R to the power E.
- Assumption #2: We can use the 80-20 rule to compute the exponent E. The result is very well known: E = log(4)/log(5) = .86135. (Here, “log” means the natural logarithm.)
- Assumption #3: Indie author #150 sold about 100,000 units in 2013. We can use this to estimate the unknown constant: C = 7,488,300 units.
Estimates For the Top 10 Indie Authors
Now we can use our formula to estimate the unit sales on Amazon for ANY indie author. Let me emphasize, I’m talking here only about indie authors, so the rank we’ll use is the indie author rank. Note that some authors are hybrid authors—they work for trad publishers and they do some indie work. My model is just a simple model and it doesn’t account for this splitting of effort. So we can’t draw incredibly precise conclusions. But we CAN make some simple estimates that can guide our thinking.
I wrote a simple program to use our formula to estimate the sales for each of a large number of indie authors. I chose the number 600,000, because I know there are at least that many authors on Amazon’s Author Central. The exact number is not all that important, except when you try to calculate the average income or the median income for authors. (But neither of these is a very useful number to calculate.)
Here are the estimates for the top ten indie authors on Amazon:
- Rank: 1, Sales: 7488296
- Rank: 2, Sales: 4121828
- Rank: 3, Sales: 2906786
- Rank: 4, Sales: 2268803
- Rank: 5, Sales: 1872074
- Rank: 6, Sales: 1600000
- Rank: 7, Sales: 1401055
- Rank: 8, Sales: 1248831
- Rank: 9, Sales: 1128348
- Rank: 10, Sales: 1030457
Holy cow! Do you see that? This model estimates that the best indie author is moving almost 7.5 MILLION units. That’s a lot more than 100k units. Yes, it’s just an approximation. But it shows us what the 80-20 rule is telling us, if we take the 80-20 rule seriously.
The model predicts that about 10 indie authors are moving more than a million units per year on Amazon.
Estimates for the Top 150 Indie Authors
Now let’s estimate sales of selected indie authors in the top 150 (the folks selling more than 100k units):
- Rank: 10, Sales: 1030457
- Rank: 20, Sales: 567201
- Rank: 30, Sales: 400000
- Rank: 40, Sales: 312208
- Rank: 50, Sales: 257614
- Rank: 60, Sales: 220174
- Rank: 70, Sales: 192798
- Rank: 80, Sales: 171850
- Rank: 90, Sales: 155271
- Rank: 100, Sales: 141800
- Rank: 110, Sales: 130624
- Rank: 120, Sales: 121192
- Rank: 130, Sales: 113118
- Rank: 140, Sales: 106123
- Rank: 150, Sales: 100000
This is telling us that about 30 authors are selling more than 400k units per year. If we add up the sales for all those 150 authors, we find a total of 58.5 million copies, for an average of about 390,000 copies per author. You can see how misleading it is to assume that all 150 of them were selling 100,000 copies. The Pareto distribution is strongly distorted toward the top sellers.
Estimates For The Rest Of The Pack
Finally, let’s look at sales of selected indie authors farther down in the pack:
- Rank: 200, Sales: 78052
- Rank: 300, Sales: 55044
- Rank: 400, Sales: 42963
- Rank: 500, Sales: 35450
- Rank: 600, Sales: 30298
- Rank: 700, Sales: 26531
- Rank: 800, Sales: 23648
- Rank: 900, Sales: 21367
- Rank: 1000, Sales: 19513
- Rank: 2000, Sales: 10741
- Rank: 3000, Sales: 7574
- Rank: 4000, Sales: 5912
- Rank: 5000, Sales: 4878
- Rank: 6000, Sales: 4169
- Rank: 7000, Sales: 3651
- Rank: 8000, Sales: 3254
- Rank: 9000, Sales: 2940
- Rank: 10000, Sales: 2685
- Rank: 20000, Sales: 1478
- Rank: 30000, Sales: 1042
- Rank: 40000, Sales: 814
- Rank: 50000, Sales: 671
- Rank: 60000, Sales: 574
- Rank: 70000, Sales: 502
- Rank: 80000, Sales: 448
- Rank: 90000, Sales: 405
- Rank: 100000, Sales: 370
- Rank: 200000, Sales: 203
- Rank: 300000, Sales: 143
- Rank: 400000, Sales: 112
- Rank: 500000, Sales: 92
- Rank: 600000, Sales: 79
Notice that the top 300 indie authors in this model are all moving more than 55,000 copies each.
And more than 2000 indie authors are moving more than 10,000 copies each.
Of course, the model also shows that there are at least half a million writers who are moving 370 units or fewer per year.
The 80-20 rule says that most people don’t sell very much. And it says that a certain select few sell incredible amounts.
My program computed a few other statistics of interest:
Total units sold: about 292 million copies
Average sales per author: about 486 copies
Median sales: about 143 copies
The Amazon Economy
So the “Amazon economy” for indie authors is wildly different from Lake Wobegon, where all children are above average. In the Amazon economy, most authors are below average. For this set of numbers, about 88% of all authors are below the average.
Notice that the median and the average depend on how many authors there are. If we increased our estimate to a million authors, then the average would sink to 317 copies sold and the median would drop to 92 copies. But the sales of those people at the top wouldn’t change.
For some reason, many advocates of trad-publishing like to latch onto the known fact that average indie sales are low. This is true, but it’s inevitable if there are a lot of indie authors. There is only so much money to be made. The more authors you have, the lower the average gets sucked. The same is true for trad-published authors.
The average and the median sales of authors are not very useful numbers. What is useful to know is the sales of the top earning authors and the value of the exponent E. Once you know those, you have a very nice way to estimate the earnings for all authors at all ranks.
One clear result is that all those sales add up to a lot. Several hundred million units. There is a “tsunami of cash” coming to indie authors.
Let’s be cautious here. The Pareto distribution is just an approximation to reality. The Pareto distribution is not reality itself. But it is probably a pretty good approximation, and once we make that approximation, we can make exact calculations. Those calculations are plausible, but of course they don’t correspond exactly to reality. That’s why we call it an approximation.
Furthermore, let’s be clear that we have made a model for unit sales of books, not for revenue. You have to work with what you have, and I’m working with just a single data point from Amazon—their statement that 150 indie authors each moved more than 100k books in 2013.
That’s not a lot of data, but it’s enough to get an approximate picture for all indie authors. If and when we get more data, it’ll be interesting to see how well the model holds up. I expect that the broad shape of the model will prove accurate, but there will probably be some surprises at both ends—for the top performers and the lowest performers.
The Broad Shoulder
There will always be a few big winners and a large number who don’t earn very much. There is a “high head” and a “long tail.”
But the important point is that there is a “broad shoulder”—a set of writers who are not at the very top and yet are earning substantial money (thousands of dollars per year, or tens of thousands per year). For most of them, this is not enough to live on. But it’s enough to make their life better. That’s cool.
If we had more data, of course we could make a better model. We will always need models, because we will never have all the data.
The calculations we’ve done here would be similar for trad-published authors. The numbers would change, but the same sort of reasoning applies, and the economy is shaped in roughly the same way. There is a high head, a broad shoulder, and a long tail.
The Future is Bright
As I have said many times, I’m not pro-publisher and I’m not anti-publisher. I’m pro-author. And the good news is that the future is bright for indie authors. Bright, and getting brighter.