**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.

## Mathematical Assumptions

**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.

## Some Cautions

**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.

I’m not mathematically-minded, Randy, but this is exciting for those of us who have gone indie. Thank you for sharing the very good news. Blessings!

Hi Tamara: Glad you liked the article. There are lots of opportunities for indie authors. There has never been a better time to be an author.

Even for those who aren’t mathematically inclined this still computes, because the field of candidates used to compute the “average” sales for indie authors has to include all the thousands who aren’t talented writers and/or aren’t really working hard at selling their books. Which means those who ARE talented and working hard must necessarily be far above the average. But it’s nice to see the math. Thanks for the encouragement, Dr. I.

Hi Athol: Good to hear from you! Yes, talented writers should expect to fall somewhere on the “broad shoulder”. That may not mean hundreds of thousands per year, but it should be worth the author’s time. An award-winning guy like you has a decent chance to get well up on that broad shoulder. Have fun!

An encouraging article for writers. Thanks, Randy. As an indie author, I have hope, Each novel I write brings a little higher return across the board, more than one would expect.The other thing I have learned, is that there are an unbelievable number of readers out there. I am just starting to realize the magnitude.

Hi Mark: Yes, it’s a great time to be an author, but it’s also a great time to be a reader. I’m reading more than ever and I’m reading a broader variety of writing. The playing field seems to be a bit more level now in favor of the newbie writer. Best of luck in your writing, Mark!

Pretty amazing approximation with the 80/20 rule. The bestselling indie that I know of (perhaps the top-selling overall) is H.M. Ward, who sold over 4 million e-books last year. That lands at your #2 spot. I know several others who sold multiple millions last year. Of course, these are the extreme outliers. I’ve heard from many more who sold in the tens of thousands, which is quite extraordinary, especially at the rate they are being paid per book.

Hi Hugh: Yes, it’s all pretty exciting considering that four years ago, the idea of ANYONE selling a few hundred thousand copies a year would have been considered nuts. And now we see many. Up at the endpoint of the Pareto distribution, things always get a little hazy, for mathematical reasons. But it’s great to hear that Holly is close to the upper end of my calculated spectrum. That is a piece of evidence that the Pareto calculation is reasonable. Kudos to you and Anonymous Data Guy on breaking the story. I was mulling your work this morning and it suddenly occurred to me that I could do a simple independent calculation using the Amazon press release from last December to get a rough measure of indie author incomes across the whole spectrum. So I ran the model and it gave reasonable numbers. I’ll be very excited to see what you and Data Guy come up with in coming weeks.

Kudos, Dr. Ingermanson! As a trad-pub author who is just testing the waters with his first indie book, this is very good news, indeed.

Hi Tom: Since I know you’re a good writer, and I’ve heard you speak on branding, so I know you’re a pretty savvy marketer, I predict you’ll do well. Have fun!

Thanks again, Randy, for explaining something important very clearly!

It’s great to hear that indie authors can do well but that doesn’t mean there isn’t a lot of indie crap (as well as traditional pub crap) out there. I’ve recently ventured into this area of publishing for a few books that aren’t likely to be picked up by traditional publishing. It does give me hope that the quality is still there.

Thanks for doing the math because I hate to.

Hi Nick: Yes, there is plenty of bad writing out there in indie books. But there is no “tsunami of crap” that keeps readers from finding the good stuff. The review system and word of mouth are efficient filters that make it very easy to find good books to read. We are not drowning in crap. We are all doing pretty well as readers. It’s a great time to be a reader.

Hi Randy,

So, let’s make the (perfectly reasonable!) assumption that all the best indie authors subscribe to your e-zine. Your site says you have 7000+ subscribers, but since it doesn’t say exactly, we’ll call it 7999 and approximate to 8000. Also, I am one of your e-zine subscribers.

Therefore, it easily follows that if and when I publish as an indie author, I will be ranked in the top 8000 and sell somewhere between 3,254 and 7,488,296 books! I’m destined to be a success! 🙂

I dare you to poke holes in my logic! (Uh wait… on second thought, maybe I don’t.)

Hi Jacob: Of course, you’re joking here, but not all my blog readers will see the holes in your line of reasoning. First, not all of my readers here are indie authors. Second, unfortunately, reading my e-zine or blog won’t automatically put you in the top of the class. You still have to do the work, and not everybody does. Third, hmmm, there is no third. #1 and #2 do it all by themselves. But the good news is that if have talent and you work hard and work smart, you will probably achieve some sort of moderate success. You can make it into the broad shoulder of the Pareto distribution. Which is not a bad place to be. There is no substitute for talent and there is no substitute for doing the hard work. Have fun!

Still, it doesn’t matter how brilliant your book is if no one knows it’s there. It is unlikely when given a chose of 100K books to choose from, that yours will be noticed, unless you have a prior platform.

Hi Lynda: Yes, the “discoverability problem” is a big problem for all authors. The importance of the data that Hugh and Anonymous Data Guy have given us is this: A surprisingly large number of indie authors have solved the discoverability problem and have gone on to earn very decent money. In some cases, as my analysis above shows, they have earned great money. In Joe Konrath’s blog today, Barry Eisler compared publishing to a lottery. That’s a valid comparison. I would only add that there are winners at all levels. That’s the lesson of the Pareto distribution. So when I talk about the “broad shoulder”, I am talking about the fact that the rewards for the “mid-list indie author” are quite good. Not spectacular, but quite good.

I so envy your math ability! Thank you for giving of your talent to help the rest of us. I have learned a ‘wealth’ of information from your newsletters and your novels. Just a novice now, but great hope for the future with teachers like you.

As a guy who is supportive of authors self-publishing, I find Howey’s work interesting, but not earth-shaking, For the record, he looked at one day of sales, at one company, and admittedly guesstimated many of his numbers based on what friends told him. Um… Would your PhD program have accepted that, Randy? Do you think his sample size is adequate? Would you allow him to create a trend line from that? The two big questions that stick in my head after reading this report: Can we rely on Amazon marketing info to be accurate? And if so, why isn’t Amazon sharing information with him?

I know the people who are raising questions about the validity of the study are being hammered as Luddites, but I tend to think this needs a bit more study before it’s declared as gospel. I like your idea of apply the principle of factor sparsity to the data, but your suggestions seem pretty optimistic. Out of more than a million authors, the average number sold is about 300. (Nothing wrong with selling 300 copies, mind you, and if they were charging a couple bucks, they made themselves about $400, which is better than a kick in the head… but it’s not the windfall you seem to make it out.) I’m not sure why you state that “the average and median sales are not very useful,” Randy. Seems as though those are very useful to give context — as in, “There are more than a million authors on Amazon, and last year 150 of them sold more than 100,000 copies.” On the one hand, I celebrate the successes. On the other, you have to admit those are fairly long odds. Again, I hesitate to say that, because everybody WANTS this to be true, and to have discovered the secret to making a lot of money at this crazy business.

I notice Hugh came on your site to say he personally knows “several others who sold multiple millions last year.” Um… this is the sort of thing that makes me wonder about his veracity. I guess I tend to doubt that he knows “several” who sold “multiple millions.” Several? Really? Even your quick data analysis doesn’t support that, Randy. Look, I’m a guy who has self-published books and done well, and who encourages the authors I work with to self-pub… but I don’t like the Amway-like atmosphere being promoted by people who want to make it sound like there are publishing fairies out there, waiting to sprinkle hundred dollar bills onto everyone. My two cents.

Hi Chip: Wow, great set of questions! I’ve been to the eye doctor today, so my eyes are still recovering from that wretched dilation thing they do. And I’m tired. So, in order to give your questions the complete response they deserve, I’m going to defer answering them. Sometime in the next few days, I’ll do a complete blog post where I explore them. You have valid concerns and I think I have valid answers.

And an error crept into my comment, Randy. Should have said “I like your idea of applying,” not “apply.” Bad editor!

Hi Randy,

Thanks for breaking that down. I’m blessing Howie, et al, for the most fun tempest in a teacup publishing has seen for a couple of years! I have three trad-pub author friends who are merrily taking all their old mid-list out-of-print titles to the bank with indie. And two of them rue the day–only two years ago–that they signed to re-issue some other old titles with a big 5 publisher. Too late, they figured out the profitability numbers between self-pub and trad-pub!

As for me, I’m biding my time, polishing, polishing, polishing, making sure my titles will knock ’em dead when they come out. (Yes, a bunch at once — as both you and John Locke have pointed out, the best marketing for a good book is several more from the same author.) Time is on my side–the field keeps tipping in favor of an indie author willing to put in Gladwell’s 10,000 hours.

Hey! Great post, Randy! Loved the depth to which you took the mathematics, and the extensive rankings that you shared. I’m a big picture & detail person so I very much appreciate the broad spectrum of specifics you showed us.

Also, I am NOT a math person, so super thanks for doing all that work and then sharing it with us! 🙂

One thing I didn’t see in the report is the idea of net income for indie published authors. Even if you only publish e-books, there are costs for editors, cover artists, and websites. These can be quite significant as a percentage of the authors gross income.

It would be interesting to see the author income graphs normalized to “net income”.

Just to be clear, we are talking about sales ONLY on Amazon, correct? Because I know authors that earn a significant amount from other distributors. Yeah, Amazon is the big dog, but I’d love to be earning what some authors are earning just from Smashwords.