Why Kindle Unlimited is Doomed to Fail

Amazon has just announced their new “Netflix for Books” called Kindle Unlimited. You pay US$9.95 a month and you can download and read all the content you want to your heart’s content. For readers it sounds like a great deal, but for writers it’s a mixed bag. Either way, it’s doomed to failure or at least in for a lot of hard times.

Why?

Well, the first thing you need to understand is that Kindle Unlimited (KU) is part of the Kindle Select program for writers. Kindle Select is a bundle of incentives that Amazon gives writers to publish their eBooks exclusively on Kindle. You promise to only have your book on Amazon for 90 days, and they give you a bunch of extra ways to promote your book and profit from it. One of the biggest parts of this is membership in the Kindle Lending Library, wherein members of Amazon Prime can “borrow” one book each month for “free”.

Actually, the reader doesn’t pay (beyond what they paid for Amazon Prime membership), but Amazon does pay the writer for each borrow. Amazon does this by having a giant monthly pool of money (say $1 million a month) which gets divided among the Kindle Lending Library authors based on the number of borrows they have. So if there was only one book borrowed from the Kindle Lending Library this month, that one author would get $1 million because it was only divided by one. Two authors having books borrowed would get $500,000 each, and so on, with the real numbers being in the hundreds of thousands of borrows and the actually profit per book likely less than $1 per borrow. (I’m pulling most of these numbers out of my butt, however you still get the idea of how it all works.)

However, Select has been actually less profitable and worthwhile for independent authors the longer it’s gone on, mostly because of the sheer number of people in it. So, Amazon is constantly trying to come up with new ways to incentivize authors to join Select, and one of these things is Kindle Unlimited. Basically, all Select books are now part of Kindle Unlimited, and a book “bought” by a KU user counts towards the Kindle Lending Library Pool of money, so in theory Kindle Select authors now how two great ways to access Amazon’s Monthly Money Pool and get a bigger slice of the pie. Which on the surface seems like a great incentive to join.

However, by linking the two programs to the same money pool, they may have just doomed both the Kindle Lending Library and Kindle Unlimited.

Let me explain.

With the Kindle Lending Library, each member could only get a limited number of “free” ebooks a month, so they chose carefully which ones they read. However, with Kindle Unlimited, you can read as many books as you want, and each of them counts towards a share of the money pie, and there’s no limit to the number of books an author can sell. This creates a huge problem for Kindle that I don’t think they saw coming.

For example. Let’s say I’ve got a book on the market that has 31 chapters. If I was a smart man, what I would do is take that 31 chapter book and divide it into 31 mini-books, which I would then put up on Kindle Unlimited as a “serial”. Then, I would go over to Fiver and pay a stranger who has a Kindle Unlimited account $5 to “read” and click through each of those 31 chapters. (Which might take them minutes, so totally worth $5.) They make $5, and I get 31 shares of the pie, which is likely more than $5 in value- at say 50 cents a read, that’s $15.50- triple my money! Even with my initial cost out, that’s $10.50 in profit.

Of course, I can take this even further. Say my book has 350 pages! Well, that’s 350 mini-books, and 350 shares of the money pie! Even at each share being worth 2 cents, that’s still a profit! Good times! And that’s just one Fiver person doing it, soon there will be dozens or hundreds of them offering this service, because they get $5 for 10 minutes work, or $30/hour doing this. (Or more!) I don’t even need real readers, or ratings or reviewers to make this scheme work! I can be doing this over and over, and making bigger and bigger profits as I do it.

So, while the people who enroll in Kindle Unlimited with their books are getting 1 share if they honestly enroll their book, I’m getting 31 (or 350) shares of that same pie. Which quickly means that it’s stupid for them not to do the same thing I’m doing, and in fact if they want to profit they have no choice but to start gaming the system and fighting for their slice of the pie just like me!

A few further thoughts:

  1. It will quickly become impossible to make a profit on it, so nobody will enroll their books there. No content means nobody will use Kindle Unlimited.
  2. Amazon could make KU invite only to stop this, but if they did so then it would defeat the whole incentive to get people to be part of Select.
  3. Amazon could set minimum lengths of books, but this is irrelevant since the point isn’t the content, but the number of “reads” a book gets, which is meaningless in this scheme. I can fill books with gibberish and still profit from them using this system.
  4. Amazon could ban “Fiver Readers”, but how to spot them? And they can just make new accounts and keep doing it again and again, whereas Amazon will quickly find their own resources limited. (Unless they employ armies of checkers, which gets expensive.)
  5. This will kill the Kindle Lending Library, because it means the share prices there will tumble down to nothingness.

So, as you can see, Kindle Unlimited isn’t just a race to the bottom for Authors, it’s actually a race to the bottom for Amazon. It’s too gameable to work, and by the time they figure out a solution, nobody will care.

Rob