Throughout 2012, Amazon wooed publishers to participate in its “KDP Select” program, which allows Amazon Prime customers to borrow one Kindle edition per month for free, offering the publisher a share of a royalty pool, totaling at least $500,000 per month. By December 2012, the monthly pool had grown to $1.4 million, but the per-unit payout for e-books borrowed that month was only $1.88.
Amazon announced in January that it would increase its “global fund” bonus for borrowed e-books from $1.5 million to $2.2 million during the three month period from December 2012 through February 2013. As a result, the monthly pool for borrowed e-books in January grew to $1.7 million, the largest in the history of the program. The per-unit payout for e-books borrowed in January climbed to $2.23.
Comparing royalties from borrowed e-books with purchased ones, when a U.S. consumer buys a Kindle edition priced at $2.99, Amazon pays the publisher about $2.09 less a small “delivery cost.” For titles purchased by U.S. readers at $3.99, the base royalty is $2.79. At low prices like these, a $2.23 payout for a borrowed e-book is competitive with a purchase. But for higher-priced Kindle editions, the payout for borrows is substantially lower than the royalty for purchases.
As it pushed beyond the U.S. and into international markets in 2012, Amazon steadily increased the royalty pool for e-books borrowed through the KDP Select program, luring more and more authors and publishers to participate. However, in order to enroll a book in KDP Select, the author or publisher is required to offer it exclusively from Amazon during the enrollment period, rather than Apple’s iBookstore, Barnes & Noble, Kobo, Smashwords.com and other e-booksellers. This has enhanced Amazon’s appeal to readers of e-books — but some participants in KDP Select feel that current policies for borrowed e-books benefit Amazon more than authors and publishers.
As of February 20, the monthly pool for Kindle books borrowed in February has dropped to $1.2 million. The per-unit payout for February is expected to be posted in mid-March.