This post, by, originally appeared on the Digital Book World site on 3/1/12.
I always find it amazing when researching marketing strategies how incredibly superstitious and eager some authors are to not just believe, but also truly embrace urban myths.
Especially if it might impact their careers.
The Kindle Owners’ Lending Library (KOLL) borrowing system is a prime example.
So rather than relying upon your cousin’s friend’s blog to terrify you that KOLL is killing your book sales, let’s return to a trusted friend.
Math. Good, old-fashioned math. Let’s calculate how KOLL is affecting your book sales rather than running around the room waving our hands over our heads.
I am going to use examples from my platform; however, you can calculate your numbers using your own data. Drilling down into your sales numbers is the only way for anyone to determine if any advertising venture is worthwhile or not.
Indie authors, or even small/trade publishers can perform this series of calculations to see if KOLL is a cost-effective option for their book titles.
Let’s look at those titles priced between 99¢ and $2.98. These 35 percent royalty books generate 35¢ to $1.04 royalty-per-sale.
Since the current KOLL Payout is approximately $1.60/borrow, any title in this 99¢-$2.98 price range is actually making money from each borrow.
In the case of 99¢ titles, you are actually quadrupling your royalties versus a sale. #sweet
The next price bandwidth we want to look at is the $2.99 titles. If we simply looked at raw numbers, it would appear that these books were losing money on KOLL.
The $2.99 price point at 70 percent royalty = $2.09 – KOLL royalty of approximately $1.60 = a net loss of 50¢/borrow versus purchase.
But not all sales at $2.99 are paid out at 70 percent royalty. A subset of your sales is always calculated at 35 percent royalty if the sales originate outside the territories covered by the 70 percent royalty contract.
On average, you can expect about 7 to 8 percent of your sales are going to fall under the 35 percent royalty rule. This brings down your $2.09 average royalty at 70 percent down to a combined 70 percent + 35 percent royalty of $2.00/book.
Now, we must subtract the delivery charge of 8¢, which brings our average royalty per book down to $1.92/book.
Average net royalty $1.92 – $1.60 KOLL average royalty = 32¢
That brings your net loss down to 32¢/borrow versus purchase.
However, we must now factor in a more human component. The question becomes: “Would each of the KOLL borrowers have actually bought your book?”