Why is the Kindle Unlimited Fund growing at a slower and slower pace?

Kindle Unlimited is a subscription service. Readers pay $10 per month (lower in countries outside the US and Europe) to get ‘unlimited’ reading. They can borrow and read any book that has been included in the Kindle Unlimited program by the author or the publisher.

Each month, Amazon pays out money to the Authors and Publishers enrolled in the Kindle Unlimited program. Money is paid out from a Fund called the ‘Kindle Select Global Fund’. The more your books have been read, the higher share of this fund you will get

If we look at the Kindle Select Global Fund History, we see a few interesting trends

1. From launch in July 2014 ($2.5 Million Total Fund) to Dec 2019 ($26.2 Million Total Fund), the Kindle Select Global Fund grew a whopping 10 times
   1. Some might argue that starting from a smaller base, means the growth is bound to be more impressive at the beginning
      1. That is a valid point
   2. However, it is worth considering that Kindle Select Global Fund (which is mostly Kindle Unlimited earnings) is $300 million a year. That’s a very healthy sized subscription service
2. Growth was much faster in the first 1 year and 4 months. The Kindle Select Global Fund grew FIVE times from $2.5 Million in July 2014 to $12.7 million by November 2015
   1. That’s 5 times growth in just 1.33 years
3. Growth in the remaining 4 years and 1 month has been relatively slow. The Fund has grown 2.06 times from $12.7 million in Nov 2015 to $26.2 million in Dec 2019
   1. Roughly a doubling in 4.1 years
4. It becomes even more interesting if we look at just Dec 2016 ($16.8 Million) to Dec 2019 ($26.2 Million). That’s 55.95% growth in the last 3 years
   1. That’s growth of just 56% in the last 3 years
   2. Very peculiar when you consider that the overall growth in the last 5.33 years has been ten times
   3. The vast majority of the growth has been in the first 1.33 years (July, 2014 to Nov, 2015), with relatively lesser growth in the most recent 4 years (Dec, 2015 to Dec, 2019)
5. Finally, if we look at the Dec 2018 ($23.7 Million) to Dec 2019 ($26.2 Million) period, the growth is a small 10.55%
   1. If you contrast the first year and 4 months of Kindle Unlimited (July 2014 to Dec 2015), with the most recent year (2019), we get a really extreme realization
   2. In July 2014 to Dec 2015 (the first year and 4 months), the Kindle Unlimited Fund payments to authors grew 5 times in 1.33 years
   3. In Dec 2018 to Dec 2019 (the most recent year), the Kindle Unlimited Fund payments to authors grew just 10.55% in a year

There is something very strange going on if

1. Kindle Unlimited payments grew 10 times in July, 2014 to Dec, 2019
2. However, Kindle Unlimited payments grew just 55.95% in the last 3 years (Dec, 2016 to Dec, 2019)
3. Kindle Unlimited payments grew just 10.55% in the last year (Dec, 2018 to Dec, 2019)

Let’s explore why the growth of the Kindle Unlimited fund has slowed down so much

Why is the Kindle Unlimited Fund growing at a slower and slower pace?

There are five main possibilities

1. Growth of Kindle Unlimited has slowed down massively
   1. Could it be that Amazon has hit some sort of ‘wall’ in terms of how many readers are willing to pay for a subscription service?
   2. Or is it that with the big brand authors from large Publishers not available, it is hard for a subscription service to grow?
   3. Could it be that Amazon finds it to not be profitable and therefore is not pushing it as much
      1. Well, it is Amazon so it is unlikely Amazon is prioritizing profit over growth
   4. Could it be that more and more self published authors (who are the lifeblood of Kindle Unlimited) are leaving Kindle Unlimited?
2. Growth of Kindle Unlimited has shifted to countries like India where the subscription price is much lower, which means total revenue growth is much slower
   1. This is actually a very likely possibility as the cost for Kindle Unlimited is just $2.36 a month in India
      1. Furthermore, Amazon regularly offers 2 month and 6 month bundles at ridiculously low prices. For Example: 2 months of Kindle Unlimited for $1.65 total
      2. If most of the growth of Kindle Unlimited is in Countries like India, where readers are paying 24% of the amount readers in US and UK are paying, then it makes sense that payments to Authors have slowed down
3. Amazon is giving authors a smaller and smaller share of Kindle Unlimited subscription earnings
   1. While unlikely, we have to consider the possibility that Amazon are gradually shifting to giving authors a smaller share
   2. In the beginning, in 2018 and 2019, companies like Amazon and Sony (Sony Reader eReader) wanted to give authors only 35%. Then Apple came in with 70% and forced Amazon to match that 70% cut to authors
   3. These days, we see Amazon ask for requirements like ‘price ebooks between $2.99 and $9.99’ if authors want to get a 70% cut
   4. With Kindle Unlimited, no one except Amazon knows how many people are actually ‘borrowing’ books in Kindle Unlimited. Authors only get a figure for ‘the number of pages read’
      1. This means Amazon is well placed to, if it so chooses, shift from a scenario where authors are getting 70% of money paid by Kindle Unlimited subscribers
      2. To a scenario where Authors in Kindle Unlimited are only getting 35% of the money paid by subscribers
      3. There is no competing book subscription service that is big enough to force Amazon to give authors a large cut
         1. It is also worth noting that you have to be exclusive to Amazon in order to sign up for Kindle Unlimited (some exceptions for big authors like J. K. Rowling)
         2. This means that it is very tough for competing book subscription services to take off
         3. Of course, as the Large Publishers are not signed up for Kindle Unlimited, a competing subscription service could, in theory, leverage those large publishers to build a competing service
   5. We have to keep in mind that in scenarios where Amazon gets market domination, it does tend to increase its cut. It is unlikely, and yet not impossible, that Amazon is shifting Kindle Unlimited allocations such that authors are getting a smaller and smaller share
4. Amazon is handing out a larger and larger share of Subscription Service revenues to areas such as exclusive deals with Authors, and relatively smaller share to the authors who are enrolled in Kindle Unlimited
   1. This is a very intriguing possibility. As a company Amazon tends to route profits from one business division, to growth of another one. Generally tending to avoid showing profits as much as possible
   2. If it were to do the same thing in Kindle Unlimited, the logical path would be to start taking 30% to 50% of Kindle Unlimited earnings and start signing up big brand authors to exclusive Amazon Kindle deals
      1. While we have had a couple of such exclusive deals recently, the number is small enough that this may or may not be actually happening
   3. This is definitely something to look out for. If in 2020 we see the number of exclusive Kindle deals shoot up, then we know that Amazon is almost certainly allocating a significant part of Kindle Unlimited revenues to tying up big name authors to exclusive deals
5. The subscriber churn in Kindle Unlimited is very high, which means that a large percentage of readers who sign up are quitting within a year or less
   1. This is definitely possible as Kindle Unlimited is currently mostly self published authors and a few smaller publishers. Most of the big name authors are missing
   2. Readers who are signing up are not indicated of this fact anywhere
   3. It may very well be that after signing up, readers find that most of their favorite authors are not included

As we can see, there are a lot of possibilities

The only thing that is certain is that the growth rate of the amount of money Amazon is paying to Kindle Unlimited authors has slowed down considerably