The Birth of the Kindle Store

It’s almost exactly ten years to the day that the first Kindle was launched, along with the accompanying Kindle Store — as I write these words, at least, on a cold November morning in 2017.

There are a lot of interesting articles circulating about the launch on 19 November 2007 and it’s funny looking back at that first device, which resembled a slimmed-down fax machine. I remember thinking no one would ever use such a clunky thing to read a book, and they certainly wouldn’t pay $399 for it!

The future makes fools of us all.

But maybe Jeff Bezos isn’t quite as visionary as popularly depicted because that first Kindle sold out in five-and-a-half hours. And it didn’t just sell out, it sold its entire Christmas stock.

Amazon wasn’t able to put it back on sale until April 2008—five months later. It’s amazing now to think that even Amazon didn’t realize how much latent hunger there was for digital reading.

What happened next is well-known: successive iterations of the Kindle were released with better specs, greater capacity, and new features, always allied with a lower price.

The display got crisper, the device got lighter, performance improved, and Amazon began selling Kindles internationally too. By the time the third-generation Kindle came out in August 2010, the price had dropped from $399 to just $139.

This lower price point ushered in the digital revolution in earnest. Sales of what became known as the Kindle Keyboard exploded, and kickstarted a corollary uptick in the sales of ebooks; all these new Kindle owners had devices to fill.

Those first hardy self-publishers — like David Dalglish — mapped out the digital landscape during Christmas 2010 and reported a massive boom in sales, one that made plenty of writers (like myself) take a serious look at self-publishing for the first time.

The sudden flowering of digital reading and ebooks and self-publishing puzzled many long-time observers of the sector.

  • Ebooks had been around since 1971 when Michael Hart typed up the Declaration of Independence and made it available to download on a rudimentary precursor to the internet.
  • The first patent for automated reading is older again, filed by Spaniard Angela Ruiz Robles in 1949—although the concept itself can be traced back to author Bob Brown’s manifesto from 1930 called The Readies.
  • In terms of commercial availability, ebooks were purchasable on floppy disks since the 1980s, ebookstores had been around since the early 1990s, and dedicated devices were available since Sony launched the Data Discman in 1992—a full fifteen years before that first Kindle.

So why did ebooks suddenly flourish? How did Amazon essentially create the modern ebook market? Why did Amazon end up being the dominant force rather than, say, a first mover like Sony?

These questions are easier to answer if you realize something important: it was never about the device.

While Amazon is responsible for many hardware innovations, I don’t think anyone would argue that the Kindle Fire is higher spec than the iPad, and Kobo arguably led the way for many years in terms of dedicated e-readers without grabbing Amazon’s market-share.

It was about the Kindle Store.

One of the biggest innovations Amazon brought to publishing was one-click purchasing. The Kindle Store is designed around making it as frictionless as possible to purchase books, and to discover them too.

Amazon’s core promise to readers is that it will always show you the book that you are most likely to purchase, not what the store manager thinks you should read, or what that big publisher is paying to push, or what critics think is “most important.”

Amazon looks at your purchase history, browsing history, and reading activity, and then suggests books it thinks you will like. It also doesn’t judge you or your tastes, surely a factor in romance and erotica becoming the first two genres to go digital.

And Amazon is completely agnostic not just to the type of book or who published it, but also the price. Amazon’s recommendation engine will recommend a book by someone like me over one published by Simon & Schuster, if it thinks a reader is more likely to purchase your book, even if my book is significantly cheaper.

Amazon knows it will make less money today on that sale, but also that it will make lots more money tomorrow as customers learn to trust its recommendations more and act on them.

This drives big publishers crazy, of course, and is the true revolution in this business. While the launch of the first Kindle is a real milestone in the history of digital reading and self-publishing, it’s the launch of the Kindle Store that really turned the industry on its head.

The Kindle Store democratized distribution, allowing anyone at all to publish, something which has been comprehensively documented.

But what is spoken about a lot less is a much more fundamental shift: the Kindle Store also liberalized the entire recommendation ecostructure. Instead of selling spots on the front table of its store to the highest bidder, Amazon opened those spots up to anyone.

It’s the real reason, I submit, that publishers despise Amazon. It opened up what was a very closed market, and made self-publishing viable—meaning that authors now had a serious alternative to the traditional publishing system for the very first time. And it was a business ripe for disruption.

The Kindle Store‘s Challenge to Booksellers

2010 was the first big holiday season for ebooks and Amazon was estimated to have sold 4 million ebooks on Christmas Day alone (and Barnes & Noble shifted a further 1 million to Nook users).

If this wasn’t enough to highlight the challenge facing bricks-and-mortar booksellers, the Kindle 3—on sale for just four months—overtook the Harry Potter series to become the top-selling item in Amazon’s history, after shifting an estimated 15 million units.

All those new device owners needed something to read, of course, and the buying binge continued right through February, when ebooks swelled to 29.5% of the market and became the top-selling format in America for the very first time.

A lot of writers, myself included, began to wonder whether self-publishing would be a smarter bet, especially when fellow authors began singing the praises of Amazon’s self-publishing platform.

Kindle Direct Publishing

2007 was also the year that Amazon launched its own digital publishing platform, allowing anybody who owned the rights to a book to upload an electronic version for sale to the general public.

Authors could set a price they desired and receive 35% commission, with Amazon keeping the rest. That percentage is 70% now but at the time this was a staggering increase on what publishers were paying.

It wasn’t until 2009, though, when the Kindle started to sell in real numbers that authors such as Joe Konrath started to experiment with selling ebooks. Konrath enjoyed a fairly typical midlist career before he decided to self-publish some of the stories which had been rejected by his publishers—ebooks he had been giving away free on his website anyway.

He wasn’t the first to self-publish with Amazon, romance and erotica writers certainly led the charge there, but Konrath was the first to openly share sales figures. Straightaway, he was making $1,000 a month and getting a lot of attention in the writing community.

Barnes & Noble, Kobo, Apple, and Google soon all began offering digital publishing platforms to match their ebookstores. Self-publishers now had access to a distribution network that rivaled that of publishing houses. And the low cost of publishing an ebook meant many writers could consider self-publishing as a truly viable option for the very first time.

Trade-published authors whose backlist titles had fallen out of print also began publishing them as ebooks, especially romance writers, who have always been at the sharpest end of this business. But it wasn’t just them. Unpublished writers who were unable to get agents began publishing themselves too.

Karen McQuestion couldn’t get anywhere with publishers and uploaded her first book to Amazon in July 2009. In less than a year, she had sold tens of thousands of books, bagged a publishing deal with AmazonEncore and a movie deal. By the end of 2010, Joe Konrath had forsaken traditional publishing completely, released a string of self-published titles, and was selling 1,000 copies a day.

Even more unpublished writers began raking it in too. Amanda Hocking, unable to convince an agent to take her on, sold a million ebooks in nine months! Defenders of the status quo tried to paint Hocking as an anomaly—and she was, in the sense that anyone who is phenomenally successful at anything is an anomaly. But that misses the point: she was able to sell as many books as some of the biggest names in trade publishing without the help of a publisher.

Soon, others followed suit. Authors like Bella Andre, Hugh Howey, HM Ward, Liliana Hart, and Barbara Freethy sold millions of ebooks on their own. Michael Wallace, Deanna Chase, Ed Robertson, Monique Martin, Chris Culver, BV Larson, Russell Blake, David Dalglish, Marie Hall, and Ryk Brown were among the staggering number of authors who all sold hundreds of thousands of ebooks without the help of a publisher.

Further down the food chain, thousands more authors were making a living from book sales. Many of them were authors who previously couldn’t get out of the slush pile.

Amazon’s revolution gave authors the opportunity to cut publishers out of the loop. Worse than that, it enabled us to steal their customers.

The Size of Self-publishing

Most online retailers aren’t forthcoming with sales data, so we have to be a little creative when measuring the size of the “shadow market” that is self-publishing.

I had a stab at it in May 2013, combining snippets from shareholder reports and press releases, estimating that self-publishers had captured about a quarter of the overall US ebook market. Some thought that ridiculous at the time. Several months later, the Author Earnings report replaced guesswork and fuzzy logic with something much more rigorous.

Using a bot to scrape the top 100,000 books on Amazon, Author Earnings determined that self-publishers were responsible for around a third of the top-selling ebooks in the Kindle Store. More than the Big Five publishers combined! Today that number is over 40%. In some genres, self-publishers now completely dominate.

In other words, we’re drinking their milkshake.

I’ve often thought of the situation as akin to a giant whale being eaten by thousands of hungry piranhas. The whale has so much blubber that it doesn’t even realize it’s in trouble until it is too late.

In its 2013 full-year earnings report, Harlequin became the first publisher to formally acknowledge the threat posed by self-publishing when it revealed that revenue had fallen for the fourth straight year. Two months later, it was gobbled up by HarperCollins.

However fast you think this change is happening, it’s probably happening faster than you think.

Amazon VP Russ Grandinetti in 2011

By the time the Kindle celebrated its tenth birthday in November 2017, publishers finally began to wonder if their estimates of the ebook market were off, if the market was bigger than they suspected—much bigger, in fact—and whether self-publishers had made far greater inroads into their customer base than previously thought.

Self-publishers already knew.

Traditional Transformation

The publishing industry has always been riddled with contradiction. In one sense, it has limped from one crisis to another since its inception and the pace of change has only accelerated in the 21st Century.

On the other hand, it’s the second-largest cultural industry in the world, and the most enduring. Press coverage can be equally confusing: alarmist headlines of publishers downsizing, booksellers going to the wall, distributors feeling the pinch, the novel dying as a form, and assertions that nobody reads anymore… which are read by large numbers of people.

Much of this can be explained by looking at who has always made money in publishing, and how that is changing.

Books generate a staggering amount of cash every single year but precious little of that makes its way into writers’ pockets. Publishers sell $125 billion worth of books every year but most authors need a second job. Some of that is down to structural inefficiencies, but most big publishers offer remarkably similar contract terms.

Why is the royalty rate for ebooks virtually identical at all medium-to-large publishers? One doesn’t need the overactive imagination of a writer to concoct that particular plot.

Writers had to endure poor terms from publishers because they had no other option. Publishers had all the power. Self-publishing wasn’t a viable option.

Getting books into stores and into readers’ hands was a messy and expensive business, but this also meant the industry was ripe for disruption, and that many authors would be cheering on those disruptive forces—especially those away from the top table, and particularly those on the outside, looking in.

Amazon gave readers an infinite bookstore at their fingertips, one which never shut. At the same time, Amazon removed all the barriers between the author and the marketplace, and offered them better terms and more money too.

Publishers reacted to this challenge in profoundly negative ways. Instead of embracing the future and being among the first to stake out the digital landscape, they turtled up, doing everything in their power to slow the uptake of ebooks.

They dragged their feet on digitization, deliberately priced cheaper-to-make ebooks at prices higher than paperbacks, attempted to introduced windowing where the ebook edition wouldn’t be available at all until the hardback had been out several months, and even went as far as to engage in price-fixing to restrict the power of retailers to discount digital titles. Self-publishers happily filled the gap.

And while disruption presented new opportunities to writers, publishing deals became less attractive thanks to falling advances and more egregious contracts containing non-compete clauses, option clauses, and unjustified rights grabs.

Which meant that more and more midlist authors jumped ship to become self-publishers.

While I think publishers made terrible decisions, they did have some kind of logic behind their strategy. They knew they controlled the print market — both in terms of distribution and the whole recommendation eco-structure — and they also knew that it would be more open in an ebook world.

Publishers were also wary of ceding further power to Amazon, who they despised, and of being cut out of the loop altogether by Amazon’s increasing courting of authors to become self-publishers.

While publishing executives were often publicly disdainful of self-publishing and dismissive of any threat it posed, documents which were entered as evidence in the ebook price-fixing trial showed that the CEOs of the largest publishers were apoplectic when Amazon raised its royalty rates to 70%, complaining that Jeff Bezos was trying to steal their authors.

But they were also afraid of something else.

Final note from Dave

If you enjoyed this post, you will love my book Amazon Decoded which breaks down how every aspect of the Kindle Store works… and then shows you how to take advantage of that with some killer marketing plans. You can read more background on Amazon Decoded here, or pick up your own copy of Amazon Decoded here.

Decoding Amazon recommendations
David Gaughran

David Gaughran

Born in Ireland, he now lives in a little fishing village in Portugal, although this hasn’t increased the time spent outside. He writes novels under another name, has helped thousands of authors build a readership with his books, blogs, workshops, and courses, and has created marketing campaigns for some of the biggest self-publishers on the planet. Friend to all dogs.