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.

34 Replies to “The Birth of the Kindle Store”

  1. “it also democratized which books get recommended” … Those were great days, weren’t they? The days before Unlimited, Amazon Publishing imprints, and big publishers buying space. When everything was by sales rank–not the mysterious “popularity ranking” (suspiciously chock full of Amazon-published titles). And before the market was flooded with thrown-together books. I can’t complain much–times are better now than they were pre-Kindle–but those early years were something wonderful we’ll never return to again (sort of like Google before AdSense, and Twitter before mobs and bots, etc–it’s the way of the internet, alas)…

  2. I loved this chapter and I’m looking forward to reading your updated Digital!

    One thing you might consider adding, if it’s not too late: the price drops of the Kindle were initially reactions to huge price drops on the first Nook, the one with two screens. Initial pricing of the Kindle was in line with the cost of the Sony Reader and other ebook readers (my first eInk reader, purchased in January 2008, was the Bookeen Cybook Gen3 and cost the same as the Kindle), but the Nook competed pretty aggressively on price and the Kindle price dropped in response to that.

  3. Excellent piece as usual.
    About the Amazon distribution charge going to 30%, leaving authors with a 70% nominal cut: that came about in November 2009 after a Random House informer reportedly let Amazon know about the upcoming price fixing conspiracy and Apple’s agency terms (70-30). Expecting Apple to offer the same terms to Indies, Amazon preemptively “matched”.
    Random House notably stayed out of Agency for months and experienced a boom in sales until they were pressured into joining. (A separate story there. )

    So Amazon giving Indie publishers a 70% cut wasn’t a trigger for the BPHs hostility but rather a result of it. Indie, Inc outselling the stagnant corporate publishers was almost certainly the goal as it breaks the deathgrip they had on book retailing which allowed them to force Amazon to Agency. At the time it was reported that around half of all books (and around two-thirds of ebooks) Amazon sold came via the BPHs. Both numbers have drastically declined since then.

    And we have a richer, more vibrant marketplace as a result.

    Also: look up at early criticisms of Kindle readers among techies and ebook hobbyists and one plaint stood out: “it’s too tied to the Kindle store”, “it’s just a storefront”.

    Indeed it was.
    Still is.

    Carry on, sir.

  4. Thanks for the great rundown!

    I used to read (and I wrote my first ‘novel’) on my Palm PDAs (Palm Pilot, Handspring Visor Sony Clie). The first true ebook I read was David Drake’s Hammer’s Slammers, which was a free mobi from Baen’s free library! Wow, that was a long time ago…

    It’s weird to think back on Mobi history. I used to use the Mobipocket Reader app (I think that’s the name), but it was nowhere near mainstream, and NOT easy to get books unless you were a techie.

    Years later, my wife gave me that first Kindle for Christmas it changed EVERYTHING!

  5. I’ve published two books on Amazon, absolutely because of David Gaughran’s helpful books, but I’ve failed in the marketing area. I’m not a social media or marketing person.
    Is there another strategy coming that will give little mice a chance to get above the 2 millionth rating?

    1. I’ve been working on a big marketing themed ball o’content for large parts of the year. Some of that made its way into Digital 3, much of it will be in a book following that one quite quickly which has the working title of (this changes regularly) “Strangers to Superfans: Optimizing Your Readers’ Journey.” That originally started as an update to Let’s Get Visible but morphed into something more comprehensive. Then there’s A Secret Marketing Book coming right after that, which I’m verrrrrrrry excited about. All three books should cover the beginner, intermediate, expert levels of marketing advice pretty well.

  6. The thing Amazon did best was make reading fun again. Suddenly, with the click of a button (the buy now tab) we were able to access a bright new world. For those of us in small towns with no easy access to a bookstore, this was exhilarating!
    I’ll always be grateful to Jeff Bezos for bringing the love of books to the reader.

  7. I buy from Amazon, so I’m a bit of a hypocrite. But I do tend to think of Amazon as a shark. It has put bookstores out of business because it can afford to sell books at a cheaper price point. I remember reading a couple of years ago that Amazon has poor margins. What would be unsustainable for most businesses works for Amazon because they make up for lost sales elsewhere. Amazon is simply too big to fail. Amazon doesn’t just sell books. Traditionally published authors may get 3% of sales but there is a large team of people working on their book. I’m not denying that large publishers get away with a lot, but Amazon’s business model makes me uneasy.

    1. A few things:

      1. The number of indie bookstores in the US is up, rather than down.
      2. The stores which have closed in the last five years are predominantly chain stores, like Borders and B&N (the guys who originally were putting indies out of business with aggressive discounting).
      3. Several of Amazon’s competitors in ebooks have deep pockets: Google, Apple, Rakuten.
      4. Traditional publishing generates huge amounts of cash every but can’t pay authors fairly.
      5. Maybe we shouldn’t mourn change so much if it means that authors are getting a fairer shake. Not saying all change is good or welcome, but overall. The situation is much better for writers now than it was any time previously. More writers are making a living than ever before.

      1. And, as point 6., It’s much better in many ways for readers, too!
        My disabled mother no longer needs to buy a £10 bus ticket to get from her house on the Isle of Wight to the nearest town to find a book, she can go online and buy one for her Kindle and it’ll be delivered there and then.
        High street bookstores are OK for mobile people close to larger towns in wealthier countries. But, during my two recent four-month stays in Cambodia, I found but a single bookshop in Phnom Penh, selling badly photocopied books to tourists (and quite a few street stalls selling them too). Everyone, though, had the latest mobile phone. After a day’s field work in remote forest, the Khmer field team with which I was working would get out their phones, play karaoke, play computer games, or read, all on their phones. Now, I don’t know if one can buy ebooks on Amazon in Cambodia but I know most Khmer folks won’t travel to Phnom Penh to buy a printed book but will download one if they can, and in English, as that’s a great way to learn English, which lots of folks want to do. I very much hope that everyone in places like Cambodia will be able to read books on their phones soon, and will start to publish.

      2. “Traditional publishing generates huge amounts of cash every but can’t pay authors fairly.”

        In most cases, traditional publishers give authors an advance of at least several thousand dollars and risk additional resources in editing, formatting, cover design, and at least some rudimentary marketing.

        Amazon does none of those things. Amazon doesn’t give an author anything up front. They risk nothing, the author risks everything. Amazon does nothing more than give you a place to park your ebook and gives you up to 70% royalty on sales, if there are any. Since most ebooks sell very few copies, the author is in debt for out of pocket expenses for editing, proofing, formatting, cover design and promotion. If an ebook proves to be a big hit, Amazon scores 30% of sales. If it flops, they lose nothing.

      3. Authors bear the most risk of all. $5,000 – the average advance – is small compensation for the amount of time invested in writing a book. They are essentially gambling that the book will earn out and pay royalties on top of that, and 80% of books don’t earn out. Also, historically the profits of a book were split between publisher and author, once the publishers costs were covered, the net return was divided fairly evenly. That has gone out the window with ebooks, where publishers take a greater share of the cover price. Amazon gets 30% (and building that store with millions and million of titles handling billions and billions of transactions cost a penny or two), the Publisher gets 52.5%, and the author only gets 17.5%. This is not remotely equitable, and the reason why the lure of self-publishing was so strong. And that’s without even getting into how egregious some option clauses and non-compete clauses and reversion clauses can be, and how many more rights publishers are grabbing these days, without paying for them either. Whatever way you slice it, terms at the traditional end of the business have worsened for authors considerably in the last 25 years.

      4. “In most cases, traditional publishers give authors an advance of at least several thousand dollars and risk additional resources in editing, formatting, cover design, and at least some rudimentary marketing.

        Amazon does none of those things. Amazon doesn’t give an author anything up front. They risk nothing, the author risks everything. Amazon does nothing more than give you a place to park your ebook and gives you up to 70% royalty on sales, if there are any. Since most ebooks sell very few copies, the author is in debt for out of pocket expenses for editing, proofing, formatting, cover design and promotion. If an ebook proves to be a big hit, Amazon scores 30% of sales. If it flops, they lose nothing.”

        Amazon is two things, a store and a publisher. Most authors don’t use Amazon as a publisher, but as a store for their books. When Amazon takes you on as an author, they do take on similar risks to other traditional publishers.

    2. P.S. A lot of these changes have also resulted in much cheaper books for readers. Something we should be celebrating, rather than fearing IMO. Consolidation in the publishing industry has driven up prices quite substantially, without increasing authors’ fortunes. Whereas retail consolidation seems to be a force acting in the opposite direction, decreasing prices and improving terms for authors.

      1. In reply to plwinkler, as a reader (that’s all I am at the moment), I went to buy an ebook published by HarperCollins (owned by the Murdock press I think?) and, on publication day, it was £39,99, matching the hard-cover price. After two weeks, the price dropped to £19,99. The paperback version was released on the same day for £22,99. That’s incredibly insulting to me as a reader – £39,99 for a 300-page ebook sold by a major publisher. And the book got several reviews of one-star on publication day complaining about the ebook cost. HarperCollins really did their author a favour there, didn’t they! I happen to know the author and his advance was £1000, it took two years for Collins to publish his book after it was complete, the only promotion he gets is Amazon reviews, and he’s vowed to self-publish several upcoming books across various platforms. Oh, and I had a look at the sample of the ebook and the formatting looked like it had been done by an intern. I wonder…….! By self-publishing, the author can get the book formatted professionally, get an equally competent cover, and charge, say, £6,99, which is a price I’d happily pay, and he’d get a five-star review because it’s an excellent book at a great price. He could have got it to me, as a reader, two years sooner than Murdock managed! I don’t do maths but I’m sure the author would get more by selling to me for £6,99 than by not selling to me for £39,99 (or £19,99).

        The only book marketing I notice these days is 1) Amazing reader ratings and 2) very occasional recommendations from friends and 3) the odd blog book review. HarperCollins doesn’t do marketing that I as a reader notice unless it’s one of the Big Authors, whose books I don’t buy.

        So, as an author (I’ve just started writing), with a finished manuscript, do I then attempt to find an agent, then attempt to find a publisher, then wait around for a year or two to get my book published and way over-priced on Amazon et al……..Or do I say sod it and publish myself, and start earning quickly?

  8. “Getting less coverage is that it’s also the tenth anniversary of Amazon’s self-publishing platform.”

    That’s not quite true.

    I don’t know the exact date that Amazon launched KDP, but I do know that Mobipocket had its own similar portal years before the Kindle Store launched. There were self-published authors who were selling their books through Mobipocket, and those books were in the Kindle Store the day it launched.

      1. Oh, wow, i forgot about DTP but I thought (the P stood for Platform).

        But no, Mobipocket had this first,

        I am really under the weather and don’t feel like digging up proof, but i was there and I distinctly recall that authors were surprised when their books in Mobipocket showed up in the Kindle Store on launch day.

        It doesn’t really though – in fact, it only strengthens your point about the Kindle Store being so important. It was the recommendation engine, and ease of use, that changed everything.

      2. Yeah you’re right on the P standing for Platform. I wasn’t fast enough with my edit!

        Anyway, it doesn’t really matter. The whole point here is that Amazon wasn’t first with ebooks or ereaders or self-publishing, but it was the Store that brought all those elements together and made them work.

    1. Yes, Mobipocket was first. We were on Mobipocket, earning 35%, for a loooong time, until DTP figured out a way to transfer our books without losing rank. I wouldn’t come over until they could guarantee that we wouldn’t lose a ton of rank. 😛 But they finally figured out a way to do it and then we started earning 70%. (I was making $10K a month at 35% back then… imagine if it had been 70% all that time! Sigh…)

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