Tag: economics

How KU Destroyed the Ebook Market

At first glance, Amazon’s Kindle Unlimited looks like a great deal to serious readers. For only $9.99 per month, you can read whatever you want from a catalog of more than 2.5 million books. And it is a great deal, for now. The downside is that it has had terrible consequences for authors and publishers alike, consequences that will only continue to get worse over time. Here is the fundamental problem with the KU program from a book industry professional’s point of view.

The proper price range for an ebook, as defined by Amazon, is $2.99 to $9.99. Outside that range, the 70 percent royalty is halved, so those are the relevant price boundaries. While the Big 4 publishers price their new ebook releases at $9.99, Castalia generally prices its ebooks at $4.99, so we’ll use that for the purposes of analysis.

Using a hypothetical 300-page book as an example, an ebook sale generates around $3.49 in royalties for the publisher after Amazon deducts its delivery fee and infrastructure charges. A full Kindle read of the same ebook generates around $1.20 per finished book, the precise amount depending upon the monthly KENP royalty, which has recently averaged around .0040 per page read.

So, on it’s face, KU means reducing the payout to the author by about $2.29, or 52 percent. That’s bad, but superficially survivable for a successful writer.

However, the reality is considerably worse. Think about what percentage of the books you read that you actually finish. I read 4.5x faster than the average reader, I consciously try to finish every book I read on principle, and I would still estimate that my book-completion rate is only around 90 percent. Sometimes a book just isn’t that interesting, sometimes a better book comes along, and sometimes you only want a specific piece of information contained in a particular book that is otherwise of no interest to you.

And consider the fact that Amazon literally markets KU as a means of “trying out new authors”, which tends to increase the number of books that the average individual samples, but doesn’t finish, as he tries, and discards, new authors he doesn’t like.

“I would never be able to afford reading so many books if not for KU. It also allows trying new authors and series. Since I don’t need to pay extra, I’m willing to try books/authors I would normally hesitate to spend money on.”

For the sake of argument, let’s assume that KU readers finish one out of every 3 books they download onto their Kindles. That estimate is probably on the high side, given the way there is a strong correlation between readers and collectors, but it will serve to illustrate the point. This means that while an author gets paid for every ebook sold, whether it is read or not, he’s only going to get paid for the partial percentage of his KU books that were actually read.

(This is probably why KU only reports normalized pages read, not book downloads. It would likely be depressing to a lot of authors to realize how few of their books downloaded are actually read at all, let alone in full.)

Multiplying the difference between a sale and a book read (0.48) by the percentage of completed books (0.33) suggests that on average, authors are making about 15.84 percent of what they were making prior to Kindle Unlimited being introduced. It also means we can estimate the amount of ebook sales revenues that has been eliminated by Kindle Unlimited by multiplying the monthly KDP Select Global Fund for Kindle Unlimited by 6.3131, which is the inverse of that 15.84 percent.

Since the September 2023 KDP Select Global Fund was $49.6 million, this suggests that Amazon is now destroying about $313 million in potential ebook sales every single month. And this doesn’t even get into the fact that because Amazon controls the sales across its site with its A9-A11 algorithms, as well as secret algorithms like Project Nessie, to influence prices and pick winners and losers on a monthly basis.

People familiar with the FTC’s allegations in the complaint told the Journal that it all started when Amazon developed an algorithm code-named “Project Nessie.” It allegedly works by manipulating rivals’ weaker pricing algorithms and locking competitors into higher prices. The controversial algorithm was allegedly used for years and helped Amazon to “improve its profits on items across shopping categories” and “led competitors to raise their prices and charge customers more,” the WSJ reported.

So, if you want to know why so many great little independent publishers have disappeared, why independent authors are struggling, and why genre publishing houses like Tor and Baen Books are teetering on the edge of failure, and why the comics publishers like Marvel, DC, Dark Horse, and IDW are facing the prospect of looming shutdowns, you’ve got your answer: Amazon ebook sales hurt the print market, and Kindle Unlimited is killing the ebook sales market.

Now, you don’t need to worry about Castalia. Even though we’ve seen the same cataclysmic decline in ebook sales that other publishers and authors have, starting in October, you’re going to see us publishing more hardcovers, paperbacks, and ebooks than you’ve seen us publish in the last three years. We just published CARAVAN OF THE DAMNED by Chuck Dixon, and next week we’ll be publishing THE ALTAR OF HATE by yours truly and QUANTUM MORTIS: A MIND PROGRAMMED & OTHER STORIES as soon as the cover art is ready. And a whole host of books that haven’t appeared in print before, including THE CASTALIA JUNIOR CLASSICS Volumes 7 and 8, are in production. We’re also going to systematically expand the number of ebooks and print editions available on the Arkhaven Store over the next year.

CHUCK DIXON’S CONAN #2: CARAVAN OF THE DAMNED

But while we probably deserve some credit for anticipating the negative consequences of KU and taking steps to avoid them, it’s your support of Library, History, and our various crowdfunding projects, and your willingness to buy books directly from us, that is the main reason Castalia is healthy while publishers who relied upon bookstores, comic stores, and Amazon to keep them afloat are rapidly circling the dustbin of history.

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Immigration of Color = Bankruptcy

It’s interesting to see a post from six years ago turned into a meme. But it’s even more interesting to see how no one who purports to be an economist ever bothers to apply the financial reality to their empty theories about immigration being “good for the economy” and the need for more skilled workers somehow justifying mass immigration.

The United States, South Africa, and Zimbabwe all provide copious historical information on the economic results of changing the demographics of the population. And the per capita lifetime budgetary impact makes it clear that even a relatively small demographic shift on the order of 10 percent can have a massive and lasting impact on the wealth of nations.

For example, the annual cost to White Americans to subsidize the population of Black Americans is $420.7 billion dollars and rising. As the white population falls as a percentage of the population, so does the ability of the various levels of government to continue providing that level of subsidy. And this doesn’t even begin to take into account the additional effect of declining average IQ levels.

The dirt is not magic.

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Encoloring the Corpocracy

If you thought nothing worked before, just wait and see what happens as the converged corpocracy reduces the average intelligence of its workers by encoloring itself:

The US Equal Employment Opportunity Commission requires companies with 100 or more employees to report their workforce demographics every year. Bloomberg obtained 2020 and 2021 data for 88 S&P 100 companies and calculated overall US job growth at those firms.

In total, they increased their US workforces by 323,094 people in 2021, the first year after the Black Lives Matter protests — and the most recent year for which this data exists.

The overall job growth included 20,524 White workers. The other 302,570 jobs — or 94% of the headcount increase — went to people of color.

The best part is that each and every one of those new hires is a hugely expensive discrimination lawsuit that is just waiting to happen. Which is why there will be no accountability whatsoever for these 300k new workers, and very likely no performance either.

This is a fantastic opportunity for ambitious white people, because there will be no end to the need for outside contractors to do the jobs that the corporate employees won’t, or in most cases, can’t, do.

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Green is Innumeracy

There is absolutely no way for any country, least of all one that is industrially developed, to come anywhere close to meeting the various ecological goals set for them by their various Green parties.

Germany’s flagship airline Lufthansa has warned that it would need to consume half of the country’s entire electricity output if it were to shift to green fuels such as e-kerosene, Bloomberg reported on Monday.

Lufthansa CEO Carsten Spohr reportedly stated that synthetic fuels manufactured using renewable energy represented the best approach to decarbonize aviation. However, it is unlikely that there is sufficient green electricity in Germany to generate them, the executive warned.

“We would need around half of Germany’s electricity to create enough of the fuels,” Spohr was quoted as saying at an aviation conference in Hamburg. “I don’t think Mr. Habeck is going to give me that,” he added, referring to Economy and Energy Minister Robert Habeck.

Normally, I’d say one doesn’t have to be innumerate to be Green, but it helps. Except the fact is that one literally has to be totally incapable of understanding math, numbers, and basic addition to genuinely support Green Party policies.

And if you want to get a lot of cars off the roads, it’s very simple and easily accomplished in less than one year. Just ban auto loans. 89 percent of new cars and 55 percent of used cars are purchased with debt.

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The Artillery Dilemma

It’s obvious to any rational observer that NATO is losing the war in Ukraine, and is losing it badly. And by badly, I mean in terms that exceed Arabs vs IDF and are beginning to approach British regulars vs Zulus. But it was always perfectly clear to everyone who understood the nature of modern land war that the US military never had any chance whatsoever of winning either a direct or a proxy war against the Russians in Ukraine.

Just as the coming naval war with China will depend almost entirely upon shipbuilding capacity to replace the ships on both sides that are inevitably sunk, the war in Ukraine depends upon the production of artillery shells. Consider the following four points.

  1. Artillery is the king of the battlefield again, accounting for 85 percent of the casualties in Ukraine.
  2. One 155mm round made in the USA by USA contractors costs 5,500 dollars, while a 152mm round made in Russia costs 600 dollars.
  3. One 152mm made in North Korea probably costs less than 60 dollars. The Russians just bought 10 million of them, and due to their oil production, can afford to buy as many shells as the North Koreans can make.
  4. Outsourcing ammunition production to China is not exactly an option these days.

Quod erat demonstrandum. Apparently this new shell-supply arrangement is very upsetting to the South Koreans. Or rather, to their puppet masters in the US who are speaking through them. Only the USA is permitted to have allies, right?

SEOUL, Sept 19 (Reuters) – South Korea summoned Russia’s ambassador to warn Moscow against any military cooperation with North Korea on Tuesday after last week’s summit between North Korean leader Kim Jong Un and President Vladimir Putin raised concerns about a possible arms deal. First Vice Foreign Minister Chang Ho-jin summoned Russia’s ambassador in Seoul to urge “Russia to immediately halt any moves to expand military cooperation with North Korea and to abide by (UN) Security Council Resolutions,” South Korea’s foreign ministry said in a statement.

No doubt the Russians will be duly chastened and refrain from further military cooperation with the North Koreans. In the meantime, and in not-unrelated news, Poland is out of the Ukrainian arms business.

“Poland will no longer arm Ukraine to focus on its own defense,” Polish prime minister Mateusz Morawiecki announced just hours after Warsaw summoned Ukraine’s ambassador related to a fresh war of words and spat over blocked grain, according to the AFP. Warsaw has throughout more than a year-and-a-half of the Ukraine-Russia war been Kiev’s staunchest and most outspoken supporter.

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An Astute and Early Observation

A business analyst predicted the Great Bifurcation on the basis of nationalism back in 2018, not due to any geostrategic acumen or historical pattern analysis, but his observation of international business activity and the transition to a younger generation of leaders:

Most great business leaders are successful because they are able to create, nurture, and support a unique and believable company value system that sets the tone for their strategy and execution. But according to the leaders I spoke with, something has changed; “Country-based value systems” are becoming increasingly important and the foundational roots of “nationalism” are starting to become more apparent in the business. By way of example, twice this week I was running different Leadership Simulations for high potential leaders. In the simulation, small teams are responsible for setting and executing a global strategy across multiple regions (which are made up of countries). I saw something in both sessions that I’ve never seen before; intense and sometimes uncomfortable conversations about how countries are losing their identities and therefore customer segments are also losing their identities which makes it harder to differentiate solutions to customers. I was surprised to see the concept of Nationalism show up in conversations about business acumen.

My take-away observation is that this is an issue that business leaders should put on their radars as my sense is that different value systems by country and market are going to be disruptive forces.

Generational Disparities are Real

The next generation of leaders are knocking on the door and their perspectives are different which is truly bothering the current leaders, but apparently not the stock markets. The next generation of leader wants their companies to do something important and meaningful and are very adept at building strong cultures quickly around values. Legacy companies that don’t make “new and cool stuff” are losing key talent and the war on talent is actually showing up in a way that is much different than anyway ever expected.

My take-away observation is that the big disruptions aren’t going to come directly from new technologies, but from new types of employees that want more value in in their business lives and if they don’t get it, will close once-thriving businesses.

Laws and Regulations are Going to Matter More

Political nationalism and in some cases political isolationism has direct impacts on business specifically when it comes to new laws and regulations. We can only all pray that physical wars don’t erupt between nations because of increased global fractionalization but one big challenge is going to be wars fought through regulations on business. It’s not a matter of if, but when.

This is fascinating, because it has long been my belief that the future can be seen, indeed, must be seen, from varying perspectives due to the fact that every change from present to future will be eventually be observed by a wide variety of individuals specializing in a wide variety of subjects. Just as a military historian can correctly anticipate that a NATO-supported Ukraine will lose a war with Russia, or that the Japan-USA historical analogy applies to a future USA-China naval war, an astute business consultant can perceive a shift in the qualitative nature of the coming executive class in the international business community and extrapolate successfully from that change.

If one is extrapolating successfully – and only time can confirm that – then the predictions in one area will necessarily line up with the predictions from another area. Think of it as transdomain futurology.

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China Governs Its Own People

A civnat and imperial subject expresses his horror of a nation daring to govern its own nationals:

Beijing is obsessed with suppressing dissent among ethnic Chinese living in democracies and has no hesitation intimidating human-rights activists and dissidents in the West.

Beijing calls it, euphemistically, ‘persuade to return’ and thinks it legitimate because democracies will, by and large, not extradite people to dictatorships like China. Indeed, the European Court of Human Rights has effectively banned its member states (which include Britain) from extraditing to China anyone under their jurisdiction. Hence the ‘persuasion’.

China thinks it has a right to enforce this because, under Chinese law, its citizens are subject to Communist Party law wherever they live. And China’s National Intelligence Law requires its people and companies to assist Beijing’s spies whenever requested — and to keep that assistance secret.

The irony of paper citizens arguing that borders don’t exist and the economy is global, but that the Chinese people don’t have the right to govern Chinese people around the world, requires a degree of intellectual incoherence that is both impressive and historically ignorant.

Meanwhile, they have no problem with private corporations attempting to control the behavior of people of every nation, everywhere around the world.

Again, the incoherence is astounding. Especially when it wasn’t until November 1991 that the USA defined economic growth in terms of state-based Gross Domestic Product rather than the historical nation-based Gross National Product.

Finally, it’s more than a bit ironic that the article warns about China infiltrating and making use of the Five Eyes surveillance system used by Britain, Australia, New Zealand, Canada and the United States to spy on each other’s citizens.

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The Two Faces of Economics

Michael Hudson explains the difference between Western neoliberal economics based on prices and debt, and historical economics based on actual production of goods and services.

Economics is not really a science as it’s taught. It’s a lobbying effort by the finance, insurance, and the real estate sector: the FIRE sector. It’s a lobbying effort by the parts of the economy that don’t produce goods and services, that only collect income without playing any productive role at all. Empty prices – that is price without any underlying value. And that is being promoted as economic growth.

And basically, it’s as if economics is like a criminal case in court where you have two opposing attorneys.The 19th century attorneys were prosecutors for the landlord class. They said, “Why should we have to pay the heirs of the warlords who conquered England and France to collect ground rents without producing anything? What possible function do they play? Why should we have to pay banks money for creating interest for creating credit that actually the governments can simply create their own money, or at least create credit for a productive purpose? And why do we permit monopolies, most of which were created by the government to sell off to creditors because it couldn’t afford to pay them their debt, why do we have to do anything of that? We don’t need it. Let’s get rid of the rentier sector.”The rentier sector being landlords, and bankers and monopolists.

Well, by the end of the 19th century, the rentiers fought back. And they developed what a defense attorney would do in a trial. They said, “There’s a whole different reality. There is no such thing as unearned income. There is no such thing as economic rent. Everybody deserves what they have. The landlord produces a valuable service in renting out the land and the housing and deciding who to rent to. And the bankers make a wonderful service when they charge interest. And especially when they charge a penalty fee because that helps make people pay their debts on time and that’s essential for productivity. So of course, we charge penalty fees as part of the gross domestic product. And monopolies are also part of the GDP, because after all, the monopolist is simply creating an orderly market.”

So, the problem is that instead of economic students getting both sides of the prosecution and the defense of the rentier economy, they’re only getting one side of the picture. They’re getting the defense of the rentiers, not the classical economics. And that’s why in graduate economic courses they no longer teach the history of economic thought. They no longer teach economic history. Because if you had the history of economic thought, you’d know that contrary to what Margaret Thatcher said, there is an alternative, that things don’t have to be this way.

There is a reason why China is growing so rapidly, and the American economy is being squeezed tighter and tighter. And that’s because its basically using its revenue to create new means of production and create a broader environment.

It’s true that it provides education freely, instead of charging $50,000 a year, which is what people have to pay in New York. But if you would say what if we credit China with every person with a degree of having paid $50,000 a year, obviously, that would be much bigger.

It’s true that the Chinese people do not have to pay $4,500 a month rent, which is the average rent here in New York City. Does that really make them poor? Or does paying the $4,500 a month rent that increases America’s GDP, actually turn out to be an economic burden?

This is why the Great Bifurcation between The Empire That Never Ended and the growing BRICS movement was both inevitable and unavoidable. The masters of the shell game can only keep winning as long as the suckers keep playing. But Russia has been kicked out of the game, China refuses to play the game except on its own terms, and their resultant success is encouraging dozens of other nations to stop playing the game.

Call it what you will, but Samuelsonian or Neo-Keynesian economics have always been nonsensical; so too is Friedmanite monetarism, because it is impossible to meaningfully quantify anything in a metric that is so readily expanded at will. One can only base social policies on “economic growth” so long before the reliance upon a myth results in insane and deleterious consequences.

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The Media Extinction Event

Clay Travis explains why ESPN is sinking fast, why the free ride that sports fans enjoyed at the expense of everyone else with a cable subscription has come to an end, and the inevitable implications for everyone in the media business

ESPN knows that their cable and satellite business is collapsing but, and this is key, they’ve also done the math and realize that streaming is going to destroy their existing cable business. Because, and this is what no one seems willing to say, ESPN doesn’t just have one bad business now — the cable and satellite bundle — they have the streaming business too, which is an even worse business. And, and this is very key, each business is accelerating the demise of the other. Streaming isn’t making ESPN stronger, it’s making ESPN weaker because it’s hastening the destruction of a profitable business — cable and satellite — for a money-losing business — streaming.

And that’s what many are still missing — as the cable and satellite bundle boat takes on water and sinks, the streaming bundle is also taking on water and sinking too. ESPN has tried to sell people on the idea that at the exact moment that the cable and satellite bundle collapses they are going to step to a brand new business, the streaming business, and it’s going to be a sturdy and successful lifeboat that carries them to richer waters.

But the reality is, streaming is a way worse business than the cable and satellite bundle. Because the only people who pay for ESPN will be sports fans. The free ride is over, your Aunt Gladys is never signing up and subsidizing your sports viewing again.

Let’s say ESPN makes $8 billion a year now in subscription fees. ($10 a month x 70 million subscribers they has before Charter cut this by 15 million). Toss in another two billion in advertising and let’s say ESPN presently nets around $10 billion a year. Okay, how many people will sign up for ESPN as a direct to consumer streaming service? If they could get 70 million subscribers we’d all have to pay $120 a year for ESPN streaming by itself. (This assumes advertising will still be the same, which it won’t, but let’s just be generous and pretend it will.) But, as I noted above, many of these people paying for ESPN now as part of their cable and satellite package never watch ESPN.

So how many people will actually subscribe to a direct to consumer ESPN streaming service? Turns out there are some early test cases.

The NFL Sunday Ticket is the most desirable direct to consumer product on the planet. Do you know how many households subscribe for NFL Sunday Ticket? Around three million.

Uh oh.

Wait a minute, you’re telling me that the NFL can only get around three million households to sign up for actual NFL games, all of the out of market games, in the entire country?

We’ve got a major math problem here for ESPN.

In other words, even if we’re generous and we assume all the other sports combined generate as much television interest as the NFL, we’re looking at a decline from 100 million at peak to six million. That’s a decline of 94 percent in households. In monetary terms, if we use a single-season, single-team MLB subscription as a stand-in for all other sports, that’s an 88 percent decline in revenue from $10 billion to $1.23 billion… with $45 billion in rights fees owed through 2027.

No wonder the Saudis are licking their lips and looking to buy up more sports leagues instead of teams. It also explains why Bob Iger is desperately casting around for anyone who wants to buy pieces of the collapsing Devil Mouse empire. But it’s not just Disney that is facing the precipice.

TNT, Turner, AMC, Nickelodeon, you name the channel, all of them are basically being held together by the cable bundle. And ESPN is the most important channel in the cable and satellite bundle, it’s the linchpin, the anchor store. ESPN is your neighborhood shopping mall’s anchor tenant — the Macy’s, the Nordstrom, the Dillard’s the JC Penny. When a mall’s anchor tenant leaves the mall is often dead for, the rest of the shopping mall collapses around it. That’s why the best analogy for ESPN isn’t Blockbuster, it’s Sears, a big mall anchor tenant that collapsed and went bankrupt.

Okay, if you’ve read to this point, you might be thinking, “This feels like it’s going to be really bad, Clay.”

Uh, yeah, it is, that’s why I called it a media extinction level event.

And yet, the alternative media will survive this unscathed, because we’re already accustomed to being entirely dependent upon our direct supporters. No free riders, no advertisers. And so, as it happens, the great media extinction may be the best possible thing for the future growth of Arkhaven and UATV.

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Holding the Strong Hand

European leaders shouldn’t have been surprised that Putin wasn’t concerned about Western sanctions, because it’s not like he didn’t know they were coming in response to his actions. The problem with always relying upon the same tactics is that the other side anticipates and prepares for them:

German Chancellor Olaf Scholz was surprised by Russian President Vladimir Putin’s complete lack of concern about Western sanctions shortly after the outbreak of conflict with Ukraine, Bild has reported.

In an article on Monday, the German tabloid cited a conversation between Scholz and French President Emmanuel Macron, which was revealed by journalist Stephan Lamby in his new book ‘Emergency: Governing in Times of War’.

The exchange, in which the two leaders discussed their phone calls with Putin, is said to have taken place on March 4, 2022 – just over a week after Moscow sent its forces into Ukraine.

It’s “not getting any better,” Scholz reportedly told Macron during that conversation. “Something bothers me more than the talks: [Putin] doesn’t complain about the sanctions at all. I don’t know if he did that in conversation with you, but he didn’t even mention the sanctions,” he remarked.

The French leader replied that Putin hadn’t addressed the issue of Western restrictions during phone calls with him either. After listening to Scholz, Macron replied: “Thank you, that was very similar to the conversation I had with [Putin] yesterday. I think he is now quite determined to go to the end.”

Who would have thought that enforced autarky could benefit an economy? Perhaps Putin has some economists who have explained that free trade is deleterious, rather than beneficial, to most national economies in most historical situations. This should be obvious, considering that the financial vampires literally depend upon capital movements in order to parasitize the real economies and divert coporate profits into their own coffers, but 200 years of unrestrained economic propaganda has been so effective that national leaders are actually basing their geopolitical strategy on inverted and incorrect assumptions.

I do find it mildly amusing that neither Scholz nor Macron grasped the obvious consequence of Putin’s lack of interest in discussing the sanctions that were supposed to be their devastating economic weapon. While Scholz appears to have had an inkling of why the Russian President was so unconcerned, apparently it wasn’t strong enough to look seriously into the matter or to revisit his assumptions.

We know the leaders of the Western puppet governments are retarded and totally incapable of successfully anticipating events or the obvious consequences of their actions. Putin knows they’re retarded. Xi, who is the smartest of all the world leaders according to Lew Kwan Yew, obviously knows they’re retarded.

But no one ever suspected they were this retarded.

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