Calculations for Audible's New Royalty Model

This is additional information for a Change.org petition asking Audible to revise how their new royalty model calculates revenue share when a Premium Plus member purchases a book for a credit and also listens to one or more title in the all-you-can-listen library. On this page, we'll show the math that isn't listed on the petition (which is already a long read and fairly complicated).

To recap from the petition, we will use the following set of data:

• Member Value: $13 to buy a Premium title
• Member Value: $7 to consume a single Plus title
• Book A - Premium title. List price $30
• Book B - Plus title. List price: $35
• Book C - Plus title. List price: $20

Using this data and the calculations of Audible's proposed new royalty model, the petition has this table: 

Okay, let's show the math. In the proposed new royalty model, whenever there is more than one title involved, the Member Value is divided based on the list price of the books (and each is treated equally). So the price of the title is divided by the sum of the price of each title in the calculation, and then that number is multiplied by the Member Value of the given plan ($13 for premium, $7 for plus).

Titles	A	B	C
A & B	13 x 30/(30+35) = $6.00	13 x 35/(30+35) = $7.00
A & C	13 x 30/(30+20) = $7.80		13 x 20/(30+20) = $5.20
B & C		7 x 35/(35+20) = $4.45	7 x 20/(35+20) = $2.55
ALL	13 x 30/(30+35+20) = $4.59	13 x 35/(30+35+20) = $5.35	13 x 20/(30+35+20) = $5.06

In the proposed "tweaked" version, the Member Value for a Premium title remains undiluted, based on the following theories:

• If the listener only wanted all-you-can-listen material, they would be in the lower-priced Plus plan
  
  
• Using a credit to buy a specific title indicates they are willing to pay for that particular content.
  
  
• When they buy a title, their expectation is that their money is going to the author of that title.
  
  
• From the perspective of a Premium Member, the all-you-can-listen content is seen as "free bonus material used to provide some "added value," but they are in that plan level for the premium content and credit purchasing. 

So, if we don't dilute the Premium Credit, how do books in the all-you-can-listen get a royalty? Well, each all-you-can-listen title will be compensated by the Plus plan Memberships which will be divided into two parts.

• Titles listened to exclusively by Plus Members
• Titles listened to by Premium Plus Members

This division will vary from month to month, but Audible knows how many titles come from each pool. For the petition, we made a "reasonable assumption" which was  20% of the all-you-can-listen content was consumed by a Premium Members and 80% were listened to by Plus Members. In this example, Given that the Premium Member Values will be:

• All-you-can-listen books listened to by Plus Members  $7 X 80% = $5.60
• All-you-can-listen books listened Premium Plus Members: $7 X 20% = $1.40

Using the same data as above and these new values for titles in the Plus catalog, here is the chart from the petition for the "proposed tweak model."

Let's repeat the calculations:

Titles	A	B	C
A & B	$13.00	$7 X .20 = $1.40
A & C	$13.00		$7 x .20  = $1.40
B & C		$7 x .80 x 35/(35+20) = $3.56	$7 x .80 x 20/(35+20) = $2.04
ALL	$13.00	$7 x .20 x 35/(35+20) = $0.89	$7 x .20 x 20/(35+20) = $0.51

Keep in mind that the numbers above is not what the author is paid. Those calculations are merely the "Member Value" and from the petition we learned the following:

Author Payment = Member Value X royalty rate

So what are the royalty rates? It depends on how the author is published (self or traditional) and if self published, it depends on whether the title is exclusive to Audible or not. 

• Self - These authors utilize an Amazon platform called ACX. Under the new royalty model an author will receive a 50% (up from 40%) if the titles are exclusive, and 30% (up from 25%) if the title is distributed "widely" to sites such as Spotify, Chirp, Libby, LibroFM, and so on.
  
  
• Traditional - These authors don't have a "direct relationship" with Audible. Their publishers periodically negotiate deals with Audible (probably 3 - 5 years), and then the author receives a 25% share (standard for big-five publishers, smaller publishers may offer higher rates). Exactly what the cut is between the publisher and Audible isn't known. But 10 years ago it was typically 35%.  If we assume it went up to 40% over the years, and we apply the same increase that ACX was given for widely distributed titles (5%), then a good assumption would be about 45%.

Note: Typically, traditional publishers don't participate in all-you-can-consume models (for instance you don't find their titles in Kindle Unlimited for ebooks. So for traditionally published authors, their books will almost certainly be confined to column A. It should also be noted that most traditionally published authors (who take a 15% commission). I've not taken that into account so the values below should be multipled by .85 if an agent is involved.

 Self-published who"distributed narrowly," and on Audible's new royalty model

Titles	A	B	C
A	$13.00 x .5 = $6.50
B		$7.00 x .5 = $3.50
C			$7 x .5 = $3.50
A & B	$6.00 x .5 = $3.00	$7.00 x .5 = $3.50
A & C	$7.80 x .5 = $3.90		$5.20 x .5 = $2.60
B & C		$4.45 x .5 = $2.23	$2.55 x .5 = $1.27
ALL	$4.59 x .5 = $2.29	$5.35 x .5 = $2.68	$3.06 x .5 = $1.53

 Self-published who"distributed narrowly,"and on  Tweaked royalty model

Titles	A	B	C
A	$13 x .5 = $6.50
B		$5.60 x .5 = $2.80
C			$5.60 x .5 = $2.80
A & B	$13 x .5 = $6.50	$1.40 x .5 = $0.70
A & C	$13 x .5 = $6.50		$1.40 x .5 = $0.70
B & C		$3.56 x .5 = $1.78	$2.04 x .5 = $1.02
ALL	$13 x .5 = $6.50	$0.89 x .5 = $0.45	$0.51 x .5 = $0.26

Self-published author who are widely distributed: Audible's new royalty model

Titles	A	B	C
A	$13 x .3 = $3.90
B		$7 x .3 = $2.10
C			$7 x .3 = $2.10
A & B	$6.00 x .3 = $1.80	$7 x .3 = $2.10
A & C	$7.80 x .3 = $2.34		$5.20 x .3 = $1.56
B & C		$4.45 x .3 = $1.34	$2.55 x .3 = $0.76
ALL	$4.59 x .3 = $1.38	$5.35 x .3 = $1.60	$3.06 x .3 = $0.92

Self-published author who are widely distributed: Tweaked royalty model

Titles	A	B	C
A	$13 x .3 = $3.90
B		$5.60 x .3 = $1.68
C			$5.60 x .3 = $1.68
A & B	$13 x .3 = $3.90	$1.40 x .3 = $0.42
A & C	$13 x .3 = $3.90		$1.40 x .3 = $0.42
B & C		$3.56 x .3 = $1.07	$2.04 x .3 = $0.61
ALL	$13 x .3 = $3.90	$0.89 x .3 = $0.27	$0.51 x .5 = $0.15

Traditionally published author: Audible's new royalty model

Titles	A	B	C
A	$13 x .45 x .25 = $1.46
B		$7 x .45 x .25 = $0.79
C			$7 x .45 x .25 = $0.79
A&B	$6.00 x .45 x.25= $0.67	$7 x .45 x .25 = $0.79
A&C	$7.80 x.45 x .25=$0.88		$5.20 x .45  x .25 = $0.58
B&C		$4.45 x .45 x .25 = $2.23	$2.55 x .45 x .25 = $1.28
ALL	$4.59 x.45 x .25=$0.52	$5.35 x .45 x .25 = $0.60	$3.06 x .45 x .25 = $0.34

Traditionally published author:: Tweaked royalty model

Titles	A	B	C
A	$13 x .45 x.25 = $1.46
B		$5.60 x .45 x.25 = $0.63
C			$5.60 x .45 x.25 = $0.63
A & B	$13 x .45 x.25 = $1.46	$1.40 x .45 x.25 = $0.16
A & C	$13 x .45 x.25 = $1.46		$1.40 x .45 x.25 = $0.16
B & C		$3.56 x .45 x.25 = $0.40	$2.04 x .45 x.25 = $0.23
ALL	$13 x .45 x.25 = $1.46	$0.89 x .45 x.25 = $0.10	$0.51 x .45 x.25 = $0.06

If you have any questions or comments, or if you are involved in an author advocate's organization and you want to learn more, you can email me (Robin Sullivan) at robin.sullivan.dc@gmail.com.