I recently became embroiled in an unexpectedly hostile discussion on Mad Genius Club over the brokenness of Kindle Unlimited. In retrospect, though, there was nothing surprising about it.

The OP had asserted that Amazon is “still the only real game in town,” which I attempted to refute. It ended with the fine folks at Mad Genius Club putting words in my mouth, threatening to ban me for my “tone,” and calling me a “pompous blowhard” and a “prancing, self-aggrandizing, self-congratulating spunkmuffin.” Which would have been amusing except that… okay, it was pretty amusing. But it was also a bit infuriating to watch so many people deliberately take offense simply because I disagreed with them.

(The irony was especially thick as they viciously attacked me, then turned around and emphatically denied that KU pits authors against authors, all while demanding me to prove to them that it does—often in the same breath.

And for the record, I do not think that there’s anything “dickish” about asking the other side to back up their argument with sources. This is especially true for things that “everybody just knows,” and doubly so when forming a negative argument, such as “no one bothers with outside Amazon.”)

In all fairness, however, there were a few arguments I made that I could have done a better job supporting. And since this is my blog, where no one holds the ban-hammer but me, it seems appropriate to make them here.

First, though, I want to make it clear to any KU readers that I’m not trying make you feel guilty for subscribing to KU. If you are a KU subscriber and you enjoy the program, great! I have nothing at all against that. Whether or not the system is broken, we’ll still find ways to get paid. Have fun, and as always, thanks for reading.

Also, I want to point out that even though I believe KU is broken, I would still love to enroll my books. The problem, as I’ve pointed out before, is that Amazon demands exclusivity for the privilege. Not only am I wary of putting all of my eggs in a basket (especially a broken one), I also think that that’s a bad deal for my readers on iBooks, Kobo, Nook, etc, or who live outside of the territories where Amazon operates. Their numbers are not insignificant.

So why is Kindle Unlimited a broken system? In a word, incentives.

In a healthy system, writers write the books that readers want to read, readers support the writers by voting with their dollar, and the middlemen (publishers, distributors, booksellers, etc) provide value to both readers and writers commensurate with the cut that they take.

A healthy system is not closed. If readers collectively decide to read twice as many books, writers collectively earn twice as much. If another writer’s books do twice as well, it does not take away from the money I earn from my books.

Contrast that with the closed system that is KDP Select. We have only a ballpark estimate for the size of the KU subscriber base. Amazon keeps that (and most other KU-related data) close to the chest. We have no idea if the pay is commensurate with the subscriber base.

Instead, writers are paid out of a fixed pot, the KDP Select Global Fund. If readers collectively read twice as many KU books, it doesn’t increase the size of the pot. The pot only increases if Amazon decides to increase it, which again may or may not be commensurate with the increase in books read, or subscribers enrolled. We have no way of knowing.

Worse, because pay is based on a share of the pot, if someone else’s books receive twice as many borrows, everyone else’s earnings go down—even if their readership remains unchanged.

This is why so many writers are up in arms about the latest KU scandal, covered in depth by Phoenix Sullivan and Ann Christy. To summarize, the current iteration of Kindle Unlimited (KU 2.0) pays authors based on number of pages read, and scammers are gaming the system with text synthesizers and click farms. It’s not impossible to make $500,000 a month with this scam, all of which is taken out of the share of legitimate writers.

Is Amazon working to fix the problem? Until last week, it wasn’t clear that they were—and it’s still an open question if they can. It’s a perpetual game of whack-a-mole where the moles keep getting smarter, increasing the odds that legitimate writers will get whacked.

When you look at the way the incentives are structured, however, there’s nothing surprising about this unmitigated mess. Amazon has divorced the readers from the writers in such a way that pricing signals no longer work. Worse, the fixed pot pits authors against authors in a zero-sum race to the bottom. You do not earn more by simply getting more readers—you earn it by getting more reads than other authors. In the meantime, Amazon keeps lowering the KENPC payment rate, and authors keep bending over.

Is there still value in an ebook subscription service? Readers certainly seem to think so. If there’s value for readers, it shouldn’t be too difficult to also find value for writers.

But when you look back on the history of KU, you realize that it’s not really about providing value for readers or writers, but undercutting Amazon’s competition. KU launched right around the same time as two other subscription ebook services: Oyster and Scribd. These subscription services did provide value to writers, as they paid full price for every completed read.

Amazon responded by launching KU 1.0, which paid writers significantly less. However, since Amazon had most of the ebook market share (at least in the US), and since non-KU books receive much less visibility on the Kindle Store than KU-enrolled books, authors were aggressively pressured to sign up. Amazon’s exclusivity requirements kept its competitors from receiving content, and as a result, they have since either folded (Oyster) or failed to gain much traction (Scribd).

It ultimately comes down to the contrast between makers and takers. KDP Select is a closed system, where the size of the pie is fixed and the best you can expect is to get a larger slice than the person next to you. This turns everyone into a taker: someone who feels threatened by other people’s success and jealously guards their own.

Is it any wonder then that KU authors, when presented with someone critical of the KDP Select program, resort to rhetorical tactics like gaslighting, lampost-moving, name-calling, and conflating disagreement for personal attacks? Sadly, no. These are all classic hallmarks of a taker, which the system has forced them to become. In this way, Kinde Unlimited pits authors against authors.

It’s a broken system, but of course, different people experience the brokenness in different ways. When I was living in Georgia, I met several older people who believed that things were better under Communism. Without a doubt, the Soviet system was broken, but these people did better under it than they did after it fell. In the same way, there are a lot of authors doing very well under KU 2.0 who would love to keep things exactly the way it is.

Several of them employ text synthesizers and click-farms.

And when KU 3.0 comes out, as it inevitably will, it will sort out a new batch of winners and losers just like KU 2.0 did before. Because of Amazon’s exclusivity requirements, many writers will lose just about everything, having developed no other income streams.

But not the scammers. They’ll just find a new way to game the system, based on the way KU 3.0 misplaces the incentives. Amazon will continue to aggressively insert itself between readers and writers, breaking the incentives structure in new and interesting ways.

And the cycle will begin again.