Is Amazon’s new 70% royalty rate the best deal for authors? Maybe not

Either-Or3-198x300.jpgRichard Curtis, a literary agent, has a blog article at e-reads in which he points out that there are some “gotchas” in the scheme.

At first glance the new 70% royalty would appear to be a no-brainer for publishers and authors, 70% being more than 50%, right? Well… not so fast.

For one thing, you are prohibited from charging more than $9.99 for your e-book. Commitment to Kindle’s DTP price structure will preclude content providers – such as the five major publishers that signed agreements with Apple – from selling their e-books on the iPad at Apple’s suggested retail prices of $12.99 to $14.99.

For another thing, the 70% royalty is calculated not on the publisher’s list price but on the actual price charged by Amazon. If your book’s list price is $9.99 and Amazon charges customers $9.99, then yes, you’ll make out well with a royalty of $6.99. However, if Amazon offers your book at $4.99 your 70% royalty will be $3.49. And the deeper that Amazon discounts the book’s price the lower your royalty goes.

There is more in the article that any prospective author should read before making a decision. Thanks to Marilynn Byerly for pointing this out.

7 Comments on Is Amazon’s new 70% royalty rate the best deal for authors? Maybe not

  1. Hmmm… “However, if Amazon offers your book at $4.99 your 70% royalty will be $3.49. And the deeper that Amazon discounts the book’s price the lower your royalty goes.”

    So, if you go with 70%, your royalties at $4.99 are the same as if you go with 35% selling at $9.99. Given the numbers we’ve seen from indie publishers showing how price-sensitive readers can be, I’d be far more confident in making more money (and selling more copies!) at the lower price point.

    The whole article seems to revolve around the assumption that volume will stay fixed as price changes. We all know how false THAT assumption is.

  2. “Commitment to Kindle’s DTP price structure will preclude content providers – such as the five major publishers that signed agreements with Apple – from selling their e-books on the iPad at Apple’s suggested retail prices of $12.99 to $14.99.”

    HUH?

    Amazon’s contract says you cannot sell the eBook for LESS on another website. There is nothing stopping you from selling it for MORE elsewhere.

    Apple I think could care less what the price for the eBook is I think the dead tree publishers are more concerned about trying to sell an eBook for $12.99 to $14.99

  3. Alexander Inglis // July 7, 2010 at 1:52 pm //

    This sounds like a very GOOD deal for authors and small publishers. Bravo, Amazon!

    It has a 70% royalty based on the selling price; an option for a 35% royality on the list price; the ability to switch from one mode to another on 48 hrs notice; a 15¢/MB delivery/transport fee (which eliminates the $2 Whispernet tax, yes?) that ensures the book lands directly on the device — unlike most other providers; the e-book must list for 20% or more less than the physical book; the title is sold in all markets the publisher has rights for; text-to-speech is enabled; the list price is $2.99 to $9.99.

    These details sound both author / small publisher friendly and consumer friendly. This sort of innovative thinking will drive more sales, not less, and grow the entire market.

  4. Keep in mind the actual financial and social dynamics of this contract.

    Amazon’s routine discounts on print books cost an author nothing. I know. I have about 30 books there. The author still gets the same royalties because they are based on the list price. They may be small, say 10% (20-25% in my case), but they don’t change. In that situation, an author always wins when Amazon discounts.

    Under this new contract, however, Amazon’s choice of discounts on ebooks imposes the burden disproportionately on the author. When a $9.95 book is sold for $4.95, the author gets $3.50 less, while Amazon gets only $1.50 less. And that’s before the download fees are included, on which Amazon is probably also making a profit. The greater the discount, the great those fees bite into an author’s income.

    The social dynamics are even worse. Again, assume a $9.95 list book discounted to $4.95, what sort of message is being communicated to customers?

    For authors, the message is that this writer ‘ain’t that good.’ Why else would the price be cut so much? Think of the bargain section at a Barnes & Noble bookstore. It’s where losers and their failed books go to die. Same dynamic here. When Amazon discounts, you look bad, so bad you may not get many more sales from the discount.

    For Amazon, the message is exactly the opposite. Despite the fact that the author is paying for more than twice as much of this discount as Amazon, the message customers pick up is that “Amazon cares. Look at the great discount we’re offering our customers. We love you much. Huggie, huggie.”

    This did not have to be. Amazon’s contract could have split the cost of discounts they choose to make 50-50. Reducing the selling price of a book from $9.95 to $4.95 could have mean $2.50 less for both Amazon and the author. Computers can easily calculate that sort of thing. Amazon isn’t doing that. It’s being ‘generous’ at an author’s expense, but hoping customers will bestow their gratitude on it.

    I am not impressed….

  5. Alexander Inglis // July 7, 2010 at 8:06 pm //

    @Michael:

    You can always opt for the fixed 35% on list price; or try the 70% on selling price and, if not happy, switch back to the 35% model on 48 hrs notice.

    I can’t agree in the least about your view that a “discounted” book = “loser author”. Virtually all fiction bestseller hardcovers are discounted 30% or more when launched. Some big name authors offer a backlist title at low price shortly before a new title comes out in order to prime the market.

    More books by an author are going to be sold at $4.99 than $14.99 because the consumer has a choice of many other authors and will, over the longer term, favour the lower prices. This is especially true when trying out a new author: it lowers the risk.

    Are you really making more royalties on your 99¢ Smashwords book (also at Barnes & Noble for 99¢) than you could do with the variable 70% royalty opt-in program Amazon is offering for Kindle titles? You edited a book, “Across Asia on a Bicycle” and published a hard cover at $19, paperback at $24 and a Kindle editon at $4.95 — all for sale at Amazon today. Given the priting and shipping costs to you for the hardcover and paperback, which is actually more profitable for you?

    It is entirely within the perogative of the author and publisher to charge as much as they want for their product; it’s the same freedom the consumer has — and the consumer is the only one who ultimately matters if the sale is to be completed. Consumers will pay for good value and what they perceive to be a fair price. But they are not anxious to pay more for less. Human nature being what it is, a lower price for a discretionary item of equal value will sell in more volume.

    Amazon’s optional scheme may not be for you: but it does sound more consumer friendly than what we are seeing from the April iPad coup forcing bestseller prices up as much as 50%.

  6. Teddypig,

    My understanding is the following (and if it’s wrong, someone will correct it).

    The catch is that for those who are on a contract with Apple’s store, the deal has been that anything they sell at Apple cannot be priced lower at any other online store than it is at Apple. “Apple’s suggested retail prices of $12.99 to $14.99” would preclude use of Amazon DTP’s 70%-to-author/publisher stipulation of $9.99 price, tops.

  7. DensityDuck // July 8, 2010 at 9:17 am //

    Andrys: Does Apple require that you price things at $12.99, though?

    Although you’re right that this whole thing is basically a direct shot at Apple–i.e. “if you want to sell via Amazon DTP then you can’t sell for more than $9.99 anywhere in the world in any format“. Not that stuff like this isn’t commonly in contracts, but it’s kind of surprising to see it written in such blunt and plain language.

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