Who Needs Publishers? Amazon’s 70 Percent Royalties For Kindle Books

Amazon’s Digital Text Platform (DTP) program allows you to compete on a level playing field in the ebook space, even if you have never spoken to a traditional publisher about your title. If you have a business book, a recipe collection, a memoir, a romance about vampires and wolverines, Amazon says, simply upload your title and get it out there.

(Don’t know how? Read my guide to creating Kindle-ready files. Not sure what all the fuss is about? Read my guide to the Kindle. Not sure if you want a Nook or a Kindle? Read a comparison here.)

New Pricing

Recently Amazon announced that content providers (publishers, authors, who ever holds the rights to a title) can opt in to their new pricing scheme that returns 70% of the purchase price to the content provider.

This is way better than the 50% which has been standard fare for ebooks until now.

Of course, this being the book business, all is not as simple as that. There are a few wrinkles:

  1. Your book must not be priced over $9.99.
  2. That 70% is off the price the book actually sells for. Amazon could discount it and your 70% would be of that discounted price.
  3. You, the content provider, pay $0.15 per megabyte as a delivery charge (which saves Amazon or the reader from footing the bill).

Now, before you allow publishing industry professionals to get your peeny in a panic [1. That’s Scottish for “get upset” – your ‘peeny’ being your pinafore. I opted for this rather than the more risque ‘knickers in a twist’. What do you think?] let’s stop and think about what this means from the perspective of the reader and the independent content provider (AKA self, or small-publisher).

The $9.99 Price Point

I have a Kindle, and let me tell you, it rankles when publishers price ebooks at or above the price they charge for a large-format, beautifully typeset trade paperback book.

The Kindle early-adopters let Amazon know, loud and clear, that they were not  happy when publishers started insisting Amazon price the books above $10. In fact, there was an impromptu boycott a few months back.

Amazon listened.

[2. I have a problem paying $16 for a paperback book, too, but at least I can see that there are hard costs, distribution costs and bookstore employees to pay, not to mention the author, editor, marketing department and cover designer. With an ebook I know that the editor and author and even the marketing department are still in there, but I also know that you can train a chimp (or at least a bunch of recent graduates) to clean up a text and export it into a file suitable for ereaders such as the Kindle. I know. I myself was that chimp eleven years ago when software was even more primitive, but systems were still systems and the only pre-requisite for the task was an ability to use a mouse, and your brain. Having full vision helped, but honestly I think even my sight-challenged friends could handle the task. It’s that straightforward.]

Traditional publishers were appalled. Some of them took their balls and ran away home, or over the fence to where Apple, playing with its shiny new iBooks store and promised to yes, price books at $14.99 if that was what the publishers wanted. Who cares what iPad readers wanted? If they want the books badly enough, they’ll pay, said Mr Jobs and the publishers from their plinth on high.

Amazon, however, responded to YOUR READERS’ CONCERNS by keeping the price of the books low. knowing full-well that few people want any particular title badly enough that they are willing to pay more than they consider ‘normal’ for it.

If you think you need to charge more than $10 for your book, then consider Amazon a place where you offer a deeply-discounted preview and go sell the higher priced version somewhere else. It’s not an exclusive program. (You can check out the terms and conditions here).

70% Of What?

Book people are rarely numbers-people, I think we can all agree on that [3. unless we’re talking about those freaky business-book people or the math-text book people in Texas. I’m talking regular book people]. Nobody goes into the book publishing, editing, agenting or selling business because they love accounts and the concept of percentages.

But even at that it is amazing how convoluted they manage to make the numbers in the publishing and bookselling industry.

Traditionally, publishers offer authors something like “10%”. That sounds pretty poor compensation for someone who put all the actual creative work into a book, but then you realise that what the author is actually offered is 10% of the net proceeds (that’s the money that publishers get after everything is paid — all the promotion and costs to produce the book — and all the discounts applied. With big-box retailers demanding 55% discounts, that 10% royalty comes out to pennies a copy. [4. In reality, most authors these days never get any royalties. They get an advance on projected earnings and then, if they’re lucky, they’re allowed to churn out another book.]

Amazon is offering  70% of the net proceeds

Yes, they may offer your title at a discount and yes you may make less on each copy. Are these numbers you can live with?

100% of list price: 70% of $9.99 = $6.99

25% discount: 70% of  $7.49 =  $5.24

50% discount: 70% of $5 = $3.50

That $0.15/MB Delivery Charge

This is new.

One of the things that confounds non-Kindle readers, when I whip out my Kindle and attempt to convert them, is the idea of how the books get to me. Do I have to attach it to my computer? (No, it’s wireless). Do I have to sign up for a wireless plan (No, Amazon covers the cost of their Whispernet wireless transfers for me)

Well, now the content providers are going to shoulder some of that cost.

If you chose the 70% plan, you will also pay $0.15/MB out of your profit every time someone downloads your book.

For the numerically challenged, Amazon uses this example:

If your book has a file size of 0.400 megabytes and a List Price of $8.99, the Delivery Cost will be $0.06 (0.400 MB x $0.15 = $0.06), and your Royalty will be $6.25 (($8.99 – $0.06) x 70% = $6.25).

Richard Curtis at eReads says they had a look at their books and had:

determined that a typical book is about 2 megabytes: a large one might be 3 MB.

Something to consider.

The Original Amazon Plan, Still An Option

You can still opt for Amazon’s 35% of list price program too, if you can stomach that 35% number.

In this program you get 35% of the list price, no matter whether or not Amazon offers your book at a discount. It’s a lower percentage, but it never varies.

Depending on your circumstances, that might work for you. [5. if you are publishing public domain works you MUST use this program, according to Amazon’s terms.]

Not The End of The World. The Start Of Something New.

Most people who get worked up about this stuff in media old and new, are people in the publishing business – either publishers, authors or booksellers.

You rarely hear regular readers getting their proverbial peenies all knotted up over distribution deals and rights issues.

Readers simply want to spend a few hours reading a good book, and still be able to afford another book when they’re finished.

To me, as a reader, and a content provider and someone who has been invited into publishing’s gated community for a few cocktail parties but no more, I think Amazon has done a good thing here and I’ll certainly be opting for the their 70% model.

How about you?