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Amazon, Author Royalties, and Ebook Pricing

I recently came across an article that gives a peak at the underside of the ebook publishing world. This falls under the category of “See How Much We Were Ripping You Off”:

SEATTLE — Amazon.com Inc. said Wednesday it is now offering do-it-yourself authors and publishers royalties of about 70 percent on their e-books.

The online retailer in January had announced plans to offer users of its e-book self-publishing program, the Kindle Digital Text Platform, book sale royalties of 70 percent after delivery costs. Those costs generally amount to less than 6 cents per book, meaning authors will be able to earn $6.25 per copy on a book that sells for $8.99, nearly double the old rate of $3.15.

(Full article: http://www.huffingtonpost.com/2010/06/30/amazon-increases-author-r_n_630646.html

So now we have the figures in black and white. The cost of distributing an ebook on a 3G network is 6 cents, and Amazon has graciously decided to stop holding authors over the barrel…quite as much. In reality, the author should be getting 90 or 95% of the profits. Why? Because the risk to Amazon in carrying an ebook is non-existent. There is no risk to Amazon. However, an author takes considerable risk devoting time to writing the ebook that is sold, and so deserves the majority of the profits. In the old publishing world of big book print runs, a publisher took considerable risk in publishing a book, and so got a larger portion of the profits–but that doesn’t apply to Amazon and ebooks.

I think you will see the author share of profits rising higher than this 70% because the different distributors are going to race to offer the most attractive deal, and as I’ve said it is a risk-free deal for them. It may never reach 95% of profits for the author, but I will be interested to see how close it will come.

Another thing that article demonstrates is the pressure for ebook prices to come down. The article mentions that, “Some major book publishers have demanded that Amazon allow them to raise prices on e-editions to as much as $14.99” which is completely appalling. That kind of pricing structure is clearly invented by someone rabid with fear that the old publishing model will disappear. In contrast to that, Amazon offers authors this higher profit margin if authors will keep there ebooks priced between $2.99 and $9.99.

The war is on, but I don’t think even Amazon’s price bracket is right. I think ebook pricing should be $2.99 and lower.

The one thing clear from the article is that neither Amazon nor the traditional publishing houses really have the author’s interests foremost in their plans. It is all about domination in the book world, and authors are but pawns in the war. So long as the contestants are fairly evenly matched, the battle will, in general, be good for consumers and authors. A monopoly win by anyone will be bad for the business.

For more reading, check out my own, “The Future of Publishing Series.”

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