Amazon announces a 70 percent royalty option

[kjk]

Nothing like competition, rumored or not

[Daithi]

Why would Amazon do this? Think about it for a second. Amazon is currently paying authors/publishers 35% and keeping 65%, but now they're announcing they will keep 30% and give the authors/publishers 70%. Why would Amazon slash their own profit margins? Furthermore, will this move make the publishers happy?

Well, let's take a look at the numbers.

Here are the numbers for a typical book using the existing 65/35 payout structure.
List Price:________$28.00 (35% is $9.80)
Pbook Retail Price:_$15.00 (So publisher/author gets $9.80 and Amazon gets $5.20)
Ebook Retail Price:__$9.99 (So publisher/author gets $9.80 and Amazon gets $0.19)

Here are the numbers for the new 30/70 payout structure.
List Price:________$28.00 (35% is $9.80)
Digital Price:_______$9.99 (70% is $6.99)
Pbook Retail Price:_$15.00 (So publisher/author gets $9.80 and Amazon gets $5.20)
Ebook Retail Price:__$9.99 (So publisher/author gets $6.99 and Amazon gets $2.00)

Cleary the publishers are now making LESS money with ebooks if they switch to this new payout structure. However, Amazon is still retaining the old payout structure, so most publishers will just stay on the old system. So why is Amazon doing this if publishers won't sign up? Because Amazon is going after the authors.

Make no mistake about, baby -- Amazon just declared war!

[Mike L]

Originally Posted by pdurrant

Hopefully it'll also be available to non-US publishers shortly.

As far as I can see, there's nothing in the announcement that restricts it to US publishers.

The announcement does say that the enhanced royalty will only be available for books sold in the United States. But it's not clear whether that means:

(a) The royalty only applies to copies of the book sold in the USA. Copies sold elsewhere will get the original lower royalty; or

(b) You get the enhanced royalty on all copies, provided the book is available in the US.

It makes quite a big difference

[AintLDS]

They should add a requirement that the ebooks are properly formatted and proofed. Can't tell you how many screwed up Kindle ebooks I've read.

[Moejoe]

Originally Posted by Daithi

Why would Amazon do this? Think about it for a second. Amazon is currently paying authors/publishers 35% and keeping 65%, but now they're announcing they will keep 30% and give the authors/publishers 70%. Why would Amazon slash their own profit margins? Furthermore, will this move make the publishers happy?

Well, let's take a look at the numbers.

Here are the numbers for a typical book using the existing 65/35 payout structure.
List Price:________$28.00 (35% is $9.80)
Pbook Retail Price:_$15.00 (So publisher/author gets $9.80 and Amazon gets $5.20)
Ebook Retail Price:__$9.99 (So publisher/author gets $9.80 and Amazon gets $0.19)

Here are the numbers for the new 30/70 payout structure.
List Price:________$28.00 (35% is $9.80)
Digital Price:_______$9.99 (70% is $6.99)
Pbook Retail Price:_$15.00 (So publisher/author gets $9.80 and Amazon gets $5.20)
Ebook Retail Price:__$9.99 (So publisher/author gets $6.99 and Amazon gets $2.00)

Cleary the publishers are now making LESS money with ebooks if they switch to this new payout structure. However, Amazon is still retaining the old payout structure, so most publishers will just stay on the old system. So why is Amazon doing this if publishers won't sign up? Because Amazon is going after the authors.

Make no mistake about, baby -- Amazon just declared war!

I agree 100%. And it's a war the publishers can't win in the end. They just don't have the digital presence or anybody working for them who can get them some of that juicy digital presence. There's got to be a lot of authors whose back catalog is no longer in print, or whose contracts are about to be renewed who are looking at this right now with big Cheshire Cat smiles on their face.

--------------

An internal monologue with a moderately successful writer about to renew his publishing deal.

So, I get what, 5-10% and zero marketing, plus you take all my digital rights until I'm too stupid, old or dead to care about them...or....I take 70%...I take 70%....70....percent...with Amazon?

At this point the author runs away yelling 'whoopee!' at the top of their lungs.

---------------

This isn't a War, the publishers would actually have to have enough troops to fight back. This is a rousting!

Let the games begin!

[Over]

Originally Posted by Daithi

Here are the numbers for a typical book using the existing 65/35 payout structure.
List Price:________$28.00 (35% is $9.80)
Pbook Retail Price:_$15.00 (So publisher/author gets $9.80 and Amazon gets $5.20)
Ebook Retail Price:__$9.99 (So publisher/author gets $9.80 and Amazon gets $0.19)

Could you explain better the emboldned part?

[pdurrant]

Yes - I mis-read that bit of the announcement initially. I thought I'd edited that bit out of my message, but I hadn't.

I read it as saying that the 70% is only available to books that are sold in the US. I think the problem with non-US sales is the wireless data charge.

Originally Posted by Mike L

As far as I can see, there's nothing in the announcement that restricts it to US publishers.

The announcement does say that the enhanced royalty will only be available for books sold in the United States. But it's not clear whether that means:

(a) The royalty only applies to copies of the book sold in the USA. Copies sold elsewhere will get the original lower royalty; or

(b) You get the enhanced royalty on all copies, provided the book is available in the US.

It makes quite a big difference

[BearMountainBooks]

Someone else probably posted about this--but this applies to the DTP only--not the privately negotiated deals with publishers. Publishers do not use DTP to upload books. They CAN and smaller publishers or individual authors with rights to their backlists DO use DTP. But the big guys have other deals/methods.

Yes, I think it does still pressure the large guys because the authors are going to want more cash to "stay" with the publishers with ebooks (because some of them still own ebook rights.)

I think it's good news for authors. I think Amazon is trying to remain competitive as more ereaders (and specifically the tablet which is rumored to be doing a 70/30 split) come out.

Wow, it's finally an interesting time in the publishing world!

[Moejoe]

Originally Posted by BearMountainBooks

Someone else probably posted about this--but this applies to the DTP only--not the privately negotiated deals with publishers. Publishers do not use DTP to upload books. They CAN and smaller publishers or individual authors with rights to their backlists DO use DTP. But the big guys have other deals/methods.

Yes, I think it does still pressure the large guys because the authors are going to want more cash to "stay" with the publishers with ebooks (because some of them still own ebook rights.)

I think it's good news for authors. I think Amazon is trying to remain competitive as more ereaders (and specifically the tablet which is rumored to be doing a 70/30 split) come out.

Wow, it's finally an interesting time in the publishing world!

Isn't it though? I love being alive right now and writing and not having an agent or a contract of any of that old stuff. Imagine if you were bogged down with all that, then this news might not be so interesting, it might even scare you a little (nobody likes competition). Besides all that, it sure is fun to watch.

[pdurrant]

Currently the 70% rate is optional - publishers can continue with their current arrangements if they wish.

You shouldn't think that big publishers are getting only 35% of RRP - they're getting at least 50% of RRP, as that's what Amazon are paying Smashwords.

The important bit in this announcement from the public's point of view is that any publisher wanting the 70% RRP option must set the RRP 20% or more below the cheapest paper edition, and must enable text to speech.

This can only be good for small publishers and ebook buyers.

[ficbot]

Originally Posted by Moejoe

They just don't have the digital presence or anybody working for them who can get them some of that juicy digital presence.

And whose fault is that?

Seriously, what they should have done as soon as the iPhone came out and they saw what was happening is gotten together on some sort of conglomerate mega-store to sell all digital books by all major publishers in one store-front. They should have made an iTunes for books. They didn't. Other people got in the game and now they have the market share in this emerging area. It's the publisher's own fault.

[Elfwreck]

Originally Posted by Nate the great

from the press release:

• This list price must be at least 20 percent below the lowest physical list price for the physical book

Does this mean it's only available for books that have a print version as well?

[Moejoe]

Originally Posted by ficbot

And whose fault is that?

Seriously, what they should have done as soon as the iPhone came out and they saw what was happening is gotten together on some sort of conglomerate mega-store to sell all digital books by all major publishers in one store-front. They should have made an iTunes for books. They didn't. Other people got in the game and now they have the market share in this emerging area. It's the publisher's own fault.

Yeah, but they'd have to have somebody at the top who wasn't asleep, and you know how much fat cats like to sleep

[pdurrant]

Originally Posted by Elfwreck

Does this mean it's only available for books that have a print version as well?

I don't think so. But it is only available for copyright books - public domain books aren't eligible.

[Daithi]

Originally Posted by Over

Could you explain better the emboldned part?

Under the current 65/35 split the publisher is paid 35% of the list price of the book. So the publisher is paid $9.80 for a book (assuming a $28 list price). When Amazon sells the ebook for $9.99 that leaves them with only $0.19 as their cut ($9.99-$9.80).

In reality, the big publishers are actually getting around 45% of the list price, and Amazon has been taking a loss on their $9.99 best sellers.