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Amazon doubles the royalties for Kindle books

August 4, 2010

Amazon’s digital text platform (aka the “printer” that produces Kindle books) recently announced and implemented a major change in its royalty system. Previously the royalty pay out for Kindle books was 35% (so yes, when we sell a book for $2.99, we get about $1.00 back), but they have doubled that royalty rate to 70%.

Interestingly, some people in the publishing industry are not happy with this move. Here’s why: it only applies to books priced out between $2.99 and $9.99. So once your book hits $10.00, the royalty sinks back to 35%. Doing the math then, a book sold for $9.99 will get you the same royalty (basically) as a book marked at $20.00. Why would amazon exercise a $9.99 cut off?To keep prices low. In the same way iTunes has an interest in keeping MP3 album prices lower than the cost of a physical CD, Amazon has a vested interest keeping Kindle book prices below the price of trade paperbacks.

Some publishers, especially bigger houses, don’t like this model. They have a lot of costs and need to charge a certain amount to make money on a book. On the surface of the equation, you would think that the money they save by not having to actually print the book, and not having to ship a physical copy would allow them room for $9.99 Kindle release but it is our understanding (and correct me if I’m wrong) that for bigger houses, the actual printing and shipping fees are an afterthought. They print at such a scale that they can churn out books for a couple of dollars (or paperbacks for even less). Their major expenses lay elsewhere (marketing, overhead, advertising etc).

But because Last Light is soooo low-frills / no-frills however (if we were an airline, you’d hate us), the change in royalty actually benefits us royally! Our expenses are mostly locked up in printing and shipping and- like those garage bands releasing their videos directly onto Youtube- we benefit mightily from not having to produce physical copies. We welcome the Kindle book as MP3 model and, unless we’re totally off the mark, we think this move will benefit micropresses and their authors.


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