Amazon made an announcement last week about the Kindle e-reader and changes to their royalty scheme for authors that may have caught your eye. I will do a quick recap:
Amazon announced it is providing authors and publishers with a “70% royalty option” for books sold on the Kindle. The new royalty regimen seems to be squarely aimed at keeping Amazon as the’ top of mind’ publisher for e-books, especially in light of the enormous number of new readers that were unveiled at the recent Consumer Electronics Show (CES) and the breathlessly awaited arrival of an Apple tablet device. The new percentage of 70%, from the current royalty of 35% per title, comes with a number of restrictions. These include:
- The actual price of the book must fall between $2.99 and $9.99 and be at least 20% below the lowest price of a physical edition of the same book.
- It has to sell for the same price, or less, as it does with competing booksellers.
- It has to be available everywhere the author or publisher has intellectual property rights.
According to Amazon’s announcement, “the 70 percent royalty option is for in-copyright works and is unavailable for works published before 1923 (a.k.a. public domain books). At launch, the 70 percent royalty option will only be available for books sold in the United States.” To see the entire announcement, go here.
My take: The royalties question is very important to authors, obviously, as that’s how they eat. Amazon’s announcement has a sobering effect on competitors and publishing houses, as many authors may opt to move their works to direct publishing by Amazon, foregoing the services (and fees) associated with working with a publishing house.
There are a couple of other considerations to keep in mind. First, with this announcement, Amazon is giving authors the ammunition to go to publishing houses and ask the royalty question, “With Amazon willing to give 70% royalties on my work, what are you willing to do for me?” This will not be an easy discussion and will require publishers to explain in very clear and specific ways what the value proposition is of working with them instead of going direct to Amazon. I foresee a publishing industry shakeout over the next two years that is partially driven by this question.
There is also another piece of data to note. According to a New York Times article of January 22, 2010 entitled “With Kindle, the Best Sellers Don’t Need to Sell”, one of the hottest ways to boost your visibility as a struggling author is to give your work away (or, more specifically, some of it). Several authors and publishers, apparently having read and considered Chris Anderson’s “Free” polemic, have decided to test it out on up-and-coming authors. Apparently it works. According to the article, free versions of an authors work can show up somewhere in the top 5 of the Amazon Kindle’s top-seller list, and has shown to drive sale of the authors other works. In one example:
“In October, the most recent month for which she has statistics, Ms. Brashear (a publisher) said Samhain offered free digital versions of “Giving Chase,” a romance novel by Lauren Dane, leading to 26,897 downloads. But paid purchases of some of Ms. Dane’s other novels jumped exponentially. Her earlier novel “Chased,” which sold 97 copies in September, sold 2,666 digital units in October, and another of her previous books, “Taking Chase,” which sold 119 copies in September, sold 3,279 in the month in which a free download was available.” (New York Times, January 22, 2010: http://www.nytimes.com/2010/01/23/books/23kindle.html?pagewanted=2&sq=amazon kindle&st=cse&scp=2)
With Amazon offering great royalties to authors, plus growing data around the effectiveness of distributing and author’s works for free and for fee on the Amazon platform, how do the competitors respond? What will publishers do to provide the kind of valuable service they have available to authors to keep them from going direct? If Authors do stay with their publishers, how do they compete for visibility and attention in a burgeoning sea of authors for an audience willing to pay for their work?
I believe there is a sea change in the works, much like what newspaper journalism has experienced in the past few years. Authors and publishers are going to have to rework and rethink their relationships with each other and how to gain the kind of foothold that will allow them to remain in business….even if the business doesn’t quite look like what it did ten years ago.
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7 Comments, Comment or Ping
Jeremy
I see very similar tracks here to the games industry. Moving to digital distribution empowered the “little guys” (developers) to access potent distribution channels directly, without the need of a big publisher as the intermediary. Of course, retail is still a prime revenue generator but with the ability to drive higher ARPU and engage in a 2nd generation relationship with your customer rather than 3rd, it still is a very enticing proposition.
I don’t see 70% lasting over time, though. MSFT started there on XBLA games, but a couple years in dropped it to 35%. Certainly builds the critical mass to bootstrap your platform well beyond the competition to start, however.
Feb 3rd, 2010
lailakaz
Good article, Jeff! It has been interesting to watch the whole current Amazon-Macmillan dispute over ebook pricing, despite the higher royalty annoucement.
I don’t see authors giving up their publishers any time soon to go publish directly with Amazon. I don’t think that we are at a point where having your book out just in ebook form is the same as having an actual physical book published and distributed… Can ebooks replace the joy of seeing your book in print, on bookstore displays, in people’s hands?
Feb 4th, 2010
Katy Balatero
As a new, unpublished author, it is extremely hard to get a book publisher to take on your project without an agent advocating for you — and it is hard to get an agent without having been published before, leading to a catch-22 situation.
I interned at a couple of Seattle book publishers and took the first crack at reading through the “slush” pile — all of the unsolicited manuscripts that people would send in. I’d write up my thoughts about them and pass them along to the acquiring editors, but it is a very rare occasion that an unsolicited manuscript is taken on for publication — maybe once or twice in an editor’s entire career.
I wonder if this new Amazon royalty scheme could provide supplementary income and a wider audience for those that are not supported by a book publisher and had planned on self-publishing their work.
Feb 23rd, 2010
Jeremy
Interesting. So would you be interested in this option, Katy, or are you going to hold out for a publisher?
(Separate thought from the previous question to Katy. No offense intended!)
This opportunity sounds like it will inflate the Amazon offering (like it needs it), but I wonder how much of that will be books that _didn’t_ get a publisher for a good reason (i.e. they suck). Hopefully they’ve learned from 5 years of UGC and have tools for filtering and rating content. It would be painful to have to sort through something akin to YouTube on the Kindle.
With my iPhone (iPod touch) and the Kindle App, I make targeted purchases for favorite authors. I don’t use it to browse much. A bloated catalog would scare me away.
Mar 3rd, 2010
Katherine Turner
This was a very interesting article and string of comments. Agreeing with Katy, it’s extremely hard for aspiring authors to get their first book published. Amazon’s 70% royalty fee may be the perfect opportunity for these authors to get their names out there. While it won’t replicate the prestige of having a publisher select and print your book, it could be the tipping point these authors need for editors and publishers to even consider their work. Agreeing with LailaKaz, I don’t see authors leaving their publishers for the Kindle- I see authors using this to try to jumpstart a career (those who haven’t yet been published, and have been trying, and trying, and trying).
I also consider it somewhat admirable of Amazon to up their author royalties. Even if it is for selfish reasons of the company, it shows a sign of respect for content creators. Jeremy said it might lead to a slew of “sucky” work being published online, and I could see this happening but I agree that they should implement some sort of filtering and rating system to balance it out.
A rating system for new authors would be especially helpful as well as successful if applied to work being offered free of cost. More people would be willing to try out a new author if they didn’t have to pay anything, that’s why the “free” model works, and therefor more people might be willing to submit a rating to help other e-book readers sort through it all.
Mar 4th, 2010
Nicole Siegel
First of all, thanks for the Kindle recommendation, Jeff. I purchased one for my boyfriend for his birthday (ok, secretly, I bought it for me too), and we love it! I honestly never had a huge desire for one and didn’t quite understand the hype. For convenience alone, the Kindle is a winner (especially when traveling). That in conjunction with the myriad of features that facilitate the reading process will make it difficult for me to go back to “real” books!
I think that the new royalty scheme will definitely benefit the less known author. I can only imagine how hard it is to get represented by a publishing company, so this concept will open the door for those writers who want to get their works exposed. With that said, we’ll likely see a huge increase in “junk” so hopefully, Amazon will have the resources available to filter content and maintain an enjoyable Kindle experience.
As for the concept of “free” in the context of the Kindle – I do believe that giving away content for free is a stepping stone to more purchases down the road. I have several songs in my iTunes library that stemmed from earlier “free” downloads. After listening to my “free” songs, at least for the ones I liked, I had no issue paying for additional songs by the same artists. There are a lot of awful free songs offered as well, and to those, I simply ignore and move on to the next ones I like. My guess is that the same model will work with free books. To those readers who want to stick with their favorite authors, they can go directly to their selection and pay the price. For more indecisive readers, the free option will give them the chance to experiment and see what they like, penalty free.
Mar 5th, 2010
Katy Balatero
Jeremy — no offense taken.
I am not actually trying to get a book published myself. However, my grandmother is probably going to self-publish a book that is based on three years of weekly articles she has written for her local newspaper, so I guess her situation was at the top of my mind.
This new avenue for income might be a good option not just for unknown authors, but for authors like her that are marketing more to a niche audience. The traditional book publishing industry is not so friendly to niche offerings because they must sell a certain amount of copies to break even with publishing expenses — so books with mainstream appeal fare better.
Mar 5th, 2010
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