Amazon has increased the royalty on books paid to publishers and authors to 70% net of delivery costs. At the moment delivery costs are based on the size of the file that needs to be transferred using the 3G phone network, Whispernet. Currently pricing is set at $0.15/MB. This means that delivery costs for a typical book of around 368KB would be fairly negligible at less than $0.06 per unit sold.
The new royalty option is in addition to the standard royalty agreement and to qualify for the higher price the book has to satisfy a number of conditions:
- The list price must be between $2.99 and $9.99.
- The list price must be at least 20 percent below the lowest list price for the physical book.
- The title is made available for sale in all geographies for which the author or publisher has rights.
- The title will support Kindle features such as text to speech.
- Books must be offered at or below price parity with any competition, including physical book prices.
The 70 percent royalty option is currently only available for books sold to US customers.
As you can see, these conditions are designed to make the ebook more competitive with its paper equivalent.
Currently publishers don't seem to understand that an ebook doesn't carry with it as much value as a paper copy, see Pricing ebooks. An ebook has no resale value and even lending it to other people is difficult. Also ebooks are inherently more difficult to steal and pirate which means that publishers' sales should be higher.
Keeping ebook prices in the range $2.99 to $9.99 with a 70% royalty means that a publisher will most likely get as much per sale as they do for a paper copy after production is taken into account.
For example, on an $8.99 book an author would make $3.15 with the standard royalty option and $6.25 with the new 70 percent option.
This has to be a good thing for publishers and readers alike.
Amazon may currently represent a scary potential for a book monopoly but at the moment it seems to be steering the industry in the right direction.
In addition to the 70 percent royalty option, Amazon also announced improvements in DTP such as a more intuitive "Bookshelf" feature and a simplified two-step process for publishing. These features make it more convenient for both authors and publishers to publish using DTP.
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