USA Today Best of 2012

Wednesday, February 24, 2010

Before we call authors "greedy", who really won the ebook pricing war?

Much dust has been kicked up since certain large publishers began fighting Amazon over ebook pricing.

Even though Amazon has been paying publishers $12-$14 for the bestseller ebooks (based on a discounted print price) it then resells to consumers for $9.99, a strategy to dominate the ebook market with its Kindle reader, publishers and some authors felt this devalued their books. All sorts of backlash name-calling ensued. Authors were deemed greedy bastards and if they spoke out in this battle, their books were given very low ratings on Amazon. Eventually, in part due to the deal Apple has offered publishers, Amazon was forced to kowtow to the pubs. Or so they say. Let’s do some math, because to me, it looks like the new business agreement isn’t going to pay the authors more – it’s going to pay them less.

The first model is an example of a BIG author, with a BIG publisher and her requisite agent. I’ll present a small author afterward.

Brandi Bigbritches’ novel A Million Heartbreaks, sells for $20 in hardcover. She earns 15% of cover price, which is $3.00, minus her agent commission (also 15%), so she nets $2.55 per sale. This is a best-case scenario, assuming her agent drove a hard bargain, by the way. Because lots of contracts are for 8%, or 10, or 12. And many are based on publisher net, not list price… Still. That sounds like plump potatoes. So let’s see how much she previously earned on those ebook editions through Amazon. Amazon paid her publisher $13 per copy they sold, of which she gets 25% (ebook royalties are higher than print, and the authors are really pushing big pubs to pay more, because smaller pubs pay higher), which is $3.25. She’s still got to feed Agent Lady, so she ends up with $2.76. That sounds even better! What was she screaming about? Answer – it wasn’t her screaming, it was the publisher, and because the prices are low at Amazon, readers at other etailers also think the price should be the same there. How much would she earn on a sale at Fictionwise? Well. Fictionwise discounts books as it sees fit, sending out awesome coupons to customers for 30 or 50% off their entire purchase, and that’s after their membership discount of 15%. So let’s see. Even if Brandi’s book started out listed at $15 on Fictionwise, then it was on sale for $12, then a member used a 30% off coupon for it, Dear Reader ended up scoring the book for $7.14. Fictionwise then pays the publisher 50% of its net…$3.57, and the author gets her royalty of $0.89, pays Agent Lady, and gets taxed on $0.76. Yowch. Doesn’t sound like much now. Remember her publisher pushing for higher pricing? Keep in mind that her publisher just took a much bigger hit per book than she did. Now let’s look real quick at the “new and improved” business deal her pub just made with Amazon. The publisher will set the ebook price – higher at first and then reduce it when it’s not so new. So let’s say she’s a real popular read and they set her price at $14.99. Amazon will now sell it and take 30%, so her publisher will net $10.49. (Of course, this is based on the Grand Assumption that Dear Reader is willing to pay this price…) Then they’ll pay her 25% of net (hopefully her contract is set up right and she won’t have to pay any of their overhead fees in this “net”. We’ll assume it’s all good since she’s got the stellar agent on her side). Now she gets a whopping $2.62!!! Her net just went down $0.14 per book… for now. In a year, when her book isn’t new and the retail price goes down, to, say for argument’s sake, $9.99… she’ll end up with $1.75. I bet she’s so happy her publisher made that fantastic deal! And I also bet she’d rather Amazon was still taking the loss per book, and not her.

Do you still think the “greedy authors” were behind all this? Keep in mind, to Brandi, she’s feeling like every ebook sale gained is one print sale lost. Food for thought. It doesn’t “cost” authors any less to produce ebooks than it does print. Big name authors are slower to jump on the ebook bandwagon for a reason, it seems.

In case anybody’s interested, here’s what an author with a small press probably earns: Susie Smallslacks has a book out in ebook (list price, $5.50) and print-on-demand trade paperback (lists at $16.00). Her smaller publisher doesn’t get the star treatment with Amazon, so currently each copy of her book sold on Kindle nets her publisher $1.93 ( the new and improved business model might be a boon for her; then again, some of Amazon’s stipulations, such as pricing being the same or lower as on any other site, might hurt her when Fictionwise has a big sale…). Her royalties with a small epublisher can be anywhere from 20% to 40%. For this example, we’ll stick with best-case, and give her 40. So she earns $0.77. Now for print, she gets a flat 8% of list price (other publishers pay 10% of net, not list price, so there is some variation here). Sure, it’s lots lower than Ms. Bigbritches’, but she won’t feed an agent… on her $16 print book, she earns $1.28 per copy. Fictionwise? After a healthy sale and a coupons, she’ll end up with around $0.52… all in a day’s work.

A very small number of authors were actually cited in any of the articles I read regarding the ebook pricing controversy. I’m guessing most of them leave this stuff up to their agents. Methinks in a few months when the royalty checks start coming in, the new and improved deal might not look so good from the authors’ and publishers’ side. But hey. Maybe my numbers are messed up. Maybe Amazon didn’t just get the upper hand… Maybe.

(Amazon’s previous cost per copy of A Million Heartbreaks: $13. Retail price: $9.99. Net loss of $3.01 per copy. Amazon’s current cost per copy: $10.49. Retail price: $14.99. Net profit of $4.40 per copy.)

Piper Denna

Romance is sexy!


Jasmine Black said...

I really am tired of hearing how authors are greedy. People who say this have no clue how hard it is to write a book and the work that goes into it. Or even how long it takes to get to the public. And then all the work after it is published. This process can takes a couple years.

I'm wondering how many of them that are complaining about authors are willing to spend every last free minute they have to write, edit and promote thier book for a couple hundred dollars. Two full years of work for a couple hundred dollars? People won't work a week for two hundred dollars, but authors are greedy? These people need a wake up call. Authors have house notes, electric bills, and need to eat just like everyone else.

Stephanie said...

It seems no matter where you go, ANY artist is greedy for wanting to actually make money on their work.

Anonymous said...

Not sure where to post this but I wanted to ask if anyone has heard of National Clicks?

Can someone help me find it?

Overheard some co-workers talking about it all week but didn't have time to ask so I thought I would post it here to see if someone could help me out.

Seems to be getting alot of buzz right now.