Amazon’s markup of digital delivery to indie authors is ~129,000%

So my book about travel came out last week! Think about buying it directly from me: This Book Is About Travel .mobi (Kindle Version) or This Book Is About Travel .pdf. A pretty exciting time. I’ve decided to write a few posts covering the launch and lessons I’ve learned. I self published it (wrote, designed, marketed and even did the layout for it) and am really proud of the project.

This post is about the where the sales of the book are coming from, and why Amazon takes 48% of digital book sales. Surprising eh? I thought Amazon was the BEST for indie authors, right? We will get into that later.

The book had a great launch, even getting to the #1 Hot Releases spot for Amazon.com for the travel section.

It started off with 17 straight 5 star reviews and a slew of people sending me pictures of the book, my book, on their devices.

Hot damn! Feeling great as an author. A few months ago I ran a kickstarter for the book to raise the funds to be able to focus on the book, and people from around the world kicked in.

That is a lot of people showing a lot of support for me.

So I wrote the book. Finished up with 25 chapters and 52,000 words. So, in plain terms, book book length. A lot based on blog posts and places I visited exploring just what the last two years of my life were living on the road.

The book itself is a critique of travel these days, and the preorders say a lot to say about the way people read books.

So 51% of the orders were for Kindle. I love my kindle. I can see why. I was amazed to see iBooks so high. I thought .pdf would do better, although I don’t know many people that read books on a computer. Note I didn’t offer .epub / nook until people asked for it, so take that with a grain of salt.

So let’s fast forward a few weeks. Book is on sale and I launched a snazzy website with the help of the guys at What Cheer. It looks like this, but you can check it out live here.

The book is on sale for $9.99 (I was betting that it was equally hard to get a $10 customer as it was a $1 customer). I worked my ass off on it and thought, hey, $10 it is. I read a lot (a book a week in 2011) and that seemed like my personal upper limit, but something I would expect to pay.

So how did the sales do?

Kindle CRUSHED on sales. People have their credit cards stored in there and the user experience is amazing. Nook is dead last again, not sure what to think of that. iBooks is at 11% and .pdf at 12%.

So as an author, I should focus on Amazon Kindle 100% right?

I started to. All my energy went to the amazon link (like this post on Facebook):

So the push worked and my supporters got behind the idea of getting me to #1 on the Travel Bestsellers!

Again, author high. It feels great having your content out there and even better when people are enjoying it (and telling their friends).

So, I’m at the end of my week, time to see just how the sales ended up and how much cash I’m taking home for a few months of work.

Wait, Amazon pays out the worst? What? This can’t be right! They are the best right? Everyone loves them. I love them. I dig a bit deeper and find this little gem:

Avg. Delivery Cost ($) 2.58.

So for every $9.99 book I sell I, the author, pay 30% to Amazon for the right to sell on Amazon AND $2.58 for them to deliver the DIGITAL GOOD to your device. It is free for the reader, but the author, not amazon, pays for delivery.

The file itself is under their suggested 50MB cap Amazon says to keep it under at 18.1MB. The book contains upwards of 50 pictures and the one file for Kindle needs to be able to be read on their smallest displays in black and white and their full color large screen Mac app). I’m confused. Amazon stores a ton of the Internet on S3/EC2, they should have the storage and delivery down. If I stored that file on S3/EC2 it would cost me $.01 PER FIVE DOWNLOADS. Hat tip to Robby for that one. Use Amazon to run your website: .01 to download a file. Use amazon to sell your book: $2.58 per download + 30% of whatever you sell.

Amazon’s markup of digital delivery to indie authors is ~129,000%

Now that isn’t 100% apples to apples, as it includes 3g delivery (whispernet) of the files but gives me no way of knowing how many devices downloaded via 3g. My book has a lot of pictures. It is about travel after all, it should have those. Double checked the compression of the files, everything looks to be best practices. File size be dammed, this sucks. How do the other services stack up to this?

I’m selling the .pdf through gumroad.com which is a new service. They take the credit card fees and you keep the rest. So for that $9.99 I keep $9.25. Payday is once a month. They host the file for free. Dreamy. No DRM but I like it that way.

Apple is actually quite good at a flat looking $7 per $9.99 purchase. They host the file and their iBooks Author is fantastic for book creation. Their app store customer service is about as bad as I can imagine (no phone, email or ticket support). You have to play by their rules and their rules happen to include error messages that block your book from being published with the descriptive “Unknown Error.” As a testament to their not giving a single fuck, their “Contact Us” is a FAQ with no way to send a message. The book looks amazing on iPads through iBooks though!

I would spend some time on Nook but it seems you all are not, so just passing over it.

So what to conclude?

Don’t buy my book on Amazon. Or do buy it. Or don’t. (UPDATE, I put the .mobi on gumroad) I could sell the .mobi file through gumroad but Amazon blocks commenting and rating for those customers that go around their buying habitat. I’m super happy with the project but really hate how much management of this type of stuff, time I could be working / consulting and actually making a $. Are books just really loss leaders for the authors careers? Big adverts in the fiction section? Not something I thought about until this part of the process. Shouldn’t writing a book be about creating the best user experience for the reader and honoring the art of story?

I’d like to think the latter. We need more art, more stories. Self publishing seems to be a great enabler of this (and the creative class), but damn Amazon, you sure know how to take a great feeling and turn it sour.

So want the kindle version and don’t want to give Amazon 50% of the sale? Buy here and I get 95% of the sale.

UPDATE #2 Welcome Boing Boing. I switched over selling .mobi first through gumroad with a link to Amazon. You can buy This Book Is About Travel .mobi (Kindle Version) here.

UPDATE #3 Welcome Radar readers.

UPDATE #4 Welcome Domino Project readers.

UPDATE #5 My kindle .mobi is now compressed and resubmitted, I will now (only) see a 36% cut from Amazon for selling the book. You can buy it on Amazon here.

So what happens to the buying habits of my readers after this post? Amazon tanks, people buy directly.

UPDATE #6 Welcome Daring Fireball.

UPDATE #7 Welcome Metafilter.

UPDATE #8 The full color 8.5in x 8.5in print version is on sale here. I see $8.37 of the $25 sale if you buy it through that link (33%), and $3.37 if you buy it through Amazon (13%). It is print on demand so there are no ongoing fees for storage or up front costs.

UPDATE #9 Some readers were saying it was hard to find out how to buy the book directly from me. Here you go!
This Book Is About Travel .mobi (Kindle Version)
This Book Is About Travel .pdf

Posted

June 11, 2012

Travel

Andrew Hyde

Tags:

Amazon, gumroad, ibooks, kindle, nook, pdf

Comments

255 responses to “Amazon’s markup of digital delivery to indie authors is ~129,000%”

Michael E. Gruen

June 11, 2012

That markup doesn’t include the cost of building the Kindle business (the marketing, the creation of the store and distribution channels, etc.), but I’m certain that ratio will go down as the rest of the market catches up.

Hell, with those kind of margins, there’s even room for traditional publishers to play ball here.
Peter Cooper

June 11, 2012

You’re right, but isn’t that what the main 30% royalty is really to pay for? The extra “delivery fee” should really just be about the delivery cost (of course, in the real world..)
Jen Grant

June 11, 2012

Apparently Bezo’s goal of “free” wifi for downloads really wasnt “free” — the authors pay it!
Michael E. Gruen

June 11, 2012

By that logic, listing on eBay should be even less expensive…
Sean

June 11, 2012

Great blog post. I think 30% fee is ok for them to take but i think $2.58 deliver fee is just taking the pi*ss.
3g_operator_nfa

June 11, 2012

What are you talking about man? The digital delivery includes the GSM/3g traffic that costs $0.15 a MB with most carriers. $0.15*19 = $2.85, which matches how much you pay…
Henry Koren

June 11, 2012

The “Free 3G” that comes with a kindle was not free, but they made the decision to join with Sprint’s CDMA network and install 3G chips into their e-readers. One might assume that Sprint would have legally bound Amazon not to do things like have a “wifi download discount”, since they still have to serve up free web traffic to kindle devices. Also, Amazon made the decision to manufacturer their kindle devices for for somewhere between an extremely thin profit margin and a loss. So that’s where your extra money goes. Who knows just how much smaller Amazon’s market share would be if they decided differently.
Chip Unicorn

June 11, 2012

Amazon doesn’t actually own WhisperNet. WhisperNet is just 3G leased through AT&T (or other options in other countries.)

On the other hand, I have no idea what Amazon would charge for wifi connections to your book.
Chip Unicorn

June 11, 2012

Amazon doesn’t actually own WhisperNet. WhisperNet is just 3G leased through AT&T (or other options in other countries.)

On the other hand, I have no idea what Amazon would charge for wifi connections to your book.
Dan Grossman

June 11, 2012

The “delivery” is 3G data to the Kindle that bought the book… which Amazon has to pay to Sprint. That’s a real delivery cost.
iBook Templates

June 11, 2012

We’ve had some success getting in touch with Apple folks via their feedback link here: http://bit.ly/LgDLOp

It’s not a support ticket though 🙁
In any event, the book looks amazing and thanks for being so transparent about your launch experience. If we can do anything to help please let us know!
Dean Howell

June 11, 2012

That’s too bad about the Nook. It is a very successful platform. Maybe you just weren’t as lucky finding an audience of Nook owners.
Eduardocereto

June 11, 2012

Can’t you bill the reader the extra fee for delivery?
andrewhyde

June 11, 2012

I would love to find that market, or find out why they are not buying.
Aguest

June 11, 2012

>> I could sell the .mobi file through gumroad but Amazon blocks commenting and rating for those customers that go around their buying habitat.

commenting, ratings, reviews, insite search, notes, highlights, subsided kindle device, customer service and support, these have value too, its their store and devices, u can go setup your own if you want and try and sell it. actually id prefer without the drm but the point is, ur not just paying for the miniscule bandwitdh cost.
orclev

June 11, 2012

Speaking as someone that has a Nook, and also knows a bunch of other people with Nooks, the device is not as dead as your stats would make it appear. I’m not sure why the distribution is so skewed in your stats, but I suspect there’s some sort of subtle sampling bias involved. Of course, as a point of reference I’m not really big on travel and thus have no interest in a book about travel, so even from my perspective as a Nook user, I’m not part of your target demographic. I notice on your charts that the Nook doesn’t seem to be much better than Kindle in terms of payout, is there a similar issue going on with hidden charges tacked on, or does B&N simply take that much of a chunk out of the sales?
Greg Cohn

June 11, 2012

Distribution is king. The net total percentage they charge has nothing to do with their costs, but it’s like Ticketmaster — their chokehold on the business, their fees to set. (Also their anti-trust lawsuits to fight.)

I don’t think it’s very sporting of them to disguise the fees, but ultimately it really doesn’t matter if they’re being used to offset actual distribution costs, subsidize hardware r&d, or settle lawsuits. If you were to do a cost-volume-profit analysis, my guess is you come out ahead with amazon as a distribution channel (and paying their fees) vs. pulling it from amazon and losing a bunch of customers.

As long as consumers keep choosing the Kindle proprietary formats, marketplace, and devices, authors and publishers will likely pay upwards of the break-even point to be present there.

All of that said, Andrew — it would really be brutal if this were a $27.95 hardcover, and you were receiving a royalty of 10% of that minus various discounts (ie, when it’s sold at Barnes & Noble for 20% off or at Walmart for 65% or MSRP, you get a discounted royalty too).
andrewhyde

June 11, 2012

I think that would be a horrible experience for the reader.
facebook-685466426

June 11, 2012

I’ve written a few books – published through traditional publishers and available in bookstores around the world. I was paid 10% of the wholesale price, which is roughly 5% of the retail price. So you got paid more than 50% of the retail price working directly with Amazon. I wouldn’t complain about that. That’s actually pretty good.

Amazon is a company that needs to make a profit. eBooks are still a relatively small market. The fees seem entirely reasonable to me.
Guest

June 11, 2012

Pass most of the markup onto the reader. Keep your profit more-or-less fixed. Either cut the cost of the PDF book, or raise the price of the Kindle version, or a little of both. More people will opt to buy the PDF instead of the Kindle version that way, making everyone except Amazon happier. Amazon will be a little less competitive.
Duff McDuffee

June 11, 2012

Yup, Amazon sucks for publishers, especially small publishers.
Don Hosek

June 11, 2012

Actually, Greg, your understanding of the discount is wrong. Going through a regular publisher, that 10% is of the net to the publisher. The retail sales price has nothing to do with that net. Typically, a publisher sells for 50% of cover price to a distributor who then sells for 60% of cover price to the retailer. Or they may be selling at 60% of cover price direct to a bookseller. Or they may be selling at a different discount rate to the bookseller. That’s the discount that matters, not the retail discount.
Duff McDuffee

June 11, 2012

Unfortunately this doesn’t work due to Kindle’s weird pricing structure.

If you raise the cost of your Kindle book more than $9.99, Amazon takes 70% right off the bat instead of 30%, *plus* the cost of “delivery fees.”

For a $9.99 book, you get basically $6.99 (70%), before delivery fees.
If you charge $10, you only get $3.00 (30%), before delivery fees.
Thus if you charge more than $9.99, you have to go up to $23.30 before you get the same commission as charging $9.99. Anything in between and you lose money.

To then recover delivery fees of $2.58 per book, Andrew would have to charge $25.88 for his Kindle book, when most similar books are going for $9.99.
Paul Chittenden

June 11, 2012

Wow. Really interesting post. Saw this on Ycombinator, and now I think i might by the book! 🙂
George Washington

June 11, 2012

not really. Authors get royalties on the wholesale price, which is fixed. The list price is just MSRP, if you will, and retailers sell the books for anything inbetween wholesale price and MSRP. Wholesale is aprox 50% of list (depending on your buying power, if you’re the retailer).
kognate

June 11, 2012

The delivery fee is (in the US) charged per MB at

Amazon.com: $0.15/MB
Amazon.co.uk: £0.10/MB
Amazon.de: €0.12/MB
Amazon.fr: €0.12/MB
Amazon.es: €0.12/MBAmazon.it: €0.12/MB

(found at https://kdp.amazon.com/self-publishing/help?topicId=A29FL26OKE7R7B)
Grail

June 11, 2012

$3 for a 11MB file is beyond the worst over-quota charges I have ever seen.
melee

June 11, 2012

Amazon should feel free to charge whatever percentage they can get away with, but charging for “delivery” of a digital product is just a scummy hidden fee.
Even delivery charges over cell networks amounts to cents.
Dan Grossman

June 11, 2012

You can’t compare Amazon’s agreement with carriers to a consumer cell contract. Consumer pricing is based on over 90% of subscribers using significantly less than their maximum monthly limit, and includes no international roaming at all.

AT&T offers international roaming data service at rates like $30 for 120MB. $3 for a 11MB file is perfectly in line with that.

I don’t think Amazon is significantly overcharging their actual costs when it comes to 3G delivery.
Chris Bell

June 11, 2012

Don’t sleep in the comments! Try a bed! Flippancy aside, a thought-provoking post – and I speak as a committed Kindle and Amazon KDP enthusiast.
Greg Cohn

June 11, 2012

That’s not actually quite correct — or at least it was not when it was my job to negotiate book contracts for a major publisher some years ago.

Author royalty contracts have always been based on retail price (typically beginning at 10% and going up to 15% for a hardcover, 7.5% tiering up to 10% for a nice (a.k.a. “trade”) paperback, and 5%++ for a mass market, pocket-sized/supermarket paperback. (While there’s no reason this wouldn’t be a negotiated term between authors and publishers like any other, in practical reality it almost never was negotiated.) These royalty earnings assume publishers are selling their books at a “typical” wholesale price (as you state 40-50% discount is the correct range), but are further reduced to any degree that the publisher is “overdiscounting”, whether that be to retailers offering deep discounts, to distributors, or to mass-market discounter retailers like Walmart. Since a lot of the book business is now heavily discounted, you can assume average real royalties net out a couple of percentage points below rack, at least.

In this sense royalties do correlate to wholesale price — i.e., the greater the discount at wholesale, the lower the royalty — but they are calculated on the basis of retail.

The broader point either way is, very little of the cost structure of the traditional book publishing distribution chain has to do with giving talent a share. Most of it, in physical books, goes to the costs of distribution — the retail share. A bunch of it goes to the costs of chopping down trees and printing and shipping books, which since they are returnable means you have to print and ship 3 books or so for every 2 that anyone actually buys. Some of it is profit to publisher, once their fixed costs (e.g., copyediting the book and getting an artist to design a cover) are paid back. And a pretty small amount of it goes back to the author (after, of course, their advance is earned out).

In the early days of e-books, publishers (or rather, traditional retailers and therefore the publishers who depended on them) were so worried about cannibalization of print sales that e-book prices were fixed at the same price as the hardcover. I’ve never begrudged a publisher their fair profit, but it was a scandal to me that the consumer paid the same amount — and the author made the same small percentage — despite there being no cost of killing trees, shipping, returns, printing, and what have you.

So, on balance, the fact that we live in a world where a guy like Andrew can write and design his own awesome book, get to a large audience across multiple retail channels without going through a publisher, and keep more than half of the retail price is… pretty awesome.
Steve

June 12, 2012

Just boycott, looks like you are doing ok on other platforms.
Tim Elliott

June 12, 2012

If Amazon is paying $0.28/MB across 3G they desperately need to hire better negotiators.

It’s common knowledge that mobile providers drastically overcharge for bandwidth usage and to suggest that Amazon is paying the same bullshit rates is pretty damn absurd.
AJC

June 12, 2012

Let’s think about this for a minute: Apple charges 30% to cover marketing and distribution (over the Internet) for games; Amazon charges the same for Kindle. Seems fair, so far, right?

And, to use an iPad I also (probably) need a 3g SIM card at $x per month for a plan. Not happy, but it’s not a fee I pay to Apple, rather I pay it to the Telco. So, it still seems fair.

But, Kindle delivers books via 3g. When I own a Kindle I pay nothing for this. Whoa. Super fair!

So, who’s paying? Well, it’s you – the author: Amazon pushes the telco fee waaay back up the line to you, knowing that you’ll simply include it in your published price. Since you’ll be cheaper than printed, anyway, it all seems fair to me.

What’s more, Amazon absorbs the ‘per byte’ fees that they must be paying into a simple, single $2.58 delivery fee to you.

Not happy. But, fair …

So fair, in fact, that Amazon allows authors like you, who probably had a snowball’s chance in a Very Hot Place to get published become best-selling authors overnight. Hmmm; I’m liking Amazon even more and more as I write this
Gustav Pettersson

June 12, 2012

And that is given that all downloads happen over 3G as well. I bet my nuts only a very small percentage of downloads happen that way.
Jack

June 12, 2012

I still use my Kindle2, which doesn’t have a wifi option.
davewasthere

June 12, 2012

That’s a tough one. $1100 for the Amazon sales still beats $330 for PDFs though, so it’s still a good channel.

I did wonder where the 3G delivery costs were made back. Although I think every book I’ve bought from amazon has been downloaded over wifi. I very rarely get to see a 3G connection.
Thomas Walpole

June 12, 2012

Just a quick comment- Though that download will cost less than 0.01 to d/l (remember- amazon is making a profit off that price), they still do run the whispernet/etc. that means deals with phone companies that may add a bit of cost to it.

Still a massive markup though. But what did you expect?
andrewhyde

June 12, 2012

I’d expect it to be like the other services who either push it onto the reader or just not charge for it (take it out of the 30%).

I’m stripping the photos from the book. Amazon pushes a bad user experience. Imagine if I priced the book at $4.99, I would have lost $ on each sale.

Most graphically intense books are kids books, remember that one.
Andrea B

June 12, 2012

I think that also offering the .mobi file through gumroad is a good idea…
Jim O

June 12, 2012

You left something out on your 70% vs 30% comparison: if you charge more that $10 they take 70% but there is no delivery fee.

Author’s take at $9.99 = 9.99 * 0.7 – 2.58 = $4.41
Author’s take at $15.00 = 15 * 0.3 – 0.00 = $4.50

You’d probably get way less buyers at that higher price point, but you’d only have to raise the price $5 to start making more money. It seems like Amazon is artificially keeping the price between $4 and $9.99.
VonLaserface

June 12, 2012

It’s likely a reflection of the demographic in my area but a vast majority of Nook customers I work with don’t do a lot of searching for content on their device or online. They still discover books via morning TV programs, radio, newspapers, magazines and browsing around stores.
Jim O

June 12, 2012

Amazon may suck for small publishers…. but is your small book publisher preferable? If Andrew came to you two years ago and wanted to get his book published, what would be his odds of getting a product out?

Instead of begging someone to take his book, he was able to just make it and publish it. He didn’t need permission, he didn’t need to beg for an advance (though he did get one through Kickstarter), and he didn’t need to front any money (save his time).

Amazon has lowered the markets barrier to entry. So they are taking 65% of the gross… what percent of a $10 book would he be pocketing if he were publishing through a small book publisher?
No

June 12, 2012

You do remember that they are already taking a flat 30% cut, and these bullshit “delivery charges” on top of that. It’s reprehensible, but that is the way proper monopolistic/oligopolistic corporations behave when you let them. 30% is already /plenty/, including delivery of all kinds and incidentals such as a comment system and a healthy, healthy profit margin. Your suggestion to go compete with Amazon on that front is two-faced, and you know it. Go compete with the US mint for making money, go compete with Amtrak for trains, go compete with Boeing and Airbus (and maybe 2-3 more) for airliners, go compete with Google/Apple on Smartphone operating systems. Oh, and do it on your own without backing by huge war-coffers. Go, do it! And if you can’t, never ever complain about anything these companies do, they are, after all, better than you!
nak

June 12, 2012

“Don’t buy my book on Amazon” (because I can get $1.90 more if you buy it through iBooks)

Ok, I won’t. You’re being quite petty here. You made more than $1000 through Amazon, and less than a third as much through your next highest netting channel — pdf. You’re selling PDFs through a new service, which is of course more likely to give you a better cut (hey, they need content) so I’ll consider them an outlier — they can’t keep up these margins forever but Amazon, iBooks and nook can keep up their margins.

As a percentage of your top netter — iBooks 100% — Amazon: 73%, nook: 93%.

You may know something about travel (I’m not sure on this since I won’t be buying your book per your advice) but you know nothing about sales.
andrewhyde

June 12, 2012

So I just have to tell people to buy my book on Amazon and they will buy it?
Then buy my book on Amazon.

You are a pro at sales, do you do consulting?

🙂
Jetdillo

June 12, 2012

Please don’t entirely dismiss Nook. I have a ton of books on my Nook, but very few of them in Nook format. Most of my e-book content is in PDF format because I like/need to sling things between the Nook and two laptops. So I’m buying a ton of PDFs but storing them on my Nook.
David N. Welton

June 12, 2012

As someone who does Kindle conversions professionally, even for a lot of images, 18M sounds on the large side. What dimensions are you using for them?
andrewhyde

June 12, 2012

Great point. I need to pick up a nook to see how the .pdf looks!
nak

June 12, 2012

Don’t tell people not to buy your book. If you are unhappy with a distribution channel don’t use it. But please don’t tell people who may want to give you money what to do. I doubt you wish you didn’t have those Amazon sales.