Why Does Amazon Pay Only an 18% Royalty for Some eBook Sales?

Earlier this week I set out to answer the question above, but as of this morning I've realized that I cannot. Neither KDP Support nor Kindle PR  have been able to tell me anything other than the boilerplate answers posted online, and after going back and forth on this issue I've come to the conclusion that they simply don't have the information.

So today I am passing the question on to my readers - and in particular, the many authors, publishers, and ebook buyers who are reading this blog. I figure if enough of you ask Amazon about this issue then they will eventually explain.

A few days ago i posted on one author's rant about the delivery fees Amazon charged on his ebooks. I didn't think much of his complaints at the time due to the fact that Amazon is quite open about those fees.  Also, it turns out that his ebook was poorly made. After cleaning up the text and some basic image optimization the size of the ebook dropped from 18MB to 2MB.

But as much as I disagreed with that author on the issue of the delivery fees, he did stumble upon a question which had gone unanswered for quite some time now.

For as long as Amazon has been selling ebooks internationally they've also been quietly padding the prices in certain countries. This isn't something you can see in the KDP support pages, and it's not something you can see in the listing pages for the Kindle Store (unless you look for it deliberately). But they are being tacked on, and Amazon still hasn't explained the charges adequately.

For example, check out the price of this Kindle ebook: The life and death of Benjamin Brash. It's listed for $2.99 in the Kindle Store, by the author, who set the same price worldwide. Depending on where you happen to be buying it from it might cost you up to $5.74 (info via eBookFrinedly and Twitter):

Some Parts of Europe - $3.33
UK - $2.93
Africa - $4.99
Asia & Pacific - $2.99
Australia, Canada, India (& other Commonwealth countries?) - $2.99
Latin America - $2.99
Middle East - $4.99

The reason I'm highlighting this ebook in particular is because the author is selling it for 2.99, and the price the author sees in her home country of Norway is $5.74. She wants to know why Amazon claims it costs so much more it operate in Norway than in the rest of Europe, and so do I.

Here's the thing about those prices. In the case of the ebook above, the author makes just over a buck from a sale to Norway (because Amazon reportedly pays 35%). But once you factor in the fees, the author actually makes around 18%, not the 35% that Amazon lists the KDP contract.

I followed up on this issue, and right before Amazon started ignoring my emails I received this boilerplate response from Kindle PR:

Pricing of titles from the Kindle Store varies by country or region due to differences in digital list prices, local market segment prices, and tax rates. When browsing in the Kindle Store, customers can sign in to see accurate pricing and availability for their home country or region.

While that might mollify some, it falls apart when you look at the facts of the situation. You see, this same ebook sells for $5.74 in Poland. Poland is a member of the EU, so you'd think that it would cost the same to sell an ebook there as it would to sell it in Germany or Italy, where this title lists for $3.33.

But for some reason Amazon pads the prices of ebooks when they're sold to Poland, Norway and other countries. Don't you want to know why?

I do, but I have been stymied in this. So I am going to pass the question on to my readers.

Folks, this should be a burning question for everyone who is selling via the Kindle Store. Amazon padding the ebook price costs you both readers and money. It is a situation which desperately needs to be explained or resolved.

Don't you think authors and publishers deserve a better explanation of why they're not getting the full payment they deserve?

If so, go ask Amazon.

24 thoughts on “Why Does Amazon Pay Only an 18% Royalty for Some eBook Sales?

  1. Hi, Nate. You’re bringing up an interesting issue. I don’t have an answer for your question, but I can tell you that even though Poland, Italy and Germany are all EU members, each country has different VAT rates, which could explain, at least partly, the price difference. Having said that, I don’t think it’s the reason why there’s a 2$ difference between Poland and Italy or Germany. Maybe 3G coverage is an issue as well, or maybe the fact Amazon has national stores in Germany and Italy, but not in Poland or Norway.

    1. Good point, but Amazon moved their operation to Luxemburg in order to take advantage of the 3% VAT. All EU ebook sales are routed through there.

      Also, The UK has a moderately high VAT on ebooks but doesn’t have high ebook prices, so VAT doesn’t appear to be the issue.

      1. For Norway at least it does not matter where the etailer is located. It is required that they add Norwegian VAT (25%) to all sales of digital goods. Of course not all etailers do this (I don’t think there are any possible sanctions), but Amazon does. Btw Norway is not at member of EU and I do all my purchases through Amazon on their American website.

        This is of course not a very popular law for consumers here in Norway. Especially since paper books are exempt from VAT.

  2. Well, in Norway the VAT is high enough that the competition is trying to sell individual ebooks and giant memory card cartridges to get around it:

    http://www.engadget.com/2011/11/21/norwegian-bookseller-begins-selling-e-books-on-memory-cards-for/

    Perhaps Amazon needs to tack on higher prices to deal with that same tax.

    Or alternatively, perhaps Amazon can simply get away with higher prices with it because Google, Nook, and Kobo don’t operate in those countries and the local competition is so comically inept that they think ebooks go on memory cards.

  3. I can’t see it being a VAT issue because other books that are at $2.99 in the US, Amazon sells for $2.99 in Norway. The reason, they are also on Smashwords or B&N and Amazon price matches. Surely if VAT was the issue then all these sellers would be charging more in some countries. That Amazon can price match the $2.99 suggests to me there is no justifiable reason for this. I speak as a Norwegian resident. The only defence is that even at $5.74 ebooks from Amazon are much cheaper than from Norway’s own ebooksellers where a typical ebook costs Kr79 (about $14)

  4. I have had a similar experience. I listed the book to sell for $2.99. But in Jamaica it lists for $4.99 and Amazon pays royalty at 35% for the Jamaica sales instead of the 70% that I get from the US based sales.

    1. It’s about time, Mike, that you agree with me. :) As for loving this, well, no. The point I try to make is that I want competition, not a monopoly or near monopoly, in ebooks, which is why I oppose everyone’s rush to embrace Amazon as god’s gift to consumers, authors, and monkeys with tin cups. As for why the price “gouging”, the answer is simple: Amazon has shareholders and cannot constantly lose money on a product line and stay in business. If it can’t make the money on product pricing, it will make it on ancillary services that are hidden from the consumer.

  5. This is a self-pubbed book and via the Amazon dashboard the author can set different prices in different markets. I don’t see how any assumptions can be made about what price changes Amazon might be making without knowing what price the author has set and in which markets.

    1. Exactly. Further, at the 2.99 price point, you can choose the royalty of 70% or 30%. I’m not sure why it’s assumed the author chose 35% when you can’t even do it at that price.

      1. The author chose 70% but that rate only applies to purchases made in a set list of countries, for purchases made in the rest of the world Amazon pay 35%.

    2. Of course I know the price. I wouldn’t have used this title as a reference point if I didn’t check that detail first. But apparently I didn’t explicitly say in my post that the author set the price as $2.99 worldwide.

  6. It’s a charge Amazon adds to Kindle ebooks in countries where it doesn’t have a 3G data agreement with a local telecommunications company. In those countries Amazon are paying roaming international data charges which are a lot higher.

    The UK used to see prices with the extra $2+VAT added to them, until Amazon sorted out something here.

    Amazon’s VAT rate on ebooks in the EU is currently 3%, as that’s the VAT rate on ebooks in Luxembourg where Amazon registered for VAT. Before the start of this year it used to be 15%.

    1. Paul, that sounds feasible. But if that’s the case, why dosen’t Amazon come clean and just say so to put the matter to rest once and for all? Is there more in the mortar than the pestle.

  7. Um, shipping and handling?

    It is a clever tactic (deceptive but clever) — your royalty is based on the retail price. But those extra fees, those are delivery fees, separate from the retail price…kind of like, shipping and handling when you buy a physical product from Amazon.

  8. Nate,

    I’m currently developing a website to provide a cheap publishing format to indie authors who don’t want to go the route of amazon or ibooks. With the rates they charge, I feel I have a good opportunity to enter the market. Would you have any advice for starting this up? What are some pitfalls that might be expected? Lastly, do you think any small startup with this idea could really stand a chance in a land of giants?

  9. Nate, it’s been well over a year since this post was run, and meanwhile we have seen some significant changes: Many of these countries where Amazon was surcharging now have other international players on the scene – ‘txtr, Google Play, etc- all managing to deliver ebooks without surcharges.

    Apple meanwhile seem increasingly to round up prices by a dollar or more for Canada, Australia and New Zealand. Books set at $2.99 on Apple US will be $2.99 in all the US currency countries (as per Apple’s convenience – Brazil, Colombia, Venezuela, Peru, etc) but will vary from $2.99 to $3.99 or $4.99 in New Zealand for no apparent reason. USD 2.99 equates to approx AUD 3.35 and NZD 3.65.

    We’ll be running a post on this subject in January. We’ve had no more luck getting a response from Amazon than you had, needless to say. Amazon’s famed customer service doesn’t run to answering awkward questions.

    If any readers have any recent examples of price-hiking by Amazon, Apple or any other retailer, we’d love to hear from you.

    And then of course there is the new back-door surcharge for Australian and New Zealand readers, where some authors are seeing their set price hiked by Amazon out of all proportion to currency exchange rates.

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