Skip to main content

Think Amazon is Your Friend? You Might Have Amazon Infatuation Syndrome

6391972911_e3b3a4f8ab_z[1]Last night Amazon posted their third official statement in the ongoing contract dispute with Hachette, and like their first statement the open letter posted last night is proving to be an effective tactical PR maneuver.

The letter, which you can read over here, said that Amazon only wanted a 30% commission from sales of Hachette ebooks, and that Amazon was fighting with Hachette over whether the ebooks would be expensive or cheap. The statement goes on to lay out the math to justify lower ebook prices, and then it concludes with the idea that authors should get 35% of the sale price of an ebook.

That last bit has turned a number of authors' heads, including Hugh Howey. He is now convinced that Amazon, a publicly traded corporation out to squeeze margins as thin as possible, cares about the royalties paid to authors by publishers:

Just as immense here is Amazon’s call for higher pay for authors, which is neatly tucked within the folds of their post. Amazon comes right out and states that they are asking for 30% on the sale of ebooks, which is what they currently get from most self-published titles. It is an entirely reasonable percentage for a retailer (bookstores get 40% – 50%). What I love, though, is that Amazon then suggests that the remaining 70% should be split evenly between the author and the publisher.

As Barry Eisler points out, Amazon just became the closest thing we have to a writers’ guild. Not only are they fighting for lower prices, which sell more books, capture more of an audience, and make more income . . . but Amazon just came out in favor of ebook royalties of 50% of net. That is twice what authors are currently offered.

I would argue that Howey has made any number of mistakes here, including taking a PR statement as fact. Another mistake that could be made would be to believe was to believe that a for-profit corporation as ruthless as Amazon cares about anything other than their balance sheet.

Later in this post I will explain why Howey is wrong, but at the moment I want to point out that Howey’s beliefs could be a sign of a newly identified condition called "Amazon Infatuation Syndrome". This term was coined earlier today by Nicole Cushing, and Hugh Howey is the first known case.

Like Amazon Derangement Syndrome, AIS sufferers have an irrational emotion towards Amazon which overrides conscious thought. In the case of AIS, that emotion is love for a soul-less corporation:

Given how Howey is gushing about Amazon above, I don’t beleive he would break up with the retailer.

Don’t get me wrong, I like Amazon; they’ve treated me well as a customer. But even though I do business with them, I make a point to never forget that one of the names proposed for Amazon was (Jeff Bezos is apparently a big believer in truth in advertising.)

Amazon is in this for their own interest, and not anyone else’s, and that is why it is important to remember that we cannot accept yesterday’s statement as fact. It is a PR statement, and as such it was not written to convey facts. Amazon’s goal was to convince you to believe an idea: that Amazon only wants a fair share (30%) and lower ebook prices.

The thing is, we do not know as outsiders that this is Amazon’s actual position. All we know is that this is what Amazon has said is their position, and that is not the same thing. For all we know Amazon is selectively reporting the facts to support their argument. made up this statement out of whole cloth solely with the goal of swaying opinion in their favor. (And just to be clear, my disbelief also extends to everything Hachette has said or leaked.)

And that, folks, is where Howey went wrong. They forgot to take the statement with a grain of salt, and in some cases that resulted in AIS.

Calmer heads have long been saying that authors should not be taking sides in this dispute between multinational multi-billion dollar corporations, and I continue to think that is a good idea. Both sides are acting in their own interest – not mine. Even Amazon, which some might argue has done well for indie authors, has only ever acted with the goal of boosting their revenues.

A pox upon both their houses, I say.

image by PhotoAtelier

Similar Articles


Dan Agin July 30, 2014 um 10:10 pm

A pox upon both their houses, you say. Maybe there’s too much confusion in this post. You argument seems to be that since Amazon is a corporation, their motivation is suspect. Really, that makes no sense. Is it not possible for a corporation to be committed to profit and and AT THE SAME TIME be also committed to social responsibility? You have no evidence that this is not the case with Amazon. The company many be ruthless with corporate competition but there is NO evidence that Amazon is ruthless with customers or authors–all the evidence is opposite. So maybe here for some reason you are Don Quixote fighting windmills. In truth, since you have no evidence one way or the other, you could just as well take Amazon at its published word on its motivations. Instead, you choose to assume evil where there is no evidence any evil exists. Maybe, since it’s Amazon and authors that are the focus in this post, you ought to ask many digital authors who pubish via Amazon if they feel abused or exploited by Amazon. I think you will find most or all say no. In sum, the pox should be wished for Hachette–I see no reason to wish a pox on Amazon. P.S. There has never been anything "soul-less" about Amazon. Jeff Bezos runs Amazon.

Nate Hoffelder July 30, 2014 um 10:38 pm

Amazon runs their warehouse staff ragged; where is the social responsibility in that? Also, Jeff Bezos is famous for saying "your margin is my opportunity". That does not fit with the idea that Amazon really wants authors to have 35% of the sale price. In fact, I would say it pretty much proves that the 35% idea is bogus; Amazon wants that 35%.

And just to be clear, I said Amazon was acting in their own interests; I didn’t say they were evil. I’m not sure why you would equate being evil with acting in their own interests, but you are welcome to make the argument.

Ebook Bargains UK July 31, 2014 um 6:04 am

It doesn’t just run them ragged. Two warehouse workers have been killed recently.

Nor does a socially responsible company find itself being sued for ripping off consumers, as per the apps payments.

Nate Hoffelder July 31, 2014 um 8:31 am

I would like to say accidents happen but fact is Amazon pushes margins further than most. The deaths are probably a result of unsafe working conditions.

Ebook Bargains UK July 31, 2014 um 10:08 am

In the first instance those responsible – the agencies Amazon hides behind to do its dirty work – were fined just $6,000 each for H&S failings. Given the second death was barely six months after the first, in very similar circumstances (albeit different location) the investigating authorities may take a closer look at the latest.

SpringfieldMH July 31, 2014 um 3:57 pm

Whereas trad pubs warehouses are workers paradises… Give me a break…

Marion Gropen July 31, 2014 um 6:11 pm

Have you BEEN in a big publisher’s warehouse? They aren’t paradise, no warehouse is, but the ones I’ve seen are not bad places to work. And they’re definitely not unsafe.

Bardic July 31, 2014 um 3:59 pm

Nate – Amazon has been paying indies 70% of gross for a long time. Why in the world would you disbelieve their statement that tradpub authors should get 35% of gross? Either way they’re still getting their 30%.

Marion Gropen July 31, 2014 um 6:16 pm

Um, because Amazon knows perfectly well that MOST of the costs of a print book are exactly the same for the e-only releases?

It’s a blatantly disingenuous attempt to fan the flames of author resentment toward publishers. It capitalizes on author (and public) ignorance of what publishers do.

Felipe Adan Lerma July 31, 2014 um 8:05 am

"there is NO evidence that Amazon is ruthless with customers or authors" –

"since it’s Amazon and authors that are the focus in this post, you ought to ask many digital authors who pubish via Amazon if they feel abused or exploited by Amazon" –

Exclusivity, applied mostly (only?) to small self-published authors, to the point of not even being able to have one’s work in libraries (digitally), is wrong. I won’t say exploited, or abused, but it’s definitely an unequal disadvantage.

And since I’m also a very long time customer, I’ll add that in that regard, I consider Amazon among the best in the business.

Ebook Bargains UK July 31, 2014 um 10:10 am

You only need to visit blogs like Chuck Wendig’s and read comments to see the level of dissatisfaction with Amazon from indie authors.

Felipe Adan Lerma July 31, 2014 um 10:31 am

Thanks eBook, I’ve obviously heard of Chuck, but haven’t been to his blog.

I guess my question would be, is it also as one-sided as so many blogs are, either super pro big publishing or super pro Amazon?

Or is it more balanced, acknowledging the good, and less desirable, of both sides, ie, thinking of the author rather than the corporate entity?

Thanks again, will try and find a link for there later.

Nate Hoffelder July 31, 2014 um 10:34 am

He tends to use inflammatory language towards self-pub but I am slowly reaching to conclusion that he is neither for nor against.

Ebook Bargains UK July 31, 2014 um 2:52 pm

I think Chuck uses inflammatory language towards everyone, but worth noting he is an Amazon imprint author.

I suspect he won’t be getting any further deals with the mighty Zon though.

Felipe Adan Lerma July 31, 2014 um 3:58 pm

Nate, eBook, thanks – followed eBook’s link, wow 🙂 looks like it’ll be a doozy to take a peek at 🙂

excerpt : "To talk about e-book prices, I want to first talk about ice cream."

Taline July 31, 2014 um 5:55 pm

Chuck Wendig wants people to think he’s unaffected so that he can take paychecks from both parties. He will go wherever the wind blows.

Marion Gropen July 31, 2014 um 6:18 pm

"No evidence" if you have the memory of a fruit fly.

What about what they did to all the self-publishers who were printing with LSI and offering Amazon 20% discount terms when Amazon forced those authors to move to CS and offer 40%?

Theresa M. Moore August 1, 2014 um 3:28 pm

This has nothing to do with ebooks. Amazon tried it and was sued for it by an independent publisher. It can’t "force" self-publishers to do anything if the publishers don’t want to. I am not aware of any such message being sent to me, and I did use CS for a short time before I became aware that it was not giving me full distribution value. I moved to LSI from CS and have not looked back. Amazon pays the wholesale discount I set, and cannot dictate terms to me. I don’t know where you got your information from, but it is flawed. I also used KDP for a while until I noticed that sales were not as forthcoming as I thought they would be. This is also Amazon’s problem, as I always had more sales through other venues in the first place. It is easy to believe that authors are trapped, but they choose to see Amazon as the most fabulous object in the universe, whereas I don’t.

Barry Marks July 30, 2014 um 10:32 pm

I think most of us are smart enough to realize that Amazon has posted a PR statement and that it’s likely to be slanted to their point of view. I hope most of us are also smart enough to realize that your statement is an anti-PR or anti-corporate statement written to express your distrust of large corporations.

I’ve just spent a few minutes googling for reference to as a proposed name of Bezos company and I could find no reference to it. There were many references to Tom Clancy’s game "". Could that be a source of confusion?

And this thing about a syndrom; taking that disease that someone invented today and then treating it like a factual part of your story, even though you never actually stated that it was a real thing, seems questionable to me.

I realize that you’re a blogger and that as a blogger you post personal opinion and that’s a fine and worthwhile thing to do. But I do think your opinions might go down easier if you do it with less invective. I’d like to read more ideas and facts and fewer expressions of anger.

I read a lot of posts on this and other sites, yours as well as other bloggers, and I enjoy them. I didn’t enjoy this one.


Nate Hoffelder July 30, 2014 um 10:53 pm

You’re right; the name should have been

Nate Hoffelder July 30, 2014 um 11:25 pm

I’ve read through the post for a third time but I don’t see the invective or the anger. Can you explain what I am not seeing?

This is a serious request; I am always ready to learn how I can improve my writing style.

fjtorres July 30, 2014 um 10:54 pm

You are confusing your adjectives.
Bezos' original name for what became Amazon was RELENTLESS.COM.
Which is a long way from ruthless.

Here’s a link from the Economist (hardly infatuated with Amazon):

Nate Hoffelder July 30, 2014 um 10:56 pm

Already fixed it.

fjtorres July 30, 2014 um 10:57 pm

And here is a fuller account of

fjtorres July 30, 2014 um 11:02 pm

As to the term relentless, the Oxford dictionary defines it as: "Unceasingly intense".

fjtorres July 30, 2014 um 11:05 pm

Oh, and I don’t think of Amazon as a friend; I think of them as a servant.
I pay them to fetch me stuff.
If they don’t please me, I give my money to somebody else.

Deborah Smith July 31, 2014 um 1:58 pm

Amazon thinks of you as a cash cow and a data source.

James July 31, 2014 um 2:10 pm

As does every store you patronize.

Avid Reader July 30, 2014 um 11:38 pm

It’s been over 24 hours. Have we had any leaks or statements from Hatchette disputing Amazon’s claims about the contract dispute?

fjtorres July 31, 2014 um 1:31 am

Just the usual disparagement and hand waving.
Just as with the author earnings reports; since they can’t dispute the facts, they pound on the table and scream.
By now the would’ve at least trotted out B&N or Kobo is they could muster a real answer to 1.74 but they can’t.
Price elasticity is a fact. Period.

Deborah Smith July 31, 2014 um 2:01 pm

See the site of Harvard PhD Dana Beth Weinberg also her posts at Digital Book World for a thorough dismemberment of the Authors Earning Report methodology. Also see for a statistician’s likewise takedown of the reports.

There are plenty of reputable sources out there who’ve dismissed the AER as meaningless.

Nir July 31, 2014 um 4:02 pm

And of course Hugh has debunked Dana also:
and Hugh and Dat guy have responded to their critics:

However, there can be little question about the actual data at as anyone could reproduce it with a pencil and paper by browsing Amazon’s site (although it would take a long time to cover as many books as authorearnings does with their web crawler).

So it seems a bit extreme to say that their reports are meaningless. If you just take the raw results that show that 25% of all ebooks on the Amazon category best-seller lists are self-published, how can that ever be seen as meaningless? What do you think the percentage of self-published books was 5 years ago? Is it possible that there has been some meaningful growth in self-publishing in the last 5 years? And even if some of their methodology is flawed, do you think it possibly meaningful that those 25% of ebooks being sold on Amazon are also earning their authors four times as much in royalties as the ebooks that are traditionally published?

You can nibble around the edges and say this conclusion or that conclusion is flawed, but it strains credulity to say the data itself is meaningless.

Jeremy Greenfield July 31, 2014 um 6:36 pm

They’re worse than "meaningless." They’re deliberately misleading. Just because Hugh and his anonymous data guy have responded doesn’t mean they proved anything. They don’t understand data and statistics and refuse to learn.

There are so many problems with the AE report that it’s hard to know where to start. But there have been ample, ample takedowns. At this point, you can read them all and decide for yourself.

Admittedly, I’m biased. So, take this for what you think it’s worth.

Avid Reader July 31, 2014 um 4:07 pm

The question related to Amazon’s posting, NOT the author earnings report.

SpringfieldMH July 31, 2014 um 4:08 pm

Again, Deborah, names please for your plenty of reputable sources.

21 days ago, on your blog on July 9th, you clearly did not know who Dr. Weinberg was, expressed serious concern about her lack of experience with the publishing industry and worried that she was not appropriate to present at the RWA national conference. Now, she’s the one name you are willing to put forward.

No sale.

Steven Zacharius August 1, 2014 um 12:53 pm

I’d like to see the author earnings report done for a month….and then the following month as a comparison. I’d also like to see the title and author showing rather than a truncated number to look at the sales. I can’t tell who the publishers are or what the titles are with these numbers. For a while the KU sales are going to skew everything until they determine how these downloads are going to have have an effect on their bestselling rankings.

Nirmala July 31, 2014 um 6:51 pm


Do you really think it is meaningless that 25% of the 120,000 ebooks on the bestseller lists are self-published? How is that meaningless? And they get the same percentage at the top of Amazon’s overall rankings as further down in the long tail. There is no manipulation of that particular set of data or interpretation. Again, anyone can check it on the Amazon site.

Even if you do not buy any of the rest of their report, it still shows that a lot of self-published ebooks are selling on Amazon.

Hugh Howey July 31, 2014 um 7:42 pm

Careful. If you disagree with Jeremy, he’ll whine to your boss until he gets you fired.

I’m not kidding.

Nirmala July 31, 2014 um 7:53 pm

Thankfully, I am my own boss. But if he whines enough, I will fire me 🙂

Steven Zacharius July 31, 2014 um 10:43 pm

As I’ve said before, at least when dealing with publishing houses, it’s revenue that counts. Units sold means nothing when books are sold for very low prices. So if the fact is true that indie books are 25% of the Kindle bestseller list, that’s nice….but what does the revenue equal when you multiply the units sold times the price they were sold for? That’s what we put in the bank. I understand that KDP authors get 70% of the revenue above a specified price, which is great for them, but it really makes the bestseller list not very relevant. Maybe it should be broken down by price point. How many indie books would sell at $ 9.99 or more? I haven’t looked at the various analytic reports from HH, but does it mention how many books in the study were at various price points?
Both sides of the business can coexist. For the life of me I don’t understand why there is bashing from both sides.
Let Amazon and Hachette negotiate their terms on their own. Somehow they’re going to come to a meeting of the minds or Hachette will figure out another way to make up the business loss.

Nirmala July 31, 2014 um 11:12 pm

Gosh Steve, have you even looked at the reports. They also calculated the dollar value of the ebook sales by multiplying the estimated number of sales by the price. And you are of course correct that the percentage of gross revenue is less for self-published books as they are generally lower priced. But Hugh and Data Guy took it one step further and calculated the amount the authors received based on the royalty rates for self-publishing and trad publishing. And again no surprise, the self-published authors more than gained back the ground they lost due to mostly 70% royalties.

Of course the net revenues to publishers matter the most to publishers like yourself, while net revenues to authors matter more to authors as they should.

Nirmala July 31, 2014 um 11:17 pm

There is an update on this post where Data Guy calculated the daily unit sales and daily revenues of the top 500 books on Amazon (leaving out the top 10) at various price points. Here are the charts:

Steven Zacharius August 1, 2014 um 8:25 am

Yes I have looked at authorearnings report. I just don’t think you can base everything about author earnings on a snapshot of one day in the life of Kindle. I think others far smarter than me with analytic ability have stated that. I’ve taken our own books from Kensington and looked at daily sales from our vendor portal and the wide range of numbers of copies sold for any given ranking is enormous…..and by enormous I mean hundreds and hundreds of copies in the top rankings and even more so at the bottom of the list. The first Tuesday of the month when releases from publishing houses go on sale would alter the rankings enormously.
If Amazon wants to show the world how great indie sales are, and I do believe they are great for a select group of writers, then they should publish the rankings and give more detail about Kindle sales in general. But they don’t, so it’s all speculation and I can only base my opinion on the factual numbers I see from our own rankings on a daily basis.

Nirmala August 1, 2014 um 12:21 pm

@Steven: Authorearnings has done their report on three different days now and two different ebook stores, so it is no longer just one day’s data. And there is another consideration if you are correct that their assumptions about the amount of dollar sales relative to unit sales is off. Even if it is way off by a wide margin, that would apply equally to both self-published and trad-published books. And even if they are off in both directions on different books, it seems pretty reasonable to assume that these errors also occur in both directions on both self-pubbed and trad-pubbed books. In other words, their specific figures for the dollar amount of sales to each group could be off, but it is most likely that they are off roughly the same amount for both groups (self and trad) since they used the same calculations for both groups.

Now someone with more knowledge about statistics could also probably figure out a number for the margin of error, or how much their percentages of dollar revenues from each group could be off due to normal randomness. But again I doubt the margin of error is greater than say 5% given that they used the exact same methodology and exact same figures of dollar amounts per rank for the calculations for both groups.

This brings us back to the original statement that the authroearnings reports are meaningless. Even if they are not perfectly accurate (and no study ever is), the results are still profoundly meaningful in showing how far self-publishing has come.

And I apologize for suggesting you had not read the authorearnings reports. That was a bit snide and I am sorry.

Nirmala August 1, 2014 um 12:30 pm

I forgot to mention my main point which is that if the dollar amounts are off by the same amount for both groups, then the percentage of total dollar revenues for sales earned by both groups as calculated in the report would still be pretty accurate. The overall percentages would stay the same as both groups totals would go up or down equally if you used different figures for dollar amounts per rank across all ranks.

Their data also shows that self-pubbed ebooks have a pretty consistent share at all different levels from the top of the rankings to the bottom of the long-tail.

Steven Zacharius August 1, 2014 um 12:41 pm

Nirmala, I’m not a statistician either but I don’t know if you can use the logic that it would be off the same percentage for both sides. All I know is that when I examine our daily ranking figures from day to day, that there are enormous swings from position to position. For example I looked at two of our titles today and one of them is ranked 562 and the other 867, yet there is only a difference of roughly 150 copies between the two of them. When I compared the actual number of copies sold for those two positions they were no where near the numbers specified on the author earnings report. There is an enormous swing on an hourly and daily basis. And how do you account for new titles being released when publishers do their weekly lay down of books at all accounts. If a new set of books from publishers goes on sale Tuesday; they’re going to have huge swings on the data for the next couple of days pushing all the other books down further on the list. There’s just too much fluctuation and I don’t even know what it all means in the end or what’s the purpose of it. Are we just trying to say that there are indies making money? Of course there are. Are we saying that the business has grown for them….of course it has. But that certainly doesn’t mean that authors from publishing houses are leaving in any sort of panic to indie publish and the constant bashing of publishing houses is not called for.

Nirmala August 1, 2014 um 1:00 pm

I may be wrong, but with a sample size now of 120,000 ebooks that make up 50% of all ebooks sold on Amazon, I think that any discrepancies would have to pretty much even out across the different groups. That is a ridiculously high sampling rate.

And perhaps Hugh and Data-Guys numbers are actually pretty accurate as an average number of sales for each position, although again it seems to be a moot point.

The exception you mention that could happen when publishers release their new books would seem to only increase trad-pub’s share and decrease self-pub’s share on those days. So if that particular objection applies to their data, it would only seem to suggest that the conclusions on authorearnings about self-pubbing may be too low.

As for authors not leaving in droves, it has always fascinated me how slowly change happens in this world. I have always been someone who has to try something new, but the vast majority of people are slow to change the way they do things. However, there can be tipping points where suddenly a new technology or approach takes off and becomes mainstream. Maybe Joe and Joe and Hugh are all a step ahead of the tipping point, and within a year or two we will see a stampede of authors into self-publishing. Or maybe it will take longer.

It seems that unless publishers become a lot more responsive to the changes in their industry and somehow dramatically reinvent themselves, there is a very good chance that the tipping point will happen sooner or later. Authorearnings is meaningful also to the degree it shifts author’s perception of self-publishing. It has probably already done that and will definitely continue to do so.

Steven Zacharius August 1, 2014 um 1:12 pm

Nirmala, if the study was done when publishers new books were released….the traditional publisher’s books would fill most of the top slots of the list. New releases do that all the time. It was push down the indie released books dramatically and decrease their ranking.
But as I said, I agree with you that indie publishing is growing. Traditional publishing is publishing less and less authors because of reduction in shelf space. Many authors who aren’t picked up by publishers decide to self publish too. But none of this means that traditional publishing is dying. If people want to indie publish they can and will. There will always be those authors who would want the publishing company to be behind them; to provide marketing, publicity, editing, touring, etc……also selling subsidiary rights and getting their books into print.

Nirmala August 1, 2014 um 1:43 pm

The other enormous factor in all of this is the overall shift to ebooks. Two of the most shocking pie charts on authorearnings are the ones in the first report that showed that ebooks make up 86% of the top 2500 selling genre fiction titles on Amazon. For the top 100 genre fiction titles the number is 92%, and the number two format was audiobooks at 4%. Paper books were 1%. That is almost unbelievable….paper books are only 1% of the 100 top selling genre fiction books on Amazon. I just went on Amazon and looked through the top 100 Mystery/Thriller books. The first paper book I encountered was #56. The only other paper book on the entire list of 100 was #58.

If ebooks continue to expand, that obviously reduces the advantage publishers have. You may be right that there will always be some authors who want the other advantages that a publisher offers, but again we may reach a tipping point where the number of such authors drops precipitously. The numbers on Authorearnings suggest that we may be seeing the first surges of a very big tsunami, or the process may unfold more gradually. A rise in the sea level will get you just as surely as a tsunami if you are living on the beach. Publishers might have a lot of shorefront property today, but I am not sure it will be worth as much in a few years.

If Barnes and Noble does not survive, that would be a tipping point, even a date which will live in infamy, if I can indulge in a little hyperbole. I just saw an interesting article about the shift to online shopping: And then this one about the magazine industry:

First music, then movies and now shopping malls and magazines and newspapers. Let’s see now, what else might be next? Perhaps paper books?

Steven Zacharius August 1, 2014 um 11:40 pm

Nirmala, I’m not looking at the AE report at the moment but you have to realize that Amazon is a force in ebooks, not nearly as much in print books. In ebooks they are probably close to 60-65% of the ebook business….it print books it’s a fraction of that. So it’s no surprise that ebooks would account for most of their top sales and I don’t know if you were looking at units or dollars. Units would make absolute sense because of low priced units skewing the results. They don’t discount printed books generally in the same manner.
There are many many other bigger print retailers than Amazon. You have B&N, Target, WalMart, Kmart, the club businesses like Costo and SAMS….the library marketplace, etc….

Nirmala August 2, 2014 um 12:25 pm

Hi Steven,

Let me first say again how much I appreciate having someone from the traditional publishing world that interacts on these blogs. It really balances out the perspective.

As for print, here are some more points: While the majority of print sales today do happen in stores, the trend there is towards ever increasing online sales. According to Nielson ( online print sales now are almost equal to the sales in bookstore chains. (And Amazon does have a 64% share of online print sales.) In addition, print sales overall are declining while ebooks are increasing.

But here is the main point I want to make: as a self-published author, I am not frozen out of the online print market. My print books are on Amazon, B&, and lots of other online outlets. Admittedly, I probably sell fewer print books even online than if I had a publisher that really got behind my book(s) (a big if, even if I had a publisher), but I do sell more than a few POD copies of my books. My author wife, Gina Lake, and I combined currently get about 20% of our book income from print sales, another 20% from audiobooks and the rest from ebooks. This is possible in part because just like with our ebooks, we receive higher percentages on our audiobooks and print books than we would with a traditional publisher. When one of our POD paperback books sells, we make about 30-35% of list price.

So as print sales move online and ebook sales continue to grow at the expense of print sales, the importance of the additional brick and mortar print sales channels a traditional publisher provides is declining. Of course, each individual author must make their own choice as to how important brick and mortar sales are to them and if it is worth giving up a large share of all of their earnings from all of the various formats. But no self-published author needs to give up print sales altogether.

Steven Zacharius August 2, 2014 um 12:49 pm

Nirmala, first of all it’s my pleasure to be here. I enjoy the interaction. It’s funny that you just quoted that PW article because I just caught up on my PW reading and I tore that page out of the magazine. Apparently for Kensington, Amazon’s print sales are extremely low and I guess are not the norm. Maybe because so much of what we publish is women’s fiction, mysteries and thrillers; which are the predominant sellers in e, that our print sales are lower than would be the case for other publishers. I’m planning on having a conversation on Monday in my office about this.
Your point about POD is valid. POD is really just like an ebook in theory because it’s a 100% sale. If it’s from Amazon, they don’t print the book until they have a firm order for it and it generally would not be returned, so they can offer a higher royalty rate to authors, similar to ebooks. Of course I don’t know what genre you write in but maybe your ebook sales are lower than normal or your POD sales are considerably higher than normal. POD sales are generally a very small piece of any business.
POD is an amazing process and it’s come a long ways but the profitability model still has POD costs way too high to compete with traditional offset printing of trade books, but it’s getting better and better.

Nirmala August 2, 2014 um 1:10 pm

My wife and I are spiritual teachers who write in the self-help and spiritual non-fiction genres. As genres go, that puts us at the opposite end of the spectrum from you as in general, non-fiction readers do still have an overall preference for paper books. So you are probably correct that our POD sales are higher than typical for self-published authors.

Print on demand is a remarkable development, in some ways as revolutionary as ebooks. But I can see how the relative costs do not work yet for a publisher compared to a large print run. But who knows in a few years, the costs might be closer. And it seems for small publishers with niche books, or even for large publishers wanting to keep their backlist active, POD might be a better choice already. Or even for a publisher like yourself: with genres that are moving quickly into ebooks, it might end up being cost effective to use POD sooner rather than later for you.

Steven Zacharius August 2, 2014 um 2:18 pm

We use POD all the time; all publishers do. We use them for titles that run out of stock, for ARC’s, or copies of books for authors to sign of our digital only imprints.

Nirmala August 2, 2014 um 2:22 pm

Thanks for the info. You are way ahead of me, and it makes total sense in those cases you mention.

William D. O’Neil July 30, 2014 um 11:53 pm

I’ve been an executive of a large corporation and dealt with execs from a number of others. Like most people you appear to have a misleading, caricatured image of what corporate executives and leaders truly are like. There is a fundamental polarity between the numbers man (or woman) and the operations man. The Darth Vader numbers-cruncher is a widely-held stereotype, but a corporation simply cannot be made to work without a very heavy admixture of operations people at the top. Given the realities of competitive pressures means that you need a lot of people who are in love with whatever areas the corporation operates in, and a CEO who has a good measure of it too.

There are any number of things that Amazon might have started selling, but it chose books. That can’t possibly be an accident, and it says something about the orientation of the people who run it. They may want to be many things, but bookseller to the universe is high among them. I find that attractive.

Top-management attention is a precious capital resource in any successful corporation. There’s only so much to go around and nothing can thrive for long without it. Amazon has devoted a lot of attention to creating a market structure for independent author-publishers. It’s very, very hard to believe that this proceeds from a cold calculation that it is the area which will yield greatest profits per unit of attention. They’re not doing it as a favor to me or other author-publishers, but the fact that they are doing it provides us with a wonderful opportunity that would not otherwise exist, or surely not on the scale that it does. I’m grateful for this opportunity. As someone with a master’s degree in business economics and a lot of business experience, I do not believe for a moment that Amazon’s focus on creating a structure for author-publishers arose out of some sort of economic determinism. If it comes to be a bad deal financially they will kill or change it, but it is not in the first instance driven by financial concerns.

Amazon is an elephant, and not always too careful of who or what it steps on. But fundamentally it’s a friendly elephant, friendly to the likes of me, and I’m glad it exists. I wish it well.

Bart July 31, 2014 um 6:42 am

According to Brandt’s book, Jeff Bezos chose books for business reasons.

Taline July 31, 2014 um 4:01 pm

If you think that traditional publishers care about books or authors, you’re fooling yourself. If they cared, they would pay their authors more and stop trying to make books so expensive for those who work average jobs and actually want to buy them. There’s this weird sense among those in love with traditional publishing that a company can’t sell books if they aren’t completely in love with books and books alone. What does that matter? Many people who work at publishers claim to love books and they still screw authors over every single day of their working lives and treat customers like they’re idiots. If push came to shove, I would pick Amazon over a traditional publisher. Amazon has taken the time to learn what it takes to SELL books, which matters a hell of a lot more to me than who pretends to love books.

Marion Gropen July 31, 2014 um 6:31 pm

Taline: Read a typical title P&L. (They’re all over the web, but I have one on my blog if you can’t find one.)

Publishers spend tens of thousands of dollars on a typical trade book launch, more on a mass market novel. Their profits (if any) come 120 days or more after the money is spent, and are tiny compared to the gross or net margins in almost any other industry.

The reason that they don’t pay authors more is that they can’t, on print. The reason that they don’t pay authors more for ebooks now is that they are allowing for the day when there won’t be a paperback market, and all of the expenses must be supported by the ebook edition.

There is a vast difference between what a publisher does and what a retailer does. And when an author doesn’t recognize that, it suggests that he or she is unlikely to be able to do for themselves what the publisher does . . . .

Alan Tucker August 1, 2014 um 8:51 am

This argument makes absolutely no sense. If publishers' margins are so bad for print, why are they fighting so hard to save it and slow ebook adoption? Ebooks will NEVER have costs like printing, shipping, warehousing, or returns (more shipping and pulping). Costs like editing, cover creation, and formatting are fixed, one-time expenditures. They are paid for when any book sells X number of copies — paper or ebook. (X being different for each title, of course) Printing, shipping, warehousing are costs that occur EVERY TIME A PAPER BOOK IS CREATED. So, please, don’t tell me that publishers are keeping ebook royalties low because they are hedging for a time when there’s no paper market.

Marion Gropen August 1, 2014 um 12:44 pm

Alan, publishers have been supporters of ebooks for decades. They tried to launch the formats long before Amazon was finally successful at it.

I don’t know why you think that they don’t want ebooks to work, but that hasn’t been my perception of their position, in general.

There are, of course, some people who take a different position in any large group. So, you will be able to find some publishing people who don’t like ebooks, just as you’ll find some self-publishers who insist on print. But they’re not the majority in either group, as far as I have been able to tell.

Steven Zacharius July 31, 2014 um 10:49 pm

Most people in publishing love books. Don’t go making ludicrous statements. First of all most people in the publishing company have nothing to do with what the author makes. Most people are there to service the acquisition that the company made when they bought the book. There are very few people who have any dramatic impact on what the author is making. The mass market field was developed to make books affordable for the masses. $7.99 for a book is a heck of a deal and that’s before some retailers discount them dramatically. It’s less expensive then a movie and gives you many more hours of enjoyment.

AvidReader August 2, 2014 um 4:24 pm

Steven, just a quick note on your concerns for AWS, they have dropped prices 42 times in 8 years and are still growing strong. Here is one journalist’s take on the latest.
Also sometimes stocks take hits. Look at Apple’s drop a few years back. Best bet for you if you don’t feel. Amazon’s strategy is working for you, sell to those that do.

Steven Zacharius August 2, 2014 um 5:42 pm

Avid, I’m a big believer in Amazon and have owned their stock for years as well as Apple. But web services is an area where there’s a lot of heated competition and they don’t have a near monopoly like they do in ebooks. And they also have companies like Google, Microsoft and Apple that have even deeper pockets than they do competing with them.

Theresa M. Moore August 1, 2014 um 3:11 pm

No, sorry, that argument is stale and misinformed. Amazon does absolutely nothing to sell the books. It puts them out there, "at our sole discretion", at any price it chooses, and it pays net revenues from that price, not the list price. For Amazon to demand that the publishers set their ebook prices at $9.99 or less is bullying the supplier and violating the basic law of business, which is to price high and adjust down to the selling point. Amazon ignores the fact that it costs money to promote and market the title, which Amazon itself does not do. In fact, when you look at their overall market strategy, it reminds me of the tactics of a Mafia don, not a bookseller. As a retailer, Amazon has no right to dictate price, but to sell at the discount as it chooses and pay the wholesale price to the supplier at the agreed to percentage. If Amazon loses margin it’s because it takes the margin and spends it on buying out companies, instead of paying the stockholders their dividends and saving money. It’s a beautiful rose that stinks.

Cindy August 1, 2014 um 3:28 pm

I think you’re wrong, It think it’s been proven that Amazon sells books better than anyone. If Amazon buys books at a wholesale price from the publisher, Amazon has every right to set the retail price for sale. Isn’t this what every retailer does? If Amazon reinvests profits to grow its business, instead of paying dividends, that is between Amazon and its shareholders. That is the American way. If I could afford to buy Amazon stock, I would.

AvidReader August 1, 2014 um 9:11 pm

Theresa, companies in a growth mode do not pay dividends. Apple just started paying them a few years ago. As a shareholder, I am quite happy to see Amazon plow its profits back in the company growing AWS, improving Prime to gain subscribers, adding employees to the tax base, improving its hardware. The companies it has bought complement its businesses such as IMDB, ComiXology, it’s new game studio and KIVA robots that will improve efficiency in its warehouses. Perhaps if publishers h ere had plowed more of their profits into efficiencies of operation, they would be less reliant on Amazon. HarperCollins bundling pilot is a step in the right direction. By bundling paper and ebooks, it protects and makes print more appealing.

Steven Zacharius August 1, 2014 um 11:49 pm

Reinvesting money in a business is fine. But is it okay to sell items below cost to drive out other competition until there’s none left because you have enough cash in your bank account? Do you want there to be one retailer left in the business?
Amazon is an amazing company. It has caused publishers to work more efficiently too.
Avid Reader….those items that you mentioned, Prime and AWS just caused them the major loss they had. They are charging $99.00 for prime and losing money on it but capturing marketshare. Amazon Web Services has had to cut its prices dramatically because of companies like Microsoft and Apple competing for cloud storage now. That lack of profit that Amazon has shown might continue even further yet.

David Forsyth August 3, 2014 um 4:18 am

You are missing a few steps in the thought process. All Amazon needs to do is pay the WHOLESALE price of the product. Then they should be able to sell it for ANY price (even at a loss). Walk to the bathroom in your local supper market and glance at the clearance shelf to get an idea of what I am talking about.

Amazon ptays me enough on my ebook sales to pay all my bills and take vacations. They are my business partner, not
my friend. They discount my paperbacks, but give me full list price royalties. I have no complaints. If they want to make less per copy than B&N does, that’s their business. And it is a business. Never forget that. Adapt, evolve, overcome.

“Modern poets talk against business, poor things, but all of us write for money. Beginners are subjected to trial by market.” ? Robert Frost

Steven Zacharius August 3, 2014 um 9:03 am

David I obviously understand that they can sell them at a loss under the wholesale model and have been doing so for years to capture marketshare because others can’t compete with their deep pockets and absorb that loss. I think what should be important is that all publishers should be on the same terms with Amazon. You shouldn’t have an elite group of big 5 publishers on agency model and everyone else on the wholesale model. There are benefits to each depending on the format of the product being sold…hard, trade, mass and the digital list price that you set.

ECW July 31, 2014 um 11:37 am

Finally, something intelligent.

ECW July 31, 2014 um 11:58 am

Intelligent remark intended for William O’Neill

Deborah Smith July 31, 2014 um 2:02 pm

Jeff Bezos is on the record as saying he chose books solely because of their demographics. It had nothing to do with any affection for books or bookselling. They were the best product portal for building a consumer data base.

William D. O’Neil July 31, 2014 um 3:45 pm

You seem to take everything Bezos says at face value. Perhaps you know him well; I couldn’t pick him out of a lineup. My experience in the upper corporate ranks taught me to be skeptical about the statements of corporate leaders, for the most part. What they say tends to be influenced more by what they want us to believe than by what they believe. This is particularly true of the money men.

But whatever his reasons for going into books, I know that he hired book people to run the operation—because it would never have worked if he hadn’t. Corporate operations have got to be run by people who are deeply in love with them. I’ve watched several cases where divisions were turned over to numbers people, who pretty soon ran them into the ground. I would guess that’s a lot of what ails tradpub: too many numbers people in their top ranks.

Who invented KDP? Who decided to buy CreateSpace and put it into POD? No doubt Bezos approved, but they probably weren’t his ideas originally and he certainly didn’t carry through all the details. I’m sure Bezos figures that they’re good business for Amazon (by whatever his criterion truly is) but they are also a real gift to self-publishing authors. With a little sweat equity they allow you to put high-quality paperback and electronic books out for sale in the world’s biggest marketplace for an investment of $0.00; I’ve done it several times.

Amazon’s conception of its interests may lead it to stop serving mine in the future. I have a Plan B, and for that matter a Plan C. But I’m glad not to have to implement them, and don’t look forward to the day that I do. Nor do I plan to be party to any cockeyed schemes for trying to damage Amazon’s business unless and until it starts damaging mine.

Marion Gropen July 31, 2014 um 6:37 pm

Amazon is very important to any publisher’s strategy, including a self-publisher’s. It’s even important to the strategy of those who use a so-called "self-publishing company," or as I like to call them, a Pay to Publisher.

But it would be wise to find alternative retail channels. You don’t ever want to let any one entity control your access to your customers. And Amazon does have a pattern of behavior with respect to self-publishers, one that goes back before this latest iteration in the self-publishing revolution.

I’m sure that Amazon’s staff loves books. But that doesn’t keep them from claiming more and more of the margin of a very low margin business. And it doesn’t mean that Amazon is going to be as careful to allow publishers a viable level of profit as, say, Ingram has been.

David Forsyth August 3, 2014 um 4:27 am

My own experience with Amazon since 2011 has been very positive. They have sold tends of thousands of my books. They have let me give away even more for free. They always pay on time. I know 2 months in advance how much I will be paid, as well as how much I make each day. Amazon asks me for feedback and input. My Amazon sales pay my bills. Any attack on Amazon is an attack on my livelihood (and thousands of indie authors like me). Please keep that in mind.

Marion Gropen August 3, 2014 um 9:10 am

David: Attacks on Amazon would be unconscionable, if it weren’t for a few things.

Being completely dependent upon any one retailer, no matter what industry you’re in, is very dangerous. Regardless of anything else, as a (self-) publisher, you need to think about your business strategy. Is it **really** in your best interest to rely upon their restraint to leave you enough profit margin to survive? Or should you develop alternative distribution channels, now, in case that restraint evaporates?

BTW, Amazon’s managers don’t owe you an ethical duty here, but they **do** have an ethical duty to their shareholders, and that duty is to extract as much profit from the sales you make through them as they can. Which means that sooner or later, they will be ethically required to squeeze your profits down to a much smaller number.

Steven Zacharius July 31, 2014 um 10:52 pm

Go read The Everything Store to learn about Amazon.

AvidReader August 2, 2014 um 12:39 am

Steven, per your response above, I’m sure you are well aware as to the history of ebooks and should therefore know that when Amazon started selling ebooks on the kindle, he set the prices of some new releases and best sellers at 9.99 with the intent of making up the difference in backlist titles which can be highly profitable. At the time, these books were costing Amazon 10.00 so the loss was one penny. The market was one percent of trade or less and prior to Amazon’s entry consisted of about 20,000 titles many of which were Project Gutenberg.. It’s main competitors were Google and Sony, two companies well able to swallow that loss. Most expected this endeavor to fail including Steve Jobs. Instead Amazon cajoled the publishers into making more titles available to increase the output to 90,000. So bottom line is Amazon was not chasing non existent competitors away but instead enticing readers to the new medium.
As for losses to Prime and it’s price incense (first in nearly a decade), it added music to the mix to stay competitive with services such as Pandora and Spotify which are impacting digital music sales as well as original content and content from HBO to stay competitive with Netflix. Each new subscriber it adds impacts the volume of merchandise bought (a much greater impact than from books) and with over 200 million active card members, it is hoping to share some of PayPal"s market. As for AWS, that has gone from a sidenote in its earnings to creating a multibillion dollar business and has the premier reputation in it. As with Apple and ebooks, the big boys like Google, IBM and Microsoft all want a share of the market and, unlike Apple, they are all ready to go toe to toe in price competition and Amazon is not going to nor should it quietly rollover.
Back to books, Amazon has always been more than great prices. That does not always win in the end as Barnes and y found out in the nineties when they tried to destroy Amazon with price cuts. Amazon is an innovator. The major publishing houses need to be as well to stay relevant and if Amazon loses focus on what appeals to its customers, another company will come along and take them. Such is the nature of business.

AvidReader August 3, 2014 um 4:48 am

Steven, I just took a look at your website. It does not work for weaker eyesight. Why can’t the page be enlarged?

Steven Zacharius August 3, 2014 um 9:05 am

AvidReader, I have no idea about why our website can’t be made larger…although I will look into it. I’ve never had anyone ask us about that before.

Taline July 31, 2014 um 4:03 pm

Bezos doesn’t need to be in love with books to sell them. He does a good job at it while the people who claim to love books are completely incompetent at it. (So incompetent that they ALLOWED Amazon to steal so much market share from them before they had any clue what was happening.)That harms the authors who have to spend many hours of their lives writing those books. I want to go with the party that is competent at selling them.

Steven Zacharius July 31, 2014 um 10:57 pm

Publishers did not ALLOW Amazon to steal marketshare. You can’t prevent a retailer from gaining marketshare….it happens. You don’t stop selling a retailer or wholesaler books especially when more and more of them are going out of business. And if there’s a company that is a multi multi billion dollar firm that is willing to take a loss on selling many items, it’s nearly impossible to stop them. Did you see Amazon’s earning report? Did you know how Amazon acquired…..they were willing to give away diapers for free if didn’t agree to sell out to them.
Time will tell the story about Amazon as they continue to wipe out competition. We have no idea what will happen with their prices when there is less competitors but the simple way for them to start making money would be to start having prices creep up after the competition is gone.

AvidReader August 1, 2014 um 9:18 pm

They don’t need to raise profits to make money. Most of their divisions are already profitable. All they would need to do is slow their investments, less infrastructure, less video content, fewer employees, stop entering foreign markets. EVentually that hurts the growth and they would grow as stagnant as some publishers I could name who increase revenue through acquisitions instead of ingenuity.

Steven Zacharius August 2, 2014 um 12:10 am

Avid Reader I agree with you about most publishers growing by acquisition as do most public corporations. Amazon is one of the very few companies that has gotten away without showing a profit and it not hurting them. Their lack of earning did drive down the stock sharply the other day though. At a certain point shareholders are going to demand a profit or they’ll sell their shares. Publishers do the same thing. Most of them are publicly owned giant conglomerates. Harper Collins just bought Harlequin and they undoubtedly hope to increase their profits from the synergies that they will have; although they of course deny that and say that all the jobs will stay in tact. It never works out that way. Warehouses get combined, sales forces get combined, etc….
I don’t know if that’s true about most of their divisions being profitable. As I just mentioned they took a big hit on AWS by having to cut prices by 25% to compete with other companies now.

William D. O’Neil August 2, 2014 um 1:41 am

" Amazon is one of the very few companies that has gotten away without showing a profit and it not hurting them."

Your knowledge of business history is clearly limited. Over the past 150 years—which is to say for the entire history of broadly-traded public companies—many firms have chosen to retain profits and invest them internally. And to the extent that they have convinced investors that this will lead to real growth, they have been rewarded with strong markets for their securities. Amazon is far from the most spectacular growth stock story in recent history.

Of course many would-be growth companies falter for want of good management, or simple bad luck. (Remember Enron or AIG?) Even the best sooner or later arrive at a point where for one reason or another their opportunities for high-return investment dwindle, and they then face a difficult and perilous transition. But some successfully tread the high wire for many decades. Not even Jeff Bezos, I expect, imagines that Amazon can continue to grow exponentially forever, but there are no clear signs that Amazon is about to run out of growth opportunities.

Those who imagine that investors are panting for Amazon to show "profits" demonstrate only that they do not understand growth companies or the investors who put their money into them. It certainly is true that As long as Amazon continues to generate high levels of free cash flow and shows an ability to find good ways to invest them its position will remain relatively secure. Growth stocks always fluctuate and those who are devoted to the Graham and Dodd approach to investing always look on them with disdain. But the realities of the investment marketplace determine that despite any temporary sags there will always be a market for the securities of successful growth companies like Amazon.

Turning to the issue at hand, for Amazon its incentives to independent author-publishers are seedcorrn, investments in growth. When and if it ceases to gain a good returns on its investments it may be tempted to eat its seedcorn, but not before. Experience with such companies suggests that generally they seek to retain or regain their growth-company status for years or decades after real opportunity has faded before finally accepting cash-cow status.

When we see Bezos forced out I will start to worry that the 70% royalty is vulnerable, but surely not sooner.

Steven Zacharius August 2, 2014 um 8:42 am

William you are correct that I am not a student of business history. However the strain shareholders are feeling for Amazon is beginning to show. Their stock dropped something like 15% in the two days after the announcement of their loss…and btw, I am a shareholder.
It’s fine to think they will be competitive going forward by reinvesting their cash but what’s more worrisome is that their cash cow, AWS, took a big hit. They had to reduce their prices 25% to compete more with other firms now. The new phone they developed is not getting rave reviews and was probably too little too late. Books are a small piece of their business.

William D. O’Neil August 2, 2014 um 9:04 am

"However the strain shareholders are feeling for Amazon is beginning to show. Their stock dropped something like 15% in the two days after the announcement of their loss…and btw, I am a shareholder."

I’d strongly urge you to stop trying to swim with the sharks and put your money in a broadly-based low-load index fund. You’ll get much better overall returns and with much lower risk than by trying to chase growth stocks like AMZN based on very limited information sources.

Steven Zacharius August 2, 2014 um 10:38 am

Just because I’m not a student of history doesn’t mean I’m not investment savvy. And for what I don’t know; I have independent investment advisers to give me advice. Hopefully they know more than me.

Iver H. July 31, 2014 um 1:17 am

Meanwhile over at ACX aka amazon they just changed royalty rate to 40% exclusive / 25% nonexclusive. So in audio market where they have near monopoly author/rights holder gets 12.5%, performer gets 12.5% and amazon keeps 75%. Cause there they can. Not author friendly. But good for amazon.

Avid Reader July 31, 2014 um 2:55 am

Isn’t it up to the author whether to split the rate or offer a set price to the performer?

Iver H. July 31, 2014 um 3:46 am

That’s true. So either author pays all production costs, or share her/his royalties 50/50 with the performer. My point was more that either way, amazon keeps 75%.

Taline July 31, 2014 um 4:05 pm

Still a better deal than traditional publishers who take 85 percent of author earnings to keep their bloated, inefficient corporations running while locking their authors into contracts for years on end.

Marion Gropen July 31, 2014 um 6:39 pm

I strongly suggest you learn where the money does go on a typical trade book before you make such pronouncements.

Taline July 31, 2014 um 8:38 pm

Marion, I would suggest you prepare for the bankruptcy instead of making these weak excuses for the traditional publishers. Also stop wasting their money. Since you work for a CONSULTING AGENCY, you’re probably here because you were hired to defend the publishers. The only thing you’re accomplishing though is showing why traditional publishers won’t survive. Their business is outdated and they waste money on people like you instead of giving their authors and customers what they want (which can be considered proof that they don’t know what they’re doing and that’s a big part of why Amazon is creaming them). No matter how many excuses you make for them, nothing changes that.

Marion Gropen July 31, 2014 um 9:57 pm

Taline, you allege below that I’m a shill for large publishers. Look deeper. I only work for small publishers and successful self-publishers.

More than that, I don’t do marketing or PR. I do finance and ops management.

You couldn’t pay me enough to say what I don’t believe.

Rob Siders July 31, 2014 um 6:38 am

The comparison between ACX and KDP with respect to royalty split is overstated. The two service offerings and businesses are quite different. Audio books have much higher overhead costs than ebooks, plus KDP isn’t a marketplace for authors to find ebook production professionals (and vice versa). The escalator program at ACX wasn’t likely met by many self-published authors, nor likely sustainable for the ones that were.

Certainly, Amazon could slash the revenue split at KDP one day, today even. But that it happened at ACX, and given their differences, isn’t necessarily what lies in store for KDP.

Deborah Smith July 31, 2014 um 2:04 pm

ACX pays none of the production costs. Those are paid entirely by the narrators or publishers/authors.

Rob Siders July 31, 2014 um 4:42 pm

I never said that it did. But, by all means, revel in your victory over the straw man.

Felipe Adan Lerma July 31, 2014 um 5:12 pm

Deborah, ACX was paying stipends based on projects they felt deserved them, so as to pay higher rated narrators. This was a few months ago, and I’m not sure what the status is at this point.

There was considerable contention, when the royalty change was announced, that lower royalties were so to pay more well know authors for higher charging (better?) narrators.

Then there was, more recently , contention that the rate decrease was to subsidize placing audio into KU. No idea how accurate that one is.

Since the royalty change, for whatever reason, my audio sales have dropped off almost completely. But there may be no correlation there, simply co-incidence.

I still have several projects under contract under the old rates, but none under the new. And sales may be seasonal, and pick up again toward the holidays. As you probably well know, most retail sales for most items cluster round certain periods of the year.

Steven Zacharius July 31, 2014 um 11:00 pm

That’s wishful thinking. Publishers have huge overhead also. That’s why royalty rates are different for books that they acquire and sell then what Kindle offers indie writers.

Rob Siders August 1, 2014 um 6:20 am

What’s wishful thinking? And what does the overhead at other publishers have to do with the revenue splits at Audible Creation Exchange (ACX) and KDP?

Steven Zacharius August 1, 2014 um 8:33 am

I believe it’s wishful thinking that Amazon won’t reduce KDP royalties. If there’s no one left in town to compete, why wouldn’t they lower the rates. Do you think they’re running a charity and care at all about author earnings? They’re running a business that is losing enormous sums of money. Most of the loss is due to reinvestment but at some point shareholders demand a profit or they sell the stock, which happened last week.
You also mentioned that the audio business has much higher overhead than the KDP business so that’s why they lowered royalties. Well publishers have higher overhead too and that’s why they don’t pay the same as KDP.

Rob Siders August 1, 2014 um 9:28 am

Where did I say Amazon wouldn’t cut the split at KDP? I’ll save you the effort: I didn’t.

I did say that "Certainly, Amazon could slash the revenue split at KDP one day, today even."

My point was that using ACX as a predictor of future behavior for KDP is speculative at best (and not to mention a hasty generalization fallacy), given that the two are different products and therefore may have separate business models.

Call me crazy… I just prefer not to conflate the two as if they’re one and the same.

Steven Zacharius August 1, 2014 um 11:46 am

Yes they are two different products but both designed for indie publishing so I would say that it’s at least an indication of what might possibly happen. What was the reason for changing it all of a sudden? They felt like it?

Ebook Bargains UK July 31, 2014 um 6:15 am

AIS may be newly named, but it’s been around a long while. Hugh Howey is one of many high profile sufferers.

Curiously they all have close ties with Amazon and get preferential treatment.

Howey says "I’ll break up with them if they mistreat me."

Very noble of you, Hugh, but as we saw with your preferential status in KU, one of the few indies to be allowed to have titles there and on other retail outlets simultaneously, you’re the last person they would mistreat.

The rest of us on the other hand… Just ask the ACX authors.

Nate Hoffelder July 31, 2014 um 8:27 am

Agreed. If AIS had existed when the petition went live I would have used it then. As i saw it, that went far beyond self interest and descended into being an Amazon cheering section.

Nir July 31, 2014 um 4:06 pm

My wife and I are ACX authors and we love it. First of all, the royalty change only applies to new titles, so we are still very happy with our terms. And when we do publish with them again, we will pay our producer and be almost as happy with 40%.

I am not so much infatuated with Amazon, but I do love the payments they send us every month.

AvidReader August 1, 2014 um 9:23 pm

My close ties to Amazon are due to price, selection, convenience and service. Amazon may put the customer’s needs first because of its business model and as a customer, I am fine with that.

Bart July 31, 2014 um 6:47 am

Thank you for bringing us all back to earth, Nate. Corporations are driven by profit, and Amazon is especially focused on dominating the market. There *are* much worse corporations, but Amazon is big, efficient and in a culturally important area, books.

William D. O’Neil July 31, 2014 um 3:03 pm

"Corporations are driven by profit,"

That’s simply absolutely not true. It’s a widely-believed myth, but even a little focus on what it means will show the absurdity of the idea. I have a business econ background and keep track of the literature in the field; I could cite a number of studies demonstrating that corporations in general are not profit-maximizers. I’ve watched (from the inside) and been party to many corporate decisions that did nothing to improve profits (or ROI, or other commonly-cited measures), and often were not even expected to. And of course Amazon very notably has not been a profit-maximizer.

Taline July 31, 2014 um 4:11 pm

Anybody who publishes your books and pays you will be driven by profit. That’s how they stay in business. What is your point exactly? Do you think Hachette is somehow not driven by profit when it takes most of the profits from its writers? Do you not think that the same corporations who have printed all the books you love are driven by profit like Amazon is? To me it’s obvious that Amazon is less driven by profit than most of the publishers. Amazon has put of making a lot more money to re-invest in its business. Publishers look for new ways to screw over their authors so they can take a higher profit and please their investors now.

Rob Siders July 31, 2014 um 7:00 am

FWIW, Hugh Howey’s turned down seven figure publishing deals because they weren’t right for him. I’ve worked with him a few times and have come away with a good sense that he’s smart and is as genuine as the nose on my face. I believe him when he says he’d sever a relationship with Amazon should it become abusive.

Rob Siders July 31, 2014 um 7:09 am

I don’t see anger or invective on your part, Nate. You did, however, construct a rather glorious strawman with "He is now convinced that Amazon, a publicly traded corporation out to squeeze margins as thin as possible, is actually authors’ best friend."

Marion Gropen August 3, 2014 um 9:31 am

You’re right, that’s glorious hyperbole.

I do think, however, that many people who depend upon Amazon for their livelihood are having trouble assessing the dangers in that dependence.

Some of them, instead of saying to themselves, "Let’s take the profits while we can get them, but let’s get ourselves in gear and find alternative routes, because this won’t last," are getting mad at anyone who suggests that this phase can’t last.

Amazon was, indeed, the innovator which got the ebook revolution off the ground, after many others had failed.

Publishers, especially large ones, put their heads together, and ensured that it would work, by putting most "big" books into the Kindle system early. We had all been talking about the potential in an ebook world for over a decade. We all knew more or less how this would play out, and it has actually worked pretty much as expected — maybe a little less piracy.

But none of us are operating under any delusions that any of the early phases, let alone this one, is permanent. Amazon has gotten ebooks going, and they’re just approaching a steady state, commercially dependable set of numbers. Amazon doesn’t need to coddle publishers, including self-publishers, for much longer.

Amazon makes $74b per year. All publishers in the US combined, including self-publishers, make about $28b. About 1/2 of that is "non-trade" and so, not the type of book you’d find on Amazon. About 1/2 of the "trade" books are sold online. So, somewhere around $7 to $10 billion are sold online, mostly through Amazon.

10% of their total revenue. If they kill half of us off, it won’t bother them at all.

But half of a trade publisher’s revenue is on Amazon, and 90% or so of most self-publishers' revenue.

That disparity in vulnerability to pressure? That’s a huge risk to all of us.

So, no, no smart self-publisher sees Amazon as a "friend." But the point is that not enough of the small press community is looking at them as a potential business-killing enemy.

AvidReader August 3, 2014 um 11:30 am

It is interesting to note that when you talk about revenue, you give Amazon’s total revenue, of which a small portion of books but when you talk about publisher revenue, you ignore that they are all parts of much larger conglomerates and only mention the U.S. publishing portion. Why are you not comparing apples to apples?

Steven Zacharius August 3, 2014 um 11:49 am

Avid Reader, there are a thousand publishers that are not part of any conglomerate and only a handful that are. I’m actually more concerned about those, like Kensington, that are not part of billion dollar firms. But even if you want to talk about the big conglomerates; they are a teeny fraction of the size of Amazon, not even in the same league. The biggest of the conglomerates are minuscule in comparison. I don’t have any problem with Amazon. They’re a magnificent retailer. I do have a problem that all of the publishers aren’t working on the same level playing field in terms of agency or wholesale.

AvidReader August 3, 2014 um 12:30 pm

Steven, I can appreciate your concerns about a level playing field for publishing but what makes publishing any different than any other business s knees. Indie bookstores are not on the same playing field as small chains who do not have as much negotiating power as the large ones. Small businesses do not have the same pull on negotiating health contracts as do larger ones. Mom and pop groceries c.f. ant get the same terms as the larger chains. Individuals can’t get the same loan terms the wealthier can who don’t fare as well as the businesses. And let’s not even talk about the power of the individual voter as opposed to lobbies

Steven Zacharius August 3, 2014 um 5:01 pm

Avid the reason I think publishers should be level is so that we have the same chance of attracting new authors to our company. If a publisher is on agency and getting 70% of the proceeds and we’re on wholesale, only getting 50%…there’s a disadvantage. However it gets more complicated than that because we have more flexibility with pricing sometimes. But it’s still a mess. You’re right though….life isn’t fair and we have to find other ways to compete, which we do.

Marion Gropen August 3, 2014 um 12:03 pm

Avid Reader: There is actually a reason that I used the figures I did.

The vast bulk of Amazon’s revenues are in the US. That’s why I did US publishing vs. the total.

The conglomerates that own a few US book publishers aren’t going to bail those companies out if Amazon tanks them. They couldn’t begin to do so for more than a very few months. In the past, not one has done so. Amazon, however, has a track history of using profits from one division to support and develop their business in other divisions. That’s why I ignored the rest of the conglomerates' revenues but not the rest of Amazon’s.

A second reason: Most US publishing is done by independent (as in not owned by a conglomerate) houses, or independent (as in self-publishing) authors.

A third reason: US book publishing is as large as the next 5 largest publishing markets **combined**. What happens here has a **huge** impact on world publishing.

So, in fact, I am coming as close to comparing apples to apples as it is possible to do.

The point is that Amazon is a single company with very little need for book sales.

Publishers, no matter how big or small they are, are completely dependent upon book sales.

Amazon has the ability to have several years in a row with very large losses, or negative cash flows, or both, and emerge as a viable company.

Publishers do not.

AvidReader August 3, 2014 um 12:20 pm

Meanwhile Amazon is committed to spending millions in all its businesses to make them innovative and customer friendly. How are publishers using their profits to accomplish a similar goal?

Marion Gropen August 3, 2014 um 12:46 pm

AvidReader: Amazon is a retailer, not a publisher. It’s superb at merchandising which is, as you know, the technical term for the things you’re discussing.

Publishers do something different, and yes, they have been putting their profits and experience to work at improving the way that they do it (and have for centuries). They make books appealing and interesting, by making the best possible use of the technologies and skills of
— editing,
— copyediting,
— layout and file conversion, then
— proofreading on all display technologies, as well as
— understanding what elements of cover design and copy-writing will signal to the right audience that this is the book for them, and
— coaching authors in how to market to that audience.

The functions of Amazon and of publishers are not at all the same, or are they supposed to be the same.

Steven Zacharius August 3, 2014 um 4:50 pm

Avid, publishers take their profits and reinvest them in the business likewise. We take chances on new genres, new authors trying to find the next trend. Many don’t pan out and some do. Keep in mind that we’re paying advances that are purely a gamble that they will earn out and even when they earn out, that doesn’t necessarily mean that the book made a profit….depends on the level of the advance and the amount of marketing spent promoting the title.

Steven Zacharius August 3, 2014 um 5:04 pm

Marion, unfortunately Amazon is now a publisher too competing with their publishing partners in a big way. B&N did the same thing decades ago but Amazon is doing it in a bigger way.

Marion Gropen August 3, 2014 um 5:28 pm

Steve, yes, Amazon publishes some books, but AFAIK, it has very small numbers of titles and sales. Unless you include its operations like CS and KDP, and I don’t.

CS acts as either a printer or a Pay to Publish service, depending upon the author’s choices.

KDP is more like an access point for self-publishers.

But, to the extent that Amazon does some traditional publishing, you are, of course, right.

Then again, they’ll probably have the same issues that B&N did when Len Riggio started its publishing operation, and thought he knew better how to do it than his more-experienced staff did. The operation bled red ink.

William Ockham July 31, 2014 um 7:50 am

There is a simple way to assess the veracity of positional claims in this type of dispute. Each side has a strong incentive to denigrate the other. If one side misrepresents their bargaining position, the other will accuse them of misrepresentation under most circumstances. Throughout this dispute, neither side has done that. If you assess all of the claims made by both sides chronologically, it is not hard to see what is going on.

Amazon opened with an offer of "let’s go back to wholesale". Hachette responded with "we want no-discount agency". Amazon is now saying "we would accept agency if you priced reasonably". This isn’t complicated.

Nate Hoffelder July 31, 2014 um 8:17 am

Are they not responding because the claims are true or because the non-response is a deliberate tactical decision? Is there any way for us to see that from the outside.

You could argue that the lack of a denial equals agreement; sometimes that is true. But in the case of Hachette-Amazon, it is also possible that the two parties are ignoring each other’s offenses so they don’t get caught up in defensive maneuvers. Also, Amazon wasn’t going to respond to the early leaks anyway so you can’t say the lack of a response is confirmation.

William Ockham July 31, 2014 um 6:13 pm

Look, you said "For all we know Amazon made up this statement out of whole cloth…" You might as well say "For all we know Jeff Bezos is a lizard person". It makes exactly as much sense. Can I prove either statement is false? No. Can I apply my experience and general knowledge of reality to make a judgment about the likelihood of either proposition? Yes.

You based your entire article on the assumption that Amazon is lying. And you have zero evidence to support that claim. Why would they make a public claim that would certainly backfire on them if Hachette calls them on it? You seem to think that Amazon is run by people who are liars and fools. I am going to assert that they are not fools.

Here is the only thing that matters. Amazon is making it clear that the dispute is about pricing. The fact that Hachette hasn’t responded tells you something. If you can’t see that, you are blinded by the view from nowhere.

Nate Hoffelder July 31, 2014 um 6:41 pm

You’re right. That was grasping at straws.

Marion Gropen July 31, 2014 um 6:42 pm

One thing that they said is a bald-faced attempt to mislead. They implied that the PPB (Paper, Printing and Binding) costs were a substantial portion of the cost of a book. Even Amazon has to know that this is not accurate.

William Ockham July 31, 2014 um 8:46 pm

Those are almost the entire cost of the book. The only thing missing is the design which is relatively minor. The cost of the story (or idea) is something else completely. The thing that confuses the entire legacy publishing industry is they can’t tell the difference between the container and the product. Nobody is buying the package. Nobody buys a book. They buy the product. That is a story or knowledge.

I find the inability to understand their own product the most baffling thing about the legacy industry. It will be what kills them. Not Amazon. Not ebooks. The fact that they don’t know their own business.

Marion Gropen July 31, 2014 um 11:11 pm

William, below, you say that the only cost besides PPB is cover design.

You’ve forgotten to include at least:
— content editing
— line editing
— copyediting
— proofreading
— markup of the text to allow conversion to other file formats in the future
— marketing to those who can increase a book’s exposure to consumers (marketing to consumers is primarily the responsibility of authors, with the coaching of the publicist)

and there’s more.

Steven Zacharius July 31, 2014 um 11:06 pm

This negotiation is about far more than just pricing. It involves overall terms for Amazon selling and promoting Hachette’s titles. It’s not just a matter of saying Hachette wants to sell a book at x price and Kindle wants to sell it for less.

Deborah Smith July 31, 2014 um 2:08 pm

Hachette does price reasonably. Its catalog contains many books under 9.99. But there are books that should be priced higher. And Amazon knows that. This is far more complex than the general public understands. Amazon is blowing smoke and selling B.S. to a gullible public that has no comprehension of the background issues or actual business of publishing. (In which Amazon has at times raised book prices and publishers have lowered them, btw)

Cindy July 31, 2014 um 2:44 pm

"This is far more complex than the general public understands. . . Amazon is blowing smoke and selling B.S. to a gullible public that has no comprehension of the background issues or actual business of publishing. "

That says quite a lot about what you think of book buyers. What I know is that Apple, Hachette and the other big publishers got caught colluding to price-fix ebooks above $9.99. That makes me suspect Hachette’s motives. Hachette’s leaking what we now know was misleading and false information about the dispute to every major media outlet confirms they are not a champion of authors or consumers.

Readers, not as stupid as you think.

Marion Gropen July 31, 2014 um 6:43 pm

Not stupid. Uninformed. After all, even authors know very little about what happens to their manuscript after the final edit and before the book hits stores.

Cindy August 1, 2014 um 11:54 am

Informed enough to know this:

“The backdrop to Amazon’s push is that e-books generate much higher profit margins for publishers than print books, where the costs including paper, printing, binding, warehousing, shipping and returns. Bedi Singh, chief financial officer of News Corp News Corp, which owns HarperCollins Publishers and The Wall Street Journal, earlier this month told analysts that margins are around 75% for e-books, about 60% on paperbacks, and about 40% on hardcovers.”

Marion Gropen August 3, 2014 um 9:34 am

Singh’s widely quoted remark is referring to **gross** margins. That is, the list price less the discounts given.

Not to profit margins.

Steven Zacharius August 1, 2014 um 11:43 pm

Cindy, the costs of manufacturing have nothing to do with a price of the ebook. Mass market books cost $.40 to produce…hardcovers maybe $1.75; yet they each sell for $7.99 or $25.00 plus. The biggest cost to the book is not only the manufacturing but also the level of advance paid to an author. You also have the publishing house overhead including marketing, editorial, etc…

Steven Zacharius August 1, 2014 um 11:44 pm

I meant to add that obviously the profit on an ebook would be higher. There’s no warehousing, no returns and no manufacturing. The most important part is that it’s a 100% sale versus up to 50% returns on a paperback which then get destroyed.

Cindy August 2, 2014 um 6:56 pm


Thanks for acknowledging what everyone knows but what publishers and others seem intent on denying: ". . . obviously the profit on an ebook would be higher. There’s no warehousing, no returns and no manufacturing. "

Publishers are making much higher margins (profits) on ebooks. Now, if you couldn would you please explain to me how that justifies price increases for ebooks. Hardcovers and ebooks are simply not equivalents. Publishing is going to have to come up with a *reason* for readers to believe this argument.

Steven Zacharius August 2, 2014 um 7:06 pm

Cindy there are two different ways to look at this. If you’re talking about digital only books where there isn’t an advance being paid, there is no excuse for a higher price in my opinion. But if you’re talking about the ebook edition of a traditionally published book it’s quite a different story. With print sales declining, the publishers still have to recoup the advance that they paid out to the author and all of the marketing and publicity costs that the spend promoting both formats of the book. Therefore they need the price of the ebook still at a relatively high price to recoup this investment. If they made the price $4.99 they wouldn’t be making back enough profit to offset the decline from the print side. Publishers look at all formats combined when they acquire a book…hard, mass, ebook.

James July 31, 2014 um 2:47 pm

So the thrust of your argument seems to be that you are smart and the rest of us are dummies and that Hachette and Amazon are really the same since they both raise and lower prices and both have items priced at or below $9.99. Whether a price is "reasonable" or not would depend on whether you are a buyer or seller. If you are selling and $10 makes you a good profit then you obviously think it’s reasonable. If you are a buyer and you really want to read a book, then $15 may be reasonable. If it’s a crappy book than $1.99 may not be reasonable. There is no definition for reasonable since it may change on a daily basis depending on point-of-view and individual needs. Many stores consider loss leaders, i.e. where they deliberately lose money on items to be more than reasonable because they bring in lots of customers who buy other stuff that’s perhaps priced higher than "reasonable." The basic premise of Walmart, Target, Home Dept, Lowe’s, etc. is that by selling stuff cheaper, they sell more, and they make more money. That seems to be a major misunderstanding between Hachette and Amazon. I frankly don’t buy the argument that the higher the price the more value accrues to the book. Content determines value. A remaindered Robert Caro is just as important and valuable as a new Caro even though the price may differ by many percent but even Caro would rather sell 40 copies at 4.99 than two copies at $25.

Steven Zacharius August 2, 2014 um 9:22 pm

James, whom are you addressing your comment to?

Taline July 31, 2014 um 4:30 pm

Ebooks require less work and should be priced less than paper books. Customers are not stupid. They know that ebooks are cheaper to produce.

Rob Siders July 31, 2014 um 5:09 pm

I’m unsure what’s meant by "less work" here. If you’re talking about their respective paths through the supply chain, then yes. If you’re referring to the production process, then it depends.

Steven Zacharius August 1, 2014 um 11:58 pm

Andrew I agree with you. Printed books obviously have more costs. But the costs have very little bearing on the price of the book. All of those costs you mentioned are relatively small compared to the selling price of a hardcover book. Of course you don’t edit the book again for an ebook.
The future of ebooks is all about discoverability. Publishing houses offer the power of the clout they have with retailers in terms of positioning their books on the retailers website because of their sheer volume. With more and more ebooks how are consumers going to find what they want to read?

Andrew Claymore August 2, 2014 um 7:16 pm

Steven, thanks for the response. Clout with retailers to assist in discoverability is certainly something few Indies have. Does Kensington actually have some kind of co-op deal with Amazon? I can’t imagine they would take money to favor anyone in the 'also-boughts', but I did notice ads on product pages.
Most Indies rely on word of mouth. It’s definitely a long-haul type of strategy, but one that can build a strong reader-base if you have the patience.

Ststeven Zacharius August 2, 2014 um 9:26 pm

Andrew all publishers at certain levels are given promotional opportunities. There are so many different vehicles available like daily deal, banners, home page of certain genres, etc.

Andrew Claymore August 3, 2014 um 2:59 am

' The future of ebooks is all about discoverability.'
I can’t argue with that, but I definitely think you can exchange the word ebooks with publishers.
Unless I’ve missed a press release, B&N is still closing stores by the bushel so publishers' ability to get authors onto physical shelves is in jeopardy. I’ve heard so many authors point to this and ask whether any value remains in signing a contract. It seems to me ( admittedly as an outsider) that your best answer is your ability aid discoverability ( I’m sure you know this, I’m just thinking through the keyboard).
That would take a serious commitment to digital, possibly at the expense of print. Maybe simultaneous release and reasonable pricing for ebooks. I’ve never bought into the argument that a movie costs fifteen bucks and entertains me for two hours, so why not an ebook for the same price when it lasts several times as long. ( Not attributing this argument to you, it’s just one that I keep seeing lately)
When’s the last time a publisher spent a hundred and seventy million to produce a book?
In most industries, when the goods become cheaper the prices come down and the market grows.

I’d better log off, I’m starting to ramble…

Kudos, by the way, for being the only CEO willing to come out and engage.

Steven Zacharius August 3, 2014 um 8:55 am

Andrew thanks for the nice words. I definitely agree there is elasticity in pricing. Publishers use it all the time too. When a new book is coming out we discount the first book in a series to a very low price to garner interest in the series….sometimes even giving it away for free for a short period. We use it as a marketing tool. I think that the print component is a good reason to sign a contract as well in addition to all of the other things that publishers do. But each person has their own decision to make as to which route they want to go, which is a good thing. I’m just guessing that it’s going to be harder and harder to find all books in general on any online retailer in the future without having the clout to get into major promotions.

Steven Zacharius July 31, 2014 um 11:10 pm

You don’t understand the business at all. Yes an ebook costs less to produce. However that difference is as little as $.40 cents for a mass market paperback to $1.60 or so for a hardcover book. The price of the ebook is not based on the manufacturing cost of the book. It’s based on many other factors; the primary one being the advance paid to the author and the rest of the overhead of the publishing company.

Andrew Claymore August 1, 2014 um 11:49 am

Steven, up to a certain point, both formats have similar costs, or perhaps even shared costs (advance). Editing has to be done for the paperback or hardcover so why would it be done a second time for the eBook (which comes out a year later in some cases)?
It’s the supply chain where they start to diverge. After the cost of printing (granted, huge runs reduce the cost of this in a way Createspace can’t match) you still need to get those books onto a pallet, moved to a rack in warehousing until the order comes in. Then you need to pay staff to pull the pallet, assemble the order and load it on a truck. Pallet positions on a truck don’t come cheap. The order needs to be received by store staff in the back room, unpacked and stocked on the shelves. There’s the overhead at the store for the month and a half the book has to 'make it' then someone has to be paid to rip the covers off, pack them up and ship them back to be received for pulping.

I’ve worked as an Industrial Engineer, specializing in supply chain, and the whole life span of a paper book seems like a costly cousin to the eBook.

Small wonder Barnes and Noble sells so many knick-knacks…

Cindy August 1, 2014 um 3:08 pm

Assuming that there is little difference in the costs between hardcovers, paperbacks and ebooks as you assert, what factors cause their margins to be so different? As I posted above, Bedi Singh reported they were 40%, 60% and 75%, respectively.

Steven Zacharius August 2, 2014 um 12:03 am

Of course the price of manufacturing does have some bearing on the margins but what I was trying to say the the cost of the manufacturing is really not that relevant as to the selling price of the book. The reason that ebook margins are so high is because there is obviously no warehousing, distribution or manufacturing fees….but the real reason they’re more profitable is that it’s a 100% sale. Generally only about 55% of all mass market paperbacks are sold. The books that don’t get sold have the covers ripped off by the retailer or wholesaler and then the insides are destroyed. This is the biggest cost in publishing.

Steven Zacharius July 31, 2014 um 11:04 pm

You have no idea what is going on behind the scenes. You’re only following the hype in the media. This negotiation will not be settled because of a PR campaign by writers. It will be settled because both sides will give in and reach a position that they can both live with. If not, each side will have to find a way to live without the other.

Marion Gropen August 3, 2014 um 1:05 pm

I’m not sure I agree with your assessment of the goals or strategies of the parties.

Each is speaking to a different audience, because of the different relationships it can have and/or needs to have.

Hachette’s authors are out trying to counter Amazon’s message, but as I’ve said elsewhere, most publishers don’t give their authors anything like a full picture of the company, the strategy, the cost-structure and so on. Truth to tell, they probably can’t begin to do so.

Like all businesses, publishing is incredibly complex. Like writing, it looks deceptively simple until you get into it.

William Ockham July 31, 2014 um 8:02 am

One more thing. If you want to know if Amazon is serious about the author/publisher split, ask yourself what Amazon the publisher does. Do the Amazon imprints pay like that?

Rob Siders July 31, 2014 um 8:27 am

Indeed, they do. 😉

Deborah Smith July 31, 2014 um 2:11 pm

Amazon makes imprint authors sign Non Disclosure Agreements, something NO other publisher does. So we get few details about their contracts.

Rob Siders July 31, 2014 um 5:14 pm

While this may be true, it’s not difficult to find authors and industry insiders who have publicly mentioned that ebook royalties with Amazon imprints are 35 percent of the sales price.

Steven Zacharius July 31, 2014 um 11:11 pm

There is more to a publishing contract than ebook rates.

Rob Siders August 1, 2014 um 7:59 am

Steven wrote: There is more to a publishing contract than ebook rates.

No one disagrees with this. Amazon says it thinks ebook royalties should be 35 percent of the sales price, which Nate asserted was disingenuous because it’s spin. William’s reply was to check that against what it pays its imprint authors for ebooks. Well, those numbers reportedly align.

That’s all this was, Steven.

SpringfieldMH July 31, 2014 um 5:53 pm

No other publisher requires NDAs?
1) Others report differently.
2) You can’t possibly know all other publishers, therefore you don’t know what you are stating.

Marion Gropen July 31, 2014 um 10:00 pm

It’s not quite true that everyone in publishing knows everything about everyone else. But it’s not far from the truth, either.

No one talks to authors, of course, but everyone in the business talks to people in other companies, incessantly, about almost everything.

Steven Zacharius July 31, 2014 um 11:12 pm

I know most of the major publishing houses and I don’t know of any NDA in any contract.

Marion Gropen July 31, 2014 um 6:45 pm

Of course, they also do a pretty poor job of the publishing part of the process . . . .

Steven Zacharius August 1, 2014 um 8:37 am

Marion who does a poor job of the publishing part of the process, publishers? I hope that’s not what you’re saying. Look at the great number of authors who have become big stars with their publishers and started as being a debut author.
And by the way we talk to authors all the time. We talk to them or their agents when we sign a contract. Their editor and marketing and publicity people speak to them all the time. I speak to them when they come to our office in NYC or at conferences or at our various parties that we have at major conventions. I’m also speaking at NINC in October in Florida…..we do speak to authors. They also email me all the time if they have an issue that they don’t feel was addressed properly and we work together to fix the problem.

Marion Gropen August 1, 2014 um 12:49 pm

Amazon’s publishing arm does, in my statement.

Individual publishers talk to their authors to a greater or lesser degree. But most don’t show authors what happens after the final draft is accepted and before it goes to the printer.

And most don’t talk about P&Ls, or why decisions are made the way that they’re made.

Most don’t reach out to writers who’ve had only rejections and try to salve their wounds.

It’s understandable, and sensible, that this should be so, but it is so, and we’re now dealing with a very polarized community at a time when it might help if we could work together more smoothly.

Steven, I’m FROM the traditional publishing world, although I’ve been a consultant for a dozen years now. I am not one of the haters on either side.

Steven Zacharius August 1, 2014 um 12:58 pm

Marion all of our authors see page proofs after the book has been edited and copy edited. They see it before we go to press. When we’re dealing with an agent we are always happy to explain our offer. I even share numbers with them if we’ve published the author before and sometimes a p & l.

Steven Zacharius August 1, 2014 um 8:41 am

Tell us more Rob about Amazon Publishing contracts. Do you have direct knowledge of an author’s contract where they were paid an advance for a book and what their royalties are? Do they sign an NDA? Do they guarantee a print component other than their own POD? Is this first hand knowledge or just information you’ve heard?

Rob Siders August 1, 2014 um 9:44 am


I’ve become convinced you don’t actually read far or closely enough—let alone draw on context or chronology—before you start typing a reply.

Steven Zacharius August 1, 2014 um 11:43 am

Oh that’s nice. Please tell me what I misread then.

Rob Siders August 1, 2014 um 11:59 am

You’re the one who began with the condescension and I simply don’t have the patience or time to keep walking you through what I actually wrote to help clarify what you think I mean.

Steven Zacharius August 1, 2014 um 12:23 pm

That’s good Rob, I wouldn’t want you to waste your time in having an intelligent conversation. So don’t bother.

Rob Siders August 1, 2014 um 12:59 pm

I’m perfectly willing to have an intelligent discussion, just not with people who condescend to me and put words in my mouth.

Steven Zacharius August 1, 2014 um 1:06 pm

Exactly where was I condescending? I was asking if you had first hand knowledge of Amazon publishing contracts and what’s involved in their contract terms? I don’t and was curious if you did?

More importantly what business is it of Amazon to say what they think an author’s royalty rate should be from publishers? Do they tell the movie companies how much they should pay their actors too? It’s none of their business. They’re here to be a retailer or distributor. If they want to pay 35% or 70% for their own publishing program, that’s up to them but they have no right to dictate what a publisher should pay and no right to tell them what the list price should be for a book.

Felipe Adan Lerma July 31, 2014 um 9:39 am

Nate, thank you for a very brave post.

I do business as a customer and a writer (the former for many many years), have a Kindle Fire, and think they have been instrumental in bringing publishing back to life for the majority of writers.

This doesn’t mean everything they do is good or best for all authors.

A top author being given special privileges by Amazon, and issuing supportive statements about Amazon, isn’t much different than a top author given special privileges from a big publisher also issuing supportive statements.

Neither author says much about problems concerning the vast majority of self-published authors, with few exceptions.

Hugh has, in a post or two I’ve seen, mentioned the enforced exclusivity for small authors to be able to participate in Kindle Unlimited; and Patterson has donated money to small independent bookstores.

But it had got to the point where I thought I wouldn’t see an article like yours, Nate.

The emperors without (some of their) clothes have assembled huge cheerleading sections, and it’s really nice to just read a post that wants to be balanced – acknowledges short comings in both giant corporate entities.

Not evil, not bad. But neither totally equitable, in differing ways, to its authors.

I signed the petition, and am glad I did –

But there still is not an author centric model that doesn’t just fawn toward either big publishing or Amazon.

Saying that the latter is the closest thing to an authors' guild we have, may be true, but –

That doesn’t mean that guild is pushing to allow the majority of available authors into it’s most innovative program yet – Kindle Unlimited, "with" the same non-exclusivity afforded well known authors.

This is not the mark of fairness, nor of a representative authors guild.

And writers of posts should, up front, at the top, or end of the post, state affiliations they have with the org they are showcasing. How they profit.

If this sounds like I’m talking about politics, and elected representative spouting agendas paid for by deep pocket lobbyists – well..that might show the level this whole "debate" has taken on.

Nate’s post, for me, is a breath of fresh air.

Disclosure: I’ll buy or sell anywhere that’s good for me, and support businesses, as best I can, that provide equal access to both all its customers, and suppliers.

None of us can know all of what’s going on – obviously we don’t.

But "trying" to be fair isn’t a bad ideal.

ECW July 31, 2014 um 11:50 am

The POV that seems to be consistently missing is the only one that matters: the reader. Authors and publishers seem to operate as if they are the only ones that matter, when in reality the success or failure of Amazon, books, culture, whatever, rests solely in the hands of readers. The moment Amazon fails to meet the satisfaction of readers it will fail (at least the book part of their business.) Has anyone bothered to see if we readers actually care about the pissing match between these two giants? It’s all just business as usual for corporations, each trying to get the better deal. The Authors United ad (did it ever appear) is a joke. The demonization of the opposition (Hatchette doesn’t help authors; Amazon doesn’t treat its employees well, etc., etc.)is silly. If you don’t like Amazon; don’t buy from them. But, remember, the rest of the world DOESN’T care what you do. OK, enough, now back to my reading chair and my tablet on which I have Kindle books, Kobo books, Google Books, and Nook books, not to mention Moon Reader books and digital magazines.

Nikki July 31, 2014 um 2:58 pm

Absolutely Yes to this! As a reader I’m not going to purchase your trad pub book that’s $14.99 when I can get 3 or 4 from a self-pub for the same price. It’s also been my experience that 90% of what I’ve read from self-pub authors is better than most of the trad pub books of I read, which ultimately are all the same book with different names because most trad pub models force authors into a bucket that they can’t get out of and that lack of ability to put forth your creativity shows to your readers. I don’t care who your publisher is. It holds no sway with me, a reader, a person that’s helping pay your freaking bills. Amazon has allowed me access to more literature than I ever thought possible and regardless of their actions in the non predictable future, (although I would say the future of trad pad is a pretty predictable slow suicide) I will be forever grateful that they gave me the opportunity to find authors that trad pub were too stupid to pick up in the first place just because they didn’t fit the mold.

Taline July 31, 2014 um 5:09 pm

I agree with this, that readers come first. I started supporting Amazon when I heard that they’re fairer to authors while charging me less of my hard earned money. I like their selection better than the copycat trend-chasing books I read when I’m in my local Barnes and Noble too. I go to them when I am in the mall and I need coffee but I see less that interests me every time I go. I don’t need to waste money on books that I will never finish.

Felipe Adan Lerma July 31, 2014 um 5:15 pm

ECW, just curious, as a reader, have you been tempted into any of the subscription programs yet? Scribd, Oyster, or KU?

Also, I have friends who are avid readers that never buy books anymore unless it’s a special gift item. They use one or more of the digitally connected libraries here in Austin.

ECW July 31, 2014 um 5:55 pm

Yes, I have a subscription to Scribd. I started a trial subscription to KU but will drop it as it doesn’t fit the way I read, i.e. adding lots of books to my "library" and then get to them when it suits me. According to my Goodreads records, I read and review, on average, only about 125-130 books a year. I wish it were more. I have been a huge book buyer ever since I was a kid. I spend several thousand a year on books (it’s my one vice – my wife is a huge reader), and started reading ebooks on a Gemstar in the late 90’s when ebooks were expensive and quite limited. The Kindle, et al, have really opened things up. I love having access to many more books (I could never find what I wanted in a bookstore,) and now limit my purchases to ebooks only. I was director of a college library for many years, but still preferred to own rather than borrow.

Felipe Adan Lerma July 31, 2014 um 6:05 pm

"only about 125-130 books a year" – I had to smile, that’s impressive 🙂

I like having books I can "get to..when it suits me" also.

So far I like all three subscription services, but lean to Scribd. Haven’t joined my friends reading via libraries yet ’cause I have so much to read I like anyway, but I can see using my library card to snag something eventually.

Sometimes, when I have an additional 30-50% off coupon, I’ll go to Half Price Books. Either get a neat child book for the youngest grandchild, or snatch up a thriller or mystery that catches my eye.

Take care, happy reading (smiles)

ECW July 31, 2014 um 6:15 pm

You, too, Felipe. I’ll check out your website and books!

David Forsyth July 31, 2014 um 3:12 pm

As a reader and Indie author I have no complaints with Amazon whatsoever. They have always paid me 70% royalties on titles priced between $2.99 and $9.99. They have always encouraged Indie authors to keep their books in that price range by only offering 35% royalties on on books priced below or ABOVE that range. It is a smart strategy that benefits everyone involved. Consumers enjoy reasonable pricing. Authors get the lions share of profits. And Amazon is the big winner through volume of sales. It is unfair to cast aspersions on Amazon’s motivation and intent when the policy they explained is the same policy that has been applied to indie titles for many years now.

What is more unfair is the idea that a boycott of Amazon would hurt anyone but me and other indie authors and small presses who rely on Amazon royalties for our livelihood. The anti-Amazon campaign is a thinly veiled attack on indie authors who have secured over a third of the Kindle sales market with low priced ebooks.

Steven Zacharius July 31, 2014 um 11:18 pm

You think that Amazon is making buckets of money on low priced books? It takes a lot more sales of low priced items to equal the sale of a higher priced item. It’s called margin. Books in general are a very low margin item which is why shelf space is declining for them at retail. But Amazon cannot be making a lot of money on self publishing when it’s still the big bestsellers that drives Amazon’s business.

David Forsyth August 2, 2014 um 2:21 am

I know that I make a lot more on my $2.99 and $3.99 titles than the one priced at $5.99. And that means Amazon does too. As Amazon describes it, "…e-books are highly price-elastic. This means that when the price goes up, customers buy much less. We’ve quantified the price elasticity of e-books from repeated measurements across many titles. For every copy an e-book would sell at $14.99, it would sell 1.74 copies if priced at $9.99. So, for example, if customers would buy 100,000 copies of a particular e-book at $14.99, then customers would buy 174,000 copies of that same e-book at $9.99. Total revenue at $14.99 would be $1,499,000. Total revenue at $9.99 is $1,738,000."

And when you take the math down to the level of indie authors like me, the best price point is $2.99 to $3.99 for bestselling fiction titles. Amazon even offers advice on the best pricing to maximize sales/profits. So I am happy making $2 per sale as long I sell thousands of ebooks a month – and Amazon is happy to make 5 figure deposits into my bank account while making 4 figures on my book sales. Why? Because I am just one of thousands of little guys who collectively make over a third of all Kindle book sales.

I have a serious case of AIS (Amazon Infatuation Syndrome) and no desire to recover.

Steven Zacharius August 2, 2014 um 8:46 am

Keep in mind that that study was done for publicity purposes in their negotiations with Hachette. I have no doubt that the price elasticity is important with indie authors where readers might not be as familiar with the writers. But with established big name writers, people have shown a continued willingness to pay the higher ebook prices…those sales have not declined. Of course people will buy more if you drop the price in half for a short time so it’s a matter of hitting the correct balance. Readers aren’t going to pay 12.99 for an indie author they never heard of but they will for a big name author. I think the bigger issue is that readers only have so much free time to read and the key point is going to be getting them to choose the book we’re all trying to sell.

David Forsyth August 3, 2014 um 2:05 am

The "study" is one of the "tools" provided for free to authors through KDP. I didn’t need really need it, since it is basically common sense (a rare thing is some circles). I didn’t join the Dime Store (99 cent) crowd, because I do think my work has value. But I didn’t overprice my ebooks either. They are data files for C sake! Nothing more, but some people love them. Enough so that royalties on my $2.99 ebooks have paid for cruises to Europe and my rent in Malibu. Go figure.

Zané Sachs July 31, 2014 um 3:40 pm

I admit it. I’ve expressed my appreciation of Amazon, even said I loooove Amazon. Why, because after three agents and years of attempting to be published, Amazon created an amazing way for me to self-publish, and it’s been great.

What did New York publishers do for me? Nothing but rejection … because my writing doesn’t fit into their limited box of genres, brand name writer franchises, and dead authors.

So yeah, I love Amazon for the freedom it has given me.

I’m not, however, blindly in love and deluded, holding on to an abusive relationship that feeds me crumbs.

Felipe Adan Lerma July 31, 2014 um 4:16 pm

Deborah, with all due respect, there was, for awhile, a semblance of a conversation about the pros and cons of both big publishing, like Hachette, and of Amazon. Things done well by either, things needing improvement by both.

But I feel that something about your tone has brought out folk wanting to only defend Amazon. It’s all great. Nothing’s ever been better. And we’re back to political parties not caring for much more than winning the election.

I know the feeling of wanting to balance things. It’s practically a fault with me.

But you obviously have an indepth knowledge of the publishing industry I’ll never get near. I’m just a tiny self-publishing author that, if I want to participate in Amazon’s KU, I can’t be non-exclusive like other authors.

Or share my work with libraries.

Yet I don’t hate Amazon. I publish all my titles on their regular store. And I love my Kindle Fire.

All that, what I’m not given as an author and what I do get, the balance of my relationship with Amazon, gets swallowed in the din.

We could use your knowledge. Tell us things that are both good and bad about trade publishing. Tell us good and bad things about self-publishing. About Amazon, Apple, Scribd, Oyster, libraries.

How and when is one better than the other?

If you do, I not only can learn, but I can hear you better also.

If I’m out of line, my apologies.

Best wishes,


Marion Gropen August 3, 2014 um 12:35 pm

Neither traditional publishing nor self-publishing is better than the other for all books, authors, goals and circumstances.

The only right answer to "which is better" is "It depends" on a long laundry list of factors.

Chris Meadows July 31, 2014 um 5:42 pm

I just want to know why it’s necessary that those people who enjoy the benefits Amazon provides and disdain the practices of the publishers such as Hachette must perforce consider Amazon their friend.

I don’t think Amazon’s my friend. I think they’re a corporation with the goal of making money. (Though in some ways they seem to be kind of laid-back about it, given their tendency to have profit numbers that make stock market analysts blanch.)

That doesn’t mean I can’t be happy about what they’re doing.

If I enjoy reading a book or watching a TV show or movie and rave about it, does it mean I think the authors or creators of that TV show or movie are my friends? They knew what I wanted to see and created it just to please me?

If I’m happy it’s a cool day, perfect for getting out and bicycling, does that mean I think whoever controls the weather is my "friend" and was doing it to make me happy?

Is there really anyone that solipsistic living in the real world today?

Let’s get real here. I haven’t seen one self-publishing writer claim Amazon is their "friend." Or even that Amazon wants what’s best for them. They’ve said that what Amazon does want seems to be in their own best interests, but that doesn’t speak to why Amazon is doing it.

People can be happy about something without ascribing benevolent motives to it, you know.

Steven Zacharius July 31, 2014 um 11:19 pm

Good point.

SpringfieldMH July 31, 2014 um 6:10 pm

Amazon Infatuation Syndrome… Lame. What oh what might that be inspired by and copied from…. hmmm, Amazon Derangement Syndrome…. Stockholm Syndrome? Adequate perhaps as linkbait. But really… come on…

Hugh Howey as naive and infatuated newcomer to publishing. Go read his biography. Really?

EVIL Amazon’s warehouses… Do self styled activists and the press even know of or cover anyone else’s warehouses? Walmart perhaps. Easy pickings and lazy demonization is what I call it.

What is your point, Nate? I get that perhaps you want the clicks. I get that some folks think it is fair to work one side of the street one day, the other the next… build someone up then tear them down… treat issues as aggressive sport in which anything is fair and nothing is off limits… rather than something to be dealt with fairly…. but….


Jim F. Kukral July 31, 2014 um 7:31 pm

Who cares why Amazon is offering greater royalties? The end result is better for the author, and the reader. Period. The only people that lost in this entire thing are traditional publishers who refuse to adopt to the new model of selling books and continue to not offer fair compensation to authors because they don’t want to see their monopoly they’ve had since the invention of the printing press fade away. Oh, and the authors who are realizing now that maybe signing the rights away to their work forever wasn’t such a good deal.

Marion Gropen August 3, 2014 um 9:37 am

Um — authors who rely upon those payments for their livelihood might want to think about **why** those numbers are so high, and **whether** those reasons will continue to exist and for how long?

Steven Zacharius August 3, 2014 um 11:25 am

Most publishers haven’t lost anything Jim Kukral. The only publisher who has been in the news is Hachette and they didn’t have a bad sales period. This has nothing to do with offering fair compensation to authors and you can’t possibly compare the KDP model with traditional publishing. With KDP they just put up the book and sell it. With traditional publishing there is an army of people behind the writer supporting the book with additional services, including promotion, selling subsidiary rights and getting the book into print. How can you even make the remark that publishers have had a monopoly when there have been thousands of publishers where authors could go to get published? There are publishers who will publish poetry and others that will publish mega start romances and thrillers and everything in between. If KDP works for you, that’s great. But there’s no reason to bash the traditional publishers where thousands of authors have made very substantial livings and are quite happy continuing to work with their publishers.

Leslie July 31, 2014 um 7:56 pm

Amazon is obviously a huge corporation, but you may want to ask why people are infatuated with them. Two obvious ones spring immediately to mind:

1. Amazon created a marketplace where people could self-publish in a legitimate way and actually make money from it (unlike most vanity publishing, which used to be the ONLY other outlet).

2. Amazon pays authors a greater percentage than traditional publishers.

Are they perfect? No. Have they opened up a whole new world for the many people who don’t pass the traditional gatekeepers (who often pass up good novels that they think won’t be "big sellers")? Yes.

Marion Gropen August 3, 2014 um 9:46 am

Leslie: Self-publishing pre-dates the ebook revolution by a lot of years. And doing so profitably has been quite common for as long as I’ve been in book publishing (25 years+).

Vanity presses were never, in all of those years, the only option. They were also, IMNHO, never a good option. I think we’d agree upon that.

The major difference now is that **novelists** can self-publish at low levels of cash investment, and make a profit.

Other major differences include:
— the technical limitations of the ebook format mean that much of the investment publishers have made in preparing a manuscript makes less impact on the end result for the reader. This means you can get away with a much lower direct fixed cost per title.
— novels by less-well-known authors can be done in low priced formats. Until now, the only way to create a low price point was in the mass market paperback, which required very large print runs to get the PPB (Paper, Printing and Binding) down to the required range of 50 cents per copy or so.

And yes, the paper, printing and binding on a book is about 10% of the list price. Not the half that you’ll hear people assuming.

Mackay Bell July 31, 2014 um 10:30 pm

It is generally assumed that everyone has their own agenda, particularly big corporations but also individuals. I shouldn’t have to begin every comment on this blog with, “Nate, I know you have a financial interest in generating traffic, so I will assume that everything you write is toward that end, but… I would still like to comment on the merits of your point, assuming you might actually be sincere…”
But in this particular case, yes, it seems clear that you don’t really believe what you are writing, but simply churned out some quick click bait.

Because I’ve read your posts often enough to know you are a smart guy, and I also know you’ve followed Hugh Howey long enough to have read posts by him repeatedly saying, “Sure, Amazon is primarily interested in what helps Amazon… Amazon might turn on us someday… Amazon’s primary interest is in their own profits… etc.”

In fact, much as I love reading Hugh’s posts, I get a little bored when he feels obligated to include an unnecessary disclaimer that Amazon might have a secret agenda nobody knows about and might someday do something different that it has done in the past. The particular post you refer to did not feature him warning that the entire knowledge of the universe is ultimately unknowable, so I guess you felt you were justified in attacking him for the benefit of people that aren’t familiar with his writings.

But first, you know better. You’ve read his other stuff and you know he has frequently qualified his support of Amazon as being based on their current practices and his best guess of their motives.

Second, none of the junk you state is true. You claim he has an “irrational emotion toward Amazon which overrides conscious thought.” No, Amazon has been good to Hugh, so it’s not irrational for him to think well of it. If you want to accuse him of being motivated by self-interest, fine. But it’s not irrational for him to be in support of a company that gave him a huge opportunity and thereby changed his life for the better. Hugh is also a careful thinker and defends his points, so you know, as well as anyone, his conscious thought has not be overridden. Hugh has been at the forefront of trying to get out actual facts and data, and the data that he has confirms much of what Amazon stated. That is, that $9.99 books sell much better than $14.99. I happen to believe if Hugh looked over the data and that wasn’t true, or if it wasn’t true based on his own experiences, he would say so. And I believe you know he would.

Neither of these accusations, that Hugh is irrational or unthoughtful, are even valid as comic exaggerations. For them to be funny, they would have to have a grain of truth. They don’t. (It would actually be quite funny to mock Hugh about trying too hard to qualify his carefully supported conclusions, and using to much data to defend simple arguments. Not to mention, responding too nicely and thoughtfully to vicious false attacks.)

I also know you have been following this debate from it’s origins at least going back to the shit volcano. So you know well which side (big publishing/Amazon) started with the low vicious attacks and have to at least admit that a good part of the hostility began with those trying to tear down self-publishing with absurd (perhaps irrational and unthoughtful) arguments.

You also could not have missed all the writers talking about the truly egregious problems they have had with big publishing: unfair contracts, books being neglected, legal fights over backlists that were abandoned, etc. For you to not even mention there might be reasons for writers to be suspicious of Hachette (or readers who think books over overpriced) and run back to the Amazon “warehouses kill people” meme, is really disingenuous. If you really are concerned about Amazon’s warehouses, and the lives of those workers, then write a real piece about it. Do some research on other warehouses owned by big corporations with similar issues. Are Amazon’s warehouses really worse? See if it’s true that Amazon has worked to fix the problem. But to jump back to the “Amazon warehouses kill people” line when this particular argument is more about keeping James Patterson’s million dollar money machine oiled with the blood ink of unprinted slush pile books seems frankly callous.

(And yes, I know, Amazon also tweaked the payout to audio books. I know, I know. How terrible. Okay… so what does that have to do with Hachette and pre-buy buttons?)

Moreover, since you and I have fenced back and forth about Apple’s role in the big publishing DOJ lawsuit, you know that the reason Hachette is trying to force Amazon into an agency model is to fix prices so Apple, Google and other ebook sellers can compete on a level playing field. That is, so Amazon cannot do what Amazon does best. Sell stuff cheap. The purpose is to empower Amazon’s competitors (possibly legally, this time). You don’t have to have inside corporate communication to understand why Amazon doesn’t want to give Hachette baskets of cash from presage orders so Hachette can actively work to lower Amazon’s market share of ebooks.

Considering your own self-interest, it makes sense you end your click bait with “a pox upon both their houses” so you can pretend to be neutral in a debate were I suppose you have economic interests both sides. But you know it’s empty PR spin in support of one side. Big publishing is losing this debate, badly.

This debate was supposed to be about saving literature. Readers were supposed to get angry they couldn’t get a book over night. Writers were supposed to be stupid enough to buy into the argument that high prices for Hachette books meant more money for cheap self-published books. No one was supposed to think through those arguments. They weren’t supposed to figure out that traditional publishers don’t care about literature and have horrible contracts and treat most writers very poorly. No one was supposed to argue that fairly priced ebooks raises all boats. And readers weren’t supposed to care if a book was too expensive for their budgets.

Somehow, people didn’t rally to the argument that government intervention for giant NY publishers who hate self-publishing was a good thing. The debate has shifted into an uncomfortably clear choice of Amazon supporting low prices for ebooks and big publishers wanting anti-competive price fixing.

So big publishing sock puppets try to distract with a “both sides are wrong” argument. But like attacking Hugh for “gushing” about Amazon, the “both sides are wrong” stuff might look like a nice comeback in the comments but it’s not going to win hearts and minds over an issue that is really important to people. And is pretty simple.

As Hugh stated, for people who like to read ebooks, and for writers who like to write them (who aren’t carried in sedan chairs by the big five), the answer is increasingly clear. It will be better if Amazon wins this war with Hachette.

Steven Zacharius August 1, 2014 um 12:03 am

Do you realize how many thousands of authors are published by traditional publishers? Do you think all of them are carried in sedan chairs? Traditional publishing is certainly not just about those authors that are big mega stars. There are far more many mid list authors that publishing houses work with on a daily basis in hopes of building their readership and thus making more money for both of them. Hugh Howey has one goal and that is for him to sell more books. His blog increases his personal recognition and that’s it.

Nirmala August 1, 2014 um 12:14 am

Sorry Steve, you’ve made some good points on here, but anyone who claims to know another person’s motivations is blowing smoke. Hugh may actually be the nice guy he seems to be.

Chris Armstrong August 1, 2014 um 12:27 am

Careful, now you’ll be accused of having Howey Infatuation Syndrome.

Andrew Claymore August 1, 2014 um 11:54 am

LOL, folks will say you’re HIS….

Steven Zacharius August 2, 2014 um 9:51 pm

You’re entitled to think I might be blowing smoke. I didn’t say he wasn’t a nice guy, I don’t know him at all and have never even spoken to him.

Marion Gropen August 1, 2014 um 12:53 am

I agree that there are a lot of publishers (100,000 active ISBN blocks in the US, at last count), and even more authors published by them, most of whom are mid-list or lower (definitionally).

On the other hand, I do believe that Mr. Howey is acting from benevolence and a strong desire to give back. I don’t always agree with his (or his Data Guy’s) analysis. I find many things that I wish that they would either do better, or make more obvious.

Nonetheless, I don’t believe we add more light by raising the heat. Let’s not insult anyone. And Mr. Howey usually avoids insulting those who disagree with him.

(BTW, folks "legacy" is insulting. Always. I prefer the more neutral "traditional," maybe? Or if you’re differentiating between the Pay to Publish operations and traditional publishers, "mainstream" works since Publish America debased "traditional" in that context.)

Mackay Bell August 3, 2014 um 3:23 am

Dozens, and probably hundreds, and maybe thousands of writers who used to be published traditionally have abandoned big publishers and are self-publishing. Many of them are writing elegantly about why traditional publishing these days is a rip off for writers. Some of them, like Dean Welsey Smith, carefully discuss the history of traditional publishing and what went wrong and how the big five turned against writers. Many say only a fool would sign over their rights to a big publisher for life for the small advances and royalties promised. Other writers continue to publish traditionally, but admit that it is impossible for mid-list writers to make a living wage. Others are keeping their mouths shut in hopes of getting the rights back to their out of print catalogues so they can self-publish. Some are doing a hybrid of self-publishing and traditional publishing. Some keep their mouths shut because they prefer the prestige of traditional publishing, even though they know the economics are unfair.

I do not know specifically of any writers being carried around in sedan chairs by publishers (that was a joke). But I do know that some writers at the very top of the traditional publishing ponzi scheme do make a great deal of money and could hire people to carry them around in sedan chairs if they wanted. You can find their names among the seven hundred or so who signed onto Douglas Preston’s petition.

In fairness, I’m sure some of the seven thousand who signed on with Hugh Howey in support of Amazon could hire sedan chairs also.

Steven Zacharius August 3, 2014 um 8:59 am

I don’t think I would characterize traditional publishing as a ponzi scheme when that’s not the case. Publishers spend years building authors and huge sums of money as well as time. Many writers appreciate that. This ongoing comment about signing away the rights for life is just a talking point and not reality as I’ve said on other sites. In the real world the rights can revert as soon as the publisher is out of stock or not meeting some agreed upon threshold of ebook sales. Usually this can happen in under 7 years….so although the copyright law gives 70 years plus life, that has never been a factor for holding onto a book at least at Kensington.

Thomas L. August 1, 2014 um 8:00 pm

Goodness, given the level of acrimony and defensiveness, I thought perhaps I had stumbled into a discussion of Palestinian rights or something. Folks, the issue here is about entertainment and how much money people are going to make, or speculate how much they’ll make or hope they’ll make, or whether one form of publishing is more evil than another. For heaven’s sake, it’s entertainment. There’s absolutely no reason why legacy/traditional/whatever-suits-you/ publishing can’t coexist very nicely. Yes, two behemoths are now engaged in a pissing match over how much they get to keep. They’ll work it out because it will be to their mutual advantage to do so. And, people, if you don’t like Amazon, don’t shop there. if you don’t like their terms don’t publish with them. If you don’t like Hachette, don’t read their authors. In the larger scheme of things, this fight means nothing. It’s trivial. It’s certainly not worth getting all worked up about. In any case, most of what I’ve read in this never-ending redundant battle of words is pure guesswork.

Felipe Adan Lerma August 2, 2014 um 9:38 am

Thomas, thank you!

David Forsyth August 2, 2014 um 10:17 pm

I agree with the gist of you post, Thomas. I just hope that people who decide they "don’t like Amazon" and choose to shop elsewhere are aware that thousands of indie authors like me make our livings from sales of Kindle and POD Create Space paperbacks. Royalties from my Amazon book sales pay my rent and greatly improved my standard of living after being laid off from construction management in 2012. Amazon is not my "friend." They are my business partner and I am happy with the relationship.

So, if you think that a boycott of Amazon will hurt the 700 pound gorilla, think again. It’s the little guys like me who are in the cross-hairs. We don’t have billion dollar contingency funds. We write stories to entertain people and make a living. Who thinks that is a bad thing?

“Modern poets talk against business, poor things, but all of us write for money. Beginners are subjected to trial by market.”
? Robert Frost

Thomas l. August 2, 2014 um 11:40 pm

You are absolutely correct. I certainly did not mean to imply any boycott whatsoever. I personally spend an inordinate an inordinate amount of money on books there.

Marion Gropen August 3, 2014 um 9:48 am

No one here can afford to lose the sales that they make through Amazon — big publisher or small. That **is** the problem.

They don’t need us, and we do need them.

AvidReader August 2, 2014 um 7:41 pm

Steven, I find your concerns about AWS odd and it seems contradictory to the view of ebooks. Amazon grew both the IaaS (AWS) market and ebooks basically from scratch and they are usually criticized for pricing of ebooks as this limits competition yet in the AWS market with many similar players (Google, Apple), who have seen the potential have jumped in. You worry that Amazon is not a near monopoly (which is a bad thing with ebooks) even though it has a healthy 37% market share and apparently has five times the computational power of its next FOURTEEN competitors combined. Because the others have deeper pockets, do you expect them to roll over and play dead? They didn’t do that when Barnes and Noble tried to put them out of business when they were a newbie. When someone puts obstacles in their path, they find ways around them such as encouraging self publishing when Apple tried taking price out of the mix or developing the cloud reader when Apple added its 30% in app purchases or one penny shipping in response to the issue of free shipping in Europe. Publishing needs to get creative as well. Bundling is one method of keeping print relevant but many don’t seem to see the possible profitability there.

Ststeven Zacharius August 2, 2014 um 9:28 pm

Andrew all publishers at certain levels are given promotional opportunities. There are so many different vehicles available like daily deal, banners, home page of certain genres, etc.

Ststeven Zacharius August 2, 2014 um 9:34 pm

I have no problems with AWS. I was just commenting at a certain point it’s going to be required for amazon to show a profit or the stock will drop. They certainly have close to a monopoly in the eBook business but not in the print area. They’ve reached this level by discounting below cost on many bestsellers and having deeper pockets to absorb the loss than most of their competitors. They are a great retailer for books.

Steven Zacharius August 3, 2014 um 8:49 am

I should also add that Kensington uses AWS.

Marion Gropen August 3, 2014 um 8:47 am

There are many, many manuscripts with a valid audience, but one that isn’t large enough to repay a large investment in publishing the manuscript. Those books are best produced by a self-publishing author, with very inexpensive services (or all DIY), and released in e-only, or e- and POD-online only channels. We all know that, including traditional publishers.

Many times, when an AE rejects a manuscript, they’re saying just that: well-written, but the audience is either one we don’t know how to reach, or that we think is fairly narrow.

There are a precious few manuscripts, maybe 50,000 per year, that have a large commercial audience. For those manuscripts, the investment of much larger amounts, including higher (more expensive) levels of editing, copyediting and proofreading will return greater sales even at much higher price points.

Publishers (and Amazon) have been aware of these facts for decades.

Online sales of trade books (aka "bookstore-type" non-fiction, and all fiction) are still only about 40 to 50% of the total. That includes all the books that are sold **only** online, and only as ebooks.

Self-publishers can follow either path, despite the propaganda that would have you believing that they can only do the online only one. But the investment amounts required and the higher risk of losing all or most of that investment mean that most self-publishers do not try that path. In most cases, this is a very wise choice.

For most manuscripts, there is no benefit to the author in licensing copyright to a publisher.

For the right manuscripts, the benefit is in the investment that a publisher makes, in the larger audience that the book reaches (which means a larger potential readership for future books, too, of course) and in the fact that the publisher takes all the risk of losing that investment.

There is a current of thought these days that assumes that publishers don’t know how to produce books as cheaply as the widely known type of self-publishers do. This is, of course, complete nonsense. There were, once upon a time, publishers who employed that model. They’re all, or mostly, gone now. But most of us remember them, and all of us inside the publishing world are aware of the techniques used.

We don’t use them, not because we don’t know them, but because they’re not going to gain that wider audience and higher price point that we need, if the investments (aka bets) we’ve placed are to pay off.

All publishing is gambling. Traditional models of publishing are **high-stakes** gambling. You play different parts of the game differently if you’re smart. And stupid publishers don’t last long — no matter which part of the game they’re playing.

Felipe Adan Lerma August 3, 2014 um 12:28 pm

@Steven Zackarius –

"I’m just guessing that it’s going to be harder and harder to find all books in general on any online retailer in the future without having the clout to get into major promotions." –

There’s an interesting and potentially hugely beneficial software for going beyond also-boughts and comparison to same-genre bestsellers, that Apple’s just acquired, BookLamp.

At this point it’s all conjecture, but this article has some nice examples of how unknown or less well known authors would get recommend to a reader’s interests :

The same writer has a really nice longer example on KBoards at :,190651.msg2698734.html#msg2698734

If this was a small company Apple got, I’m sure others, like Amazon etc either have something similar in the works, or are looking for such. Either way, even if not eminent, seems very promising, esp to less well known writers and readers in general.

Steven Zacharius August 3, 2014 um 4:54 pm

I know the CEO of BookLamp very well, Aaron Stanton…..a brilliant guy with a brilliant idea. We were one of the early supporters of his giving him all of our files for him to analyze. His process is truly revolutionary and is not based on reviews or some other buying pattern…it’s based on the style of writing. It’s description of Pandora for books is fairly accurate. I just spoke to Aaron last week and wished him well and told him he owed me a cut of the deal since when I first met him I suggested that he sell the concept to someone like Amazon or Apple. I will look at the links that you provided Felipe.

Felipe Adan Lerma August 3, 2014 um 5:15 pm

Steven, that’s absolutely encouraging to hear. Thanks so much for your reply (smiles).

Steven Zacharius August 3, 2014 um 4:58 pm

I read both of the links you provide Felipe. I really don’t agree that indie authors are dominating bestseller lists because you really have to look at revenue and not units sold….as I’ve said 1000 times already. If a person is selling a book for $.99 cents…’s a lot easier to sell a lot of units pushing that book up the list….but in reality the revenue is a fraction of what a typical traditionally published book would bring in. I’d be in favor of seeing bestseller lists based on price points. Even us publishers do low priced promotions too so this would be fair. We’ve done many books that were severely discounted to generate interest in a series from that author.

Felipe Adan Lerma August 3, 2014 um 5:29 pm

Was that in there? Frankly I’ve begun to turn a deaf ear (blind eye?) toward a lot of the see-saw one-up-manship of the so called debate now.

Yes, there are points and trends, but beyond that…

I only caught the parts about BookLamp –

How it might really mean I won’t have to depend on who is dominating what to somehow miraculously help someone discover my work.

That’s why I’ve been attracted to subscription plans (without exclusivity), and why BookLamp looked so promising to me. Your personal contact and description of your experience of it on the comment above is extremely encouraging.

Thanks again, Steven. Best wishes (smiles).

AvidReader August 3, 2014 um 6:17 pm

Steven, I do appreciate you taking the time to comment. It is often difficult to swim upstream against opposing views. About your question regarding data analyzing price points, how much number crunching does your firm do. Amazon does have quite a bit of data and constantly analyzes it sometimes sharing with its business partners what might be a better approach for them even if it generates less revenue for Amazon but it is their proprietary information. I know that some indie authors often test their pricing for the best fit. The major publishers as well should easily be able to slice and dice available data without relying on outside forces to do it for them. While you as a smaller publisher may not have the same resources, they do not have the same excuse and for them to call on Amazon to automatically provide it is disingenuous.

Steven Zacharius August 3, 2014 um 9:19 pm

We are a smaller publisher but not that small. Kensington is a $75,000,000 company. Amazon shares some information but not that much. It is proprietary. Kobo is probably the one who is most sharing other than Scribd. We test prices all the time. We frequently discount books and will be discounting backlist titles more in the future. But frankly when you have so many titles to manage, it is quite difficult. We probably have close to 5000 active ebook titles now.

AvidReader August 3, 2014 um 1:14 pm

Marion, you are being myopic in discussing the business of publishing. You described the process of putting a book out but left out; finding talent, paying the proper price for that talent, negotiating contracts with talent, suppliers and distributors, real estate, costs analysis on returns, accountability for auction overruns, building relationships with talent suppliers and vendors, budgeting, analyzing data and forecasting and so much more.

Marion Gropen August 3, 2014 um 3:16 pm

AvidReader: you’re right. Publishers do have to do all of those for an ebook, just as they do for a print book.

Self-publishers have to do much of that, although some do more than others, and almost all do a lot less of all of the above than a traditional publishing house does.

Retailers do very little of most of it.

I’m not seeing why you see that as me being wrong about something?

AvidReader August 3, 2014 um 4:47 pm

You seem to feel that publishers are fine doing business the same way year after year and not innovating or improving efficiencies but chastise Amazon who has started from very little and constantly reinvents in its business offering its customers a top notch experience when others do not put through the same effort and therefore lose market share. While I can see that some smaller publishers and bookstores won’t have much influence, that does not stop the major ones for offering other alternative purchasing options including the big 5 and Google and Apple. Barnes and Noble as well had the opportunity at one time. DO NOT blame it on price as Amazon offers more than price and even when there was price equity, others did not gain much ground. If others want to compete with Amazon they need to come up with a compelling alternative.

Steven Zacharius August 3, 2014 um 5:10 pm

Avid, I will say this again. It’s hard to compete against Amazon when they’re willing to sell tremendous quantities of books at a loss. I remember when they recently had a Stephen King hardcover for 1.99….probably an $16.00 loss per book and they probably sold tens of thousands of those or maybe 100,000…who knows? Who can compete with that…certainly not a smaller online retailer or any indie bookstore. They consistently sell bestsellers near cost or below cost to capture marketshare. This has nothing to do with indie publishing because that’s a different piece of the business but it makes it very difficult for other retailers to compete with traditionally published books with Amazon. I think we’re going to see increased pressure on Amazon going forward to start generating profits. You could see that in the sharp drop in the price of their stock when they reported their recent losses. Time will tell.

Marion Gropen August 3, 2014 um 5:44 pm

Why defend Amazon? We’re not attacking it.

I have nothing against Amazon for what it has done. I don’t think it has done anything wrong (other than issuing a few misleading statements).

It doesn’t need to do anything wrong to be dangerous to self-publishers and larger publishers alike.

In fact, if it has the power to squeeze all of us, it has an ethical obligation to do so. And I’m reasonably sure that as soon as the ebook market stabilizes it will execute its ethical duties in that way.

As for publishers as a whole being inefficient, that’s a popular misconception. First, there are 100,000 active ISBN blocks (and hence, nearly that many publishers) in the US alone. Some of them are probably run by idiots, but very few idiots survive for long in this industry.

If "the way things are done" were static, or if it were inefficient, a few of those publishers would change things and eat everyone else’s lunch. That hasn’t happened.

The "way things are done" has changed radically every few years, for as long as I’ve been in the business. And publishers who didn’t adapt quickly to take advantage of each and every change vanished.

But even if they are — that has nothing whatsoever to do with whether or not Amazon is going to go after the margin that it thinks it can get.

Nor does it have anything to do with whether or not Amazon will go after the little guys after it’s done with the big ones.

In every other iteration of this pattern, and there have been several, Amazon started with the big ones, squeezed what it could get from them, and then went down the size range. It hasn’t hit the e-only author-publishers before, but it has certainly gone after the POD-only author-publishers in the past.

I see no reason to think that it won’t do so again. Do you?

ECW August 3, 2014 um 3:24 pm

There are times when I regret having subscribed to comments on a blog. This is one of those times, my inbox becoming clogged. It’s also unfortunate that bloggers, for whatever reason, feel the need to "stoke-the-fires." Unfortunately, there seem to be two camps evolving, each becoming more intractable, when, in fact, they could co-exist quite nicely. Traditional publishing is needed. Yes, of course, it often is overly bureaucratic, laden with infrastructure that must be accounted for, has a horribly inefficient consignment system, and often doesn’t treat some authors as well as they would like. But it has, does, and will provide support for a print system that remains needed and authors writing long works over time.

They also, but are probably loath to admit it, desperately need Amazon with its infinite shelves and astonishingly speedy delivery of books into the hands of readers. Not to mention their kick-starting of the ebook which will probably save many publishers; there’s no question ebooks can breath new life into the mid- and back-list. Amazon has also provided another invaluable service: providing a simple and often profitable mechanism for anyone who wants to write (speaking as a reader we love them) on subjects or genres traditional publishers might not want to risk their capital. That’s wonderful. Choice is magnificent.

Both forms of publishing can co-exist quite nicely and should. Because all new technologies require a bit of sorting out, it will take a while to work out the details of payments and processes. That’s what S&S did with B&N, and that’s what Amazon is doing with Hachette. Mark my words. They WILL work it out. All retailers have spats with their suppliers. That’s OK.

In the meantime, neither side is evil and no one is served by stirring the pot. Celebrate that we can have both a profitable print industry and vigorous digital world.

Felipe Adan Lerma August 3, 2014 um 3:26 pm

Thank you! (smiles)

Steven Zacharius August 3, 2014 um 5:11 pm

Exactly right ECW.

William D. O’Neil August 3, 2014 um 11:49 pm

I want to offer another way of looking at this, by analogy to banking.

Banks traditionally were financial intermediaries which transformed short-term money (deposits) into long-term money (business loans and mortgages). It was quite a complex function drawing on a wide range of skills and competencies and requiring very careful judgment—and a sound capital base. That was how it was, at least in the United States and most of Western Europe for about 150 years.

But by the 1980s the development of financial markets offered attractive outlets for short-term money (e.g., money-market funds or, on a larger scale, repos), and at the same time alternative sources of long-term money (bonds and private placements, or commercial paper endlessly rolled over). This encouraged disintermediation or "unbundling," cutting the banks out. The result has been what has lately come to be called the "shadow banking system," banking-like services without banks. (You may not be interested in shadow banking, but it has an interest in you; it was largely responsible for the violence of the 2008 crash.)

Publishing is like banking and traditional publishers are like traditional banks, in that they take writings and transform them into book sales. Like traditional banking it is a process involving a wide range of skills and competencies and requiring very careful judgment—and no little capital—in order to be successful.

But now technology and the development of retail markets has made disintermediation possible in publishing as well. Instead of accepting the traditional publishing package an author may buy the various publishing services individually. Indeed, with appropriate software and skills in using it he may perform many of them himself.

Amazon has played the role of Goldman Sachs in this, offering to provide many of the services that make unbundling of publishing. (And believe me, none of the calumnies heaped on Amazon by the forces of traditional publishing are any more sulfurous than what traditional bankers have said of Goldman and its kin. Indeed there are many parallels. And traditional banks depend on Goldman et al in somewhat the same way that traditional publishers must depend on Amazon.) Amazon, with its low blended cost of capital, even provides the capital for shadow publishing via KDP or CreateSpace.

But note that shadow banking has not driven traditional banking from the field. Arguably the traditional banks are thriving as never before, and all the larger ones have a foot in both camps, traditional banking and shadow banking. I will be rather surprised if we do not see generally parallel developments in publishing. There are, as a number of people have argued, real reasons for traditional publishing. But there are real reasons for shadow publishing and efforts to strangle it at this stage are futile and self-defeating.

Marion Gropen August 4, 2014 um 1:21 pm

I agree with the analogy above, and am impressed by it.

I would add: it doesn’t make sense for traditional publishers to feel threatened by self-publishers' success. (And I don’t see any of them feeling that way, either.)

Why? Because publishers don’t compete with each other, let alone the self-publisher.

**Books** compete with other books that serve the same needs. Before the ebook revolution, there were about 200,000 new titles coming out in the US alone each year. Now, it’s more like 1,000,000. Sounds scary?

Not so much.

The effective competition for any book that has a chance to get significant sales is only the top 100 or 200 titles in its narrowly defined market segment. That hasn’t changed. In fact, the number might have increased, since we’re not as constrained by physical discoverability in stores (including bookstores).

Most major publishers can get most of their titles into that top couple of hundred for as long as they ever did after release. That hasn’t changed.

If the rest of the titles aren’t yours, it doesn’t matter, not at all, who did publish them.

That’s why I don’t think publishers are threatened by, or trying to slow down, the self-publishing revolution.

William Ockham August 4, 2014 um 8:23 pm

"For as long as they ever did after release"

That, my friends, will be the epitaph on the gravestone of legacy publishing. That statement is both true and the reason that legacy publishing is doomed. Their business model assumes that books have a short shelf live. Today, the shelf is infinite. Reality has changed and they don’t get it.

Not that you are wrong. Everything you have said about the present is essentially correct. The thing you don’t get is that most of the things that you think are important evidence of a healthy industry are irrelevant and the thing you fear most (Amazon) is the only reason the legacy publishers are still in business. Publishers exist at the whim of Amazon because publishers failed to adapt to the changing climate.

Steven Zacharius August 4, 2014 um 10:02 pm

William I don’t know where you get these thoughts from. Legacy publishing is far from doomed. Most companies are doing better than ever and big-time authors have not left publishers at all. Amazon is not the reason publishers are still in business. If ebooks hadn’t come along, print book distribution would have been much bigger than it is now. It’s a changing technology and publishers have handled the transition very well. If Amazon were gone tomorrow there would be somebody else stepping up and filling their shoes. Indie stores would start coming back and the chains would expand.

David Forsyth August 5, 2014 um 2:20 am

I don’t know what world you are living in, Steven. Amazon is the biggest seller of all outlets, for all publishers (self or traditional). The inflated prices of Big 5 ebooks are listed as the most profitable per-unit sector for Harper Collins – but they ignore how many more they would sell at a reasonable price. Meanwhile, Indie book stores have been expanding continuously for the past few years. I’m new to the game, but can see the writing on the wall. I’m keeping my digital rights and self-pubbing until I get an offer I can’t refuse.

Marion Gropen August 5, 2014 um 9:11 am

David, I’m going to run some numbers below this (so there’s a wider space on for the comment.

Talking in generalities and without specific illustrations of what works how is never going to help us communicate our meanings.

Steven Zacharius August 4, 2014 um 9:53 pm

I like it, well put.

Felipe Adan Lerma August 4, 2014 um 7:17 am

One of the best analogies I’ve read, thanks William.

Hope you don’t also see an unsustainable derivative and debt bubble analogy there, or over-extended stock market 🙂

Though the little I’ve read of BookLamp, and how it works, could change (again) significantly.

Apple just bought it recently, but I’m sure there’s similar stuff available or already inside Amazon and maybe some real shadow-shadow folk we don’t even know about yet.

WDR (a commentator on the KBoards) has a long but I thought really nice example of how it works :,190651.0.html

Steven Zacharius August 5, 2014 um 8:17 am

David, I am living in the real world. You apparently are only living in the indie eBook world. There are bigger retailers than Amazon. Don’t forget the mass merchandisers, the clubs, etc… Ebooks are only a piece of the pie. And it’s the smaller piece still. You’re basing your recommending that eBook prices drop on amazon’s chart of sales that was part of their publicity campaign during their negotiations. Publishers have lots of smart people who analyze data all the time.

Marion Gropen August 5, 2014 um 9:43 am

I’m going to do one comment per topic, so you can skip and scan to the ones you care about:

Elasticity isn’t the same for all books.

The demand curves for e-textbooks are very different than for the latest and greatest novel from a "Name" author, and both are radically different from the demand curve for the first novel from John Q Smith.

So, when Amazon published the number 1.74 as the elasticity for ebooks, it was, and we all know it was, an over-generalization.

Given the number of titles from various categories and types of author, market segment and so forth, the weighting on that over-all calculation will have been heavily in favor of books that are
— self-published — this probably won’t change the elasticity
— genre fiction — all of the elements: genre vs. general, novel vs non-fiction, trade vs. non-trade have an effect on elasticity.
— from authors with limited fan bases — the size of the fan base and the degree to which fans want this **particular** book are the primary determinants of elasticity.

Publishers' ebooks seem to me to be mostly trade, mostly novels and, among novels, tip toward genre fiction. So far, the number fits.

But the thing that doesn’t fit, is that publishers don’t invest in books unless they think that their investment can make a large change in the possible sales. That means that fan base or platform or not, they have to believe that the readers they know how to find are going to want **this particular** book, rather than some book from the same shelf in the store.

Publishers also "window" prices. If they think that a large chunk of the public is going to be willing to pay $30 to get the contents of that book now, rather than waiting for the pb, the issue a hb, and price the ebook at about half of that, at the same time. Then later, they issue lower priced editions to pick up more, and more of the public — the ones who would rather wait than spend more.

So, the price elasticity for the broad base of Amazon books probably won’t fit the books that publishers are charging top prices for. (NB: "Big" books are the ones that get top prices assigned. We all know that books that come out simultaneously in mmpb and ebook are priced well within Amazon’s $2.99 to $9.99 preferred band.)

Felipe Adan Lerma August 5, 2014 um 10:58 am

Marion, it’s encouraging to learn some of these nuances re elasticity & price. The encouragement being in your willingness to communicate complex issues, the clarity and patience of your expression, and the fact we have a society where this style of discourse is not only allowed, but thriving.

And even though I don’t visualize myself as other than self-published (ebook wise), I really enjoy the learning. Thank you!

Marion Gropen August 5, 2014 um 11:27 am

Happy to help, in any way I can.

Be aware, though, that many self-published authors get to the point where this level of sophistication is **required** if they’re to get the full reward they’ve earned from their work.

When you decide to self-publish, don’t fool yourself. You are launching a publishing company. It’s just as complex to run well as any other publishing company of comparable size.

Don’t shortchange yourself by dismissing most of the complexity out here as "not applicable to me."

I personally know a fair number of extremely successful self-publishers. Most of them started when success was far more difficult to achieve than it is now.

It’s well within the range of possibility for your operation to get very big very fast.

On the other hand, most books do well to break even, when you account for the author’s time at a reasonable wage.

Some of the difference lies in the sophistication with which authors make their decisions. Some lies in the skill with which they write and the audience for which they write. And some is plain old dumb luck.

You may never need this information. You may need it tomorrow.

Marion Gropen August 5, 2014 um 9:49 am

Increasing Revenue is **not** the same as increasing profits.

If you have any variable costs (where the total expense changes with the number of copies sold or the revenue), it is entirely possible to have more revenue and less profit. It’s basic algebra.

Amazon has almost no variable costs with an ebook. Publishers have significant variable costs.

This is obvious and well-known to Amazon. They’re assuming that the public will take their statement that publishers are being stupid, and get mad, without stopping to think about what’s being said.

IOW, Amazon is calling publishers stupid, but assuming that everyone else is stupid. I’d like to think we can show them that they’re wrong.

Zané Sachs August 5, 2014 um 10:07 am

I’ve been following this thread for days, and I appreciate the discussion. Thanks Marion and Steven, for providing insight into the world of traditional publishing. I’ve attended a fair number of conferences, spoken and studied with some extremely successful authors, but I never understood the pricing and it’s elasticity. Not that I understand it now, but I do see that it’s complex and somewhat cumbersome.

As an indie author, I pay people up front (editing, formatting, cover), and after that my only expense is any paid advertising or promotion I decide to do. Consequently, I can sell through and make a profit fairly quickly. And I have a lot of flexibility that isn’t available to publishers who have tremendous overhead including payroll, insurance, rent, etc.

Thanks for sharing your experience in an open discussion.

Marion Gropen August 5, 2014 um 11:32 am

Zane, that is a common approach, and often the best one. Often, but not always.

I’m glad that you enjoy this discussion, and I’m glad that we’re able to have it here. Not all communities are as accepting of hearing things that don’t fit "the dream."

I believe that we all have an obligation to "pay it forward," and this one way I choose to do it.

Most publishers love to share what they know when they’re allowed to do it.

Steven Zacharius August 5, 2014 um 3:39 pm

Glad I could provide the info from my pov.

Marion Gropen August 5, 2014 um 11:59 am

"More revenue = more profit."

Amazon’s statement assumes this. It is, however, only true in one case.

If you have no direct variable costs, then it is true. If you have very low direct variable costs, it is often true.

If you have significant direct variable costs, it is frequently not true.

This is basic algebra. And it’s basic accounting and corporate finance. Amazon’s staff is extremely good at all three, so they have to know that their statement is nonsense on its face.

[Variable costs, for the non-accountants among us, are those where the total expense increases alongside increases in copies sold or revenue.

Direct costs are those clearly tied to the production of any particular edition — as opposed to salaries or rent or other types of overhead.]

Marion Gropen August 5, 2014 um 12:20 pm

"PPB [Paper, Printing and Binding, plus shipping into the warehouse] and distribution are the only costs involved in a print edition, so the ebook has almost no costs."

This is sometimes true. It’s also often not true.

Most traditional publishers focus on the books where it will not be true, because it is with these books that their investments can create the biggest increases in sales and profits.

A typical small press loses 60 to 70% of the print list price to discounts given and to warehousing and order processing. The analogous cost of an ebook going through KDP, and in the "preferred price range," is 30%.

A typical PPB is going to be 5 to 10% of list.

A larger chunk goes to royalties, with smaller pieces for marketing, and the amortization of the several thousand dollars invested in cover design, editing, copyediting, layout, file conversion, then, last step, proofreading.

[BTW, proofreading does not mean checking for errors in spelling, punctuation, grammar and usage, let alone continuity and facts. That’s copyediting. Proofreading does mean comparing the copyedited ms to the ebook files or to the page proofs, to ensure that no new errors were introduced during the process of going from final draft to book.]

The total in direct expenses, if you include discounts given, and before overhead and profit, is usually 90 to 95% of the list price.

For an ebook, all of the stuff after PPB and distribution still has to be done.

So the costs of the print book as a % of print list price would be:
60 to 70% distribution/discounts + 5 to 10% PPB + 15 to 25% other.

The costs of the ebook of that same ms would be:
30% of the ebook price + 15 to 25% of print list for the other expenses.

If the price for the ebook is 1/2 of the print list price, then you have:
30% of ebook price + 30 to 50% of ebook price for those other expenses = 60 to 80% of list in costs, before overhead and profit.

It sounds as if the profit margins are doubling, doesn’t it?

But the author needs to get the same absolute royalty per copy no matter whether it’s print or ebook. That’s why we doubled the rate when we cut the price in half, above.

The publisher also needs to make the same absolute amount of overhead and profit per copy, for very similar reasons. So the rates of profit per revenue **need** to double when the price is cut in half, for them just as for the author.

That’s why a price point of half of the current least expensive print edition is the right price point.

Don’t think that Amazon can’t figure this out on their own. They’re quite familiar with the numbers, and pretty good at math . . .

Marion Gropen August 5, 2014 um 12:23 pm

I’m writing too much here. Blathering on in someone else’s comment stream’s pretty rude.

If anyone is actually interested in more (and I have lots more to say), let me know, and I’ll find somewhere else to do this without being quite so inherently offensive.

Write a Comment