By: Ebonye Gussine Wilkins
As a result of this madness, I got an interesting email from Amazon since Somewhat Close To Normal is available on Kindle. Amazon is targeting their KDP authors directly, urging them to take action. I thought about their email for a while, and avoided talking about it. While I do have a degree in business, I’m no expert, especially with economics, but something about this didn’t sit right with me. Here is a quote from that email:
Many inside the echo-chamber of the industry often draw the box too small. They think books only compete against books. But in reality, books compete against mobile games, television, movies, Facebook, blogs, free news sites and more. If we want a healthy reading culture, we have to work hard to be sure books actually are competitive against these other media types, and a big part of that is working hard to make books less expensive.
Moreover, e-books are highly price elastic. This means that when the price goes down, customers buy much more. 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. The important thing to note here is that the lower price is good for all parties involved: the customer is paying 33% less and the author is getting a royalty check 16% larger and being read by an audience that’s 74% larger. The pie is simply bigger.
I do agree that eBooks are highly elastic. Avid readers might buy more if the price is lower, however, that isn’t all there is to say about this topic. They are mostly talking about best-selling authors, not the majority of most indie authors. Most indie authors in their right minds wouldn’t price their eBooks at $14.99 (because it really wouldn’t sell at that price, and rightly so). Most of them price their eBooks at $9.99 or lower, as suggested by Amazon. But then again, most indie authors do not sell 100,000 copies of any of their eBooks. If they did, then every author would be successful, every author’s book would be lucrative, and we’d all be turning out books all willy-nilly with the knowledge that for every 100,000 copies we sell, we’d be bringing in a lot of money.
I should also mention for those who don’t know, that revenue is not the same as profit. This is over-simplifying, but revenue is how much money is brought in from sales. Profit, is how much money is left over after taking care of overhead (read: expenses). Big publishers, have a lot of overhead: marketing, editors, printing, keeping the lights on, etc. Smaller publishers or even indie authors may have smaller overhead, but they generally turn out significanlty fewer titles per year. If you’ve got a J.K. Rowling equivalent under your company, then it helps offset the costs of having an author that sells a lot less. Not all authors make large amount of money. There is an increasing number of authors (especially indie authors) that do make a living off their books, but most of the time, they are working day jobs to manage their households until they become a best-seller with a great track record.
That being said, royalties are higher on eBooks. Royalties on eBooks sold on Amazon can range anywhere from 30% to 70%, depending on the country that your eBook is sold in. Some people make a decent living on eBook royalties, but many do not. Having your book available as an eBook doesn’t automatically mean that you will sell more books just because eBooks are in demand. There are so many other factors at work here. For example, from what I’ve noticed, many eBooks are inappropriately priced based on their page count. It is unclear how indie authors should price their books, especially since Amazon’s estimates on how many pages a eBook should be vary widely. I once asked an author why they were charging $9.99 for an eBook that had 43 pages. She told me it was more like 200 pages, and that Amazon’s estimate was incorrect. If readers do not want to pay $14.99 for a print book of 200 pages, they are certainly not going to pay $9.99 for an eBook with less than 100 pages. The readers may not know the difference, but their perception of your book price being unjustified will definitely hurt your sales.
It seems to me that Amazon is using data that doesn’t apply to most of it’s KDP authors, in order to sway those very authors into doing what will work for them. They know that if they can rally their tens of thousands of indie authors behind them, then they can better bargain with Hachette. Amazon accuses Hachette of keeping authors in the line of fire (and hurting their sales and royalties in the process) to have leverage over Amazon. It is starting to look like Amazon is using their indie authors in the same way.
I believe that indie authors should think about the situation carefully, and then begin to take action. It may seem like it only affects traditionally published authors now, but soon enough, if those authors lose the war, the indie authors will be next. Whether we are indie authors or not, we must take special care to pay attention to what is happening and address it accordingly. After all, the reason why we write and publish, is for the love of literature.
What are your thoughts on the Amazon/Hachette dispute? Has it affected you so far? Let us know about it in the comments.