I've just finished reading the latest post up on Hugh Howey's blog and some light seems to be penetrating the darkness which has recently descended on the site. The post is called "Stuff I Want to Know" and it's directed at Amazon. I urge you read it. Publishers in particular should study carefully some of the ideas and speculation on data collection and marketing programs and take notes. There is some good stuff there.
However, some of these questions require Hugh to perform a 'physician, heal thyself" exercise. For example, Hugh wants to know:
+++ I want to know why you all haven’t come out and explained that the 70% cut we make on ebooks priced in a certain range aren’t really royalties. (See #5 of this list for an example of improper usage of the term). When they’re called royalties, the 70% seems exceedingly generous. Because publishers pay a lot less. But publishers provide other services, like editing and cover art. We are handing you a finished product. As a distribution fee, you taking 30% (plus more for delivery fees) sounds less crazy-generous. It seems downright reasonable, in fact. Or even an area where you all could afford to give a little more.+++
One of the reasons that Amazon hasn't told people this is that, to date, Howey's site has done a great deal to reinforce this misapprehension. For example, on August 1st, in his Friends and Corporations blog post, he told us:
Also, in last week's article, I pointed out a post by Shelagh Watkins, who repeated the Amazon 70% royalty rates myth and no one at the time, including Hugh, told her she was mistaken in her beliefs and calculations. But, it's certainly a very good thing that Hugh has learned in the ensuing 23 days that Amazon does not pay anyone a dime in royalties when you upload your book to its servers and pay your 30% retail usage fee.
It needs to be pointed out that the greatest source of the confusion about royalties vs. retail usage fees is Amazon, which describes the 70% left over once the fee has been paid as a royalty. Amazon should stop using that word and Hugh and other writers should call on them to do it. I just have. I hope Hugh does also.
It's also refreshing to see Hugh, for the first time, take a closer look at that 30 point retail usage fee. However, I disagree with him, in so far as indie authors are concerned. I don't think it's reasonable. I think it's way too high. As I've already pointed out in this blog, close to 30 points net margin is a license to print money in channels. Later in this series, I'm going to post up a "what your time is worth" analysis that will help you visualize how that 30 point fee makes earning money on your book an even harder task than it already is. It will also help bring the pricing issue into sharper focus.
Hugh also wants to know about this:
It's also a fine thing that Hugh has started to realize that Amazon's 35/65 retail usage fee is ridiculous. I kind of wonder what took him so long to see the problem in terms of bundling. And there are other aspects of the issue he's missed to date.
But the reason for the fee isn't hard to figure out if you understand what's going in the Hachette vs. Amazon battle. It has almost nothing to do with the welfare of the authors and almost everything to do with the desire of two industry forces to change the balance of power between them. If you haven't worked in and researched channels, the motivations of both can be obscure. If you have (I have), it's nothing that new. Suppliers and channels are always duking it out. Unfortunately, Hugh so far has failed to understand this and has not provided dispassionate and accurate analysis on the struggle.
Later this week, we'll be providing just that. I'm not sure Hugh will read the post (though it feels to me like he's read the previous ones), but when you read it, I think you'll have a better take on what's going on and can use that information to your best advantage.
Second Chance by Dylan S. Hearn
Publisher: Wet Feet Publishing; 4 edition (January 22, 2014)
Form Factor: Kindle
Because seen through these eyes
We lead a double life
No one will know
So check it out steppin' out here I go
Are we, are we, are we ourselves?
Are we ourselves and do we really know?
Lyrics excerpted from "Are We Ourselves," The Fixx
For the last twenty years of so, I've been following guys like Ray Kurzweil and Bill Joy, prophets of the singularity and the melding of machine and mind. Ray Kurzweil thinks we'll be uploading our brains into boxes in the 2040s and is all over YouTube pushing the idea. He doesn't actually tell us how we're going to do it, but that's OK. That's what the imagination is for. One semi-serious concept I have read about involves removing your grey matter, slicing it up into sashimi layers, mapping your exposed neuronic net, and transferring it into a virtual mind. I can just imagine the title of a book based around that approach. "The Baklava Conspiracy." Yuck.
The movie and TV industry has also been fascinated by the concept, but the quality of the work dedicated to the topic varies widely. Mind/machine melding inspired the writers of Star Trek to write the worst episode of the series, Spock's Brain. (Don't start. The Omega Glory was NOT worse than Spock's Brain.) On the the other hand, two Arnold Schwarzenegger movies on the topic, Total Recall and particularly The Sixth Day, were intriguing.
Regardless of how we (theoretically) get there, the mind in a machine concept is pure catnip fo Sci-Fi writers. I know because my own book, Rule-Set, uses mind uploading as a major plot point and target for dispute. I have to admit, I'm a bit skeptical about the idea. In the 80s I used to do hobbyist programming in languages such as Lisp and Turbo Prolog and watched the AI Winter descend over technology. You didn't have to be a genius coder to realize that you weren't going to build HAL 9000 with Lisp machines. By chance, I'd also read Hubert Dreyfus's What Computers Can't Do and the sequel, What Computers Still Can't Do and though at the time I thought the man lacked imagination, the fact is he nailed it. It was sad. Every geek and dope smoker went to see 2001: A Space Odyssey in 1968, and while no one could figure out the last twenty minutes of the movie, we all agreed that HAL and his friends would be around and barking out orders to us meat bags by the beginning of the next millennium.
But HAL never showed up. (But we're all still hoping that he does. And maybe stars in a better movie than the "meh" 2010 sequel.)
I've thought a great deal over the years about why we've failed to build sentient AIs and have come to the conclusion that it's not just a matter of bits, bytes and switch connection density. I also think there's a context problem. I describe the issue this way in Rule-Set.
"Let’s go back to the rose and thorns. We feel pain because our bodies have evolved in concert with those thorns to warn our brains we are experiencing physical damage. This is important because we if we lack that warning, our bodies may be destroyed. But how do you model pain and feed it to a neural net in a way that’s relevant to the software? Never mind distinguishing pain from the sensation of tickling vs tingling vs burning and so on? How does a stream of electrons moving through wires or superpositioned in a qubit ever ‘feel’ pain or find it relevant in any way? AI has spent the last forty years or so discovering that Bishop Berkeley was wrong. It’s not all about what’s in your head. It’s all about what’s in your head and what’s outside it.” Myrdin pointed to his temple, then waved at the interior of the control room. “It’s a unity.”
Thus, when the opportunity to review Second Chance by Dylan Hearn appeared, I took it. Dylan's another writer who can't stay away from mind/machine catnip and I wanted to see how he played with the meme.
Second Chance, the first book in a projected series, is set in a future, post-dystopian world where a mysterious corporation, Re-Life, has perfected the technique of transferring your mind to a computer-based brain simulation, then copying the stored entity into a clone. From a scientific standpoint, this is quite plausible when you study such efforts as the French Blue Brain project, work being done at IBM and other efforts to model our brains in software. (Though no one is quite ready to discuss the actual transfer process.)
Second Chance uses a third party narrative and shifts its viewpoint among several key characters. The main dramatis personae are Stephanie, a newly elected "Delegate" to the British legislature, Randall, an "information cleanser" whose job is to monitor the datasphere (an Internet replacement) and remove and obfuscate data, Nico, a private/public crime investigator who gets a cut of every malfeasance he solves, and the Technician, a shadowy figure connected to Re-Life's past who's constantly running about doing fishy things with body parts, clones, and very advanced computers.
The lives of these characters intersect when Jennica, a young Re-Life researcher, goes missing after discovering that there's something not quite right about how the Re-Live process works. The problem has something to do with data. Something to do with what happens to the mind when we bid adieu to one body and say hello to another. Perhaps something is not...quite...right?
And off we go.
Now, I need to get a couple of things out of the way. The first is that the first 10% of the book is a bit slow going to an American audience. Author Hearn is British and brings a Euro sensibility to the book. Said sensibility encompasses:
Another problem with Second Chance is that the post-dystopic future sometimes sounds too much like the present hot mess we all live in. For example, in this new and better tomorrow (the result of a seminal socio/political upheaval referred to in the book as "The Miracle") politicians are obsessed with polls, are constantly checking the Internet -- errr datasphere -- to read what people are saying about them, break their promises on key positions when it's in their interests to do so, take sexual advantage of their employees, and stab each other in the back with a vigor and regularity that would make Titus Andronicus proud.
And what's changed is?
OK, enough quibbling. Ignore the speed bumps at the beginning of story and you'll be rewarded. At its core, Second Chance is a twisty, fascinating story that draws you further in as its narrative unfolds. The plot links together puzzle box fashion so read carefully. One of the most intriguing concepts the author introduces is the promise of true physical immortality for the entire populus, not just the elites, who are already enjoying its benefits (but at what cost)? It's the Jehovah's Witness version of heaven, a vision of absolute eternal comfort paid for by absolute eternal control.
Just as interesting is the speculation in the novel that begins to swirl around the Re-Life process. The arguments about mind vs soul have raged since Descartes kicked off the era of modern philosophy. Advances in quantum physics have raised even further questions as the possibility of quantum teleportation, however unlikely now, looms as a physical possibility in the future. When/if we succeed in cutting the bonds between our physical bodies and the various electronic afterlives and simulated heavens waiting to debut in the future, will anything be left behind when the ghost leaves the shell?
Second Chance begins to probe these questions in the first book and promises to explore further in the sequels. I'm looking forward to reading them.
What Hugh Howey Won't Talk About (but Should). You, the Publishers, and the Channels. Part III of Several Parts
There are three possible tiers of distribution in contemporary publishing, and you. Let's deal with you first.
You May Have Built That but Now You Don't Own It
In the current publishing model, you aren't part of the distribution chain. That's because when you sign a publishing contract you transfer limited ownership of your writing to a third party in return for a defined form of renumeration, mainly, royalties. (There are fixed payment deals and many variants on the basic model, but I won't cover them.)
The limits of the ownership transfer can vary. In some cases (becoming more rare but still very common), you transfer all your rights indefinitely. In many cases, you also transfer your rights to works directly derived from the original, such as a sequel, even if you never write the sequel. This transfer can cover paper, audio, electronic, Braille and form factors yet to be developed (direct rendition of text to your frontal lobes via biometric inputs, for example. Don't laugh. That's not as Sci-Fi as it sounds. Give it ten years or so).
Other limitations can include:
These are other ownership limitations, but in today's world, the above are the most relevant.
Before going further, please hammer home the concept of "transfer of ownership" into your noggin. The US court system is quite comfortable with the idea and judges and juries will be unsympathetic to the argument that since you wrote it, you still "own" your book after you have sold it. I'm sorry, you don't own it anymore. The words, characters, plot, etc. are now owned by a third party with the exceptions of any specific limitation clauses built into your contract.
By understanding the critical concept of the transfer of ownership, you will avoid creating this type of pathetic post that appeared on Hugh Howey's blog on August 12th (and which no one bothered to correct). Reading this is equivalent to watching a toddler wander into rush hour traffic on the Cross Bronx Expressway:
Amazon explained that midlist authors benefit from the increased sales of lower priced books. A $14.99 ebook in the KDP program has a 35% royalty rate. That’s $5.25 for the publisher and $9.74 for Amazon. A $9.99 ebook has a royalty rate of 70%. That’s $6.99 for the publisher and $3.0 for Amazon, which seems like a poor deal for the retailer (a loss of $6.74 on every book sold at $9.99 compared to $14.99), but $9.99 ebooks outsell $14.99 ebooks by a ratio of 1.74: 1. For every 1.74 ebooks sold, the retailer makes $5.22, $12.17 goes to the publisher and there’s a saving of $5/ebook for the reader.
Poor Shelagh (though, in her defense, Amazon is promulgating the myth that their retail usage fee is a royalty) believes that after she uploads her book to Amazon with a $9.99+ price tag she will be receiving "royalties." This is wrong. Uploading her book simply means it can now be listed and purchased on Amazon. At no time will she have ever transferred ownership rights to her book during the process of uploading it to the Amazon servers. She will never receive a penny from Amazon in royalties. Amazon will take 65% of the sale while providing no publishing services and minimal marketing programs. All she will receive is 35% of the income of the sales of her book. The rest of the money will now rest comfortably in Jeff Bezo's pocket.
(If you jump to the complete post, you'll quickly find it's mathematical gibberish because its entire premise is based on an erroneous presumption. Shelagh has zero understanding of the concept of retailer margins and markup but you don't.)
You and the Publishing World of Tomorrow
Before going further, if you, as an indie author, decide it is your best interests to sign with a publisher, I strongly suggest you not sign a traditional publishing contract unless they're offering you an obscene amount of money to do so. Definitions of obscenity vary, but even if you've led a G-rated life, I doubt you're going to see a giant advance. (If you do, don't write to tell me; I'll just hit you up for a loan.)
Assuming you do move ahead with a publisher, your contract should incorporate:
Let's examine that last bullet point in greater detail. In all the sound and fury surrounding the Hachette vs. Amazon struggle, the most critical point has been ignored. And that is publishers are traditionally supposed to be able to sell and market your books, but in the world of E-books, they can't.
Why? Because they don't know who their buyers and readers are. Amazon, Kobo, Smashwords et al do.
In the vanishing world of paper, publishers marketed their products primarily by putting them in places where people went to buy books. The model allowed them to know how many books were sold and where, but it never informed them of who bought the books. To this day, none of the major publishers have good information on their readers. They're starting to obtain that information via their own direct sales operations, but the data is fragmented across divisions and platforms. I doubt if any of them have a handle on their E-sales or have good analytics systems in place. That kind of geek stuff is not what they've been trained to think about.
This means that major publishers are seriously handicapped when it comes to providing the publishing services of tomorrow. While I don't know how the current H vs. A imbroglio plays out, I do know what will happen if publishers don't learn to identify their readers and put together effective marketing programs on behalf of writers.
The retailers will. And believe me, they are thinking about it. I'll shortly be writing about MDF (marketing development funds) programs in this series and the part they play in channels. It will be informative.
But in the meantime, if the big publishers are smart, they'll buy Kobo, or Smashwords or Oyster or someone and use that as a start to create a counterweight to Amazon and a data analytics hub for their own marketing purposes. Because if they don't, they are truly doomed. The channel will devour them whole and they'll deserve their fate.
What Hugh Howey Won't Talk About (but Should). And Don't Take Amazon's Latest Claims About the Awesomeness of $2.99 to $7.99 Pricing Seriously. Part II of Several Parts (a .5 Release)
Sorry for the .5. I've worked in software for many years and we tend to do that.
Just a quick update on the Hugh Howey stemwinder of August 1st. I thought this was interesting:
So, no one has anything to say about the actual arguments and positions from either side? Is that what I’m hearing? To equivocate between Amazon and Hachette by saying both are corporations is absolutely absurd. Monsanto and Whole Foods are both corporations. So they’re the same, right? No need to look any further?
I’d rather dig deeper than that, if nobody minds.
* Amazon allows anyone to publish. Hachette doesn’t even allow unagented submissions, meaning they require you to pay 15% of your earnings to a third party just to talk to them, no matter how well you can represent yourself.
From the Amazon Publishing Website (This site is dedicated to Amazon's house imprints.)
Amazon Publishing does not accept unsolicited manuscripts, proposals, or other submissions at this time.
What Hugh Howey Won't Talk About (but Should). And Don't Take Amazon's Latest Claims About the Awesomeness of $2.99 to $7.99 Pricing Seriously. Part II of Several Parts
In part I of this series we took a close look at Amazons' 30% retailer markup and analyzed why the company is benefiting handsomely from its model. Again, no criticism of Amazon is implied. Amazon is a channel company (yes, I know that they create some of their own content. Macy's has house brand shirts that they contract to be produced. We'll discuss that later). As a channel company, Amazon worships margins. That's what channel companies do.
(A quick aside. In its public tussle, Amazon offered to return to Hachette authors the "proceeds" from the sale of their books on Amazon. Please note that this offer did not include Amazon's 30 point markup. That, they keep. Channel companies give up margin with the same alacrity as the head lion of a pride gives up a dead zebra he's just stolen from the hardworking ladies of the group.)
The Other Amazon Retail Markup Schedule
To date, most of the conversation has focused around Amazon's 30% retail markup for books sold under $9.99 and over $2.99. But Amazon also has another retail markup schedule. That's a 35% you /65% them retail markup schedule. For some reason, Amazon advocates such as Hugh Howey do not discuss this alternate schedule. They should. The reason is that this markup is not connected to any sort of economic reality. You cannot make money on your book when you give away 65% margin points to a channel. Thus, for all practical purposes, Amazon has thrown tens of thousands of authors out their system.
These are many authors and publishers of niche books and limited editions aimed at small audiences. In many of these markets (including one I write for, software and SaaS companies. I also write for the great fantasy/Sci-Fi-book-you-just-can't-put-down-and-should-buy-right-now segment.) the number of customers for books that cover topics of relevance to this market is small, numbered perhaps in the mid thousands of readers worldwide. There will be no hope of generating sales volumes large enough to make the time and effort of writing such a book worthwhile. Titles that discuss such things as SLAs and their place in the business model of an online software firm seem to lack the broad appeal of a JK Rowling offering. Therefore I and many others, at least in regards to these types of books, are locked out of Amazon. This is not a complaint, simply an observation. It is fair to note however, that Amazon has loudly proclaimed its pricing is in the best interests of authors. If you're selling a novel about alien invasions or the latest zombie apocalypse, this may be true. For other categories of books, their 35/65 pricing isn't.
Another factor to consider is that at the punitive 35/65 split, you are also blocked from using a publisher if you decide you want to go down that road. There is no margin left in the sale of the book to attract a good publisher (in other words, one that will really work to get you book reviews, execute effective SEO, build or provide E-mailing lists, back that up with social media, etc.)
The final result of Amazon's pricing schedule is that if you want to make money, you are stuck in a $7.00 pricing box. In its most recent proclamation on the topic, Amazon claims this is a good thing and they say they have the numbers to prove it:
+++ It's also important to understand that 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. +++
This is an impressive bit of text and at first glance, a strong argument in favor of Amazon's pricing policies, though I do find Amazon's attitude somewhat authoritarian:
+++ Many e-books are being released at $14.99 and even $19.99. That is unjustifiably high for an e-book. +++
I would think the market would be the best arbiter of pricing, not Amazon. But, after all, it is their store and they're entitled to their opinions. But a quick analysis of the Amazon's statement reveals their claims are incomplete and also nonsensical in certain respects.
The first problem is it lumps all books together into one big pot leading to what I call a median stew. Let's take a look at a single example, author Stephen King, whose pricing I will defend even though he did write Insomnia. (Don't ask. Just...don't ask.) Stephen has lots of books available on Amazon at different price points. I see The Stand is on Kindle for 5.17. The Shining for $1.99. And here's his latest book, not yet released, The Revival, $14.99 on Kindle. God, what a fool Stephen and Simon and Schuster are. First, the 35/65 split. Oh, wait. I'll bet real American dollars that Simon and Schuster isn't paying 35/65. That's for the little people. The split is more likely 75/25 or even 80/20. King's got clout in the business.
Also, I don't think Stephen King is losing ".74" copies at that $14.99 price because Stephen King is a brand. There are lots of people who can't wait to get their hands on his books and will happily pay an extra five bucks to get them as early as possible during the novel's roll out period, probably sixty days. After that, it might make sense to drop the price back to $9.99 or whatever careful testing indicates is optimal. Certainly, over time, the price will continue to decrease and to give Amazon all credit, I'm sure King has seen increased residual sales of his earlier works because of the long tail effect.
But the reality is at $9.99 during the launch, King will be leaving money on the table. The revenue generated by the increased number of people who will buy more copies at $9.99 will almost certainly not be offset by the money lost by not satisfying the market desire of a significant number of readers to get their hands on the book ASAP and who will willingly pay a premium for the privilege. That's the power of a brand and you should all strive to become one.
Or consider book publishing's biggest brand, JK Rowling. Imagine she's just announced a new Harry Potter book. Harry Potter and the Adventure of the Golden Franchise. Think those millions of fans out there wouldn't shell out a few extra bucks to get their (virtual) sweaty palms on the latest tome about the boy wizard? And if you want to see what real clout does for you in the book business, go click on her E-book links on Amazon. Welcome to "Pottermore." (Somewhere, Jeff Bezos is weeping.)
BTW, if Amazon wants to dispute the above analysis, it can easily do so. But it won't. The company possesses huge amounts of data and can provide all kinds of detailed analyses on price points for highly branded authors, unknowns, niches and special markets. It does not do so. If it did, its current argument would immediately fall apart as you looked at different scenarios, markets and promotional strategies.
So the question is why the current Amazon pricing model? That's all about power and the future. We'll dig even deeper in the upcoming parts of this series.
What Hugh Howey Won't Talk About (but Should). And Amazon is Not a Publisher! (Part I of Several Parts). A Quick Update
Hugh Howey has just posted up another stemwinder on his blog and some of it leaves you scratching your head.
He makes several points in favor of Amazon, but I'm afraid two of them are off the charts wrong. Here's the first.
+++ * Amazon pays roughly six times the royalty rate that Hachette pays. +++
As I've just pointed out, Amazon doesn't pay you a dime (or anyone else) in royalties. Amazon extracts margins from you in return for access to its electronic shelf.
+++ *Amazon allows me to retain ownership of my work, which means I can leave if conditions become unfavorable. Hachette is making it more difficult to reclaim the rights to one’s work. +++
This is off the point. Amazon never was a publisher and ownership of your book was never an issue. If you were published by Random House, because B&N sold your book didn't give them ownership of your book rights. That's something you fight out with publishers.
That's enough for now. Have a great weekend if you've read this.
What Hugh Howey Won't Talk About (but Should). And Amazon is Not a Publisher! (Part I of Several Parts)
I swung by Hugh Howey's site the other day, and he's just posted up an article on his blog entitled: Could it be any Clearer? I strongly urge you to click on the link and read it. Well worth it, whatever your take on the Hachette vs. Amazon issue.
Now, Hugh's a big Amazon fan, as anyone who's read his blog postings know. But I think he's losing perspective on the issue. I also think there's an element of an odd sort of class warfare that has crept into the entire debate that I find very strange. It's a sort of "Stephen King Must Make Less So I Can Make More" vibe that's strumming along some of the blogs. One of these days, I expect to see posters of Holston from Wool dressed up like Che brandishing an AK-47 if things go on like this.
Before going any further, I need to make it clear I'm neutral on the dispute between Hachette and Amazon. These are both large companies with vested interests and money to make and protect. I expect neither to put the interests of authors first. That's not what large companies do. I do expect both to blubber hugely when talking about the travails and problems of authors, then, when the cameras are off and the interviewers are gone, look after their respective piggy banks and not worry a whit about whether or not you, the author, are making a living writing books. This is as it should be.
Further, anyone, from an objective standpoint, should understand the tremendous benefits that the electronic shelf as provided authors. It has:
Now, Amazon has received much of the credit for the above, though it all would have occurred whether it was WalMart, B&N, or you who had built the platform. The discussed capabilities are inherent in the technology. But it was Jeff Bezos and Amazon who realized the opportunity and built an effective channel for E-books. It was a brilliant move and I'm overflowing with admiraton. And in E-books, Amazon is reaping rich rewards. And it deserves them.
That said, I'm an author and an ungrateful bastard. Also, I need to eat and I'm going to want to avoid handing over any more of the proceeds from my book to the greatest extent possible. After all, if didn't write the book, no one has anything to sell.
So let's first level set everything. The first thing that you must learn is that Amazon does not pay you royalties! Yes, I know that's what they call their retailer markup, but that is completely misleading. Amazon is NOT a publisher. They provide NO publishing services. Amazon is a channel. It does not make a market for your book. It does not promote it. It will not generate reviews. It doesn't edit or copyedit it. Does not design it. Does not provide graphics or graphics guidance.
If you doubt this, here is a test you can take to prove this to yourself:
Always remember that channels do not make markets. You will make the market. That 30 points (30% retail markup, not royalties) Amazon is charging you is channel margin. Because of its size, Amazon can pretty much lock its 30 point margin in and regardless of whether you have a publisher or not, you will pay that fee to use its downloading service because right now, there isn't much in the way of competition to force it to lower its retail markup. One of the principle points of argument between Hachette and Amazon is wants to raise its margins with Hachette up to 30 points. Hachette is paying less than you. What the amount is has not been disclosed. Probably between 20 to 25 points.
Now, let's look a little more closely at that 30 points. Howey has stated that bookstores typically markup their books by 40% to 50%. This is true. This is their gross margin, because now they have to support an extensive physical infrastructure. Once this is accounted for, a paper bookseller's net margins range between 6% to 15%. For the physical stuff Amazon buy and resells, margins are similar.
But the 30% retail markup Amazon is charging you is for it to stock its electronic shelf with an E-book. And this is far less expensive than managing physical inventory. Once you have built an electronic shelf, the cost of adding new items to the shelf drops steadily as the initial cost is amortized over time. And remember, the physical cost of maintaining electronic infrastructure tends to drop as well. Server space gets cheaper, CPUs faster, memory cheaper, etc. Even programming and support costs can be sharply cut via outsourcing. (One area that's much trickier to manage is the cost of power.)
So, what is the cost to Amazon of adding your book to its shelf? Pennies, maybe. Let's stretch a bit and say, $0.50. Heck, let's make it $1.00.
Oh, and you can't factor in Amazon's transmission costs when they sell a book. That's applied against your retail markup. I'll put up a table at a later date to factor that in.
So, Amazon's net markup on your book is 29 points.
In channels, 29 points net margin is a license to print money.
But, wait! That's just for books under $9.99. For books over that figure, Amazon's retail markup is 65%. 65 points. Take away that buck.
In channels, 64 points net margin is not a license to print money. It is a license to print gold bars.
I've raised this point several time on Howey's blog, but no one seems to want to talk about this.
I'll be digging into that number in the next part of this series.
Review Submission Guidellines
Want me to review your book? You must join the Rule-Set mailing list and contact me at firstname.lastname@example.org. Do NOT use the contact form for a review request; for press and publishers only. Your book can be a proof but ready for sale within 60 days.
Scifi/-fantasy only at this time. Make sure it's been professionally copyedited. If it's not, I'll know in about five pages and will reject the book. I don't mean to be a hump about it, but approximately 40% to 50% of the books I've received have had far too many typos, comma splices, misuse of dependent clauses, etc. (No, it doesn't have to be perfect. Most books have a few typos, including ones coming out of "traditional" publishing.) Your book cannot succeed in the market with such flaws and it's not fair to ask reviewers to read it in such a state.
I'll take a look at YA, but I'm not the best fit to that audience. PDF, Mobi, print all fine. If you have an author website you wish me to link to, please provide the URL. I don't charge and I also don't guarantee a good review!
Please note comments on blog posts are limited to 5K characters. System limitation.
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create esquelle new_book as select [ * |very, very cool ]: My Review of Esquelle and the Tesla Protocol
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The Far Bank of the Rubicon by Erik Wecks
Second Chance by Dylan Hearn
The Beauty by Aliya Whiteley
Space Games by Dean Lombardo
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