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.
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