Home » Amazon, Pricing, Royalties » The E-Book Pricing Promo War is Heating Up

The E-Book Pricing Promo War is Heating Up

14 April 2013

From TeleRead:

“Publishers are beginning to do more aggressive e-book price testing,” according to a brief news item that appeared on thePublishers Weekly website yesterday. “Both Houghton Mifflin Harcourt and Storey Publishing have recently announced monthly pricing promotions that set prices for a selection of titles at no higher than $2.99.”

Houghton Mifflin Harcourt‘s promotion, which the company is referring to as Take 5, will be getting underway sometime next month. Five thematically similar titles will be grouped together as part of the promo, and those e-books will be offered for $2.99 or less.

. . . .

Storey [Publishing] seems to be discounting a ton of its books; certainly more than five. Each month the publisher chooses some sort of theme (April’s theme is Gardening; March’s theme was Crafts), and then of course e-books fitting that theme are offered for $2.99 or less.

Link to the rest at TeleRead

PG decided to run some numbers for indie vs. traditionally-published authors on $2.99 ebooks from Amazon.

The indie author’s numbers for the sale of a single book are easier to run, so PG will show those first. (Sorry for the clumsy formatting, but that’s what WordPress wants to do.)

Sales Price $2.99
Delivery Charge $0.08
Net for Royalty Caculations $2.91
Amazon Royalty Percentage 70%
Amount paid to Author $2.04

Now, let’s look at the numbers for a traditionally-published author on a $2.99 ebook sale on Amazon. These assume the author receives the a royalty of 25% of net ebook proceeds which is standard across all big publishers these days.

Sales Price $2.99
Delivery Charge $0.08
Net for Royalty Caculations $2.91
Amazon Royalty Percentage 70%
Amount paid to Publisher $2.04
Percentage Retained by Publisher 75%
Amount retained by Publisher $1.53
Balance Payable to Author and Agent $0.51
Agent’s Commission $0.08
Amount paid to Author $0.43

In round numbers, the traditionally-published author must sell five times as many ebooks as the indie author sells to come out ahead. The indie author receives $2.04 for the sale of a single ebook. The trad author receives $2.16 total royalties for the sale of five ebooks.

Amazon, Pricing, Royalties

17 Comments to “The E-Book Pricing Promo War is Heating Up”

  1. Another thing to consider in the “price wars” is How long can the publishers afford to fight?

    Self-publishers have fixed costs ranging from $0 (total DYI, and counting only cash out of pocket) to a few thousand dollars for editing and packaging. Once the fixed costs are paid for, all else is profit. Publishers have overhead: editorial staff, art departments, marketing staff, office rents, high-priced executives, lawyers, accounting departments, and on and on and on. The BPHs are trying to maintain a “lifestyle.” Can they?

    There are consequences to this strategy. I wonder if the BPHs are prepared to accept them.

    • “Desperate times call for desperate measures.” – Proverb

      It depends on how the BHPs are approaching this pricing strategy.

      A quick glance through this week’s Kindle Daily Deals e-mails show a wide variety of books from BHPs at $2.99 or less. But the significant thing to me was how many are older releases.

      It reminds me of DWS’s “produce model”, and these books are being treated like the “manager’s special”, i.e. products reduced in order to sell before they go bad.

      Can they do this with brand-new releases 100% of the time? Jaye’s right in that regard. The BHPs would lose their cushy Manhattan offices if they did.

      (This is hardly a valid scientific sampling, by the way.)

      • I don’t think the Kindle Daily Deals are priced by the publisher. I think Amazon’s marketing team does that. At least, that’s the impression I got when discussing with someone from Amazon.

  2. PG, thanks for running the numbers. Very interesting.

  3. I’m not sure your calculations are relevant in the above examples, PG. Both theses houses are predominantly non-fic. I know Storey does a lot of how-to books and Houghton are into education, so there is a chance their authors are working on a commission basis rather than usual advance/royalties.

  4. I’ve seen the $2.99 price on books by Harpercollins and St Martin Press and I’m sure others. These are all YA books that I’m talking about.
    These prices have stayed too and not just done for a short promotion either. So these authors have made very little off thier ebooks.

  5. As someone buying from Amazon.com who isn’t American, I’m noticing that a lot of the publishers doing these pricing changes are only changing their prices for the US customers. A book advertised in POI as 99c (pubbed by Simon & Schuster) is still a full $12 for me.

  6. I’m from Canada and I got the books for 2.99 and under at Amazon.com. Mind you I have switched over to Amason.ca so I have never tried there.
    Most of the time I get them from Kobo. They have all those prices as well.

  7. Well that’s still more than you’d get if you were selling for $.99, which at one point was a very popular tactic. I guess the question is, “can the publishers deliver five times the audience that indies can get?”

    For a certain tier of indie writer, that’d probably be hard to do. For the rest of us though? Yeah, probably.

    • Here’s a dirty little secret for you:

      Publishers don’t ‘deliver’ audiences at all. If a publisher gets five times the average sale per title that an indie gets, it’s chiefly because the publisher rejects every book that seems unlikely to deliver large sales all by its unsupported self.

    • “For a certain tier of indie writer, that’d probably be hard to do. For the rest of us though? Yeah, probably.”

      Doubtful, but even if that were true, it would still make more sense to self-publish and keep all the rights.

      • Dan, I agree with you. That’s why I’m self publishing! I’m just pointing out the “cut” of a book that’s being discussed is considered perfectly acceptable in some corners — for a $.99 book.

        Which the above aren’t, mind you.

        But I will say that yes, someone who is published by a big publisher is going to sell more books than I am. I don’t need to see their sales to prove that.

  8. Where is your evidence that publishers are getting the same royalty rate as self publishers?

  9. Publishers don’t get royalty rates; they give them. So your question doesn’t make sense. E-book royalty rates with a BPH can range from 25% down to an unconscionable 4% based on creative accounting on the publisher’s side. For an indie working through AMZ, the royalty is 70%.

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