Pricing

Amazon hints at e-book price hike on Jan 1st

17 December 2014

From The Bookseller:

Amazon has warned that e-book prices will rise come January following a change in VAT law in an email to self-published authors. On 1st January Amazon will “make a one-time adjustment to convert VAT-exclusive list prices provided to us to VAT-inclusive list prices” resulting in a rise in the list price of thousands of e-books.

From 2015, VAT will be charged at the rate where the customer resides, rather than where the servers are based, meaning e-books bought by UK readers will be charged a rate of 20%, as opposed to the 3% levied by Luxembourg, where Amazon is based. The Kindle Direct Publishing team has contacted authors published on its KDP platform explaining that when the new law comes in on 1st January, Amazon will make a one-off adjustment to the prices of e-books already published, increasing, for example, a £5.00 list price of a book to £6.00 to account for the 20% VAT rate.

The one-off price-change example implies e-book prices will rise when the law comes into effect in January. In the run-up to the change, there continues to be speculation about how retailers and publishers will handle the change, with some tax experts warning that price hikes were inevitable.

. . . .

Amazon has also explained that e-book royalties would be calculated on the list price of a book minus VAT. And following the new law, minimum and maximum list prices for the 35% and 70% royalty plans on KDP will change to also include VAT. However, the retailer assured   authors that titles scheduled to run in the Kindle Countdown Deal in the UK marketplace during or after 1st January would still be eligible to finish that promotion, even if the list price does not fit the new requirements of being priced between £1.99 and £15.99, including the VAT.

. . . .

Other retailers have been less clear about what will happen to prices. A Kobo spokesperson said:  “We will continue to work closely with our publisher partners, both agency and wholesale, to bring our customers the best possible offering.” Nook did not want to make a comment about what would happen to prices.

Authors have expressed concern that the move would either impact their royalties, or, if prices rise, sales. Mark Edwards, author of several books including Because She Loves me (Thomas & Mercer), currently at Number 2 in the Kindle Chart, said he was concerned about the new VAT law’s impact. He said: “My concern as an author is that the amount of royalties we earn is going to decrease unless the price of e-books go up. But if that happens, sales might decrease. My feeling is that prices won’t go up, so authors will lose out on royalties.” He added: “Nobody wants e-book prices to rise because this could harm sales and discourage readers. It’s hard enough to make a living as an author and it’s going to be even harder now that more of the money readers spend on e-books will go to the government and less to the people who write, publish and sell them.”

. . . .

At the time, Richard Asquith, vice-president of global tax at online accounting service Avalara, said he expected retailers to adopt the “Ryanair-style” model of adding VAT at the till. He said: “Companies are getting much better at protecting their margins. If they don’t increase prices on 1st January they will do it soon [after]. Otherwise it’s a huge dent in their business model. It’s inevitable that it will come.”

Link to the rest at The Bookseller

Jeff Bezos’ Lemonade Stand

15 December 2014

From the New York Times’ Bits blog:

Philip K. Dick’s “The Man in the High Castle” is about what the title character calls the “terribly, terribly disruptive” nature of reality, so it is awesome that the terribly, terribly disruptive Amazon has now filmed this classic science fiction tale. The pilot will appear early next year from Amazon Studios. Any member of the Amazon Prime perks club can watch it free.

Nothing in life is truly free, of course, even from Internet companies that proclaim their generosity. As Amazon loads the benefits on top of Prime — including costly original programming like “High Castle,” older movies, a streaming music service and an e-book lending library — the conventional wisdom is that these customers will return the favor by ordering much more from Amazon. Come for the movie, stay for the vacuum cleaner, diapers and marmalade.

But there is another, more hidden group paying for “High Castle”: people who buy physical books on Amazon. The retailer’s expansion of Prime benefits, as well as its myriad other projects, appears to be fueled in part by fattened margins on all sorts of books beyond the top best sellers.

Say, for instance, “High Castle” is terrific and you wanted to read something else by Mr. Dick. There are quite a few novels to choose from and Amazon has them all. But the deals are often less than compelling.

“Dr. Bloodmoney,” “Confessions of a Crap Artist,” “In Milton Lumky Territory,” “The Penultimate Truth,” “Time Out of Joint,” “A Scanner Darkly” and 15 other Dick novels were all discounted 10 to 17 percent late last week.

. . . .

 These are not the sort of bargains that made Amazon into the biggest bookseller in the world. In 2001, the retailer announced with much fanfare that it would discount by 30 percent books selling for $20 or more.

. . . .

 Sales boomed. “It’s Adam Smith economics that volume will go up when prices go down,” Amazon’s chief executive, Jeff Bezos [said].

. . . .

Although Amazon does not reveal its pricing strategy, that blanket 30 percent discount seems a thing of the past. Customers today also pay sales tax in much of the United States, which equates to a price increase of as much as 9 percent.

Mr. Bezos is apparently now using a different measuring stick than Adam Smith economics. Books are helping pay for the company’s expansion, he suggested in an interview this month.

. . . .

 “It’s like we built this lemonade stand 20 years ago,” he said. “It’s become very profitable over time, but we also decided to use our skills to open a hamburger stand and a hot-dog stand and so on.”

. . . .

 If Amazon seems to have changed its business practices, its message is still the same. It talks the way it did a decade ago, when it was still relentlessly driving down prices. In the confrontation with the publisher Hachette over e-books last summer, the retailer made the crowd-pleasing point that it was on the side of readers against the fat-cat publishers that wanted to line their pockets.

Link to the rest at New York Times and thanks to Jan for the tip.

PG didn’t check Amazon’s prices for all the books mentioned in this article, but, for those he did, the author was citing hardcopy prices, not ebooks.

PG speculates that ebooks are much more profitable than hardcopy books for Amazon. Since most indy authors make a large portion of their money from ebook sales, this sounds like a win-win.

Ebook Tax Rises to Hit Publishers, Retailers, and Writers

28 October 2014

From Chris Lynch: Hack of All Trades:

Following a European Commission ruling dating back to 2008, e-books are to be taxed in the European member state in which the consumer is located, at the tax rate of that country, as opposed to the country from which the product is sold. The move prevents Amazon, Nook and Kobo from applying the low 3% tax on e-books sold to European countries, just because their headquarters are in Luxembourg. Instead, the e-book retailers will have to apply the standard UK VAT rate (20% at the time of writing) to e-books sold into the UK.

. . . .

Some publishers are already threatening a “revolt” if Amazon tries to pass the additional costs on to publishers. Speaking to The Bookseller Alessandro Gallenzi, founder of Alma Books, said: This isnt a thorny issue, its a hornets nest. Who will take the hit? I dont know. Amazon has so far been absorbing it; I doubt itll do the same moving forward. However, if it tried to force it on publishers there will be revolt and Amazon knows that.

. . . .

From a practical standpoint, there isn’t any good news for writers here. If you’re working with a traditional publisher who ends up with higher costs, or deeper discounts, as a result of this change then you will see your royalties squeezed. If you’re an independent, expect to have to work even harder to market your book as prices creep upwards.

If Amazon are smart about this they’ll protect their KDP exclusive writers for as long as possible from this VAT change, making their platform more profitable for their indie authors and slipping another knife into the ribs of traditional publishing houses.

. . . .

The downside is that UK consumers, publishers, and creators have been working, some even thriving, under a system where the largest retailers were operating in a tax structure that was, at best, a loophole. Like it or not, its hard to paint this as a tax rise; it’s the closure of a loophole. Readers may love their cheap eBooks, but the gravy train may be coming to an end.

. . . .

Despite the ruling, booksellers across the spectrum have long argued that digital books should attract the same 0% VAT rate as physical books in the UK. An Amazon spokesperson said: Amazons view is that the same reduced VAT rate should be applied for both p-books and e-books.

Link to the rest at Chris Lynch: Hack of All Trades and thanks to Nirmala for the tip.

Austrian minimum book price to apply to e-books, web sales

27 October 2014

From telecompaper:

Print books sold online in Austria and electronic books will be subject to the set price law.

. . . .

The law charges publishers and book importers with setting a floor for the price of books. From December, this law will apply in Austria for books sent from overseas, too.

Link to the rest at telecompaper

Speculation on the Amazon – Simon & Schuster Deal

21 October 2014

From Hugh Howey:

Whew. As a Simon & Schuster author, I have to say I’m relieved to see how quickly my publisher struck a deal with Amazon. According to several sources, the negotiations took just a few weeks and the agreement was reached with months left on the current contract. It’s a multiple-year deal, and both sides sound pleased with the results. Simon & Schuster retains the rights to set prices, and Amazon retains the ability to discount.

Everyone is speculating on the finer points of the deal and wondering why Hachette can’t come to terms with Amazon.

. . . .

Engadget reports that Simon & Schuster now has “a financial incentive to drop prices.”

The New York Times quotes S&S as saying that “with some limited exceptions,” the contract gives S&S the ability to dictate prices.

A financial incentive to drop prices. Limits on S&S’s ability to dictate prices. What does this deal entail?

Some commentators are hailing the deal as a return to Agency pricing, but I wonder if these are the same commentators who claim that self-published KDP authors employ Agency pricing?

Guess what? We don’t.

Our agreement with Amazon is something more like Incentivized Agency. If we set our prices between $2.99 and $9.99, we get 70%. If we set our prices outside that range, our split drops to 35%. According to our EULA, Amazon retains the right to discount our ebooks as it sees fit.

What does this mean? It means if we price our ebooks at $14.99, Amazon has plenty of meat left on the bone to discount our ebooks back down to $9.99. The customer gets a good price, and Amazon still makes a profit. That is, we the authors are punished for jacking up the prices.

Who wants to bet that this is what Amazon wants from publishers? The KDP agreement is what Amazon offers with practically zero negotiations back and forth. We should take it as their ideal agreement. The publisher (in this case, individual self-published authors) set the price. But it’s within a range that Amazon specifies, or else we lose margin.

So when Hachette cried foul back in May that Amazon was after a percentage of profits, that’s because they saw Amazon offering perhaps only 50% on ebooks priced above $9.99.

. . . .

There’s another advantage to this deal for Simon & Schuster. Pressure for higher ebook prices comes from print retailers, who don’t want to be undercut. Publishers aren’t stupid; they know they can sell more ebooks at a lower price and make money doing so, but they worry about harming existing partnerships. S&S can now price some ebooks high, knowing that Amazon has room to discount, and they can go to the buyers at their major accounts with the digital list price to show their support. That is, the blame for the eventual lower sale price will fall on Amazon, which brick and mortar outlets already loathe, and S&S gets to look like a champion. Meanwhile, they are giving up a percentage of margin to help Amazon discount. Everyone wins. Especially the customer.

Link to the rest at Hugh Howey and thanks to Patrice for the tip.

October 2014 Author Earnings Report

20 October 2014

From Hugh Howey:

The latest Author Earnings report is up. This is our first look at the effects of Kindle Unlimited — we’ll be diving in further in coming months. I wish our conclusions could be more . . . conclusive. To me, weighing all the benefits of KDP Select against the minus of exclusivity, my thinking is that KDP Select is great for those starting out and those selling at the very highest levels. For those in the middle, who might be getting traction on other outlets, the increase in sales does not seem to outweigh the percentage of the market given up.

. . . .

I’ve been able to experiment with KU without the exclusivity requirement. It’s not a permanent exclusion, and I’ve been leaning toward exclusivity and staying in KU once it expires. I’m now leaning the other way. Even with the potential of All-Star bonuses, I’m not keen on a system that rewards the top and bottom but leaves out the middle. What I’d love to see is for Amazon to drop exclusivity as a goal.

. . . .

So why not make KU elective for all authors? Why not set the pay scale by page rather than reward shorter length works? Compete for readers in all the other ways that Amazon excels (customer service, one-click, search, also-boughts, recommendations, reviews, etc.) and let authors publish their works far and wide.

Link to the rest at Hugh Howey

Here’s a link to Hugh Howey’s books

Local book industry concerned at proposed shake-up

30 September 2014

From Dynamic Business:

One of the more controversial proposals in the recent draft review of competition policy was its recommendation to lift parallel import restrictions on books, with the review warning this amounted to an implicit tax on Australian consumers.

The restriction prohibits the importation into Australia of a product by anyone other than the licensed Australian manufacturer or distributor, cutting off an important alternative source of supply.

Removing the restriction would see more books on offer for cheaper prices. The draft review, led by Professor Ian Harper, warned the continuance of parallel import restrictions would be similar to having a tariff in place because local industry remains shielded from international competition.

Australian consumers are also increasingly able to circumvent the restriction anyway. They can buy e-books or simply go online and have books shipped overseas from warehouses directly to their front door.

. . . .

He said the restrictions placed onerous limitations on the ability of bookstore owners to import products requested by customers. He said the restrictions also meant that the price of books was higher, forcing everyday Australians to pay more for their books.

“You could come into a bookshop, hold a book up and show it to them and say ‘I’d like a copy of this’. I would say, ‘I don’t have it. I’m not allowed to have it’,” Mr Strong said. “I don’t think the publishers understand it. I think they are just panicking. Embracing change helps business.”

“Lifting import restrictions is obviously better because you have access to more books and access to cheaper books.”

Link to the rest at Dynamic Business and thanks to Hugh for the tip.

Amazon looks to launch e-books in Netherlands

24 September 2014

From Reuters:

Online retailer Amazon.com Inc is in talks with a number of Dutch publishers to sell e-books in the Netherlands, the Financial Times reported, citing a Dutch publisher.

“Within the book trade it has been a recurring message that Amazon might enter the market. But now Amazon has actually been in touch and so we are getting close,” the report quoted Sander Knol, the director of Xander, a Dutch publisher that has been approached by Amazon.

. . . .

Although the Netherlands does not allow print books to be sold below their cover price, posing a problem for Amazon that regularly sells books at discounts, there is no cap on how retailers can price e-books.

Link to the rest at Reuters

When Giving Away Free Books Is the Smartest Thing a Writer Can Do

3 September 2014

From author Scott William Carter:

Nothing seems to stir up more disagreements among writers these days than all the issues related to pricing books. Unlike in traditional publishing, writers have lots of control about how they market their books on the indie side. And while there is no one-size-fits-all approach to pricing or marketing, it’s become pretty clear to me that few writers understand how powerful (and nuanced) a marketing tool FREE! can be in a digital marketplace where the cost of production and distribution, at least for the indie writer, is nearly zero.

. . . .

In the month of August, I gave away 150,000 ebooks of The Gray and Guilty Sea. Sales of the two sequels exploded. My mailing list doubled overnight. Hundreds of positive reviews poured in (on Amazon alone, the number of reviews on The Gray and Guilty Sea jumped from 30 to over 300 in a few weeks) and I’ve gotten dozens of nice emails from readers. It’s the most effective promotion I’ve ever done.  More importantly, I did it not because I was desperate, but because I believed in my work.  I believed that if readers got to spend a few hours with the curmudgeonly Garrison Gage, a lot of them would want to spend a few hours more and would be willing to pay money to do so.

. . . .

The key to giving away free books is to give away a Lindt truffle and not a Hershey kiss, and to do it in a way that the buyer can easily buy more once they have tried the sample. If your book has a presentation that makes it look like a truffle (by blurb, cover, original price, and of course the contents), it’s going to look very attractive next to a bunch of Hershey kisses (books with bad covers and blurbs and, more often than not, contents). When a writer gives away the first book in a series away for free, it’s like having the bag of truffles right there at the table.

Link to the rest at Scott William Carter

Here’s a link to Scott William Carter’s books

Two Wrongs Don’t Make a Right

18 August 2014

From Hugh Howey:

But three lefts do.

And what of Orwellian triple-speak? That’s like double-speak, except you circle back around to the truth again. I’m seeing some bizarre protestations about an Orwell quote making the rounds among the anti-Amazon crowd. When Amazon sent a letter to KDP authors asking them to help talk sense into Hachette, one of the points detractors seized upon was a quote from George Orwell about paperbacks. From the letter:

The famous author George Orwell came out publicly and said about the new paperback format, if “publishers had any sense, they would combine against them and suppress them.”

The quote was taken out of context, pundits and bloggers cried. The rest of the letter from Amazon was dismissed because of a single fact that seems to have been gotten backwards. In reality, they said, Orwell thought cheap paperbacks were great. He flat out says so. Can’t you hear the sarcasm dripping from his voice? He wasn’t really suggesting collusion.

Except he was. And he wasn’t being sarcastic at all. An intrepid researcher tracked down the origin of the quote, and Orwell was indeed suggesting, just as Amazon portrays, that he and others of his time thought cheap books would destroy the trade. Great for consumers, sure, but bad for everyone else.

. . . .

Publishers today—like Orwell was in his time—are terrified of affordable literature. Amazon’s point is that they were wrong, and that cheap paperbacks helped grow the entire pie of reading and enrich everyone in the industry. It bears mentioning, I think, that one of the pundits who twisted Orwell’s wording to suit his needs also freely admits that he encourages publishers to jack ebook prices up as high as possible to protect the print trade.

Another thing lost from this debate is that $9.99 is not the ideal price point for all ebooks. In fact, most ebooks would generate more revenue at even lower prices. $9.99 is like a speed limit. Exceed it in rare emergencies, but also feel free to drive slower where appropriate. Among the 120,000 ebooks we’ve analyzed at AuthorEarnings.com, $4.99 ends up being the bestselling price point by far.

Link to the rest at Hugh Howey and thanks to Ashe for the tip.

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