I had an interesting experience this week: I just bought a brand-new hardcover novel for less than I would have paid for the ebook. I wouldn’t have noticed except that I’ve been doing a lot of stuff online this week, and Amazon, good marketers that they are, sent me an e-mail to let me know that I had received a preorder discount of 90 cents.
I prefer to read paper books, although I do read ebooks, especially when I’m binging on a series.
The thing is, I’d ordered the book six months ago from Amazon. The book, Sara Paretsky’s Brush Back (which I’m enjoying, thank you very much), has a publisher’s list price of $27.95 for the hardcover. Amazon never listed the book at full price. I believe I initially ordered a $17.95 hardcover. I kept getting notices of discounting from Amazon, until this last, which arrived after the book was shipped.
Caveat here: I preorder because it makes some random day feel like Christmas. Suddenly, a book I really, really want shows up in the mail, almost like a surprise gift from a special friend.
I had forgotten that the Paretsky was coming out in August. If you’d asked me, I would have said September, because that used to be her release date. So when I received the most recent notice of the preorder discount—one that sounded final, final—I went to Amazon and looked up the publication date for the book.
And just about fell off my chair when I saw that the Kindle edition was $13.99 and the hardcover was listed at $13.
. . . .
As I searched for the publisher’s list price, too lazy to get up and pick up my copy from the other room, I found that Barnes & Noble lists the book at $16.83 for the hardcover and $11.84 for the Nookbook.
. . . .
Agency pricing has returned to ebooks, which means that publishers are setting their own ebook prices and the retailers, like Amazon, are not discounting. The ebook price on Amazon is clearly a price-match with Barnes & Noble, not something that Amazon has done.
I poked around Amazon, looking at e-book prices, and almost fell off my chair for a second time. Lisa Scottoline’s next book, which releases in October, has a $14.99 ebook. So does Michael Connelly’s November release. And Stephen King’s November release. Robert Crais’s next book shows a $12.70 Kindle edition paired with a $13.37 hardcover. Does that sound familiar?
And what’s fascinating to me is that these books, and the dozens of other traditionally published upcoming releases that I looked at are coming out of different publishing companies. Not different imprints of the Big 5, but each of the Big 5.
Once again, pricing seems…agreed upon.
. . . .
Nonetheless, Amazon is leaving the ebook prices—set by the publisher—alone…and messing with the paper prices.
I mean seriously messing with the paper prices. I should not have been able to get a brand-new hardcover for more than half off the list price on the day the book released. Maybe at Christmas. Maybe nine months from now, as the publisher gets ready to release the mass market paperback.
But now? Release day? Seriously?
. . . .
The traditional publishers are screaming about Amazon. I’ve learned over the years that when someone screams about something, they’re doing so because they feel some kind of pressure, some kind of pinch.
How could traditional publishers be feeling a pinch from Amazon? After all, in the United States, Amazon is selling more books than any other retailer. Why would that hurt traditional publishers? Is it hurting traditional publishers?
Oh, my friends. One should never ask these sorts of questions. Because the answers are often surprising.
From the evidence that I’m seeing, here’s what I believe is going on.
Amazon is clearly fighting the price war on a variety of fronts, and I’m sure Amazon’s policy is pretty simple: They want affordable ebook prices. So if traditional publishers want to charge $14.99 for a Kindle edition, then Amazon will make sure no one buys the expensive Kindle edition by lowering the price of the hardcover.
My unscientific examination shows that when the Kindle prices are high, the discount on the paper edition is deeper.
. . . .
When publishers returned to Agency Pricing, they had to agree to the same ebook royalty schedule that indies have. Which means that for any ebook priced over $9.99, the publisher will receive 35% of the sales price. (If the publisher prices the books between $2.99 and 9.99, then the publisher receives 70%)
The publisher, with a $14.99 ebook, will receive a royalty payment per sale of $5.25. If the publisher had priced the ebook at $9.99, the publisher would have received $6.99.
So traditional publishers are deliberately receiving a lower percentage royalty to keep the ebooks prices artificially high.
But traditional publishers aren’t the only ones taking less money to prove a point. If business is being conducted as it usually is, then traditional publishers sell their books to Amazon at the discount they use for all of the other big accounts (Wal-Mart, Costco, and so on).
That would be 60-64% of list price. This is known as a deep discount.
So, if Amazon pays 64% of $27.95 for the hardcover of, say, the Paretsky book, then Amazon is paying a little over $10 per book. Amazon is currently selling that book for $13, making a $3 profit.
If Amazon sells the Kindle edition of that book, Amazon makes $7.57 per sale. (65% of $11.64) If Amazon sells any of the $14.99 ebooks, it makes $9.75—over three times what it’s making on these discounted hardcover new releases.
Why is Amazon doing it?
I’m guessing here that the price wars continue. And Amazon is trying to force publishers to return to $9.99 ebook prices.
. . . .
Publishing contracts have changed in the past 15 years. Now, each contract has a discount schedule, reducing the royalty if a book is sold at deep (or what the average person would call high) discount. In the past, many contracts didn’t have a discount schedule; the publisher would eat the loss.
Now writers get a much lower royalty if the actual discount to the retailer is low.
At 60-64%, some writers are receiving only a 1-2% royalty. Let’s be charitable and give that writer a 2% royalty. That’s 2% of $27.95, which comes out to 56 cents per hardcover sold.
If the book sells at full price, the writer would get 10 to 15 to 20%, depending on the royalty schedule. (Often royalties are based on sales numbers—10% to 150,000 copies, 15% to 500,000 copies, 20% over 500,000 copies.)
Let’s be realistic instead of charitable this time. Most writers traditionally published in hardcover never sell 150,000 copies of that hardcover. The writer will get the 10% royalty, which is $2.75 per book. Not 56 cents. That’s a significant loss for books sold at deep discount.
But it’s a fact of life. That writer would get the 56 cents if Amazon sells the book at $27.95 or if Amazon sells the book at $13.37. It won’t matter to the writer at all.
The squeeze occurs on the ebook prices. Currently traditionally published writers across the boardare getting 25% of net income received on ebook sales.
So…if the publisher sells the ebook through Amazon at $14.99, and Amazon pays the publisher a royalty of 35%, then the publisher will receive $5.25. That’s “net income received” of which the writer will get 25% or $1.31.
However, if the publisher sets the ebook price at $9.99 on Amazon, the publisher will receive $6.99. The writer will get 25% of that $6.99 or $1.74. A little better.
But the other bonus at the lower ebook price is this: It has been proven over the years that the lower price point brings in more sales. So the writer would receive more money per sale and also make more sales.
The traditionally published writer is losing out here.