Do you own an e-reader? Are you an avid reader and/or author? If you answered “yes,” read up on the current e-book pricing decisions of the Big 6 legacy publishers (Hatchette, MacMillan, Simon and Shuster, Penguin, HarperCollins, Random House). Here’s a quick
primer. Otherwise, you might get sticker shock the next time you go e-book shopping.
What’s the beef? From a publishing standpoint, e-books are very lucrative. They cost very little to distribute and the production costs are one-time. Inflating the price of an e-book is one sure way for a publisher to make money, which is why legacy-published books won’t EVER be cheap again.
Recently, the Big 6 have banded together to fix their prices much higher than consumers are used to paying for e-books. One of the most expensive e-books in the Kindle Library is The Greater Journeyby David McCullough. Published by Simon and Shuster, the e-book costs $19.99. Figure a few cents to transfer the file, $6 to Amazon, there’s $14 left over. At a 15% royalty rate (the average is between 6%-15% of retail), Mr. McCullough gets $3, Simon and Schuster makes $11. Multiply it out to 200,000 books sold. McCullough makes about $600,000; Simon and Schuster makes $2.2 million with no overhead (printing costs, shipping, storage, etc.) to subtract.
In a Twitter chat last week, I asked an author about their opinion regarding e-book pricing. They said “don’t have one.”
Wait, what?
As a relatively unknown author, it’s an uphill battle to get new readers no matter how much marketing you do or how outstanding your product is. In fact, after two books, I still have to get past the friends and family that ask for free copies. Price your book at .99 cents, and you get the “impulse buy” crowd. But when the natural ebb-and-flow of sales happens (or boom and bust, depending on your vantage point), what do you do to position yourself for more sales? Drop it to .50 cents, or free?
If you are a writer, or aspire to be legacy-published, the Big 6’s stance should outrage you. In addition to all of the other obstacles you face, now you have to wonder if a reader will shell out $20 for your book or go to an online pirating site and get it for free. Indie authors, like me, are stuck between offering books for close to nothing, or pricing them as high as the market goes and seeing our sales suffer.
What do you think?
authorbrianthompson.wordpress.com 
The author’s math is unclear. The Kindle royalty on a $19.99 book is 35%. Amazon gets about $12.99, the publisher approximately $6.99.
If the author was getting 15% of that, he’d be making about $1.04. So his take would be roughly 1/3 of what the article states at 200,000 sales.
Thanks for responding, Bob. The numbers were off, so I’ve revised. Let’s take another look:
Under Amazon’s Kindle Direct Publishing platform, publishers get 35% of books priced .99 cents and under. At $1 and over, publishers get 70%. So, the Amazon royalty on a $19.99 book would be 30%, not 35%, which equals $6. The transfer fee is dependent on the size of the file, but it’s less than $1.
You’re right – many author contracts have now shifted to royalties based on publisher net. In my example, 15% of a $19.99 book would be $3 if it’s on the retail price, about $2.10 if it’s on the publisher’s net. With revised numbers, the author would make between $420,000 to $600,000 and the publisher somewhere between $2.2 million to $2.4 million.