Jeremy Ross Media

This looks like a major step, doesn’t it? Amazon is apparently trying to stay competitive with Apple, B&N and others. A 70/30 split in favor of the content provider seems to be the coming industry standard. But there are a lot of strings attached… .

See my analysis after the jump.

JEREMY ROSS MEDIA ANALYSIS

Sticking to what has been publically announced or reported , here’s my analysis.

The new Kindle 70/30 deal will be offered to self-publishers through Amazon’s DTP program starting June 30, 2010. It’s open to anyone, from individuals to large publishers,  should they want to take advantage of it.

Amazon gives an example of a text novel, stating that, after a six cent distribution fee, an author would earn $6.25 per copy on a book that sells for $8.99, rather than the old rate of $3.15. I realized after looking into this more deeply that there is an unprecedented set of conditions attached…

Once I read through the lengthy terms, however, I was concerned that Amazon’s offer was far from comparable with Apple’s terms for a 70/30 split currently available from the App Store (and reportedly coming in some related form for the iBook store). Apple’s approach has, frankly, done a lot to establish digital sales of all media types as viable.

Charlie Stross provided an excellent summary of the problems with the DTP deal in his blog post  covering the pricing control battle that has just exploded between major publishers and Amazon:  Amazon, Macmillan: an Outsider’s Guide to the Fight

“From a distance this looks competitive, but the devil is in the small print; to get the 30% rate, you have to agree that Amazon is a publisher, license your rights to Amazon to publish through the Kindle platform, guarantee that you will not allow other eBook editions to sell for less than the Kindle price, and let Amazon set that price, with a [floor of $2.99 and a] ceiling of $9.99.”

In addition, to what Charlie noted, the book’s list price must be at least 20 percent below the lowest price of the physical edition of the book.

After realizing the issues that major publishers will have with these terms, I was not surprised to see that Amazon will still offer their previous, apparently-less-favorable royalty split DTP deal with fewer conditions attached as an alternative. In that scenario, the self-publisher receives 35% of a suggested retail price that he or she sets.

From my perspective, working as a consultant with publishers of comics and other visual books that tend to have large files, the .15 cent per MB digital distribution fee is actually the most significant non-starter.

An all-text book might be a half-meg while a visual book could be 10 MB per chapter (download file size limitations would practically force you to sell it by chapter!)and have six or more chapters.  In short, the fee might be equal to or greater than not only the publisher’s share but also the full retail price.

The always-insightful Calvin Reid at Publisher’s Weekly wrote a revealing overview in his article: Amazon Offers Higher Royalty on Self-Published e-Books — Publishers Weekly, 1/20/2010

At the end of what is becoming an exceedingly long day, the “real” publisher deals Amazon offers to midsize and larger publishers are likely to have more acceptable business terms than the DTP ones—at least, after the dust settles from the current brou-ha-ha over Agency vs. Retail/Wholesale models.

FULL TEXT OF AMAZON PRESS RELEASE:

AMAZON ANNOUNCES NEW 70 PERCENT ROYALTY OPTION FOR KINDLE DIGITAL TEXT PLATFORM, ENABLING AUTHORS AND PUBLISHERS TO EARN MORE ROYALTIES FROM EVERY KINDLE BOOK SOLD

SEATTLE—(BUSINESS WIRE)—Amazon.com (NASDAQ:AMZN) today announced details of a new program that will enable authors and publishers who use the Kindle Digital Text Platform (DTP) to earn a larger share of revenue from each Kindle book they sell. For each Kindle book sold, authors and publishers who choose the new 70 percent royalty option will receive 70 percent of list price, net of delivery costs. This new option will be in addition to and will not replace the existing DTP standard royalty option. This new 70 percent royalty option will become available on June 30, 2010.

We’re excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books.

Delivery costs will be based on file size and pricing will be $0.15/MB. At today’s median DTP file size of 368KB, delivery costs would be less than $0.06 per unit sold. This new program can thus enable authors and publishers to make more money on every sale. For example, on an $8.99 book an author would make $3.15 with the standard option, and $6.25 with the new 70 percent option.

Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books, said Russ Grandinetti, Vice President of Kindle Content. We’re excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books.

DTP authors and publishers will be able to select the royalty option that best meets their needs. Books from authors and publishers who choose the 70 percent royalty option will have access to all the same features and be subject to all the same requirements as books receiving the standard royalty rate. In addition, to qualify for the 70 percent royalty option, books must satisfy the following set of requirements:

The author or publisher-supplied list price must be between $2.99 and $9.99

This list price must be at least 20 percent below the lowest physical list price for the physical book

The title is made available for sale in all geographies for which the author or publisher has rights

The title will be included in a broad set of features in the Kindle Store, such as text-to-speech. This list of features will grow over time as Amazon continues to add more functionality to Kindle and the Kindle Store.

Under this royalty option, books must be offered at or below price parity with competition, including physical book prices. Amazon will provide tools to automate that process, and the 70 percent royalty will be calculated off the sales price.

The 70 percent royalty option is for in-copyright works and is unavailable for works published before 1923 (a.k.a. public domain books). At launch, the 70 percent royalty option will only be available for books sold in the United States.

The Kindle Digital Text Platform is a fast and easy self-publishing tool that lets anyone upload and format their books for sale in the Kindle Store. To learn more about the Kindle Digital Text Platform, visit http://dtp.amazon.com/

Amazon’s newest shot to keep e-book prices low and to develop more original content is a new royalty program that will give authors and publishers who use the company’s self-publishing Kindle Digital Text Platform a much higher rate that (sic) standard royalties. Under the program, which goes into affect June 30, authors or publisher who choose the new 70% royalty option will receive 70% of list price, net of delivery costs on all e-books sold. The new option will be in addition to the existing DTP standard royalty option.

Delivery costs will be based on file size and Amazon said that new program will enable authors and publishers to make more money on the sale of e-books. In Amazons example, on an $8.99 book an author would make $3.15 with the standard option, and $6.25 with the new 70% option. To qualify for the new rate, however, e-books must meet a set of requirements that includes carrying a price between $2.99 and $9.99, a price that must be at least 20% below the lowest physical list price for the physical book. The title must also be made available for sale in all geographies for which the author or publisher has rights, although at launch the option will be available only for books sold in the U.S. In addition, books must be offered at or below price parity with all competition, including print book prices. Amazon said it will provide tools to automate that process, and the 70% royalty will be calculated off the sales price.