Okay, maybe tomorrow.
Or the day after that.
I’ll get back to you.
But it’s definitely going to fall. At least, that’s what authors keep telling me about Amazon’s 70% royalty rate. I have heard this at least once a month for two years. Rates used to be lower before the iBookstore and B&N began competing for self-published clients, so the argument goes that once Amazon forces out their competitors, they’re gonna halve the royalty rate and rake in all those juicy profits (the Wall Street crowd is laughing right about now at the concept of Amazon raking in profits).
Let’s ignore the wild assumption here that Amazon is somehow going to force all competitors out of a market that has almost no barrier to entry. (We could all sell PDFs on our websites for 99 cents if we want). I think this second and equally irrational fear of halving our payout arises from the huge discrepancy between what online distributors pay self-published authors and what traditional publishers pay their authors. How can Amazon and B&N and Kobo afford to continue paying 70% royalties when major publishers only pay 12.5%? Surely this is a false market that must eventually collapse, right? Right?
Wrong. There’s a fallacy in this fear. Two fallacies, in fact. The first fallacy is to ignore the fact that traditional publishers have expenses besides the author. They have buildings to lease, employees to pay, printing costs to consider. That 12.5% is just one expense that comes out of a larger pot. So the first fallacy is that the royalty split is insanely generous. The second fallacy is that this is even a royalty we’re earning. It isn’t. It’s not a royalty at all.
When I worked at a small bookstore, we typically received 40% discounts on the books we ordered. That means we were happy to keep 40% of the profit and send 60% back to publishers (which they split with the printer, author, etc.) 40/60 isn’t far off from 30/70, which is what Amazon and B&N pay. Nearly the same split, but the difference in overhead is enormous!
So the fear mongers want us to be terrified of a profit split that is nearly identical to the profit split that bookstores have used for decades. The reason is that they confuse a wholesale price for a retail good offered for a royalty. My 70% pay isn’t a royalty. When I hand Amazon a book to sell, I’m telling them they can have it for 30% off my retail price. A price that I get to set.
Just like a publisher, I do all the work of producing and delivering a product. They get 30% in exchange for distributing it. That’s not a crazy deal. What blinds people to the fairness of this rate is the comically smaller royalties from major publishers. We have come to think of 12.5% as fair. But again, this is a bad comparison. Royalties to authors aren’t the same as profits to publishers. We are the publisher when we self-publish. So start comparing our 70% take to a publishers’ 60% take when they deliver a book to a bookstore — keeping in mind that we don’t have a physical location to lease, shipping costs, or employee wages — and you’ll see that this is a very fair, sustainable, and permanent rate. If anything, there’s room for it to be more generous.
Just like the sky, this rate isn’t coming down. And I’m not afraid to put a public declaration on this. Because hey, the chicken littles and the Jeremiads are wrong every single time. Yes, even tomorrow. Especially tomorrow.