Indie Fables: The Myth of the 70% Royalty

Truly disruptive developments in technology impact not just on related industries, but have repercussions far beyond, changing society. It’s why they are called revolutions, not just improvements on the previous infrastructure.

The printing press was one such.

Railways. Manned flight. The internet, of course.

Epublishing? No question is has transformed the publishing industry itself, and transformed the lives of many who aspire to making a living from it. But to be a true revolution it has to impact on wider society.

It’s too soon to be certain how history will regard what we now term the epublishing revolution, but I think it safe to say it will be classed as revolutionary.

Epublishing is revolutionary because it is capable of transcending media boundaries yet still be available to anyone with the requisite and readily available technology. Not just a transfer of an existing industry to a new means of delivery (movies are shifted from celluloid to magnetic tape to aluminium disk to digital without being revolutionary changes) but a transformation in what is available to read, where it is available, how it is read, and most importantly in the relationship between the creator-supplier and consumer.

Like any revolution, epublishing has its proponents and opponents, and like in any propaganda war truth always the first casualty. As in any revolution, epublishing has its icons and its demons, and reasoned debate is rarely an option.

Urban myths abound. You know the type: trad publishers eat babies for breakfast, alligators live in the sewers beneath New York and you can earn seventy per cent royalyties from Amazon around the globe.

BTW, for those wondering, Hugh Laurie is not actually a trad publisher. And I can personally vouch for there being no alligators in the sewers of West Africa. Crocodiles on the other hand…

So this is the first of an occasional series intended to strip away some of the more colourful blandishments of both sides, and take a look behind the us and them mentality that is so pervasive and corrosive, and view the reality behind the war of the words.

And we’re starting with the biggest myth of all – the myth of the 70% royalty.

*

The fabled 70% royalty is of course the weapon of choice of any self-respecting indie wanting to poor scorn on the traditional publishers. And no question the royalties paid out by the trads are piss-poor. Don’t for one second read this as an apology for the failings of the trad pubbers to pay a fair whack to their authors.

But equally, don’t fall for the opposite extreme that the trads are therefore robbing us blind because Amazon and other e-retailers pay up to 70% royalties. The trad publishers may well be robbing us blind. But that’s a different argument for a different time.

What’s important to grasp here is that Amazon are not paying 70% royalties. In fact, except in the case of the select few who have signed up with the Amazon imprints, Amazon aren’t paying royalties at all.

Okay, they call the payments royalties, but actually they are charging a 30% fee for distributing our books, selling our books and processing the fees. They then hand us the remainder. By what stretch of the imagination is that a royalty? A rose by any other name? Not so. If we sold an ebook on eBay and eBay paid us the money after its fees were deducted would we call that a royalty? Of course not.

Amazon, Apple, B&N, Kobo and co. are not our publishers, they are our distributors and sales agents. That’s why it’s called self-publishing, folks!

The point being, it’s crazy to directly compare what Amazon (or Apple, or Kobo, etc) hand out (after deducting their sales commission/distribution-fee/payment processing fee) with a royalty from a trad publisher.

Low as trad-pub royalties may be (7%-15% is typical), it’s ludicrous to suggest that a trad publisher paying 15% to the author is somehow pocketing the other 85% as profit. Apart from anything else they have to pay sales commissions/distribution fees/payment processing fees just like we do. They have production costs, just like we do.

Does that justify the trad publishers’ higher list prices and lower pay-out of real royalties to authors? Of course not. But the arguments against trad pub practices stand better scrutiny if we deal with facts, not Konrathian hyperbole. The grave-diggers and pall-bearers of the trad publishers have their own agenda, and can be entertaining to read. But facts are easily lost in the one-sided debates.

I’ll return to this in future posts. Here to address the realities of “royalty payments” from bodies which aren’t acting as publishers and are actually charging distribution fees, not handing out royalties.

In a bizarre twist by the company that prides itself on offering consumers the cheapest prices and claiming the agency model keeps prices artificially high, Amazon penalize any author wanting to give the reader real value, and more than double the distribution fee if we choose to list at less than $2.99.

Which of course means that for many ebooks the so-called Amazon “royalty” is only 35%.

And that applies to rather more than you might think.

*

There’s a common misconception touted by the celebrity self-publishers that writers can earn 70% globally by being indie. If only…

For ebook purchases outside of the Kindle countries Amazon only pay 35% regardless of list price. Far from giving you the fabled 70% royalty they actually charge you a 65% sales commission/distribution fee/payment processing fee. And of course they then also add the infamous $2 surcharge to the buyer’s bill.

New Delhi, not New York

So your 99c ebook sold in downtown Buenos Aries or New Delhi will cost the buyer $2.99. But you’ll still only get 35c. In case you’re wondering that’s an actual “royalty” of less than 12%.

That’s always assuming they let Johnny Foreigner buy your book at all. A reminder here that, as a resident of a West African country, I cannot buy my, your or anyone else’s ebook from Amazon, not even with the $2 surcharge, because Amazon block ebook sales to almost the entire continent.

Not quite as bad as Barnes & Nobles Americans-only policy, agreed, but hardly a global sales reach. Apple by contrast have iBook stores in twenty or so countries and don’t surcharge. Kobo have even bigger global reach, and curiously they don’t surcharge either.

*

The big appeal of Amazon and B&N for authors is of course the ability to self-publish relatively easily. Although for B&N that applies only to Americans. Everyone else has to go through an aggregator like Smashwords.

Apple and Kobo both, in theory, accept indie authors, but the hoops to jump through are such that few try and even fewer succeed, so again aggregators like Smashwords come into play. But in order to get into B&N, Apple and Kobo through Smashwords you have to subject yourself to the ignobility of the “meatgrinder” to get premium status, and as anyone who submits multiple titles will know, that can be an absolute nightmare.

We can submit two identically formatted files one will be approved and the other come back time after time after time from the auto-vetter for some revision that actually doesn’t need revising. Typical is to get an email from Smashwords saying your ebook has passed all the tests and been approved, followed by an email literally five minutes later saying that exact same book has failed and must be re-submitted!

For those who persevere Smashwords gets you, in addition to those mentioned already, into Sony and Diesel, and Aldiko and Stanza. Useful, true, but how well do Smashwords perform compared to direct uploads?

For those of us outside the US, B&N’s long-standing policy of blanking anyone outside the US borders meant Smashwords were pretty much our only hope of getting listed there. And while the evidence is anecdotal, it does appear being in B&N via Smashwords does you few favours. We sold next to nothing in B&N via Smashwords, despite huge sales on Amazon. Almost all of the B&N success stories we are aware of are from direct-upload authors.

The same goes for Kobo. Again, anecdotal evidence suggests Kobo and Smashwords do not work well together.

Our own experience is telling. Last year saw our e-titles in the e-stores of the two biggest bricks and mortar book-sellers in the UK – Waterstone’s and W.H.Smiths. We let Smashwords get us into W.H. Smiths as their e-store is operated by Kobo. We went via a more direct (and more expensive) route with Waterstone’s (Smashwords do not supply any UK stores except W.H.Smiths through Kobo).

Last year we had two top ten hits in Waterstone’s, held number two spot in store for some while, and was the most searched for name in store. In W.H.Smiths? Nothing. You could count the sales on one hand.

What little we did sell via Smashwords last year was through Apple, and the sums are just too embarrassing to mention. Yet somehow we sold well over 100,000 (of just one title) on non-Smashwords platforms last year. And not just on Amazon and Waterstone’s. As we demonstrated here, we have been getting ourselves out into ebook stores far and wide.

No, these sales aren’t massive. Yes, Amazon will probably dominate the scene for a few years yet, and will maintain it’s position as the biggest ebook retailer in the US. But ebook sales worldwide can only get bigger. If you’re not out there you won’t share in it.

*

Some people are dismissive of Kindle UK because sales there don’t match up with Kindle US. Well, no question the US is a bigger market. And Kindle UK is much newer than Kindle US. E-readers are still a novelty in Britain.

But the UK’s time will come. Those who have a foot in the door now – not just on Kindle UK, but on all platforms – will be well placed to ride that swell when it does come. We know. We’ve got the t-shirt. Just think Waterstone’s.

We’ve also got a direct route into the other major e-stores including B&N, Kobo and Apple, without playing games with Smashwords’ meatgrinder and their ludicrous auto-vetter. And more importantly we have a direct route into far more stores than Smashwords offers.

As said here a week or so back, we can now get you into these stores too.

On Thursday here on MWi we’ll be explaining just what that involves, and which ebook stores you could potentially be selling in. Unless you’re locked into KDP Select then this is a great opportunity to reach new markets at no upfront costs. If you are with Select then come and join us when your ninety day experiment is up.

We’ll provide the ISBNs and quality-formatted ePub files where necessary, and any titles listed through us will be featured in the We Love Waterstone’s promotional campaign in the UK, and similar campaigns internationally.

No, it probably won’t make you rich and you may not sell at all. In which case you lose nothing. On the other hand you may just be the indie that beats us to the number one spot in the UK’s Waterstone’s or Tesco ebooks (the e-store of the UK’s biggest retailer by far), or that makes it big in South Africa’s Kalahari store, New Zealand’s Fishpond store or…

No, we can’t guarantee sales in these stores. But there are two things we can guarantee.

One is that if you’re not in those stores you haven’t a hope in hell of ever selling there and establishing your brand there.

Two is that ebooks are a world-wide phenomenon and growing fast. China already is the second biggest e-reader market in the world. It will probably eclipse the USA later this year.

E-readers, tablets and smart-phones are everywhere, in every country. India is just about to launch its latest mega-cheap tablet, the iBerry Auxus.

Don’t for one second think these “third world” countries don’t have e-readers and tablets. The average citizen might not be able to afford an iPad or a KindleFire (not that the Kindle devices are available internationally anyway) but there are plenty of cheap, locally produced tablets, e-readers and smartphones available.

People are e-reading worldwide, not just in the USA and UK.

Will they be reading your ebooks?

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    • Charley R
    • February 13th, 2012

    I hope so! I always thought the seventy-percent-royalty myth was a bit fishy, thanks for clearing it up Mark! 🙂

    • Thanks Charley.

      Amazon are a great company to partner with, but there is so much misinformation out there that lead some people to forget it’s a business, not a best friend.

        • Charley R
        • February 14th, 2012

        *nodnod* Wise words from the pro.

  1. Good lord, I’m gullible. I was in the “oh boy, this is great” camp until I saw my recent six-week statement and realized that there are so many unintelligible shenanigans on the statement. For some unexplained reason or another, there are a bunch of sales for the same book listed at very odd prices and with only 35% royalty. Yes, I know some countries are segregated out of Amazon’s 70% but there are hundreds of sales in this category and we can never know if the figures are legitimate. Now, after reading your excellent post, I realize that there’s a bunch of stuff going on behind the seemingly benevolent Amazon curtain.

    • At the end of the day Amazon is in the business to make money, Consuelo, and so long as authors don’t lose sight of that, and always treat the relationship as a business, then hopefully Amazon will prove, if not quite benevolent, at least neutral.

    • gerrymccullough
    • February 13th, 2012

    Good to see you back writing posts, Mark! (or is this Saffi?)
    Interesting stuff, whoever!

    • Thanks, Gerry! It’s MW by the way!

    • Oi! I resent that remark! 😉 Clearly the post above was written by Mark, everyone knows that I am the good-looking/funnier one. 😉

      (Funnily, you are the second person this week to suggest that we might be the same person!! I am distraught!) Maybe one day, Mark and I will appear in public together and lay the myth to rest once and for all… 😉

  2. Another highly interesting post, Mark. Glad you’re feeling better.

  3. I agree; I dumped Smashwords because it was too much of a headache, and so am not in Barnes and Noble right now. I’m going to change this with my new editions. But I have no grievance with Amazon’s 30% service charge–they are THE distribution pipeline that is paying my bills every month (total income from WtC and VI is holding at around $2,500/month currently). That said, I fully expect to see competitors either knock them off or force them to revise their business practices in the future. Free-market economics apply to distributors as much as everybody else.

    • Fantastic numbers, Marion!

      I agree, the 30% charge is quite acceptable (like we have a choice…) but needs to be seen for what it is.

      If you’re making that sort of money from Amazon now what will it be like this summer when you’re on all the major platforms with the revamped titles?

      As I said over a year ago, when WtC was still a foetus, I wish I was your manager!

  4. This is verrrrry interesting, Mark. I sure bought into the 70% royalty story. I’ve been a reader of Konrath’s blog since forever, and thought most of his ideas were sound, although I didn’t actually drink the Kool-Aid, because I couldn’t figure out how a nobody could have the same results as an established, trad-pubbed author like him.

    Nobody is saying this stuff, and nobody in the US has a clue that our books aren’t marketed the same way world wide.

    Charley–your review is so well written and thought provoking! I’m certainly interested in your view of YA, which is now the engine that fuels traditional publishing in the US. I guess it makes sense that they’re churning out a lot of schlock. It’s just what they did with chick lit in the last decade.

    Susan’s book sounds fascinating. I might have to take the YA plunge myself with that one.

    • Thanks, Anne.

      According to Konrath his “legacy” past has no bearing at all on his current success. 🙂

      Susan’s book is highly recommnended. As is Marion’s Wearing the Cape (see George above).

    • cc carlquist
    • February 13th, 2012

    This post is definately a “keeper” to be filed and revisited. Thank you.

  5. Okay, I understand what you mean by s distribution fee, but as I read I realized I don’t have the understanding I think I do on the term royalty. Would you explain it, or point me to an explanation, please? :}

    As to your question. I’m certainly hoping more than just people in the Us get a chance to read my story… once I’ve got mine out there. It’s in the pipeline though *he he*

    :} Cathryn

    • Royalty is a broad term (dating back to the feudal system when the Crown owned all property) but essentially is a percentage or fixed price return to the creator of a product that is then developed and marketed by third parties.

      Amazon can legitimately call their payouts royalties in the broadest sense of the term, I guess, but there is no comparison with a “publisher” who is taking a manuscript from scratch and adding value by editing, designing, producing, distributing and marketing that product.

      All Amazon is doing is providing a shop-front and delivery system for your book, after you as author, or your publisher, has done all the work.

      Crucially when Amazon does take on the publisher role, as with the Amazon imprints, and actually provides publisher services, that 70% “royalty” is nowhere to be seen.

      • Thanks for clarifing that and letting in on where the word came from. Much appreciated. :}

  6. Another great post Mark! What is interesting here is just how differently our US authors see the industry and Amazon’s & B&N’s dominance of it. It’s almost like there’s a little starred and striped bubble! 😉

    There’s a whole universe out there guys and whilst you may well still see the huge majority of your sales through the platform of the mighty ‘zon, how about coming along with us and sharing your wares with the remaining 6.7 or so BILLION other potential readers out there? 😉

    • The difference in perception is remarkable, you’re right. And not helped by the likes of Konrath and co who believe the world starts and ends in the USA.

      Long term I wonder just how many sales Konrath is forsaking with his Amazon exclusive love-affair.

      • I’m glad to say my day job does international business, so I’m a bit more aware there’s more than just our little star spangled bubble (who wants to be stuck inside a red white and blue bubble for eternity anyway I want colors! and lots of them!) *ahem* Sorry…

        Anyway, I’m jsut glad that getting books out into other countries is not nearly as hard as it is for my day job company to place it’s product, being the regulated product that it is. :}

    • Lee
    • February 16th, 2012

    Wow, this was very interesting, and educational. Indie has turned the publishing industry on it’s head all over the world.

  7. Very good post. I will be dealing with many of these issues as well.

    .

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