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Imagine one percent, 129000 times
June 15, 2012 12:31 AM   Subscribe

"Amazon’s markup of digital delivery to indie authors is ~129,000%" - author Andrew Hyde reviews the take for the most popular digital publishing platforms
posted by Blazecock Pileon (48 comments total) 17 users marked this as a favorite

 
Amazon is set up to be pwnd by a scrappy startup.
posted by stbalbach at 12:35 AM on June 15, 2012


Thing is for the reader, Amazon is at worst neutral, at best good and convenient. Costs the same, works on their favorite device, etc. No reason to buy a DRM-free one or PDF, they just want the book on their Kindle. But I think it won't be long before people start shopping around a bit. What if they googled this book to check reviews real quick, and Google showed it selling on the author's own site in a Kindle-friendly format for $7.99? They might just buy it. But that's a behavioral change on the consumer side. Amazon will continue to ream the people who use it to access their huge audience of readers with compatible hardware. I feel for this guy in a way but also he must realize that the very ability to be able to list his book so easily and set his own price, etc etc, is a valuable service. The idea is you increase your reach, but get less per sale. Would he rather earn $5/book on Amazon and sell a thousand copies? Or sell half as many on Gumroad or what have you?

Aaanyway. It's an interesting space, and everybody is reaming each other while they can. Soon the reamers and reamees might be different, but that's just publishing evolving.
posted by BlackLeotardFront at 12:46 AM on June 15, 2012 [1 favorite]


Amazon is set up to be pwnd by a scrappy startup.

Underdogs and weaklings only prevail in fiction. Amazon has some pretty heavyweight wolves blowing on their straw walls yet even as the author admits: "So 51% of the orders were for Kindle. I love my kindle. I can see why."

Of course the "indie" author has the same possibility as any "indie" band, if you think publishing fees outweigh the benefits, be your own scrappy start-up, build your own website, and sell direct to the public. The author even provides a ilnk to such a site:

"So want the kindle version and don’t want to give Amazon 50% of the sale? Buy here and I get 95% of the sale."

But still Amazon is the store most of his customers are buying from. That says something about the value of Amazon to readers which this travel writer ignores or fails to understand.
posted by three blind mice at 12:50 AM on June 15, 2012 [4 favorites]


Imagine one percent, 129000 times

That's not how percentages work. For example, 50% is half, not 50 times 1%. Individual percentiles are not units. To say you have 1% isn't the same thing as saying you have 1 meter or 1 liter.

The correct interpretation of the fact that Amazon marks up things by 129% is that Amazon adds about 129 words for every 100 words the author delivers. These words come in the form of advertising for Amazon, or in the form of book descriptions, or possibly customer reviews. Bob from Omaha, who is a trusted reviewer, will probably contribute at least 140 words. So that 140% right there.
posted by twoleftfeet at 1:05 AM on June 15, 2012


"Amazon’s markup of digital delivery to indie authors is ~129,000%"

This is misleading. It would have been more accurate to say that his markup from Amazon is unusually high because the size of his book is huge. Most indie authors (who aren't publishing graphic novels or books with a lot of photos) won't have the same digital delivery costs.

Here is Amazon's fee structure. Authors get to choose one of two options: a 70% royalty or a 35% royalty. For the 70% royalty option, Amazon takes a flat 30% fee for every book they sell that is priced under $10. The rest of his loss is on digital delivery. Amazon charges authors $0.15 for every megabyte downloaded by their customers. The 35% royalty option includes delivery fees -- those aren't paid by the author.

The photos in his book have raised the size of his file (to an unusually large size: 18.1mb,) and massively increased the cost of digital delivery.

All of that should have been obvious to him if he had read the royalty options details.
While Hyde may have a fair point, he might not have read the fine print.

In the Amazon Kindle Direct Publishing agreement, the company clearly states that there is a delivery charge for files. It depends on the country, but in the U.S., it’s $0.15 per megabyte — and other countries are comparable. At 18.1 megabytes, the delivery charges on Hyde’s book add up.

For frame of reference, Haruki Murakami’s 900-page behemoth 1Q84 (Random House) has several images (though certainly not as many as Hyde’s book) and clocks in at only 3 megabytes.

posted by zarq at 1:28 AM on June 15, 2012 [6 favorites]


He does make the point that $0.15 a megabyte is a bit steep, given the cost of transferring the same amount of data from Amazon's own S3 system.
posted by Jimbob at 1:43 AM on June 15, 2012 [5 favorites]


The photos in his book have raised the size of his file (to an unusually large size: 18.1mb,) and massively increased the cost of digital delivery.

One of the things people love about the kindle is that the books "just appear, instantly" once you've bought them. On WIFI its really fast, over cellular its still pretty impressive (even when abroad).

I think its pretty likely that Amazon is using delivery fees to strongly encourage publishers to keep their books small. This helps maintain the fast user experience and also means readers don't fill thier kindle up really quickly. The original kindle would only be able to hold 10 books as big as this author's if my recollection is right. The new kindles have a lot more storage but the principle holds... delivery fees discourage publishers from putting 10MB jpegs of cover art onto the first page of their ebook. It'd be pointless and no one wants it, but vanity and a hopeless desire to stand-out would surly lead publishers down the path if the fees were lower.

As a purchaser I'm glad that the fee structure makes book size a key concern. It may not be a good thing for coffee-table art books but in 99% of cases I think it helps. But I'm an old curmudgeon who thinks most images clutter up web pages so what would I know....
posted by samworm at 1:52 AM on June 15, 2012 [2 favorites]


I suspect that the $0.15 a megabyte is a holdover from the days when Kindles only had 3G wireless delivery & it probably did cost them something close to that to deliver e-Books to their customers. Now that Amazon has a de facto monopoly with their Kindle e-Book platform, there's no pressure on them to change it, even though they've introduced Wifi to all their Kindles & the average cost of delivery has dropped through the floor.

It does seem like they're cutting off their nose to spite their face a little though: they went to all that effort to introduce the Kindle Fire & are charging a fortune for publishers to deliver content that actually takes full advantage of the platform in e-Book form.

samworm, you make a good point about the immediacy of the platform being very important though. It might well be that Amazon has decided to keep the charges precisely in order to prevent publishers from loading up their files with data. (If they really want to ship a data heavy file there's always the 35% royalty option.)
posted by pharm at 1:55 AM on June 15, 2012


One difference is that kindle delivery includes wireless delivery on 3G kindles. With S3 that portion is paid for by the downloader. The two costs are not comparable.
posted by markr at 1:55 AM on June 15, 2012


markr, it would be very interesting to see the proportion of 3G vs Wifi downloads for Amazon sales. Given the price premium for the 3G versions, I suspect that the overwhelming majority of them are Wifi downloads these days though.
posted by pharm at 1:58 AM on June 15, 2012


That's not how percentages work. For example, 50% is half, not 50 times 1%. Individual percentiles are not units. To say you have 1% isn't the same thing as saying you have 1 meter or 1 liter.

Actually, yes 50 percent is fifty times 1 percent, pretty much by definition. What you can't do, but nobody is saying that anyway, is that fifty percent of foo equals fifty times one percent of bar.
posted by MartinWisse at 2:53 AM on June 15, 2012 [2 favorites]


Somebody was saying "Imagine one percent, 129000 times" in the title of the post.

Which was probably a joke. I'm 95% certain. Which means that five out of every 100 people won't get that joke.
posted by twoleftfeet at 3:11 AM on June 15, 2012 [2 favorites]


Amazon is never the good guys, but Apple has proven themselves vastly worse.
posted by jeffburdges at 3:53 AM on June 15, 2012 [1 favorite]


So Alexandre Dumas is actually losing money when I buy a Kindle Edition of The Count of Monte Cristo for $0.99?
posted by infinitewindow at 3:56 AM on June 15, 2012


I find it rather shocking that no one seems to find it relevant the Bezos has a rep for contributions to rightwing causes. Is this Metafilter, or has some imposter site hijacked the DNS somehow?!

I simply won't buy from Amazon if I can avoid it. Depending, I might decide to not buy at all, if Amazon is my only source. I don't care how nice a Kindle is. I have an iPad, and it works.
posted by Goofyy at 4:14 AM on June 15, 2012 [3 favorites]


If you read his entire post and the associated comments, he never even bothered to use the compressed azw format. Once he compressed the book, the delivery charges dropped to $0.52, so his take per book is now essentially the same as Nook.
posted by Lame_username at 4:16 AM on June 15, 2012 [13 favorites]


I find it rather shocking that no one seems to find it relevant the Bezos has a rep for contributions to rightwing causes.
Could you provide a cite for that? I pulled his contribution history from newsmeat and his donations are to his anti-sales tax PAC, Patti Murray D-Washington, Maria Cantwell D-Washington, John Conyers D-Michigan, Spencer Abraham R-Michigan, Slate Gorton R-Washington and Patrick Leahy D-Vermont. That doesn't look like the profile of a rightwing supporter at all.

The only thing I've ever seen is that they were slow to leave ALEC, but that didn't seem to reflect an underlying ideology and they did in the end bail.
posted by Lame_username at 4:25 AM on June 15, 2012 [2 favorites]


That says something about the value of Amazon to readers which this travel writer ignores or fails to understand.

An important detail is that Amazon already has my credit card details. If I want his book, I can buy it without hassle and I don't have to input my data to yet another system. Switching costs.
posted by ersatz at 4:29 AM on June 15, 2012 [2 favorites]


It would be a fair point that the 15c/mb is paying for 3G/Whispernet. However, I don't have a Kindle, I buy Amazon ebooks to read on the Kindle app on my phone or notebook. I'm paying for the data over 3G. If the really want to call this a delivery charge, not profit, the author should pay less when I download.
posted by Jimbob at 5:14 AM on June 15, 2012


So the lesson is, right a misleading blog post, get lots of linkage, and get tons of press for your book. Bravo. Bet that paid for the delivery fees.
posted by smackfu at 5:26 AM on June 15, 2012 [7 favorites]


What I want to know is where is the Bandcamp for ebooks.
posted by Sokka shot first at 5:55 AM on June 15, 2012 [3 favorites]


No, the real lesson is that if you complain about this:

I’m super happy with the project but really hate how much management of this type of stuff, time I could be working / consulting and actually making a $.

Get yourself a publisher and no longer have to worry about this.

Division of labour rules.
posted by MartinWisse at 5:56 AM on June 15, 2012 [5 favorites]


AT&T charges $30/30gb or $50/50gb to consumers for its data plans (thats 0.1 cents / mb, so even for 3g Amazon's delivery fees are 150x higher than the absolute max it could be costing them. If AT&T charged you $0.15/mb, your 50gb data plan would cost you $7,500.
posted by Pyry at 6:03 AM on June 15, 2012 [1 favorite]


Amazon is never the good guys, but Apple has proven themselves vastly worse.

To folk who don't really want to support Amazon or Apple: try B&N. Not wanting to let Amazon get a monopoly on e-books was one of the major reasons I bought a Nook (the other being that I like its hardware much more). For folk like me that don't want to see physical bookstores disappear from the marketplace, I think that B&N is now your only hope. Large cities will be be able to support independent outlets like Politics and Prose, but that's of little use to the large majority of book lovers. I admit that B&N's corporate future is much murkier than A&A, but I have a hard time believing that anyone would lose access to their books if B&N were to go out of business- there's quite a lot of Nook owners out there, and they'd scream bloody murder.
posted by gsteff at 6:13 AM on June 15, 2012 [1 favorite]


Let me get this straight. His photo book that is 10x larger than an average book is costly to guarantee free delivery to millions of end consumers via existing 3G networks in dozens of countries?
posted by stp123 at 6:53 AM on June 15, 2012 [2 favorites]


I think its pretty likely that Amazon is using delivery fees to strongly encourage publishers to keep their books small.

Yes, Amazon's royalties are very specifically aimed at having you have a small sized book that is priced under $10. Big book, you pay. Over $10, you get half the royalty. To say "this pricing makes no sense" is ignoring the forest for the trees.
posted by smackfu at 7:07 AM on June 15, 2012


But still Amazon is the store most of his customers are buying from. That says something about the value of Amazon to readers which this travel writer ignores or fails to understand.

After the post was made, direct purchase became the medium most of his customers bought from. Cheers!
posted by pcrsweetness at 7:12 AM on June 15, 2012


To be honest, you'd have to be a real jerk to use the Kindle link now. Even though it is way easier than the direct download.
posted by smackfu at 7:18 AM on June 15, 2012


So for every $9.99 book I sell I, the author, pay 30% to Amazon for the right to sell on Amazon AND $2.58 for them to deliver the DIGITAL GOOD to your device. It is free for the reader, but the author, not amazon, pays for delivery.

How much do authors of physical books make? I bet it's nowhere near 50% of the sticker price. And how many more books do they sell being on Amazon, versus being on their own website or some scrappy startup?

A lot of people seem to think that networks are somehow free, because there are no marginal costs per unit of data once you buy the equipment and hook up the wires. It costs almost nothing more for a router to squirt data out at 100% than it does for it to sit there doing nothing. But they have to pay for the equipment, upgrading the equipment, maintaining the equipment, etc. If they have $1,000,000 worth of switches and routers in their data center that has a certain capacity, they need to (at the very, very least) sell $1,000,000 worth of data to pay it off.

Further, the costs of the equipment is a stairstep kind of curve, but the "payoff for that investment" curve is much smoother. They have to figure out a way to balance the costs of provisioning the equipment with the expected revenue. If they charge too little, they won't make enough money to pay off the equipment before they need to replace it. If they charge too much (or if they over-provision), they won't get enough demand to pay off the equipment.

Maybe Amazon charges too much, but they have to charge something. It only makes sense to charge more to those customers (the authors) who use up more of their resources.
posted by gjc at 7:19 AM on June 15, 2012 [2 favorites]


If Amazon called it an "oversize book surcharge", would be people be getting so annoyed?
posted by smackfu at 7:20 AM on June 15, 2012


I just looked at his numbers. This might not be particularly correct, but the number of books sold in the 100 book period as Nook is the same as the 300 book period. Seems like the proportion of Nook sales should remain constant. I wonder if he is ending up turning off potential purchasers rather than simply converting them from Amazon to direct?
posted by gjc at 7:48 AM on June 15, 2012


Amazon has been systematically de-valuing the worth of books for years. Everybody seems to like the idea of cheap books and taking money away from book publishers, but they forget that saving a little money on a download makes an enormous impact on authors--and changes the kinds of books they will write in the future. Who's going to be able to afford to spend 10 years of their life researching an award-winning, rich history or biography, only to earn pennies for it on Amazon? I left a career in book publishing because of the way the industry is circling the drain and taking authors down with it.
posted by J-Do at 7:51 AM on June 15, 2012


Maybe Amazon charges too much, but they have to charge something. It only makes sense to charge more to those customers (the authors) who use up more of their resources.

Sure, but the amount Amazon is charging for delivery is completely divorced from what it actually costs to ship bits around these days. If you bought a CD from ebay and the seller charged you $450 shipping, you would probably be pretty pissed, right?
posted by Pyry at 7:56 AM on June 15, 2012 [2 favorites]


How much do authors of physical books make? I bet it's nowhere near 50% of the sticker price. And how many more books do they sell being on Amazon, versus being on their own website or some scrappy startup?
It varies, but assuming a traditional publisher and an author who is unknown, the author would typically see about 10% of the hardback price and around 8% of the paperback price.

He's using print-on-demand and he gets 33% of the price if you buy it directly from him and 13% if you buy it from amazon.
posted by Lame_username at 8:00 AM on June 15, 2012


Everybody seems to like the idea of cheap books and taking money away from book publishers, but they forget that saving a little money on a download makes an enormous impact on authors

Strange how our perspectives differ. It has never seemed to me like I was saving money by going digital. The few times I have purchased books for download it was always for the convenience. For most of the books I could have purchased the book cheaper in paperback. Maybe I'm an outlier though.
posted by ODiV at 8:01 AM on June 15, 2012


If you bought a CD from ebay and the seller charged you $450 shipping, you would probably be pretty pissed, right?

But if you didn't even look at the shipping charge before buying and assumed it was free shipping, would people have much sympathy for you? That's the equivalent of what this guy did. "Oh, there's a delivery fee? Damn."
posted by smackfu at 8:18 AM on June 15, 2012 [1 favorite]


129,000%

I'm not a big fan of Amazon (why I was roundly cursing them just the other day as I shelled out nearly 30 bucks because I had to watch season to of Downton Abbey RIGHT THAT MINUTE) but this sort of comparison (representing Amazon's delivery charges as a straight percentage markup of the cost of transmission) is kind of dumb (actually since this guy used it to drive traffic to his direct sales it is damn brilliant - but treating it as a meaningful number is pretty questionable)

You're paying for having your work available via Amazon's delivery system, not data transmission costs (why not call it a billion percent markup, it's not as if Amazon's cost for transmitting a megabyte is actually anything like a fifth of a penny). Is it a fucking gouge? Of course it is.

But good luck, for the majority of authors, getting anything like Amazon numbers from their cheap transmission through whatever home-brewed or off-brand direct sales method.

I do hope stories like this plant the seed to buy direct from authors when possible, though.
posted by nanojath at 8:22 AM on June 15, 2012


How much do authors of physical books make? I bet it's nowhere near 50% of the sticker price. And how many more books do they sell being on Amazon, versus being on their own website or some scrappy startup?
It varies from author to author and by format (paperback or hardcover), and it can escalate as sales climb, but it's ~10% of the net price (the price after the discounts to the retailers, which can be ~50%). But authors don't earn royalties until they earn out their advance--if your advance was $10K, your 10% per book goes to the publisher until that 10% per book crosses $10K. Most authors don't accomplish this feat.
posted by mekanic at 8:23 AM on June 15, 2012 [1 favorite]


Amazon is never the good guys, but Apple has proven themselves vastly worse.

Even for an anti-Apple zealot this is remarkably silly. Amazon is an abusive monopolist, yet Apple is being investigated. Proves that Bezos's political contributions have paid off I suppose.
posted by epo at 8:26 AM on June 15, 2012 [1 favorite]


But authors don't earn royalties until they earn out their advance--if your advance was $10K, your 10% per book goes to the publisher until that 10% per book crosses $10K. Most authors don't accomplish this feat.

In which case, they are getting more than 10%.
posted by smackfu at 8:32 AM on June 15, 2012 [1 favorite]


Sure, but the amount Amazon is charging for delivery is completely divorced from what it actually costs to ship bits around these days. If you bought a CD from ebay and the seller charged you $450 shipping, you would probably be pretty pissed, right?

But that's not even close to the scenario here. This is the choice of using eBay and paying their fee, versus attempting to sell it on the street with no fee.
posted by gjc at 9:06 AM on June 15, 2012


AT&T charges $30/30gb or $50/50gb to consumers for its data plans (thats 0.1 cents / mb, so even for 3g Amazon's delivery fees are 150x higher than the absolute max it could be costing them. If AT&T charged you $0.15/mb, your 50gb data plan would cost you $7,500.

You're out by an order of magnitude there, chief. In fact most PAYG and overage charges weigh in around $1.50/MB on most carriers so Amazon is getting a considerable discount in this arena.
posted by Talez at 9:16 AM on June 15, 2012


Oh, you're right, it's $30/3gb and $50/5gb (1cent / MB and not 0.1cent/MB), so Amazon's only overcharging by 15x and not 150x, at least for 3g.
posted by Pyry at 10:16 AM on June 15, 2012


Of course AT&T also charges $30 for 1 GB and expects most of their users to be under that number. They are the masters of having plans that seem reasonably priced, but then not having the plan you actually want.
posted by smackfu at 10:45 AM on June 15, 2012 [1 favorite]


Who's going to be able to afford to spend 10 years of their life researching an award-winning, rich history or biography, only to earn pennies for it on Amazon?

The same people who do it now, like the fellow who wrote a history of rebellion and repression in Italy 1972-77, largely of interest to about a couple of hundred specialists and perhaps some schlachtbummlers and bought by fewer.

I know the wild successes of mefi's own cstross, lately seen buying Balmoral as his little house in the country or jscalzi, busy buying up about half the square states to use as littertray for his cats might blind people to the simple fact that to make a small fortune as a writer, start with a large one.
posted by MartinWisse at 11:35 AM on June 15, 2012 [1 favorite]


Yeah, this is pretty ridiculous.

Amazon is charging $2.90 or something to deliver his book. But remember, amazon sends the file over 3G. The Kindle owner doesn't pay for cellular service if they have a kindle, apparently it's taken out of the price of the book.

He's calculating the base rate on cost to send the book over the internet, in which case the customer is paying for the bandwidth (either through their cable bill or maybe their cell bill, whatever)

Now, maybe the price is higher then it needs to be. But what other people in this thread have said is that books without a lot of pictures don't cost as much to 'digitally deliver'.

And the thing is, when you put a book on amazon, you're essentially getting free marketing. Of the first 300 books he sold, and 73% of those were kindle books. Why? what people found convenient. The thing is, even if you put a file up on gumroad and as many people see it as see the amazon thing, people might feel uncomfortable handing their credit card number over to yet another provider.

Also calling this "Imagine one percent, 129000 times" Is pretty ridiculous. "1%" of his estimated bandwidth cost would be $2.58/129000/100 = 2.17*10-5 cents.

So the number that is being multiplied "129000 times" is in fact 21.7 millionths of a cent. (or 217 nano-dollars)

posted by delmoi at 1:51 PM on June 15, 2012


Who's going to be able to afford to spend 10 years of their life researching an award-winning, rich history or biography, only to earn pennies for it on Amazon?
Is that worse then earning pennies off of hardcover and paper back books, where most of the money goes to the people cutting down the trees, making the paper, and shipping the books around?
posted by delmoi at 1:56 PM on June 15, 2012


Oh, you're right, it's $30/3gb and $50/5gb (1cent / MB and not 0.1cent/MB), so Amazon's only overcharging by 15x and not 150x, at least for 3g.

One thing that continually astounds me is the attitude that spectrum is infinitely reusable at no cost to the carrier and that cell data is entirely fungible.

You get your internet for $30/3gb because AT&T has done the research and expects that not many people will come close to using this 3GB and this is the typical amount that people with smartphones will pickup. Nor is it practical for consumers to find ways to extract every last byte out of a plan. Because of this AT&T can offer bandwidth at the low low price of 1c/MB safely assured that the average actual revenue of this service is going to be far higher. My speculation is that as quota/price plans get bumped up the sole reason is to deliver the same or higher apparent value of the data (in this case 1c/MB) while increasing the amount of revenue actually generated per kilobyte that flows through. Further speculation I honestly wouldn't be surprised if AT&T targets anywhere between 7-9c/MB revenue from their data.

Paying by the KB? You're going to have to pay far, far closer to the revenue generated by this data to compete and you're going to have to pay a "pain in the ass" penalty from AT&T. Your ARPU is going to be absurdly low and administration costs will tend to be fixed per user so the cost recovery, little alone profit, is going to have to come from somewhere. In this case it's the price you pay for casual data. It also has to be high enough to discourage more tyre kickers to head to fixed monthly plans with their associated higher and more predictable ARPU.

I'm guessing Amazon passes on the cost to their authors at a rate very close to what they pay to their Whispernet providers. Even if we assume they don't they also don't charge for redelivery of the book to other platforms and they don't charge for redownloads if you delete it from your Kindle. Would the situation be any better if Amazon deducted a smaller amount from the royalties from the author every time the book was distributed over 3G? What about loans? Would they be deducted from an author's royalties?

The situation isn't ideal but it's much better than most of the available alternatives. Most of it will come out in the wash and the situation appears to discourage stupid use of a rather limited resource (in this case radio spectrum).
posted by Talez at 1:08 AM on June 16, 2012 [1 favorite]


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