Did You Feel the Tremor in the Industry Last Week?

by Steve Laube

800px-Good_Friday_Earthquake_at_Turnagain_Arm

I know what it is like to feel the earth move under my feet having experienced the ’64 Alaska earthquake firsthand. (The above picture is from the neighborhood where we lived called Turnagain Arm.) Therefore I know the difference between a 9.2 Richter scale quake and a tremor that registers near 2.0 on the scale.

Last Thursday Amazon announced they were reducing the royalty payments for authors and vendors who use their ACX service to sell self-published audio books. The amount will change on March 12th for new contracts to a flat rate of 40% instead of the 50%-90% rate they currently pay.

No big deal, right? Sort of like a 2.0 tremor. If you blinked you missed it. And since many don’t have an ACX account to sell audio books they are unaffected. However this should be a reminder to all authors and publishers who use KDP (Kindle Direct Publishing) that Amazon can change their royalty terms at any time.

This is the danger of putting all the proverbial eggs in one basket. If any author chooses to only utilize the economic system of Amazon for their sales they can be vulnerable to any changes. I once met a man who sold the foil that was used to make the dairy creamer packets for McDonalds. He had one client. His job was to search the world for the best price on foil. And he lived in terror of losing his client.

Be very clear, I am not suggesting that this is going to happen. Amazon’s 70% royalty rate on kindle ebooks has not changed. All I am suggesting is that it could.

Imagine the outrage if Amazon decided to change the royalty structure for ebooks. In another part of their company they have already started floating the idea of changing the price structure for the Prime Membership, either by raising the price or creating a multi-tier payment for services. The change would affect 10 million or more customers who will scream, complain, and then comply. Could the multi-million dollar ebook KDP division be up next for review?

Rather than speculate on specifics just imagine ANY change Amazon would make to the royalty structure for ebooks. Authors would scream, complain, and then comply.

The incredible opportunity for an author to get their work into the marketplace has been made accessible by Amazon. It is a wonderful thing and has changed the industry. My caution is that the authors who feel so incredibly empowered right now do not see the shackle around their ankle. They have been captivated by one “ecosystem” and are vulnerable to the corporate decisions that can be made at any time.

Much of the Indie versus Traditional publishing debate revolves around the generous rates provided by Amazon for ebooks. I am not suggesting that one is better than the other. What I am saying here is that those who are vociferous in their defense of going Indie should also start exploring diversification in their sales channels. The Indie author needs to emulate the traditional publisher that has been diversified for a long time.

Unfortunately the options are limited with ebooks. Smashwords will get your work on the majority of non-Kindle platforms like Kobo, Nook, and Apple. And Smashwords receives a percentage of those sales, as they should in exchange for the service. The Sony Reader is gone, the Nook is losing steam, and Amazon’s market dominance grows. And with such growth the incentive to offer generous rates can diminish.

Your Turn

What options have you explored for your Indie projects?

Is a print edition of your work available? POD or print run?

Is this post just fear mongering or should we be concerned?

32 Responses to Did You Feel the Tremor in the Industry Last Week?

  1. Avatar
    Judith Robl March 3, 2014 at 5:26 am #

    Steve, thanks for the update.

    I wasn’t aware of this tremor. I have often thought of people living in earthquake zones, wondering how they feel secure, how they deal with a situation that absolutely petrifies me.

    Living in central Kansas, my concern for earthquake is remote. However, I remember a time (sixty-odd years ago) when the bells in the church steeples here rang with no one at the ropes. The bells were more sensitive to the movement of the earth than I was. Most of us felt nothing.

    But we were put on notice, that it CAN happen here as well. It hasn’t yet. But that doesn’t mean it won’t.

    There is a parallel. Thanks for bringing this to our attention.

  2. Avatar
    Pegg Thomas March 3, 2014 at 6:07 am #

    It’s good to remember that there were valid reasons for our laws against monopolies.

    • Avatar
      Steve Laube March 3, 2014 at 10:03 am #

      A quick clarification. Amazon is not a monopoly as defined by the Department of Justice. There are multiple options when it comes to your retail purchases.

      However, Amazon is undoubtedly the largest online retailer. I read one statistic that claims to know that books are only 7% of Amazon’s total sales. Not sure how they can know that, but I’ll “quote it” just the same.

      In the AudioBook world, Amazon bought Audible which was and still is the most popular online retailer of audio books. They later bought Brilliance Audio. Then Amazon created ACX to allow self-published authors and small presses a means to create their own audio books. An incredibly innovative and amazing service.

      Thus, in one sense, they do dominate the audio book landscape.

      • Avatar
        Pegg Thomas March 3, 2014 at 10:22 am #

        Yet. But they way they are buying up, or pushing out of business, their rivals… they could get there.

  3. Avatar
    Renee Blare March 3, 2014 at 7:29 am #

    Interesting. Amazon is a monster company and grows more powerful everyday, not just in the area of publishing. I agree with your idea of diversification for the indie author. A book is a product. Amazon shouldn’t be the only source people have to use to obtain it. Of course, that’s easy for me to say. I’m not publishes, traditionally or indie…yet.

    • Avatar
      Renee Blare March 3, 2014 at 7:33 am #

      *published* Sheesh! Really, I can spell! LOL

  4. Avatar
    Nathan D. Maki March 3, 2014 at 7:44 am #

    Thanks for the update and perspective. As an author who currently is published by a very small niche publisher I’ve been wondering of late whether self-publishing someday through Amazon and then doing a POD hard copy on my own would get me a wider readership. (My publisher is shy about e-book promotion, so few e-books move.) This is a very valid point, and something I’ll have to take into consideration going forward. Thanks!

    • Avatar
      Steve Laube March 3, 2014 at 11:17 am #

      Nathan,

      If I may be so bold? Any publisher who is “shy about e-book promotion” is missing a very important segment of their market. Dare I say they are well behind the curve and are reducing their chances of being successful in the marketplace?

      • Avatar
        Nathan Maki March 3, 2014 at 6:44 pm #

        You certainly may be so bold; I’ve argued the exact same thing with them (as politely as possible…they are my publisher after all) but to little effect so far. They did drop the price to $2.99 for a week, which resulted in some sales. I’m certain that I could sell more e-books myself if I retained copyright and had control of free days, prices, giving promo copies to bloggers and reviewers, etc. That’s why I’m torn between publishing through them and self-publishing. They are my first publisher and I feel I owe them a debt of loyalty. I guess I’ll keep trying to draw them into the 21st Century. 🙂

  5. Avatar
    Chapman Monroe March 3, 2014 at 8:11 am #

    40%? Isn’t this significantly better than any “deal” any first time author can hope to get from the monster publishers?

    • Avatar
      Stroppy Author March 3, 2014 at 9:48 am #

      Yes, it is a better deal in theory. But in practice, the cover price will be lower and the sales smaller than if you have a traditional publisher. Unless you supplement with masses of marketing that you don’t count as a cost. 40% of not much is still not much.

      • Avatar
        Heather Day Gilbert March 3, 2014 at 9:51 am #

        Um…I agree that 40% doesn’t seem like much, but I’m fairly sure trad. pubbed authors don’t keep anything like 40% of audio sales. I also don’t think they have any say in cover art/reader for their audio books. I’d love to know trad. pub stats on that, if anyone could comment on it?

      • Avatar
        Steve Laube March 3, 2014 at 10:10 am #

        If a traditional publisher does their own audio edition the cover art is invariably the same as the artwork on the regular book.

        If a publisher licenses the audio edition to a third party publisher, that third party usually uses the original artwork.

        So whether the author has any say on the final cover of the audio depends on their involvement on the original cover artwork.

    • Avatar
      Steve Laube March 3, 2014 at 10:07 am #

      Whether or not the royalty rate is bigger than you can receive from a traditional publisher is not the question or observation being made in this blog post.

      But to answer your question, yes, 40% is still a higher royalty percentage than anyone, newbie or veteran would receive from a major publisher on audio books.

      But it isn’t comparing apples to apples. In ACX you can sometimes get a professional reader to do the work of reading your book in exchange for a percentage of the profits. This can cut down on the costs to produce the work.

      The traditional publisher absorbs all those costs. And they can spend upwards of $3,000 to pay the talent and rent the studio time. (Please note this is a generic number and is not be used as “Steve said it costs this much and I can get it cheaper.”)

    • Avatar
      Ros March 5, 2014 at 2:43 am #

      You can’t compare the two situations, though. In a deal with a trad publisher, the author doesn’t take any financial risk or deal with any of the production side. A self-publisher producing their own audio books takes all the financial risk and oversees all the production. Sure, ACX deserve a cut for the services they provide of hosting and selling the audiobooks online. But do they deserve 60% of list price for that? I don’t think so.

  6. Avatar
    Connie Almony March 3, 2014 at 9:14 am #

    No, Steve, this is not fear mongering! Anyone with that amount of control is bound to be tempted to abuse it, and that company has not shown itself as one to resist temptation to take more control. I am a recently indie-pubbed author (as a means of building platform to become hybrid), so this affects me. I also believe there is a great shift for many established authors to include indie, including those who continue to contract with traditional houses. It is not only a means of publishing. Providing regular bits of fiction content is also a form of platform. I have seen authors create side-stories to the main story, different POVs of a character in one scene being sold for 99 cents as an adjunct to the bestseller. Indie pub fiction series are replacing the blog and social media as platform builders—especially in fiction. Therefore, authors need to know who they are beholden to and whether or not they can trust him/it.
    I am particularly concerned for the Christian market and the Christian retailers. Unlike Amazon, the online Christian retailers don’t just allow any old story on their sites (nor should they). Many Christian readers rely on the Christian retailer to be a sort of filter or gatekeeper for Christian content. For this reason, they are not as likely to carry the Christian indie-author’s material because they have been relying on the publishing houses to be gatekeepers for THEM. This will need to change. Some may think we should go back to the old system of relying solely on the publishing houses, but my sense is that is not going to happen (unless you believe you can push the Empire State Building all by yourself) and we all need to figure out what to do with this new beast, where we can encourage great Christian content, utilizing great Christian resources, and not rely on one big guy who does not have our best interests at heart.
    We can work together to make this happens, but we first need to take our heads out of the sand to see what new structures need to be built.

  7. Avatar
    Heather Day Gilbert March 3, 2014 at 9:26 am #

    I agree that this is something indies are monitoring closely. I’m on the brink of getting my book out via ACX, but thankfully my reader and I slid in under the royalty change deadline. Immediately, we both thought of how Amazon could easily put the pinch on book royalties. I have diversified though Smashwords (B/N, etc), but honestly, Amazon offers MANY incentives to go exclusively through them (being able to schedule freebie days and Kindle countdowns, not to mention more of THEIR advertising if you go with Kindle Select).

    I haven’t personally been too impressed with Smashwords (more difficult to load up, etc), and I’m considering going with Kindle Select for my second release, so I can make use of the freebie days. That said, all authors are keeping a listening ear to the ground and if more of those tremors hit, we’ll be ready.

    Sadly, there isn’t another mega-opoly distributor like Amazon out there. Wouldn’t it be nice if Christian publishers started one?

  8. Avatar
    Bob Mayer March 3, 2014 at 9:57 am #

    The Everything Store should be mandatory reading for everyone in the industry.

    • Avatar
      Steve Laube March 3, 2014 at 10:16 am #

      Bob,
      Thank you for the recommendation. I agree. Every author should have read or be reading The Everything Store. Do I dare post a link to Amazon’s page for the book? Wouldn’t that be ironic?
      (By the way Bob, I visit your blog every day. http://writeitforward.wordpress.com/)

      Let me link to the publisher’s page instead:
      http://hachettebookgroup.com/titles/brad-stone/the-everything-store/9780316219266/

      When you go there, click on the “Retailer Websites” link and be amazed at all the sales channels the publisher links to.
      It sort of solidifies the point that this is the kind of work any Indie author should be doing too.

  9. Avatar
    Rachel Leigh Smith March 3, 2014 at 10:27 am #

    Changes to the KDP royalty structure WILL happen. Sooner rather than later, I think. Amazon is in this business for money. Nothing else matters. I would say they’re also in it to crush any and all competition, as evidenced by the under-handed backstabbing of publishers large and small.

    This article came out in The New Yorker a couple weeks ago. It’s a LONG read, but worth the time. The author was able to interview several former employees of Amazon and they reveal a side of the company that makes me very glad I stopped shopping there years ago. Yes, you read that right. I do not shop at Amazon. Except in the Marketplace if I absolutely cannot find what I want anywhere else. I own a Nook and do 90% of my online shopping at B&N, where I get my free shipping on every single order for $25 a year.

    http://www.newyorker.com/reporting/2014/02/17/140217fa_fact_packer?currentPage=1

  10. Avatar
    Steve Myers March 3, 2014 at 10:51 am #

    I’ve sensed there are a lot of TREMORS and EARTHQUAKES lately – at least warnings things are subject to change and renegotiation.

    There was a film produced in 2001 that went under the radar titled THE MAJESTIC with Jim Carey in the lead. Though it had to do with the RED SCARE of the 40s/50s it had some memorable lines. One set of the dialogue was like this:

    Agent: “You play by their rules, or they’ll destroy you.

    Peter/Luke: “I thought this was a democracy.”

    Agent: “The Declaration of Independence? The Constitution? Just pieces of paper with signatures on them. And you know what a signed paper is? A contract. Something that can be renegotiated at any time.”

    That seems to be the peril in many fields and a threatening thought in government as well.

    I’ve seen it in a different way recently: FACEBOOK. I’ve seen Facebook evolve and change over the years almost from its beginning. Its rules of operation and author control of pages constantly seems to evolve without little or no warning. Recently, the Author’s page I created post the 2012 ACFW DFW Conference changed. I no longer have access as the administrator. It treated me like a follower. And no matter writing FB, seeking forum Q & A, and silence from their nonresponsive end – I lost that platform to reach potential readers. FB allowed my original page (Personal) to stay active (with administrative access) and for some reason my dormant media production company page (that I thought I deleted in 2007). However, like the Eagles song HOTEL CALIFORNIA it is true that FB is a place where “You can check out any time you like, but you can never leave.” The only way to leave is go dormant and not post again.

    And everything (all our posts, photographs and thoughts posted there belong to them). I also recently learned every character typed belongs to them even if you think you are deleting them or not posting. Get angry at someone and write a tart response? Then double think before pressing send or post ‘No, I’ll just delete it?’ You might do so but they retain in Data Mining’ everything. For what purpose? I don’t know. The NSA or their own purposes… I suspect their contract amendments keep their attorneys busy and may resemble Santa’s scrolls of paper.

    What should be known is they can ‘renegotiate their contract’ at any time and lock one out of their platform for promotion. We’ve already seen how they are limiting viewers of pages, starting to charge for increased exposure, and producing a clutter of advertising cutting back in what was the original lure to the site. I envision a time when it becomes counter productive to a writer (or actor/artist) to belong unless one pays for the service to access readers.

    Where AMAZON takes this cue is perhaps a warning shot over the bow of writers. I’ve been a moonlighter for Costco over the past 6+ years so I look at the big retailers (including WalMart/Sams) in how they relate to their vendors, employees and members/customers. They (the retailers) dictate to their vendors what packaging, distribution, period of sales, and price points will be. That can change at the will of the company subject to ‘renegotiation,’ at their discretion. I have no doubt AMAZON will do what’s best in AMAZON’S view and change the contract agreements at any moment with any vendor including writers. How that stands up in court will probably side with their point of view.

    Though not a monopoly (by present government/court definition) they are the largest player in the room with Apple right behind them. I’ve avoided the temptation to self publish, preferring a more stable process to work with an agent in a solid contract with a publisher and protections built into the contract so not to wind up with a ‘bait and switch’ change. Jay Leno once joked (in the tug of war over the tonight show with David Letterman at NBC decades ago) that ‘NBC actually stood for NEVER BELIEVE your CONTRACT.’

    The tremor, earthquake or shot over the bow at Amazon suggests (at least to me) of the need or the essential (smart) decision to work with an experienced agent to navigate the dangerous waters of contracts, publishing, media, or related fields.

    Thank you Steve Laube for both coverage and commentary of this important story.

  11. Avatar
    Shadia Hrichi March 3, 2014 at 11:19 am #

    I agree with Connie. As a new Christian author, it is virtually impossible to get noticed in the traditional publishing world. As such, many resort to self-publishing and their best (if not only realistic) outlet is Amazon (my book is print, not an ebook). What makes it even more challenging (I believe for both publishers and authors) is the near-zero opportunity for Christian authors to showcase their self-published works through reputable book contests, which is otherwise a terrific way to ‘filter’ quality work. Writers Digest has one of the most well-regarded self-published book contests however, their ‘inspirational’ category features almost anything, including New Age and the like. I’d gladly pay $100 to submit my book to a Christian self-published book contest run by a reputable Christian agent or publisher (hint, hint 😉 in order to transfer rights to a traditional publisher. Until then, Amazon will continue to attract more and more authors (both good and bad – which is sad for all of us)

  12. Avatar
    Leola Ogle March 3, 2014 at 11:20 am #

    Wow! As a “hoping to break into the industry” writer, this has been very insightful. Thanks for sharing.

  13. Avatar
    Richard Mabry March 3, 2014 at 11:44 am #

    Steve, As usual, excellent information. I was unaware Amazon had bought Audible. It would appear that the good (financial) days for independent e-publication may slowly be coming to an end. If the traditional publishers would just improve their contract terms, it’s possible they may ultimately meet in the middle. But don’t hold your breath. As always, thanks for an informative post.

    • Avatar
      Steve Laube March 3, 2014 at 12:54 pm #

      Yes, Amazon bought Audible in January 2008 for about $300 million. Wisely, they never changed the branding so their identity remained intact. Similar to what Amazon did with Zappos.com (a place to buy shoes). They are fully integrated into the Amazon multi-verse yet with a unique customer base.

  14. Avatar
    Allison Bottke March 3, 2014 at 1:21 pm #

    This is all so informative…but overwhelming. I’m currently in the process of reviewing options to publish and distribute the first study guide in the Setting Boundaries series. The POD company I’m using isn’t working out. Staying on top of the ever changing market and the opportunities opening (and closing) could be a full time job. Thank God for pros like you who share your knowledge and insight. What a blessing!

  15. Avatar
    Mir March 6, 2014 at 12:55 am #

    When an author is giving their mss and rights to option the rest first and the contract states it’s for the term of copyright, is that not putting eggs in one basket? That egg is pretty much cooked for life. And I forgot who made the comment about the standard royalty structures being the same for the Big 5 (except for name authors), so that’s sort of eggs in the same basket if they all state X percentage of this and Y percentage of that. Where’s the diversity for the little guy?

    Amazon surely will try to maximize profits. And if it becomes too greedy, some upstart with a tech idea like Bezos will come along and be competition. I think more competition is great. Anything that keeps more money flowing to the content CREATOR is great, imo. So, let’s hope more techie wizards for epublishing show up and make this really interesting. Because e-reading ain’t going away, and trad pubs have to stop with the dreadful ebook royalties.

    Let’s hope everyone becomes more author friendly, trad and non-trad.

    • Avatar
      Ellie March 8, 2014 at 2:36 pm #

      Ahh yes, an upstart with a great idea… that’s how Google knocked Yahoo off its throne. I remember when Google was just a new search engine. All no frills. But they must’ve had a plan. It CAN be done.

  16. Avatar
    Barbara Robinson March 6, 2014 at 8:27 am #

    Like someone else said, if you’re a new Christian author, Amazon is your best option. I do have four novels published through a publisher, but I am publishing my own through KDP. You can also do your own print books through Amazon. I haven’t done that yet, but I’m thinking about it. Christian authors no longer give new authors much of a chance to diversify. That’s why Amazon will get my business as long as it’s profitable to me. I don’t have to have an agent. I am getting a greater readership with my self-published books which I spend a lot of time promoting because as someone else also said my publisher didn’t do much promoting. I think they’re beginning to do more though, but my KDP books move better. As long as I’m making enough money to pay some bills, I’ll keep publishing through them, and I’m grateful to God for the door they opened for new Christian authors. I wish there was a good contest for new Christian authors so we could get noticed. If we have to compete with the ones who are big names, chances are we never will, even in contests, but God knows what’s best, so I put my faith, trust, and books in His hands. I pray about them and what I should do. That’s the best I can do. If it becomes to the point it’s no longer worth my time and effort, I will no longer publish. I imagine others would follow suit. Who wants to work their fingers to the bone for nothing? I’m willing to work hard, but it has to be worth it.

  17. Avatar
    Barbara Robinson March 6, 2014 at 8:28 am #

    I meant Christian publishers, not authors 🙂

  18. Avatar
    Graeme Ing March 11, 2014 at 2:29 pm #

    Interesting article, but I’m not sure the points are all valid. As someone pointed out, signing with a traditional publisher is putting your eggs in one basket. That publisher could also change their royalty rates at any time (at least on the next book even if contractually bound on an existing one). Amazon is no different or no worse. Arguably, dropping from 50% to 40% (ACX) or even a hypothetical KDP drop from 70% to say 50% is still a large sum for the author. The best advice in this article (whether Indie or Traditional published) is keep your options open and don’t shackle yourself to one provider.

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  1. ACX Royalty Changes and My Thoughts as a Narrator | Becky DoughtyBecky Doughty - March 10, 2014

    […] for their sales they can be vulnerable to any changes.” If you want to know who wrote this, click here. I highly respect this person, so please understand that it is not my intention to malign, but […]

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