Big publishers are really bizarre. And online bookstores are just as peculiar.
When Amazon, during its launch of Kindle, pleaded the 9.99$ ebook price cause, publishers rose up against the model (the wholesale model: where the online bookstore decides the price) fighting for the agency model (where the publisher decides the price), for a single fundamental reason: if we let Amazon, Barnes & Noble, Apple, etc. set the price, they would reduce ebook prices to unsustainable levels, establishing corresponding price expectations in consumers.
The publishers got their way, defeating all the bookstores, from Apple who rode the wave of the debate to Amazon who buckled under it, up to Google Play who officially played hardball with small publishers saying wholesale or nothing but, according to rumours going around on the Internet, accepts the agency model with big publishers. In fact the ebook market is currently based on the agency model, which theoretically allows publishers to set the price, in order to prevent ecommerce giants from lowering prices to unsustainable levels. But…
But reality is another story and, as often occurs, even paradoxical, so much so that you can’t help but think that publishers and independent or local online bookstores are masochists at heart.
With the initial wholesale model Amazon discounted the ebooks with its own money: it paid the publisher what was due, and then sold the ebooks below cost if necessary, losing its own money.
Now, with the agency model, the publisher sets the price, but… which price is it setting?
This is the real news: actually publishers are competing to support, with their own money (and that of their authors!), special offers of Amazon and all the online bookstores using Kindle Store (how long can they compete with Amazon on who can lose more money?), setting introductory prices, relaunch prices, special offer prices, etc…. at levels Amazon never would have dreamed of sustaining by itself: 0.99€ and so on!
Result: publishers are losing loads of money, just like online bookstores, and authors aren’t protesting yet because they haven’t realized what’s happening.
Let’s crunch the numbers for an ebook sold at 0.99€:
- 21% of the price goes to the government by way of VAT (0.17€), leaving 0.82€
- (at least) 35% of the price net of VAT goes to the store + distributor (0.29€), leaving 0.53€
- at least 2.5% (when it sells well) of the price including VAT goes to the payment management system (paypal, cartasi, bancasella, … you pick): that’s another 3 cents, and we’re down to 0.50€ which finally goes to the publisher
- now the publisher pays the author 25% of the net proceeds, that’s 25% of 0.50€, or in other words 125 thousandths (ONE HUNDRED AND TWENTY-FIVE THOUSANDTHS OF AN EURO!)
All in all, if the ebook in question is a big hit and sells, let’s say, two thousand copies, the author would pocket a whopping …. 250 Euros! And they say self-publishing….