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1/20/2010
01:21 PM
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Amazon Raises Kindle Pay Rate

The company says that its revised rate plan has nothing to do with Apple's announcement next week.

Amazon on Wednesday said that in June it will offer authors and publishers a far greater share of Kindle e-book revenue, a move widely seen as a defense against Apple's and Google's expected entry into the e-book market.

Amazon has been paying Kindle authors and publishers a 30% royalty. Under the newly announced program, authors and publishers have the option to take a 70% royalty, less electronic file delivery costs of $0.15/MB.

Amazon says that the median e-book file size is 368KB, which would reduce author/publisher revenue by less than $0.06 per unit sold. Thus, a Kindle title listed for $8.99 would net the author or publisher $6.25 under the new 70% plan rather than $3.15.

The 70% royalty plan requires that the list price to be between $2.99 and $9.99 and to be 20% less than the lowest price for a printed version of the book. It also requires that the title work with Kindle features like text-to-speech, a technology that has upset sellers of audio books.

Russ Grandinetti, Amazon's VP of Kindle Content, characterizes the new plan as an improvement on the rates offered to authors of printed books, which he says are often in the 7% to 15% range.

The alternate rate plan also brings Amazon's value proposition in line with Apple's iTunes App Store, which offers app publishers -- many of whom have turned their books into apps -- a 70% royalty, and with Google's planned 63% royalty for Google Editions (45% when the sale comes from a Google partner).

Asked whether Amazon's announcement is linked in any way to speculation that Apple next week is planning to introduce a tablet device that could compete with Kindle, a company spokesperson said simply, "No."

Apple next Wednesday is widely expected to introduce a tablet device that will offer publishers the chance to sell their wares in the company's highly successful iTunes Store. The company has reportedly been negotiating with major publishers, presumably to win them over to its proposed business model and thereby make their content available for its new device.

Google meanwhile intends to launch its Google Editions program later this year. The company aims to make e-books available for a variety of devices.

What remains to be seen whether a better royalty rate actually results in greater profits for authors and publishers. Some reports have suggested that major publishers hope to sell e-books for prices ranging from $14.99 to $19.99, in line with printed books.

But there's downward pressure on the price of digital content. Popular Kindle titles list for $9.99, but under the new 70% plan, that will be on the high-end of the price range.

The average price of an app in Apple's iTunes App Store is approximately $2.65, far lower than most boxed software.

Between Apple, Amazon, and Google, sellers of digital books will have to sell a lot more to make up for lower list prices.

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