Author discovers that Amazon can reprice his indie Kindle books however they want and cut his royalties, at will

Veteran author Jim C Hines offered some of his titles independently direct through Amazon's Kindle store. He discovered that Amazon reserves the right to arbitrarily reprice his books -- slashing the cover price of a $2.99 title to $0.99 -- and pay royalties on the lower price.

Hines points out that when his traditional publisher and its bookseller partners decide to offer his work at sale prices, he still gets paid royalties based on the cover price, and discusses the difficulties he faces in lacking the clout of an agent or a major publisher in negotiating with Amazon over this practice.

With my DAW books, if a bookstore offers a sale, I still get my royalties based on the cover price. Amazon is selling Libriomancer for pre-order at almost half-off, but I’ll get paid my full amount for every copy sold. Not so with self-published titles. Looking at my reports for last week, my royalties were slashed by 2/3 for every copy sold, because Amazon paid me 70% of the $.99 sale price, not my list price.
According to the KDP Pricing Page, royalties should be based on the list price ($2.99) unless the price adjustment was due to a price-matching situation (dropping the price to match a competitor’s price) … but my royalties report still shows a 67% cut.
When I followed up with the DTP team, they responded thusly:
The price at which we sell your book may not be the same as your list price. This may occur, for example, if we sell your book at a lower price to match a third party’s price for a digital or physical edition of the book… In this case, if you have chosen the 70% option for your book, your 70% royalty will be calculated based on our price for the book (less delivery costs and taxes).
Of course, this wasn’t actually the case, as there was no lower third-party price. I asked them again to show me where their Pricing Page or Terms of Service allow Amazon to arbitrarily cut your book’s offer price and reduce your royalties based on that change. I haven’t heard back from them.

Who Controls Your Amazon E-book Price? (via Making Light)

I write books. My latest is a YA science fiction novel called Homeland (it's the sequel to Little Brother). More books: Rapture of the Nerds (a novel, with Charlie Stross); With a Little Help (short stories); and The Great Big Beautiful Tomorrow (novella and nonfic). I speak all over the place and I tweet and tumble, too.

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http://www.facebook.com/profile.php?id=679549499 Michael Birch

This surprises me since I thought they were paid royalties based on the cover price post-mark down as well.
Ender Wiggin

from what i’ve heard it’s entirely a bot based ecosystem down there. I can definitely understand a dead tree edition getting into an automated price war, but how the hell does that happen with the kindle edition? Do they even allow third party ebook sales via their platform? (that’s pretty cool if they do from a consumer standpoint, but seems unlikely),
Rider

Watch him make 10x as much money selling .99 books.
KBert

Anyone expects Big Business to play fair / by the rules???
- retepslluerb
  
  I expect them to abide be their rules, which aren’t necessarily fair.
  
  I wonder why there’s a new flood of whining about Amazon practices here – I’ve been remarking for years, that their rules are are strict and to their benefit as those of Apple, but apparently cheap electronics and books at low, low prices made people now wanting to hear this.
  - wysinwyg
    
    How is it “new”? Lots of people (not just you) have been talking about how dirty Amazon is for years.
    - retepslluerb
      
      In my experience not that many. Not even close to the hullabaloo around the app store or ebay’s practices.
      - wysinwyg
        
        Well my experience is contrary to yours. I hear a lot more shit-talk about Amazon than about ebay.
t3kna2007

If — and this may not be the case, but if — Amazon thinks this’ll increase their revenue from sales of this item, doesn’t that also mean an expected increase in revenue for the author, since they’re both getting percentage slices of the same pie? Or is there more to it than that?

It’s a separate issue as to who gets to decide what the price is, and if I were the author I’d want that to be me.
- EyeInHand
  
  That’s one theory.
  Another is using an author’s work as a loss leader – to drive more business/sales to their more profitable products – while the author bears most of the loss (essentially all) , with no choice or recourse.
- Sean McCrohan
  
  There is more to it than that, because the royalty PERCENTAGE is tiered based on price.
  
  The way the original poster describes the royalties as working, selling 10 times as many books at 1/10th the price is a win for Amazon and a loss for the author, because while the total amount spent by customers is the same, the author is getting a smaller percentage of it.
mappo

The price at which we sell your book may not be the same as your list price. This may occur, for example, if …

It seems to me that the author is not properly comprehending the above statement. Amazon didn’t stipulate that they could only lower the price under certain circumstances. They flat out said that they might lower the price, and then provided an example of why they might do so. It might be dirty, but they said it up front. That the author didn’t understand what they were saying isn’t their fault.
- AnthonyC
  
  Of course it’s their fault. It may be perfectly legal, but that doesn’t preclude it from being their fault.
  - Andrew Singleton
    
    Whole Legal it breaks Wil Wheaton’s ‘Don’t be a Dick’ rule. ERgo it is bad.
  - mappo
    
    It’s their fault that he doesn’t understand what they said? That doesn’t make sense.
    - AnthonyC
      
      Try to read just about any contract, and it will be nearly impossible to understand. Not because the concepts are difficult, but because of the way it is written. The response to his question after the fact was fairly comprehensible, but that doesn’t mean the initial written terms were.
      
      Look, he’s a writer, he’s clearly fluent in English, so if he read a contract and did not understand it, then that means Amazon wrote it in such a way as to be intentionally obfuscatory. Most legal documents are.
ObeyMyBrain

This runs counter to the post you ran on the 23rd about Carlos Bueno’s Lauren Ipsum, and bots driving down the price. In his article he said that Amazon automatically putting his book on sale did nothing to his profit margin because Amazon ate the discount.

http://boingboing.net/2012/02/23/amazon-coms-many-bots-feud-o.html
- Ender Wiggin
  
  oo good catch. it’s probably a pebkac error somewhere..
- taintofevil
  
  Lauren Ipsum is a physical book, and Amazon seems to play by the same rules as all other publishers and pay based on the retail price. The Kindle store is different, because it is all Amazon’s. Percentages there pay based on the sale price, which Amazon can set arbitrarily with no input from the author.
http://twitter.com/David_N_Wilson David_N_Wilson

The pricing practices at Amazon are clearly delineated from the start. If they find that your book is priced lower somewhere else, it’s in violation of the initial agreement with them to publish the book. I don’t know of any instance where, without some violation of their policy, Amazon has lowered the price and then paid a lower price royalty…if you play by their rules, they are pretty steady. An agent wouldn’t change this for you – because there are 10,000,000 other people fine with the same agreement.

You may not be aware of someone else offering your book at a lower price, unless, of course, Amazon is the only place you distribute. We had cases where we made the mistake of lowering a price on Smashwords, who passed it on to their distribution network, and the sale price of .99 was still there on a couple of other sites without us being aware of it…but it WAS there.

It’s not a perfect situation…but they have to try and enforce their policies, and I’ve found them pretty reasonable (if a little slow) in coming back and fixing things.

DNW
http://twitter.com/crawford4033 James Crawford

Having enjoyed my own bout with Amazon’s pricing policies, I’m unsurprised to find an established author having issues. The KDP policies are draconian at best, and undermine your control of your own intellectual property at worst. http://www.bloodsoakedandwriting.com/2011/10/09/two-things-you-need-to-see-for-the-following-saga-to-make-sense/
ujin

This is a micro econ problem. Is Hines more interested in maximizing profit margin or total revenue? I would think total revenue, in which case Amazon is saying “Listen Jim you are a great author and we love your books but we are much better economists then you. We are going to use price discrimination to match the current price and demand of your product. We want to make money on this as much as you and this should maximize both our revenues. Trust us.”

My tendency would be to trust them. Unless I wrote books about econ.
- retepslluerb
  
  Amazon makes money on all sales. The author does not. Therefore your assumed reason that they are in the same boat does not apply.
  - ujin
    
    I should have known better than to trust them!
- http://twitter.com/deirdresm Deirdre
  
  An author is only eligible for 70% royalties if they price a book at $2.99 or higher (there are maximums, which iirc are $9.99). So if Amazon cuts the price by half, the author’s only getting a quarter of what they were because they’ll get knocked down to 35% royalties instead of 70%.
  - rtb61
    
    Choose and perish. Amazon are not a publisher, they are a logistics company. If they ain’t moving product, they ain’t generating profit.
    They will strive to ‘move’ as much product as possible, in the digital world this can look odd, in the logistic world it’s normal.
    Don’t like Amazons rules don’t sign their contracts. Digital copies without, proof reading, printing, distribution and retail are another whole ball of wax when it comes to publishing or more accurately virtual publishing.
    - wysinwyg
      
      TL;DR:
      
      “Fuck yooz humans, corporations 4eva!”
  - Dave Clegg
    
    Not true, my wife’s book got price matched to .99c but she’s still getting 70%, as it also states in the article
    “… In this case, if you have chosen the 70% option for your book, your 70% royalty will be calculated based on our price for the book (less delivery costs and taxes).”
http://nelc.livejournal.com/ NelC

Trusting Amazon would be easier if they answered the author’s queries reliably, or even asked if he was okay with them mucking about with the price. And that’s ignoring the issue that lowering the price lowers the percentage cut the author makes, so lowering the price only increases Amazon’s revenue.

I’m pretty soft-hearted about trusting people, and it’s taken me a few years to learn that when a corporation takes advantage of you, the safest thing is to remove that trust, because it doesn’t matter how honest individuals working for the organisation are if its methods aren’t sound. Jim Hines signed a deal that let Amazon screw him, so they did, and now they’re giving him the runaround. There’s no reason to trust them any more.
http://baconner.myopenid.com/ b

I’ve never read the agreement for ebook sellers, but for amazon app store developers this behavior is the stated policy. I won’t sell any of my apps on their store as a result. The agreement states that they can discount your app at any time and that your cut will be paid based on the lowered price not the suggested price you set down to a specified minimum cut. They can opt to give your app away for free as well paying you the minimum possible cut for each copy they give away though in practice they’ve been known to attempt to convince developers to waive the right to any payment with the pitch that it’s good publicity. That of course leaves developers with thousands of new customers to support and not a dime in return, not a good deal. IMO Amazon takes massive advantage of independent app developers while making different deals for big app developers like Rovio. Sound familiar?
- Jonathan Roberts
  
  You see, even big businesses believe piracy is a good deal for creative artists.
http://www.jjsaul.com Jim Saul

Amazon has effective control of a market that will soon eclipse print publishing itself, and to enter that market one must cede to them control of price?

There’s no “the author sets the motherfucking price and it stays put unless the author agrees to a change” option when selling through them?

Time for antitrust enforcement, immediately.
- Phil Armstrong
  
  IIRC you can sign up to a fixed price setup (which is similar to the deal you get if you sell paper books through Amazon), but in that case Amazon will only pay 35% royalties.
  
  The 70% isn’t *quite* the greatest deal ever either: delivery costs (bandwidth etc) will be charged to the 70% royalty option, and you’ll only get 35% for sales outside the US/UK/EU. Also notable is that the 70% is from the after tax price, not the pre-tax price.
  
  On the other hand, if you choose the 35% option, then whatever pricing games Amazon plays, you get the 35% of list price, unless you’ve made the book available for free elsewhere.
  
  It seems to me that setting a “reasonable” list price and letting Amazon play their pricing games, with you always getting a fixed cut, might oft-times be preferable to taking on the risks that come with the 70% royalty option.
  
  (The biggest risk to the small-readership author under either scheme is probably Amazon mistakenly thinking you’ve given a new book away for free elsewhere, advertising it as such themselves and your entire readership grabbing the book for free from Amazon. Good luck extracting any compensation for that out of Amazon if that happens to you…)
  - http://www.jjsaul.com Jim Saul
    
    Thanks for the clarification… that sounds more reasonable, the emphasis on the “more.” Ceding 65% to Amazon for shuffling bits still sounds like they are using their position to far overreach what market forces would reflect.
    - Phil Armstrong
      
      Well, to be fair they did invest a sizeable chunk into developing the Kindle platform, including the device itself (which I believe is sold at close to or even below the price it costs to make though I don’t have a source for that). They’ve got to make their money somewhere.
      
      I wonder how often they discount the 35% option books? If you end up getting 50% on average then you’re probably doing pretty well. If you’re selling a book of any size (images etc) then that 15c / Mb charge is really going to hurt when they price your book at 99c.
pebird

Independent writers need to organize their own self-publishing house. We need to get a copy of an agreement between Amazon and a traditional publisher.
http://narrowstreetsla.blogspot.com David Yoon

Is it insane to suggest a simple, free DMOZ-like directory of indie writers selling their wares with no middleman? That vs. the Big Corporate model—I wonder which would get the writer more money? I’m inspired by what Louis CK did recently, but then again he’s freaking Louis CK.
http://www.facebook.com/people/David-Ivey/100001560181769 David Ivey

Whatever the problem was appears to have been fixed, because the lowest priced Amazon Kindle book for Mr. Hines is now $2.99. It would nice to see if Doctorow/Hines posts any update on this issue.
http://luzme.com Rachel Willmer

If you’re an author that wants to get a headsup when this is happening to you, you could open a (free) account on my ebook search site http://luzme.com; and add your books to your watchlist. Then you’d get notified whenever Amazon or Kobo or whoever changes the price they’re selling your books for.

Rachel
hadlockk

This just in: People like paying $1.99 or less for online, digital goods.

On one side, I feel for “the artist” here, but on the other side I see mass hypocrisy; many if not most authors are pricing themselves out of their own market. Amazon has seen the future, and they’re doing their best to push the market where it’s going to meander towards anyways.

Are you an independent author? Great! I would love to give your story a read, the synopsis sounds great. No, I’m not willing to risk more than $1.99 to find out if you’re any good as an author. Do you write Zombie Apocalypse books that involve time traveling cowboys with laser six-shooters? Fantastic! I’ll buy your whole trilogy - for three dollars.

This whole concept that digital goods are worth more than $5 each, especially from first time or independent authors, needs to die. Kudos for Amazon for taking the harder path and pushing the market where it needs to go.
Ito Kagehisa

Well, if you clicked on the iTunes EULA, anything is legal.

Oh, you didn’t read it, did you?
http://www.thecomplainer.org/ The Complainer

It is probably time for the DOJ to weigh in on potential for going after Amazon, Apple, and BN for possible antitrust violations.
http://twitter.com/jezri1 Lisa Hollar

5.3.2 Customer Prices.To the extent permissible under applicable local laws, we have sole and complete discretion to set the retail price at which your Digital Books are sold through the Program. We are solely responsible for processing payments, payment collection, requests for refunds and related customer service, and will have sole ownership and control of all data obtained from customers and prospective customers in connection with the Program.
Sole and complete discretion…it is right there in the user agreement.