Friday, June 15, 2012

If You Think Amazon Is Gouging You On Delivery Costs, It's Only Because You Didn't Do The Math Up Front

I'm seeing some online noise lately from authors who are outraged at the "delivery costs" being deducted from their KDP book royalties. These authors are posting angry diatribes against Amazon on their sites, blogs and social media accounts, railing against Big Bad Amazon and their sneaky, author-cheating, money-grabbing tactics.

Here's the problem: it's those authors' own fault if Amazon is retaining so much in delivery costs that their books aren't earning a respectable royalty, because those authors OPTED IN for a royalty percentage that includes a deduction for delivery costs in the first place.

When you publish a Kindle book through KDP Select, you must decide whether to choose the 70% royalty or the 35% royalty option. Many non-detail-oriented authors just click that 70% option without considering, or even knowing, the repercussions of that choice.

Two such repercussions are delivery costs and royalty as a percentage of sales price. These are important, because they impact the amount of money you ultimately earn per copy sold.

If you go with the 35% option, your royalty per copy sold is 35% of the retail price you set, period. Even if Amazon elects to discount your book for some reason, you get 35% of the original price you set on every copy sold.

If you go with the 70% option, your royalty per copy sold is 70% of the retail price you set, minus delivery costs, with some caveats. Delivery costs are as follows, per Amazon's current pricing page on the KDP site: $0.15/MB £0.10/MB €0.12/MB €0.12/MB
€0.12/MB €0.12/MB

Obviously, the larger your file size, the higher your delivery cost, and the lower your net royalty per copy sold. In every one of the angry posts I've seen, the book in question was heavily illustrated or formatted, resulting in a huge file size. It would've been a simple thing for these authors to do the math ahead of time based on their books' file size, and if they had done so, they likely would've concluded the 35% option was the smarter way to go for these particular books.

There's a KDP FAQ that explains these details right here, and per another section of the FAQ, the average delivery cost per KDP book is six cents. For a book containing only text and maybe a handful of decorative embellishments, that's a totally reasonable and believable figure. Straight text novels I've published or formatted generally come out somewhere between 240 - 350 KB, so on such a book, the delivery costs are negligible.

Note that you can choose different royalty options for different KDP books, it's not like you must choose one or the other and then it applies to your entire KDP catalog.

Now, back to those caveats. There are other factors to consider before choosing the 70% option, and these are fully disclosed and explained in the KDP royalty FAQ section about the 70% royalty option.

First, if you're selling your book on other sites (even if in other formats) and any of those sites decide to discount your book for any reason, Amazon will immediately discount your book to match the lowest price its 'bots find on the web and base your royalty calculation on that price---NOT the list price you originally set. This is why I generally advise authors who are selling through multiple outlets to go with the 35% option, because they have no control over vendor pricing, and with the 70% option their royalties will be entirely unpredictable because the book's ultimate sales price on Amazon will be unpredictable.

Second, you must set a retail list price between $2.99 - $9.99 for your book. Some authors will balk at the low end, since it excludes 99 cent and $1.99 pricing, others will balk at the upper level because for some books, especially textbooks or technical books, it may be legitimate to charge more than $9.99.

I won't detail everything else one needs to consider before making the choice between the 35% and 70% royalty options, because frankly, if you're the author-publisher, that's your job. And if you don't take the time to research the consequences of your publishing choices, that's nobody's fault but your own.


JVRC said...

Interesting. I've not published through KDP Select yet, but was looking at it for my next novel. I have no problem with taking the delivery costs out of my royalties. I think it's fair, but that's me. I didn't know this other information. I'll make sure to read everything before I publish but this hasn't dissuaded me from doing it. Thanks for the info.

Unknown said...

Another instance where the author, no matter whether indie or trad, needs to pay attention to the contract! Thanks for outlining this for everyone.

Richard Sutton said...

Great Post, April! Most of us tend to overlook all the fine print at times. I've decided not to opt into Kindle Select for my first two books, but it will be a consideration for the next one, if the numbers all balance out. By the way, it's been some time and I'm glad I found your new site. You seem to be rolling along really well!

Ryan Fitzgerald said...

Thank you, thank you, thank you. I'm tired of hearing people whine about how Amazon is gouging them when in reality, they should have known what they were getting into. I'll admit the delivery costs seem to be higher than they should be, but if you read the fine print, you know what you're signing up for.