How Amazon Makes Its Money

MobyLives, a must-read for anyone curious about the changes taking place in publishing, has an excellent post today about the cost of publishing ebooks. What’s more, today’s story led me to an earlier post about self-published author Andrew Hyde who learned the hard way that Amazon takes more than just a 30% commission from its Kindle Direct authors:

Amazon’s total fees ate away almost a third of Hyde’s royalty: The book retails on Amazon for $9.99, and under the 70% percent royalty plan Hyde imagined he would get $7. But Amazon charges $2.58 per download to deliver the ebook, with the author’s royalty being calculated on what’s left after the delivery fee is deducted.

One of the things Bezos and crew have done extremely well is convince readers and self-published authors that they’re on their side despite all evidence to the contrary. But what I’ve wondered for some time now is how Amazon plans to make its money publishing ebooks. After all, they’re now selling Kindles at a loss, and their business plan for ebooks has been to sell them at a loss as well. If the publishers’ settlements with the DoJ get approval, Amazon will be prevented from selling ebooks at less than what they pay the publishers, but that won’t stop them from maintaining razor-thin margins. Moreover, Amazon’s financial statements are notoriously opaque, rarely revealing which parts of its business are profitable.

So, how do you make a profit selling both ebooks and ebook readers for nothing? By screwing authors and charging them for the privilege.

- Matt Tanner

2 Comments

Filed under Hooray Fiction!

2 responses to “How Amazon Makes Its Money

  1. Thanks for posting this not-so-good news. Definitely something authors considering self-publishing need to know.

  2. Sorry to be such a pain but I have tried to find the sweet pea site using what you gave me but I cant figure out what that sign is that is betewen the e in Page and the U in userid? I havent seen that symbol before and just simply cant find it…sorry for the trouble

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