Amazon ups book royalties PDF Print E-mail
The online retailer increases royalties on discount books sold for its Kindle e-reader, ahead of Apple and Google`s market entry.

Amazon.com will offer higher royalties on the discount books sold for its popular Kindle electronic reader in a move to boost profitability and pre-empt the anticipated entry of Apple and Google into the e-book market.

Under the new programme, which takes effect on 30 June, Amazon will pay authors and publishers 70% of a book`s list price, net of delivery costs. The plan is limited to e-books whose list price is between $2.99 and $9.99.

Amazon says the Kindle has sold briskly since its introduction in 2007, but the online retailer is facing pressure from publishers concerned about dwindling royalties, as well as new, formidable entrants that could squeeze what e-booksellers make from each title.

"We believe that the move is a pre-emptive measure in advance of Apple`s iSlate announcement and the pending launch of Google`s online bookstore," Lazard Capital Markets analyst Colin Sebastian wrote in a research note.

Apple is widely expected to unveil its tablet computer, which could also function as an e-reader, at a special event next week in San Francisco.

"You can bet that Amazon has heard specific numbers from people who are talking to Apple and is trying to respond," said Forrester Research analyst James McQuivey. "Essentially, Amazon will match whatever pricing Apple is giving people."

The Wall Street Journal said News Corp`s HarperCollins Publishers unit was negotiating with Apple to make e-books available for its tablet. The publisher would set prices for the e-books, and Apple would take a percentage of sales, the report said.

Squeezing publishers

Amazon and rivals such as Barnes & Noble and Sony are jockeying to offer as many titles as possible in their e-bookstores to make their devices the most attractive.

Despite the new royalty plan, relations are likely to remain strained with publishers that are still smarting from last year`s price war involving low-cost books sold online by Amazon, Wal-Mart Stores and Target.

Lazard`s Sebastian said in his note that Amazon`s top priority for e-books will remain low prices which fuel consumer adoption of the Kindle.

Publishers will stay most concerned with what lower retail prices for e-books will do to demand for higher priced hardcover books, McQuivey said.

"In the long term, publishers are worried about the changing perception of the worth of a book," McQuivey said.

Authors typically get between 7% and 15% of the list price for their physical books, or 25% of the net proceeds publishers get for their digital books, Russ Grandinetti, VP of Kindle Content, said in a statement.

The higher royalty programme is also restricted to books whose list price is at least 20% below the lowest for the physical book, Amazon said.

UBS estimated earlier this month that Amazon had sold one million Kindles in the fourth quarter. Forrester expects US consumers to buy six million e-readers in 2010, with many opting for the industry-leading Kindle.

Barnes & Noble and Borders Group both declined to comment on whether they would change their royalty plans, while Amazon and Apple did not respond to requests for comment.

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