As Apple tablet looms, Amazon adopts App Store business model
Amazon announced Wednesday that its share of revenue from some content sold for its Kindle e-reader will be more akin to Apple's iPhone App Store business model, with a 70-30 split in favor of the content provider.
The new deal will take place June 30, offering publishers a much higher share of revenue than the current system. When factoring in the cost of delivery at 15 cents per megabyte, Amazon said the average $8.99 book would earn the content provider $6.25. Under the previous plan, they would have taken just $3.15.
Those who opt in for the new 70 percent pricing must meet a specific set of criteria as defined by Amazon:
The author or publisher-supplied list price must be between $2.99 and $9.99
This list price must be at least 20 percent below the lowest physical list price for the physical book
The title is made available for sale in all geographies for which the author or publisher has rights
The title will be included in a broad set of features in the Kindle Store, such as text-to-speech. This list of features will grow over time as Amazon continues to add more functionality to Kindle and the Kindle Store.
Under this royalty option, books must be offered at or below price parity with competition, including physical book prices. Amazon will provide tools to automate that process, and the 70 percent royalty will be calculated off the sales price.
"Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, vice president of Kindle Content. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books."
The 70-30 share of revenue happens to be identical to the business model employed by Apple with its App Store for the iPhone and iPod touch. With more than 3 billion total downloads and over 100,000 applications available, Apple has found great success.
That success has also been profitable for the developers who sell software on the App Store. One upstart company, Tapulous, now makes more than $1 million per month in total sales.
Amazon is not the first to adopt the 70-30 revenue model popularized by Apple. AT&T has announced it intends to take a 30 percent cut of software sold via its new app platform, and Intel's AppUp Center for Atom processor-powered netbooks will also employ the same split between it and developers.
Recent reports have said that Apple intends to continue that strategy in providing content for its forthcoming tablet, which is expected to serve as a multimedia device that can, among other tasks, be used for reading printed content. HarperCollins and other major publishers are said to be in talks with Apple to provide their content for the tablet.
While speculation suggests Apple's tablet will not function solely as a device intended for reading, its alleged ability to display e-books has had some dub it a "Kindle killer." In an interview last September, Apple CEO Steve Jobs said he believes "dedicated devices" like Amazon's Kindle will remain niche products while multi-purpose devices like the iPhone "will win the day."
The new deal will take place June 30, offering publishers a much higher share of revenue than the current system. When factoring in the cost of delivery at 15 cents per megabyte, Amazon said the average $8.99 book would earn the content provider $6.25. Under the previous plan, they would have taken just $3.15.
Those who opt in for the new 70 percent pricing must meet a specific set of criteria as defined by Amazon:
The author or publisher-supplied list price must be between $2.99 and $9.99
This list price must be at least 20 percent below the lowest physical list price for the physical book
The title is made available for sale in all geographies for which the author or publisher has rights
The title will be included in a broad set of features in the Kindle Store, such as text-to-speech. This list of features will grow over time as Amazon continues to add more functionality to Kindle and the Kindle Store.
Under this royalty option, books must be offered at or below price parity with competition, including physical book prices. Amazon will provide tools to automate that process, and the 70 percent royalty will be calculated off the sales price.
"Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, vice president of Kindle Content. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books."
The 70-30 share of revenue happens to be identical to the business model employed by Apple with its App Store for the iPhone and iPod touch. With more than 3 billion total downloads and over 100,000 applications available, Apple has found great success.
That success has also been profitable for the developers who sell software on the App Store. One upstart company, Tapulous, now makes more than $1 million per month in total sales.
Amazon is not the first to adopt the 70-30 revenue model popularized by Apple. AT&T has announced it intends to take a 30 percent cut of software sold via its new app platform, and Intel's AppUp Center for Atom processor-powered netbooks will also employ the same split between it and developers.
Recent reports have said that Apple intends to continue that strategy in providing content for its forthcoming tablet, which is expected to serve as a multimedia device that can, among other tasks, be used for reading printed content. HarperCollins and other major publishers are said to be in talks with Apple to provide their content for the tablet.
While speculation suggests Apple's tablet will not function solely as a device intended for reading, its alleged ability to display e-books has had some dub it a "Kindle killer." In an interview last September, Apple CEO Steve Jobs said he believes "dedicated devices" like Amazon's Kindle will remain niche products while multi-purpose devices like the iPhone "will win the day."
Comments
I just hope this means we end up with Kindle app plus the Itunes/Apple app plus some other options so that the tablet is like a virtual street with the all the books sellers competing hard to sell us books, magazines, audio books, comics, reference material, video etc.
I cannot think of a better situation than that... books for consistently 20% less than hard copy, plus no doubt other promotions, and the benefits of cheap delivery is a win for us consumers.
From a consumer's perspective a color screen and overall better user experience will put a significant dent in the Kindle on the other side of the platform. A double whammy to the Kindle.
Sorry Jeff, you should have changed your royalty rate a long time ago. Not the week before Apple announces the product/platform.
Unless they know something, and if they do, why don't we know?
Too late Mr. Bezos ... you should have taken action earlier to ensure build the distribution side of the Kindle platform. A simple case of network effects here ... more content providers/publishers would have signed up with a 70% royalty rate. This would have ensured that content providers would be a bit more locked-in to the Kindle platform. Now Apple is about to change the game and you're surely gonna see a migration to Apple's tablet platform.
From a consumer's perspective a color screen and overall better user experience will put a significant dent in the Kindle on the other side of the platform. A double whammy to the Kindle.
Sorry Jeff, you should have changed your royalty rate a long time ago. Not the week before Apple announces the product/platform.
This is almost like, "Hey, sure we've been ripping off you authors all this time, but now that we've gotten word about Apple's planned royalty reimbursement rates from some of our publishers, we're going to cut you in on a great deal!"
Competition is always a good thing...
When factoring in the cost of delivery at 15 cents per megabyte, Amazon said the average $8.99 book would earn the content provider $6.25. Under the previous plan, they would have taken just $3.15.
What does factoring 15 cent per MB have to do with what the author gets?
If it's 1 MB or 10MB and sold for $8.99, the author would still get $6.25.
Amazon pays the 15 cent per MB out of their cut, right?
Amazon's new split to match the App Store is irrelevant, as they don't sell apps. And since the don't know what Apple is going to charge for content for a mythical e-reader, it's sort of stupid to set their prices now.
I was wondering that too. Considering how popular the App Store is now, Apple may even go for a 80/20 split since the App Store is actually raking in profit. It is there, after all, to provide apps and content to whatever devices Apple sells, not to make a profit. So Amazon is probably like all the other tablet makers trying to see if they can steal Apple's "thunder". Problem is, they're currently fighting against an unknown beast that has infinite potential (aka vaporware.. at least for now) according to their own rumors
Doesn't matter Mr Kindle....If all it does is books, it will remain a niche product.
Despite e-ink being better with regards to your eyesight / eye-strain you are correct.
Sorry Jeff, you should have changed your royalty rate a long time ago. Not the week before Apple announces the product/platform.
I think dedicated eInk readers are going to parish this year but I don?t agree that he should have changed the pricing earlier. I don?t think it would matter (they?ll need to have a more fulfilling product) and companies should price their products to what the market will bear.
Plus, Amazon has to pay Sprint, AT&T and others for access to their networks. I have no idea how they are charged but they have to include the 3G radios in the price of the device and pay for the data transfer in some fashion so it does makes sense that the cost for buying books cost Amazon more per MB than the zero cost Apple pays when you use your private provider. (When Apple added iTunes and App Stores to the phone this may have changed).
I really hope that 3G radios are included in Apple?s tablet.
I was wondering that too. Considering how popular the App Store is now, Apple may even go for a 80/20 split since the App Store is actually raking in profit. It is there, after all, to provide apps and content to whatever devices Apple sells, not to make a profit. So Amazon is probably like all the other tablet makers trying to see if they can steal Apple's "thunder". Problem is, they're currently fighting against an unknown beast that has infinite potential (aka vaporware.. at least for now) according to their own rumors
The Amazon and Apple mirroring is ALL relevant as it's all about controlling the distribution channel. That's what Amazon don't want to lose (its everything to their business), and that is why they've announced the changes to leave as little room as possible for Apple.
As to the App store not being there to make a profit... ahem... it's hard to say that the 30% they charge to developers for each app sold is about cost recovery. It's not. Just like MSFT, Apple is very happy to supplement their underlying product sales with revenue from services. If we accepted the suggestion that there is no profit motive for apps etc, then equally we'd also have to assume that they spent all these years developing iTunes solely to ensure the Macs we buy would have nice music player software out of the box. Again, they'd didnt.
It needs simply to make great, easy to use e-book authoring software. Easy job compared to what Apple already has made with music (GarageBand, Logic) and film (iMovie, Final Cut). Actually, the job is already mostly done with Pages and now the iTunes LP authoring tools. It just needs a little tuning and rebranding to make its purpose obvious.
The next step is to promote Apple's iTunes BookStore, set up Author Accounts for people, and then BAM! It'll happen just like it happened with the iPhone apps, with "normal" people joining the ride and filling the world with creative content (and also lots of -avoidable- junk too, but it's ok). Not only books, but all kinds of periodic content could be delivered like this too. Excelent (interactive ?) educational books can be updated with additional fees, magazines can be subscribed to, iBlogs can be distributed for free.
One could say that all this can be delivered through browsers with HTML5. But the Apple platform, ubiquitous iTunes penetration, the ease of use and of purchase would make the difference. Again, a great user experience + Apple's marketing magic + all the rest of it's functionality (current and improved iPhone apps) would drive the first users. Easily accessible authoring would drive a lot of content, which would drive more users, which would drive more content...... we've seen this story not long ago, and it's even easier to do with literature, art and news content than it was with software.
The publishers would have to use their influence to become the best content providers also, or disappear if they fail. After all, publishers started as the ones possessing the big printers. When those are not needed anymore and I can do it all on my Mac... or better, on my Apple Tablet (or whatever name it will have) and send it straight to the iTunes BookStore, I can write and publish without even having to learn the iPhone SDK...
"Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, vice president of Kindle Content. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books."
The amount paid to the authors will not change for any current book because of this. Instead, the amount paid to publishers will jump for current books. Hrm...
Nevertheless, this seems like good news - the extra revenue will eventually allow some more scraps to trickle down to the authors. Or perhaps, the publishers are being disintermediated out of the picture, and authors will increasingly self-publish via ebooks.
And, now that they're moving to Apple-style pricing, but with a slew of restrictions and demands, where are the posts about Amazon's insane, locked-down fascistic tendencies?
Jeff Bozos is pretty much Hitler, is what I'm saying.
the cost for buying books cost Amazon more per MB than the zero cost Apple pays when you use your private provider.
Can't be absolutely zero, Apple does have to serve the file. Cheap but not free.
I just hope this means we end up with Kindle app plus the Itunes/Apple app plus some other options so that the tablet is like a virtual street with the all the books sellers competing hard to sell us books, magazines, audio books, comics, reference material, video etc.
That sounds like chaos. It would be much better if the only place you could get content was from the App Store.
Two things: given that the Amazon was taking 50% of the proceeds, where were the posts about Amazon's greedy gouging of content providers?
And, now that they're moving to Apple-style pricing, but with a slew of restrictions and demands, where are the posts about Amazon's insane, locked-down fascistic tendencies?
Jeff Bozos is pretty much Hitler, is what I'm saying.
Pretty rash condemnation of Amazon and Bezos. This seems very unlike your usual rational and thoughtful postings.
The amount paid to the authors will not change for any current book because of this. Instead, the amount paid to publishers will jump for current books. Hrm...
Nevertheless, this seems like good news - the extra revenue will eventually allow some more scraps to trickle down to the authors. Or perhaps, the publishers are being disintermediated out of the picture, and authors will increasingly self-publish via ebooks.
Authors still can't singlehandedly write good e-books. As I said on post #15, that's where Apple should come in...