Amazon’s e-book policy squeezes publishers

For many authors who have had their manuscripts ignored by major publishing houses, self-publishing is a great way to get their books out to the public. If their books do sell, they stand to make significantly more money than through a normal publishing deal. An author who publishes their work via the traditional route can make up to 30% in royalties on book sales; a self-published author through Kindle makes 70% in royalties. 

Meanwhile the Kindle Storyteller Prize, worth £20 000, has been announced. It will be awarded to an author who publishes their book of no less than 5 000 words through Kindle Direct Publishing between 20 February and 19 May 2017. 

Self-publishing success stories include, of course, Fifty Shades of Grey author E.L. James, whose real name is Erika Mitchell. She first attracted attention publishing Twilight fan fiction as Kindle books. She has since sold over 100m copies of the Fifty Shades trilogy and in 2014 topped Forbes’ list of highest-earning authors with earnings of $95m. 

Amazon publishes about 4m e-titles a year, about 40% of which are self-published. Reportedly, more than a third of the top 100 Kindle books being sold are self-published. Books within the crime and psychological thriller genres, which remain very popular among readers, dominate the self-publishing scene. 

However, over the past few years big publishers in Europe and America have been crying foul. The media has repeated their claims that e-book sales declined for the first time in 2015 and continued to decline in 2016. What they are not saying is that e-book sales are not declining as a whole – they are actually increasing. Instead, it is the share that belongs to these major publishing houses that is declining. 

Sales of self-published e-books, on the other hand, are rising. Major publishing houses have increased the prices of their books, and many in the industry claim that this is a major contributing factor to the decline in sales. 

Before 2010, the major issue for many publishers was that Amazon controlled pricing and insisted on selling e-books at $9.99, when the publishers wanted a higher retail price for their e-books. 

When publishers tried to negotiate new contracts with Amazon that allowed them to control the price of e-books, the online retail giant responded with heavy-handed tactics such as delaying deliveries of their books to customers and removing standard discounts from certain publishers’ books. 

But pressure mounted and eventually the e-tailer agreed to new contract terms. The result was that prices rose. Amazon was still seen as a dominant company in the e-book market and in 2015 the European Commission launched an anti-trust investigation. 

Amazon controls about 75% of the US e-book market, and is the largest e-book retailer in Europe too. The investigation focused on books in English and German, the largest markets for e-books in Europe. 

The commission argued at the time that Amazon’s e-book contracts with publishers, which stipulated that they must give Amazon terms as good as those of its rivals, could violate European law and may have dampened competition from other e-books distributors. The commission was concerned about “discount pool” conditions, which linked potential discounts on e-books to their corresponding prices at rival sellers. 

The day after the news of Amazon’s new literary award broke, so did the fact that the company had agreed to change key conditions in its publishing contracts with authors.

In a bid to escape a drawn-out investigation and potential fine, Amazon offered not to enforce any of the controversial clauses in question for the next fives years and would allow contracts containing the discount pool clause to be terminated with 120 days’ notice. European publishers have a month to comment on Amazon’s offer. 

In the UK, where Amazon has a 90% share of the e-book market, chief executive of The Publishers Association, Stephen Lotinga, has also called for action from authorities, stating that with Brexit a few years away, the country’s authorities could no longer rely on the EU to deal with these issues. 

“When a business reaches such scale, if left unchecked, it is almost inevitable that they will use their dominance in such a way to ensure the status quo does not change and thereby prevent real competition in the marketplace,” he said. 

It’s becoming clear that while Amazon, a digital disruptor, has managed to break some of the stranglehold of the major players in the publishing industry, concerns are mounting that it is developing a stranglehold of its own. 

This article originally appeared in the 16 February edition of finweek. Buy and download the magazine here. 

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