Do You Even Know What You Are Talking About?

For starters, as a publisher, I do acquire the rights to publish works directly from authors. Many publishers do not. There are a couple of reasons for this: Publishers use literary agents as filters. If a manuscript can get representation from a respected literary agent, chances are that there’s something worth reading there. Maybe not something the publisher will want to acquire, but not total drek, either. But Endpapers Press, which is a part of Author Coach, is a small press. We don’t pay what big houses pay, so getting submissions from agents can be a challenge.

The second reason is that publishing is full of jargon that most people may never have heard. When my wife and I watched Younger together, a TV show set in the publishing world, I laughed when they talked about a magazine publishing a chapter of the work before publication, instead of saying the magazine had bought first serial. They did this because, while the entire publishing world knows that first serial rights are the right to publish a part of the work before publication, the rest of the world does not.

When a publisher buys a book directly from an author who has never been published before, it becomes the job of the publisher to educate the author. This can take time and patience.

If the author has an agent, educating the author becomes the agent’s job. And since the agent is representing the author, authors tend to listen to their agents, whereas they might question what the publisher is saying and feel the need to research it. And the truth is, there’s a lot of incorrect information out there.

I once attended a panel at San Diego Comic-Con about publishing. No one on the panel worked at a publishing house, nor was there an agent on the panel. The number of incorrect statements being tossed around made my head spin. I had to leave, lest I stand up and shout out, “None of you know what you’re are talking about!”

The Submission

In a traditional publishing process, a book comes into an editor from an agent or perhaps directly from the author. The editor may reject the work based solely on the cover email. For example, if the genre is not one in which the editor generally acquires, or if the subject matter is simply wrong for the house. If the editor chooses to consider it further, they may start to read it or ask their assistant to be the first reader.

Let’s assume the editor reads it and loves the manuscript. What next? The editor may go to another editor in house and ask them to read it. If the editors often agree on things, this can be a good way to create some support for the book before bringing it up at an editorial meeting.

Generally, at the editorial meeting, if the editor-in-chief or publisher thinks the book sounds interesting, they will ask if anyone else wants to read it. Hopefully, you get some volunteers. In houses where assistants attend the editorial meeting, this can be a real opportunity for them to step up and participate. Everyone’s opinion counts when it comes to being a reader. You like or you don’t.

So let’s say three editors volunteer to read the book, and the next week each comes back and sings its praises. What happens next?

Calculating the Advance

At some publishing houses, editors may be asked to run a P&L—profit-and-loss estimate—on the book, using different prices, page lengths, and royalty rates to determine what an appropriate advance might be. The editor will be given sales estimates, also, to see what happens if the publisher buys the book, typesets it so it’s 384 pages, sells it at $27.00, and ships 15,000 copies with a 50% sell-through, i.e., 50% of the copies shipped aren’t returned. An editor can do this by hand, but today publishers have elaborate systems that can include many more variables such as type of paper and the cost of that, set-up fees at the printer, etc., to determine much more accurately what the appropriate advance might be.

Of course, much of what the publisher is doing is guesswork. Print runs are driven by orders. If a publisher has orders for 10,000 copies, it will print enough to fill those orders and perhaps extra in case of early reorders. But if the orders are for 10,000 copies, it certainly won’t print 50,000 copies. And no one knows the orders until the salespeople start selling the book to accounts.

Publishers have certainly guessed wrong, overpaying massively for books that didn’t sell. But plenty of best-selling books were acquired for very reasonable sums of money and far, far exceeded the expectations of the publisher.

So, assuming the P&L turns out some advance numbers that make sense, the editor will be authorized to make an offer of a certain advance or authorized to offer up to a certain number. If the editor chooses to go in low and try to get the book for less, that’s a valid strategy. It can leave the agent or author feeling like a winner if they talk the editor into offering more, while the editor knows they are still in safe territory.

Now let me pause and tell you that there are certainly editors at a certain level who do not go through this process. They may be executive editors or they may have their own imprints and as such have the authority to offer on books up to a certain level without anyone else authorizing them to do so.

The Offer

So the editor makes an offer. That offer may be on the phone or by email. Either way, there are generally not a lot of details. Usually it’s advance, payout, territory, splits, royalties, word length, and proposed delivery date. Any agent can make an informed decision on an offer based on this. Some may ask some additional questions, such as is the publisher offering any best-seller bonuses? An agent might ask if the editor would consider making this offer a “floor,” so that the agent can run an auction. But, generally speaking, this is about it. Everything else can be hammered out in the contract negotiation.

So how does this go down?

In an email, it might be as simple as this:

Dear [Agent]:

Thanks for sending along [TITLE] by [Author]. We really like the book and I’m excited to be able to make you the following offer:

Advance: $10,000, payable ½ & ½

This means half on signing of the contract and half on delivery and acceptance of the manuscript; some publishers want to pay on a different schedule, limiting their cash flow.

Territory: World [this means world rights, all languages] with splits of 80/20 UK and 75/25 translation

This means the publisher will acquire the rights to publish in all languages and if it licenses UK or translation rights to British or foreign publishers, the author will receive either the 80% or 75% of any advance and royalties, which will be applied to their US advance until that advance earns out.

Royalties: Standard hardcover; 7½% straight trade paperback; 8%-150M; 10%TA.

Every agent knows what this means, but every author does not. All of these are based on retail list price, even though that is never mentioned. “Standard hardcover” is 10% of the retail list price to 5,000 copies sold; 12½% to 10,000 copies sold; and 15% thereafter. The trade-paperback rate is a flat rate with no escalators. Some publishers start at 6% and escalate to 7½% at 20,000 copies sold. The mass-market rate is 8% until 150,000 (yes, that’s right) copies sold, and 10% thereafter.

E-Book 25% of net; Audio 10% of net.

These rates are based on net and a smart editor makes that clear, so as not to mislead the agent or author. If a book is $25.00 and sold at a 50% discount, the hardcover royalty is $2.50, or 10% of the MSRP. If the E-Book is $14.99 and sold at a 30% “commission” under an Agency Model, the publisher’s net is $10.29 and the author’s royalty is 25% of that, or $2.62. Since most E-Books are sold by Amazon and under an Agency Model, the publisher receives 70% of the sale price, which is set by the publisher and not Amazon. Smaller publishers cannot get an Agency Model and are likely “selling” E-Books to Amazon at a 55% discount, meaning they net 45%. Small publishers using Kindle Direct Publishing get 70% on E-Books, but the price can be changed, even without their permission. It may be worth asking if the publisher sells under an Agency Model, but 25% of net is nearly written in stone at most houses.

Word length, i.e., how long the final manuscript will be.

Ever change the font and margins of your English paper to make it longer or shorter? Authors can do the same thing. Back in the age of typewriters, almost everyone used a Courier mono-spaced font and an average of 250 words per page was typical. Now, the type and spacing are easily manipulated, so word length is more important than ever. But what is a “word?” Is the word length what Microsoft Word says it is? Not for old-school publishers. I use five characters including spaces as a “word,” but you can get far more complicated and publishers do when they are working on P&Ls: they do cast-offs: https://www.bookmobile.com/art-book-printing/how-many-pages-will-your-book-have/ Most publishers’ contracts do not specify how they calculate word length, which may or may not be to the author’s advantage.

Due date, i.e., the date that the complete, revised manuscript will be delivered to the publisher.

I’d bet that 99.99% of first novels are sold as complete manuscripts. The odd exception may be a celebrity who has never written a novel and only has a “treatment” of what it could be and a chapter or two. And the publisher acquiring the rights to publish your book has no intention of publishing the draft they just read. There will be notes for a rewrite from your editor, there will be line editing performed by your editor, and there will be copyediting, done by a freelance or possibly in-house copy editor. The due date is the date by which you are expected to have completed the revisions based on your editor’s notes. Line editing and copyediting come after. The best way for me to explain “acceptance” is that this takes place when the editor feels you have successfully executed all of the requested revisions or that you can’t, and the editor will have to do more in line editing. Either way, you are done revising and rewriting and can be paid the amount due on delivery and acceptance. The rare publisher waits until after copyediting is complete and you have signed off on it.

The one exception is if the editor feels you did your best, but the book still needs a ton of work. In a sense, this is the fault of the editor, for buying a book that was so far from ready, but that won’t make you feel any better when they call up to reject your book and ask for the signing payment back. The odds of that happening are pretty slim. In over thirty years in publishing, I’ve seen one manuscript rejected and that was due to it being too long and the editor was unwilling to work with the author to cut it.

We’re very excited to be making this offer and look forward to working with the author. Please let me know of your acceptance of this offer and I’ll get a contract going.

Now, that’s a little ambitious, don’t you think? The editor expects the agent or author to accept the first offer? Unless the offer is so outstanding or the book has been turned down all around town, first offers usually result in counteroffers.

The Counteroffer and Other Shenanigans

Offers also result in agents anxiously calling anyone else who has the manuscript and letting them know they have an offer. In short, they begin “shopping” the offer, hoping for a better offer or to pit one publisher against another in a bidding war. If there is a ton of interest, the agent might set an auction date, giving the first offering editor the chance to set a “floor,” or minimum bid for the book. But that’s not usually the case. Usually there’s just a counteroffer.

But it’s this shopping of the offer that generally leads publishers to press agents and authors for an answer quickly. They want to know the deal is done and get to work on the next steps. Waiting more than a day or two for the agent to get back with acceptance or a counteroffer is almost a sure way to end up in a bidding war.

Or, for the agent, it can be risky if they can’t get a counteroffer. Imagine if an agent took a week to get back to me. I’m an editor working for a publisher. Agent comes back a week later to accept the offer or counter. I may simply say, “Listen, you took a week to shop my offer to other publishers and you got nowhere, so my offer stands as it. So take it or leave it.” In my experience, almost every agent or author will take it.

So, it makes sense for an agent or author to counteroffer early on. That might not stop them from shopping the offer to other publishers, but at least they are keeping the iron in the fire and not cooling on the side.

A counteroffer might be looking for more money, a smaller territory that allows the agent to retain UK and/or foreign rights to the book, thus ensuring 100% of the advance and royalties on such editions go to the author (after the agent’s commission, of course!). It might be looking to retain audio, though several major publishers now consider getting audio a dealbreaker. The word length might be negotiated or the due date. The payout might be negotiated. Some publishers insist that one-third be paid on publication of the work. If the book was bought without a manuscript, e.g., a writer-for-hire of a media tie-in novel, one payment may be on D&A of the outline of the work. The permutations can be quite varied, but if you can get ½ and ½, that’s probably the best you can get.

The Acceptance

So, after probably two or three days of offers and counteroffers—though often less—the editor and agent or author have agreed on these basic terms: advance, payout, territory, splits, royalties, word length and due date. So you are done, right? No, because there still isn’t a contract. At best you have a deal memo that is contingent on signing a contract. While publishing tradition is that you now have a deal, and the book will be withdrawn from submission elsewhere, this deal can still fall through based on the contract. This is, in my experience, very rare, and here’s why: most authors won’t risk losing the deal. As an agent, I have had only two authors ever refuse to accept a contract and both times it was because the publishers wouldn’t give the author approval over the copyedited manuscript, thus not ensuring the author they would have final approval over the text of their own work.

Now, I’ve written over 2,500 words here (2,800, if you count words old-school), and I could probably write another 20,000 or more on negotiating an actual contract, so I will end here.

Hopefully, this has given you, the first-time author, a better sense of what goes into receiving, negotiating, and accepting an offer on your novel.

Good luck!

The post How are Book Offers Made? appeared first on Author Coach.

One of the downsides of the growth of self-publishing is a decline in the quality and readability of books, as self-published books often are not edited, copyedited, or professionally proofread. Hence, it becomes more and more important for readers to pay attention to who is publishing that book you are thinking of buying. See a major publisher’s name on there, chances are pretty good it will be a good book. See CreateSpace on there? Buyer beware. See a weird name you’ve never heard of, Google it and see if they are a “real” publisher or if the author just made up a name to list instead of CreateSpace.

That’s not to say all self-published books are bad. They aren’t. But if you consider over 1,000,000 were published in the last year, the odds of finding a bad one are likely greater than finding a good one.

At Author Coach, we work with authors to take them through a very traditional publishing process. We always encourage an outside developmental editor and copy editor review the manuscript, and a professional proofreader review it. And, of course, you need professional service providers for cover design and typesetting. Yes, the technology to self-publish easily is out there. But the time and labor to give any book the attention needed will always require a hands-on approach and far more money than most authors realize.

If you would like to read the full PW article, you can find it here.

The post The Number of Self-Published Titles Cracked 1 Million in 2017 appeared first on Author Coach.

Amazon calls these pages “errors” or “duplicates,” but the truth is that they don’t just appear from nowhere. There’s no magic involved. Someone is posting them.  In my experience, this is a third-party seller or sellers, who either are doing a terrible job entering data, have errors in their data, or are outright just trying to rip people off.

Here’s an example I just came across today: Lost Days, by Michael Jan Friedman.

There are couple of things that give away the second entry as a “duplicate:” First, see the “1850” on the end of the title. You won’t find that on a legitimate posting. Second, the price. That’s a real shocker, isn’t it? Who would pay that for a used book, when the new book is just $15.99?

The next clue comes when you click on the the title. You’ll find it is only sold by third parties and that there isn’t an ISBN. Just an ASIN. This indicates that this title is not linked to the original book. The prices on this one range from a low of over $50 to a high of over $80. Either these are serious errors in the sellers’ databases or Lucy, you got some ‘splaining to do!

The nice thing is that if you are the publisher or author, you can notify either Createspace or Amazon of the page and they will take it down. The problematic thing is that there are so many of them. As an author, you have to go through every one of your books and check for them. Laborious, for sure, and it shouldn’t be your job, but if you want it done right, you’d better do it yourself.

A.

The post Is Amazon’s “Duplicate Title” Problem Costing You Sales? appeared first on Author Coach.

In her article, Rasenberger makes one key statement that is so grossly inaccurate that I feel it calls into question her knowledge of everyday industry practices of the publishing business.

The standard e-book royalty rate for many publisher is 25% of net profits; the publisher shares just a quarter of his profits with publishers.

As an agent, I have negotiated publishing contracts with every major house. No publisher shares a percentage of net profits. According to Merriam-Webster, a “profit” is “the excess of the selling price of goods over their cost.” It is not the difference between what publishers are paid and what they pay authors.

What publishers’ contracts actually say is that the publisher will pay the author “25% of the net amount received.” This language is nearly universal in publishers’ contracts. Contracts also nearly always define the term “net amount received.” For example:

All monies actually received by the Publisher from sales by the Publisher (directly or through agents or distributors) of Electronic Version(s), less any applicable taxes, handling or processing fees paid by the Publisher, customer refunds resulting from bona fide errors in the transmission of the Work and commissions paid or payable to third parties.

So, how does this work in practice? If a publisher has an Agency Model agreement with Amazon, it generally will receive 70% of the amount paid by the consumer, less a delivery fee. That delivery fee may be only seven cents, but they add up. On a $9.99 eBook, the publisher may receive $6.93. It will then account 25% of that net amount received to the author, or $1.73. The $6.93 is not the publisher’s profit on the eBook. It may be difficult to calculate the profit on an individual eBook sale because the publisher’s expenses are amortized across the costs of publishing the book in multiple formats. The 25% the author received is a royalty expense. The costs of paying editors, copy editors, typesetters, proofreaders, cover artists, cover designers, interior designers, publicity, eBook conversion expenses, distribution fees, co-op payments, and other expenses all come out of the cumulative amounts received before you can figure out profit. One could easily argue that authors benefit from getting a share of the amount received per book, because so many books are not profitable.

If a publisher has a wholesale-model relationship with Amazon, Amazon is likely paying that publisher 45% of the publisher’s suggested retail price on the eBook, i.e., Amazon is receiving a 55% discount. So, if the publisher has an SRP of $9.99, Amazon is likely paying it $4.50 for every eBook it sells. Amazon may also be discounting the book well below the publisher’s SRP. Of that $4.50, the author would receive 25% or $1.12, though if the contract includes a deep-discount clause that can be applied to eBooks, the author could be receiving just 10% of net, or 45 cents. Regardless, in either scenario, the author receives more money if the publisher has an Agency Model with Amazon.

Is this making a mountain out of a molehill? No, because the difference between a percentage of profits and a percentage of net is as big a deal as a percentage of retail price versus a percentage of net. There is no doubting that deep-discount clauses are prone to abuse. The fix for that is for agents to argue that they cannot apply to “normal wholesale and retail channels, including but not limited to sellers such as Amazon.com, Barnes & Noble, Costco, Walmart, Target, and other retailers customarily engaged in the sale of books.” Some publishers will agree to this and some will not. Like anything else is a publishing contract, the publisher’s willingness to negotiate depends on how badly it wants the book or author.

Anyone who has ever heard the term “Hollywood accounting” should be very afraid of the idea of publishers paying authors based on profits. As for the argument of whether or not authors would be better receiving a percentage of the SRP (as they do on hardcovers and paperbacks) versus a percentage of net on eBooks, that’s highly dependent on the discount. If publishers can maintain an Agency Model with sellers, then the net is actually better and, in fact, would be better across the board. But when discounts get higher and net gets lower, the royalty based on SRP is better.

Therefore, the argument could be made that a flat royalty might work and might make sense, but only if the discounts granted are low enough to ensure authors don’t lose money on the deal. And there are too many moving parts in that. Publishers would have to draw lines in the sand regarding their discounts and booksellers would have to stop demanding better discounts. However, the history of publishing shows the opposite trends. So an across-the-board flat royalty not only would not benefit authors and provide higher income, it would no doubt hurt them.

Do I think publishers could pay more in eBook royalties? Yes, but I am less concerned about the rate being based on net or retail than I am about the lack of escalators. As the number of copies of a book sold increases, the costs of publishing it are amortized over more and more copies. Therefore, the profit per copy increases. Yet, eBook royalties rarely have escalators. Think about that. The eBook edition is the one likely to be available the longest and, over time, probably sell the most copies. It is, by nature of the format, less expensive on a per-copy basis than printed copies. Yet, the author’s royalty rate does not increase based on the number of copies sold. This is the battle the Authors Guild and other writers’ organizations should be fighting: the fight to get escalators on eBook sales.

When you factor in all of the above, flat royalties are not worth considering. They may simplify the accounting, but they work against the very goal the Authors Guild would seem to be seeking in its argument for authors to receive a larger percentage of “net profits.”

The post The Authors Guild’s Mary Rasenberger Gets It Wrong on Flat Royalties appeared first on Author Coach.

Two sides met in battle.  On one side, there were several major publishers and Apple.  On the other, the Department of Justice (with Amazon in the wings, whispering into the DOJ’s ear).  I think we all know how that turned out.  And you probably know the history of it, so I will simply mention that one major instigator in this battle was Amazon’s pricing of major titles at a maximum of $9.99, apparently often at a loss, and clearly leading customers to believe that the eBook of a $30 hardcover should be 1/3 the price, which devalues the hard work and creative effort that goes into writing a book.

Following Amazon’s logic, a Picasso is really only worth the cost of the paint.

If Amazon hadn’t insisted that eBooks should be only $9.99, we may not have the agency model today.  But it did.  And while the DOJ won the battle, in the end publishers sort of won the war, because the limitations of the settlements on publishers weren’t in perpetuity.  They were, basically, two years, and have all or nearly all expired now.  Which means that publishers are again able to name their price for eBooks, versus having to let Amazon set the price.

But what about the little guys publishing with KDP?

What about all of those publishers who are using the Kindle Direct Publishing (KDP) program to sell eBooks?  And, honestly, these are not just little guys.  There are definitely publishers with a good number of titles using KDP.  After all, the royalty is 70% of net, which is basically what publishers using the agency model get.  The big difference is that publishers using KDP cannot price books above $9.99 if they want that 70%.  Amazon requires publishers to keep their prices within a specific range or the rate publishers receive is cut in half, thereby restricting publishers’ ability to set their own prices.  Ironically, Amazon is doing the same thing to KDP publishers as publishers are doing to Amazon: forcing pricing to be on its terms.

And then there’s that pesky VAT problem.

The price that Amazon allows you to set for all countries that have VAT has to be VAT-inclusive, so that £9.99 on a book sold in the UK is actually £7.99 plus VAT.  Publishers lose 20% to the VAT on that sale.

To put this in perspective, the US price is not inclusive of sales tax.  So if you buy a book and there is an 8% sales tax in your state, you pay $10.79.  You, the customer, pay the sales tax.  But, in the UK, Europe, Australia, and other countries with VAT, on a title priced at 9.99 in the local currency, the publisher pays the VAT and therefore lose anywhere from 3% to 27% in income, depending on the VAT in that country.  This is, of course, grossly unreasonable and Amazon obviously has the ability to let publishers set a VAT-exclusive price but chooses to require small publishers and self-publishing authors to pay these taxes for their customers or lose half their income because they broke the 9.99 price point.

But the problem at KDP goes beyond VAT.

What about when you publish a title in both eBook and print and you want to set a reasonable price for the eBook—compared to the print edition—just as the big publishers do?  What if you want to bundle two or three eBooks together and offer them at a discount from their individual price, but still price it more than $/£/€9.99?

One might argue that not only is Amazon causing publishers to lose money be requiring them to keep prices at 9.99 or less, it is restricting the availability of discounted bundles for its customers.  And as Humble Bundle and Storybundle have demonstrated, readers like their bundles.

Amazon KDP is the elephant in a field of mice.

Sure, sales on iTunes, Nook, Kobo, and Google Play may be 2% of sales on Amazon—and Apple is just as guilty of trying to force VAT-inclusive prices on publishers when it should not—but at least I can price a book above $/£/€9.99 if I want.

It’s time for Amazon to break open the ceiling on the 9.99 price point.

Let publishers price their books as high as they want and still receive 70%.  This would allow publishers to set a VAT-inclusive price that accurately reflects both the price of the book plus the VAT, as well as allow for bundling or even just pricing of a new book at market rates, which are often higher than $/£/€9.99.

Cutting publishers from a 70% rate to a 35% rate simply because of price point is not just unfair, it is bullying. And Amazon wants to be a friend to indie publishers,  not a bully, right?

The post Amazon KDP, It’s Time to Break through the 9.99 Ceiling appeared first on Author Coach.

These things are expensive because they are expensive to make, right?  Are books not expensive to make?  How much is a writer’s time worth?  Should a writer not make enough money to earn a living?  Ironically, when a $200M movie bombs, no one blinks. But when a book bombs, the author is tarred for life with bad Bookscan numbers.  Publishers may never buy another book from that author.

Most books are priced to earn publishers a few dollars at most.  The price that bookstores pay publishers is based on the retail list price (RLP).  That discount is often higher than 50%, with 55% being quite common.  If the publisher pays royalties based on the RLP—say the industry-standard rates of 10% on the first 5,000 hardcovers sold, 12.5% on the next 5,000, and 15% thereafter—that means that fully 60-65% of the cover price is accounted for.  So the publisher of a $25 hardcover earns $8.75-$10.  From that, the publisher must cover the cost of the printing of the book, the design of the book, shipping the book, paying the editor, paying the copy editor, paying the proofreader, paying the publicist, and myriad other costs associated with publishing a book.

So, what does the publisher need to do to ensure it makes enough money per title to pay all of those costs and earn a modicum of profit?  It has to raise the cover price.  If booksellers such as Amazon or Barnes & Noble would accept a lower discount, then prices could come down.

Once upon a time, the discount to booksellers was somewhere between 42% and 48%, and bookstores would offer discounts on New York Times best-sellers, taking a smaller profit on those but hoping you’d pay full price for another book while you were in the store.  But in order to grow, Barnes & Noble begin discounting nearly every book by at least 10%, which drove a lot of smaller bookstores out of business.  Now you’ll pay the full price at B&N stores on most books, because it no longer has to offer discounts, as there is so much less competition among brick-and-mortar bookstores.

Then Amazon came along and changed the game on B&N, which is now struggling to stay in business at all.

But Amazon is not taking a smaller discount than any other bookseller.  Sure, the biggest publishers in the industry may have been able to move over to the so-called “Agency Model” and now pay Amazon a 30% commission and net 70%, less delivery charges (funny that Amazon charges publishers a “digital delivery fee” on something that costs nothing to push to a Kindle, but offers customers free shipping on the print edition).  Of that 70% of net, the publisher probably pays 25% to the author.  So a $14.99 eBook (of a $25 hardcover) nets the publisher $10.49 and nets the author $2.62.  That leaves the publisher with $7.87, which is less than the publisher makes on the $25 hardcover, despite it being the same book—the same content—but it has to be priced lower than the hardcover because Amazon trained customers to expect the cost of an eBook to be far less than the cost of a printed book, even when the only printed edition available is a $25 hardcover.

In an apples-to-apples comparison of the costs of the hardcover and the costs of the eBook, the price difference should be about $3.  That’s roughly the cost of paper, printing, and binding and the cost per book of shipping a hardcover (assuming you are shipping boxes of the hardcovers to stores).  And we have started to see eBook prices coming up, much to the anger and frustration of many readers, but rarely to a place where the eBook price is more than 80% of the hardcover’s price.

I believe all movies should be $8, but do I go on Amazon and give one-star reviews and complain in the comments that the movie is overpriced at $19.99?  No.  I just choose not to buy the movie.  Presumably if enough people don’t buy the movie, the price will come down.  That is the beauty of market forces.

But if publishers can’t make enough money selling books, then they can’t stay in business, which means all Amazon will have left to sell is self-published books for $2.99.  Is that the future you want for the publishing business?

So don’t complain about books being priced too high.  If you want book prices to be lower, complain to Amazon and B&N that they should lower the discounts they demand, so that publishers can make the same amount of money per title at a lower price point, which will allow those publishers to stay in business.

The post It’s Booksellers, Not Publishers, Who are Responsible for High Prices appeared first on Author Coach.

When you go to the Kindle page, it now tells you what the price is including VAT (and helpfully converts your US price to a VAT-inclusive price in the EU and Japan), but if you are not really paying attention, you may not realize that you will be underpricing your book if you accept Kindle’s prices. You are also paying the tax for the buyer!

At today’s rates, a $6.99 book in the US should sell for €6.59 before VAT. As every country has a different VAT rate, you need to calculate each VAT-inclusive price and you’ll know you are right when Amazon calculates the price without VAT as €6.59.

In truth, Amazon’s pricing system is working backwards and appears to be intentionally leading you to underprice your books. If the system were really trying to be useful and accurate, it would ask you to set a price for all VAT countries VAT-exclusive, and would then calculate the price including VAT and that would be the price on your book in those countries that have VAT. And, honestly, it would be an actual service to publishers if it worked correctly, rather than trying to mislead publishers to have lower—and profit-cutting—prices.

Again, if you do not do your own VAT-inclusive pricing, you are paying the tax for the buyer. By calculating the VAT-inclusive tax off the US price, the net price calculated by Amazon for your book will be less than the US price converted into the foreign currency, since Amazon is taking your VAT-exclusive US price and turning it into a VAT-inclusive price in the EU and Japan.

As for Australia, Amazon doesn’t even tell you that the price you are setting is VAT-inclusive, but if you look at any of your books on Amazon.com.au, you will see that it states “includes tax, if applicable.” Well, there is a VAT on eBooks in Australia and it’s 10%. In New Zealand, it is 15%. See http://www.internationalpublishers.org/images/VAT2015.pdf. So you need to add 10% to your listed price in Australia and 15% to New Zealand (though Amazon does not offer separate NZ prices, other online retailers do).

So, as the saying goes, if you want it done right, do it yourself. Don’t let Amazon automatically set the VAT-inclusive price or you will be paying the taxes for your buyers.

A.

The post Is Amazon Misleading Indie Publishers on VAT Pricing? appeared first on Author Coach.

I visited Barnes & Noble’s Nook UK site at http://www.nook.com/gb/ and put in one of my titles, DEFCON One, by Joe Weber.  I found the customer-facing price was “£5.40 including VAT.” The price I had set for the UK was £4.50.  The UK VAT is 20% and so the math works out.  My price plus VAT equals the price shown to customers, including VAT.

Phew!

Now, unfortunately, there doesn’t seem to be a Nook site outside of the US and UK that I can access.  Presumably they ask publishers to enter pricing in Euros for customers who are using a Nook in Europe but still buying from the US or UK site.

It would have been awesome if Nook Press was more clear in their guides and even in their emails when I asked questions about the VAT changes, so that I wouldn’t once again be repricing everything there.  If you have been waiting to see how this VAT business shakes out before repricing, you were probably smart!

A.

The post Deciphering Nook Press’s VAT Policies appeared first on Author Coach.

You may not know this, but Apple’s prices have always been VAT-inclusive at a rate of 3%. This means that your eBook prices on Apple should have been 3% higher than they were at Amazon and, if they weren’t, you were making less per eBook sold than on Amazon.  Now that both Amazon and iTunes will be pricing VAT-inclusive, Amazon will be the winner, because Amazon offers greater pricing flexibility than iTunes, though it may mean that your iTunes royalties will be higher per sale because your price on iTunes will be higher.

On December 5th, Apple sent out a modest email on the subject of the VAT changes, including a link to more information.  Here’s what you get when you click the link:

Why are value-added tax (VAT) rates changing, and when?
The European Union approved changes to VAT legislation impacting the applicable VAT rate for the sale of digital goods, including electronic books. Previously, VAT rates for electronic books in the European Union (EU) were based on the retailer’s country. Beginning January 1, 2015, the applicable VAT rates in EU territories will be based on the country in which a customer is resident.

VAT rates for customers in non-EU countries like Norway (25%) and Switzerland (8%) will remain unchanged.

Contact your tax or legal advisor for further information about these changes.

How are VAT rates changing?
Before January 1, 2015, iTunes has applied the electronic book VAT rate for its country of residence,  Luxembourg (3%), for all sales in the European Union.

Beginning January 1, 2015, the following VAT rates (current as of November 30, 2014), based on the customer’s country of residence, will be applied:

Note that VAT rates in EU member states may change at any time depending on relevant legislation. The standard VAT rate is used for all EU countries except France and Luxembourg, which have authorized a lower electronic book VAT rate.

Who is affected by these VAT changes?
Publishers who sell books on iBooks in the European Union will be affected.

How do the changes affect me?
The customer prices you deliver to iBooks are customer facing prices which include VAT, while Apple’s commission and the publisher’s proceeds are calculated after VAT is deducted. We will not be making any automatic adjustments to your prices to reflect any new VAT rates. Unless you update your prices on iBooks, your proceeds for some book sales in the EU may change. {Emphasis mine.}

For example, here is a comparison of how VAT calculations may change for a book you priced at € 9.99 in two different territories:

{Whoa! I’ll make a full Euro less in Spain???!!}

*Apple’s commission and Publisher’s proceeds are calculated after VAT has been deducted from the selling price on iBooks.

 If you want to change the price of your books, you can schedule a price change to take effect on or after January 1, 2015.

In a way, I give Apple a bit more credit than Amazon for explaining what is happening.  And while it would be nice if they increased the prices across the board for all books to reflect the new VAT, Apple has an advantage over Amazon because it allows you to schedule the price change to take effect when the new rates take effect.

That said, Apple should be making the change because it can do so programmatically and far more easily than any one author or small publisher.  There are 28 countries in that list.  Whereas you could previously log onto itunesconnect.com and change the US price and have that cascade down through all 51 of Apple’s iTunes stores, you will now have to manually update 28 of the 51 prices.  If you have a couple of dozen or more titles, this is quickly going to become a nightmare.

Also, Apple’s application of tiers is going to limit you some and ultimately make all of your books more expensive on iTunes than other sites.  For example, on Amazon a $2.99 book that goes from VAT-exclusive to VAT-inclusive needs to rise in price somewhere between 16¢ and 75¢.  But Apple’s tiers are generally $1.00 apart.  So if you are selling on Amazon, you can individually price your books in a number of EU countries more precisely than you can on Apple.  And your titles on Apple are going to end up being more expensive.

Take the UK, for example.  Apple’s chart says the VAT there is 20%.  On Amazon, your £2.99 book can be priced at £3.59, an increase of exactly 20%.  But on Apple, where the tiers restrict you, you have to go up a full Pound to $3.99, thus your titles on iTunes will be priced higher than on Amazon, BN.com, or Kobo, always, it seems.

I’ve contacted Apple and brought this to their attention.  The big question is, will they do anything about it?

In the meantime, independent publishers need to pay careful attention to their pricing to ensure that all markets are now priced accordingly, or face a nasty surprise with the first royalty reports of the new year.

A.

The post iTunes Royalties and VAT-Inclusive Pricing appeared first on Author Coach.

On January 1, 2015, European Union (EU) tax laws regarding the taxation of digital products (including eBooks) will change: previously, Value Added Tax (VAT) was applied based on the seller’s country – as of January 1st, VAT will be applied based on the buyer’s country. As a result, starting on January 1st, KDP authors must set list prices to be inclusive of VAT. We will also make a one-time adjustment for existing books published through KDP to move from VAT-exclusive list prices to list prices which include VAT. We’ll put these changes into effect starting January 1st; you may always change your prices at any time, but you do not need to take any action unless you wish to do so.

One-time Adjustment for Existing KDP Titles:

Starting January 1st, for any titles already published in KDP, we will make a one-time adjustment to convert VAT-exclusive list prices provided to us to VAT-inclusive list prices. Subject to minimum and maximum thresholds, we will add the applicable VAT based on the primary country of the marketplace to the VAT-exclusive list price provided. For example, if an author had previously set £5.00 as the VAT-exclusive list price for amazon.co.uk, the new VAT-inclusive list price will be £6.00 because the applicable VAT rate in the UK is 20%. Please note, if an author had set a consistent VAT-exclusive list price for all Euro based Kindle stores, those prices will now be different due to varying VAT rates for the primary country of each Kindle store. For example, if an author had previously provided a €6.00 VAT-exclusive list price for amazon.de, amazon.fr, amazon.es, and amazon.it Kindle stores, the list prices including VAT will be €7.14 (19% VAT), €6.33 (5.5% VAT), €7.26 (21% VAT), and €7.32 (22% VAT) respectively.

Minimum and maximum list prices for the 35% and 70% royalty plans will now also include VAT. For books published before January 1st that would fall outside these new limits after VAT is included, we will adjust the list price to ensure the book remains in the same royalty plan that was previously selected.

Learn more about the new minimum and maximum KDP EU list prices:

https://kdp.amazon.com/help?topicId=ANRML55B0BWBK

You skipped that link, didn’t you?  Well, you shouldn’t have, because what this email doesn’t say, is that the maximum prices for UK and EU books are not rising, even though the pricing must now be VAT-inclusive.  So if you are selling a book in the UK for £9.99 VAT-exclusive, you will now be forced to have the same price VAT-inclusive, meaning that your net Amazon KDP royalties will be cut.  Why isn’t Amazon raising the max VAT-inclusive price given the changes in the tax laws?  There’s no answer to that given and we can only presume that it is because Amazon is standing firm on its belief that eBooks should cost no more than 9.99, be it in US Dollars or UK Pounds.  And also that Amazon doesn’t care that KDP clients are going to be screwed by this change.

Royalties will continue to be calculated based on the list price without VAT. The amount of VAT applied depends on the country where the customer is located. Consider a book with a £6.00 VAT-inclusive price on Amazon.co.uk, for sales to customers in the UK we would apply the UK’s 20% VAT rate and the price we use to calculate royalty would be £5.00. The 23% Irish VAT rate will apply to purchases from Ireland, so a customer buying from Ireland would still see £6.00 but, applying the 23% Irish VAT rate, we would calculate royalty based on the VAT-exclusive list price of £4.88.

Learn more about how EU prices affect royalty payments:

https://kdp.amazon.com/help?topicId=A30XCAGX3E5QDC

eBooks available for pre-order, scheduled to release after January 1, 2015:

For pre-orders placed before January 1, 2015 on books that will release after January 1, 2015, we will pay your royalty as though VAT were still only 3%.

eBooks scheduled for a Kindle Countdown Deal:

If you currently have one or more books scheduled to run a Kindle Countdown Deal in the UK marketplace during or after January 1, 2015, your book will still be eligible to finish that promotion, even if the list price does not fit the new requirements of being priced between £1.99 and £15.99, including the VAT.

Setting List Prices for EU Kindle stores:

Starting January 1st, to make it easier to set customer friendly list prices without having to calculate VAT for each country, authors will set list prices for EU marketplaces that include VAT. To accommodate this, the KDP pricing grid will be updated to accept VAT-inclusive list prices. Previously, if an author wanted to provide a suggested list price of “£1.99”, he would have to set “£1.93” as the VAT-exclusive list price to account for the 3% VAT we would have applied. Now, authors can simply enter “£1.99” and we will deduct the applicable VAT to calculate royalties. In the pricing page, authors will also see their suggested price without VAT displayed for the primary country of the marketplace to help them understand how royalties will be calculated for sales to customers from that primary country.

For those authors who set their EU marketplace prices automatically from their US list price, we will convert the US list price to local currency and that will be the list price that includes VAT. For example, if an author sets the US list price to be $10.00, then we will convert that price to Euros for the German marketplace, and assuming the exchange rate is 0.8, the Amazon.de list price including VAT will be €8.00. For purchases in Germany, we would deduct 19% VAT and calculate royalty on a VAT-exclusive list price of €6.72.

Whoa! Hold on! Allow me to interrupt this incredibly boring email with an observation: this will drive down the net price of the book and therefore your Amazon KDP royalties.

This appears to be a straight-forward explanation of what Amazon is doing and written in a way that one might say is intended to be seen as “helpful.”  But is it?  If you price your book at $2.99 in the US and allow Amazon to auto-price it, it will be €2.39 in the Germany.  If that price is VAT-exclusive, your royalty is based on €2.39, but Amazon is saying that that price will be VAT-inclusive.  Why is Amazon doing that?  Obviously it has tons of computing and programming resources, so it could make the pricing work however it chooses.  And it is choosing to have it work in a manner that will lower the net price of the book and therefore authors’ royalties.  Don’t let them do it. (Use the link below to let them know your preferences.)

To the UK and European markets, coming January 1, it will look like eBook prices have gone up, in some cases over twenty percent.  This could lead to a big hit in sales until readers realize the change in how VAT is applied.  Let’s hope Amazon is educating Kindle customers as well as KDP clients.

To counter Amazon’s choice in pricing structure, you can no longer allow Amazon to calculate the price, until such a time as they give you the choice of how such prices should be calculated.  I would want to set the base price, before VAT is added, and then let Amazon add the appropriate VAT.  So for a $2.99 book, it would be €2.39 before VAT.  It’s VAT-inclusive price would be €2.87 and my royalty would be based on €2.39.  Therefore, I do not lose income because of Amazon’s choice in how to convert US prices to EU or UK prices.

Again, Amazon could make their system calculate the converted price before VAT, but is making the choice not to, probably because they don’t want customers to see a sudden increase in prices of twenty percent or more.  But should you, the publisher, pay that tax?  No, of course not.  If Amazon wants to keep customers from having sticker shock because of the change in the tax laws, it should be willing to pay publishers royalties based on the VAT-included price.  Amazon will make less per sale, but certainly it can afford it more than KDP publishers can.

I now return you to this overly complicated and boring email.

Learn more about setting list prices for EU Kindle stores:

https://kdp.amazon.com/help?topicId=A30464Q6OVH578

As always, if an author list books with a lower list price on other sites, we may price match those books to the lower prices. We recommend authors review their list prices that include the new VAT on January 1st when these changes go into effect to determine if they want to make any updates.

We think that respecting your VAT-exclusive list prices and keeping books in their chosen royalty plans offers the best experience for authors. If you would like your books to be handled in a different way, contact us with your feedback:

https://kdp.amazon.com/contact-us?topicId=euvat

Best Regards,
Kindle Direct Publishing Team

The post Amazon KDP Royalties To Be Cut by VAT Pricing Changes appeared first on Author Coach.