Dear Amazon Shareholders: Our Customers Adore Us! Love, Jeff Bezos.
Why wouldn’t they? Even the Department of Justice acknowledges that Amazon has some of the industry’s cheapest e-book prices.
A letter sent to shareholders today by founder and CEO Jeff Bezos, titled “The Power of Invention,” tackles the publishing industry head-on by explaining how both authors and customers are benefiting from its Kindle publishing business.
While Bezos fails to address the DOJ lawsuit, which accused Apple and five major book publishers of conspiring to raise e-book prices, he provides a glimpse at how he’s changing the economics of the business on a small scale.
Bezos says Amazon’s Kindle Direct Publishing division has already produced more than a thousand authors who are selling more than a thousand copies a month. Some have reached hundreds of thousands of sales, and two have joined the Kindle Million Club.
Authors who use KDP get to keep their copyrights, keep their derivative rights, get to publish on their schedule – a typical delay in traditional publishing can be a year or more from the time the book is finished – and … saving the best for last … KDP authors can get paid royalties of 70%. The largest traditional publishers pay royalties of only 17.5% on ebooks (they pay 25% of 70% of the selling price which works out to be 17.5% of the selling price). The KDP royalty structure is completely transformative for authors. A typical selling price for a KDP book is a reader-friendly $2.99 – authors get approximately $2 of that! With the legacy royalty of 17.5%, the selling price would have to be $11.43 to yield the same $2 per unit royalty. I assure you that authors sell many, many more copies at $2.99 than they would at $11.43.”
If you can’t take Bezos at his own word, the letter includes eight quotes from customers and authors who have benefited from Amazon’s services, including its publishing, fulfillment and Web services.
“These innovative, large-scale platforms are not zero-sum — they create win-win situations and create significant value for developers, entrepreneurs, customers, authors, and readers,” he wrote.
The company’s stock was trading down 1.81 percent, or $3.46 a share today, to $187.23. In recent months, the stock has slipped from its 52-week high of $246.71 a share.