January 22, 2010, 12:00 AM

Amazon will double royalty payments for authors who offer works for Kindle

Amazon will double royalty payments to 70% for authors and other providers of content for its Kindle e-book platform. The e-retailer also unveiled new technology that lets game developers and others distribute and sell content for the Kindle.

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With two Kindle updates in one week, Amazon.com is upping the ante for rivals seeking to catch up to the leading e-retailer in the fast-growing e-book market.

On Wednesday Amazon, No. 1 in the Internet Retailer Top 500 Guide (a PDF version of the company’s financial and operating profile can be ordered by clicking on its name), revealed higher royalty payments for authors who use the Kindle platform to publish their manuscripts in e-book form and on Thursday announced the upcoming release of new software that lets electronic game developers and other content providers format their latest creation for distribution and sale on the Kindle platform.

The new royalty structure for the Kindle digital text platform, which goes into effect on June 30, will pay authors a commission of 70% of a book’s list price, minus the net delivery cost. Amazon says authors typically get a 25% commission today on e-books from major publishers. Delivery costs will be based on file size and priced at 15 cents per megabyte, says Amazon. “At today’s median desktop publishing file size of 368 kilobytes, delivery costs would be less than six cents per unit sold,” Amazon says. “On an $8.99 book an author could make $3.15 on the standard option and $6.25 with the new 70% option.” The new royalty schedule is double Amazon’s current royalty rate of 35%, the retailer says.

To qualify for the 70% royalty, an author must price an e-book between $2.99 and $9.99 and the list price must be at least 20% below the lowest list price for a paper copy of the book. The title must also be available for sale in all geographic areas where the author or publisher has rights, Amazon says. "Today, authors often receive royalties in the range of 7% to 15% of the list price that publishers set for their physical books, or 25% of the net that publishers receive from retailers for their digital books," says Amazon Kindle vice president of content Russ Grandinetti. "We`re excited that the new 70% royalty option for Kindle will help us pay authors higher royalties when readers choose their books."

The higher royalty is the latest move by Amazon to capture a bigger share of the electronic books market, which Forrester Research says will generate an estimated $500 million in sales this year. Amazon, which says it sold more e-books for the Kindle on Christmas than paper books, also is taking steps to make more content available for Kindle readers. In December best-selling business author Stephen R. Covey moved the exclusive e-book publishing rights to two of his books, “The 7 Habits of Highly Effective People” and “Principle-Centered Leadership,” from Simon & Schuster to Amazon.com for one year.

Amazon also is seeking to make new kinds of content available for the Kindle. The e-retailer yesterday announced a new application that will let other content developers post, distribute and sell their content on Kindle. The application, which is aimed at content providers such as electronic game developers, word game and crossword puzzle authors, and others, will give users an easy way to post and sell their content to Kindle owners. Amazon hasn’t designated a full release date, but beta trials begin in February with content providers such as Zagat, which will distribute travel-related reviews and ratings, and Sonic Boom, which is developing a series of word games and crossword puzzles.

"We`ve heard from lots of developers over the past two years who are excited to build on top of Kindle," says Amazon Kindle vice president Ian Freed. "The Kindle development kit opens many possibilities and we look forward to being surprised by what developers invent."

The latest Kindle initiatives are designed to build on Amazon’s strengths as a low-price bookseller and as an e-commerce technology developer, says analyst Colin Sebastian of Lazard Capital Markets. “Low prices are Amazon’s current priority,” he writes in a new research brief. “We believe Amazon’s top priority for e-books is to maintain low prices, which help to drive consumer adoption of Kindle readers and fortify Amazon’s leadership position in a nascent digital market. We continue to believe that Amazon remains well positioned over the long haul to maintain a leadership position for low-priced, high-quality e-readers, which appeal to the company’s highly literate consumer base.”

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