Can I Raise the Dead with the Amazonium Codexorum?

Now, back to where I started when i was so rudely interrupted by Kathleen Hale and her “light stalking.” I’m still not sure where light stalking rests on the hierarchy of criminal complaints; somewhere between a dash of armed robbery and a smattering of homicide, I think. But enough about her ridiculousness. This is what I was working on when I was sidetracked. Anti-climactic, I know, but then being sane and rational is always more dull than batshit crazy.

I got into a bit of a pissing contest in the comment section of a pretty solid piece on how crucial (or even accurate) the advance system used by publishers truly is by author William O’Neil on The Digital Reader site a couple weekends back. Normally, I let these things go, but in the last comment left by author Rick Chapman, in response to the moderator admonishing him for being too confrontational, he conveniently left a bullet point list of areas where he thinks I’ve been misled or not properly informed. Personally, I do so enjoy a good confrontational argument, so let’s go through it point by point. The discussion, by the way, bounced back and forth across various comments to the post. Feel free to go check out the entire thing at the above link, if you’re interested. Here’s the full comment, in italics, with my thoughts interspersed in plain type.

“I have been completely factual in my statements. Facts aren’t confrontational. Facts and dispassionate analysis are always acceptable. Dan, on the other hand, has made repeated misstatements of fact. I believe he has read too many times on too many sites assertions about Amazon that are misleading and untrue. These include:

* Amazon pays royalties. Amazon pays no one royalties except with the exception noted. Amazon should immediately stop making that claim and accurately describe what it’s charging you. A “retail usage fee.” A “download fee.” I’ll let them define it. But it’s not a royalty.”

I didn’t say anything about whether it was a royalty or not. I’m not sure it really matters, though. Generally speaking, a royalty is a negotiated percentage paid from the revenue (or some version of net) generated when you license a work for use. When I put something up on Amazon, I am licensing them to sell, reproduce, distribute, etc, the work. For that, under the terms of the license, I get 70% of the gross in defined price ranges and 35% of the gross in others. You can make a case that it is, at least, a form of royalty.

I don’t think it matters what you call it, however. The important thing to remember is the difference in the type of payment you get from a publisher and what you get from Amazon. With Amazon, the payment hasn’t had any production expenses incurred backed out or accounted for. It’s up to me to determine how to use that payment, in what percentages, to recoup my expenses. In this sense, I agree that it’s not always made clear and can often be presented as an apples to apples comparison when it’s not. Arguing whether or not it’s a royalty, a fee or whatever is a semantic exercise that has no real bearing on the facts at hand. Amazon’s payout is before production expenses are backed out or accounted for, one from a publisher is after. This could be made more clear and the 70% to 12.5% (or what have you) comparison is not strictly accurate.

To use a somewhat imperfect construction analogy, Amazon’s payment is like the check a contractor gets for work from a homeowner. The contractor has to pay labor wages, materials, etc, from that. A publisher’s payment is more like the paycheck a laborer receives from the contractor. You can make a good salary as a skilled laborer, but everyone in construction knows the real money is in being the contractor. I saw this phrase the other day and I like it, so I’m gonna co-opt it here. It’s called “Controlling the Capital.” Call it a royalty, call it an expense, you get a cut of the gross and you retain your IP. The cost of that is 30% and you cover production expenses (which you also control).

“* Amazon complains about agency pricing but imposes a modified version of it on indie publishers. Their margin is locked in a la agency; you have very limited pricing flexibility as I’ve noted. Accurately. And not every author is writing a book about the Zombie Apocalypse. Or Vampire Love. Or Dating Werewolves.”

Amazon still retains ultimate control over the pricing. As such, any price flexibility I have is at Amazon’s discretion. I’m not sure how much “agency” one can exercise when their actions are entirely at the discretion of another party. You can call it modified agency but when the modified part serves to restrict the agency part, it seems to be a bit of a misnomer. But again, it doesn’t really matter what you call it. I have no right to tell Amazon what to do, Amazon retains that power in total in its agreement with me. A big part of Agency type agreements is that the supplier has some or all of that control. I don’t. Amazon encourages me to price within a certain window by offering a higher cut of the gross in that range. I have limited freedom to price how I choose, even outside that range where I’d incur a lower cut of the proceeds.

But Amazon could change it at any point and I’d have no recourse to stop them, other than to pull my material. That’s an option not available to me if I’m under contract to a publisher, by the way. Can’t just pull my book from them if I don’t like what they do for me. That’s another benefit you’re paying for in that 30% cut, too. Flexibility is underrated and can be expensive if you give it up. Call it modified agency if you like, doesn’t matter. It’s not the same thing as a deal where the publisher can restrict or prevent discounting or otherwise dictate terms to the retailer. What it is is far more important that what it’s called.

“* Amazon is attempting to create a pricing codex. It says so on its website. I note that no one here will address that truly remarkable statement. If you would like to, I would like to hear your speculations on how the codex will be created, maintained, and enforced.”

(First off, here’s a link to the author’s piece about the pricing codex he believes Amazon is trying to impose, as background.)

I’m not sure what you’re point is here, that Amazon is trying to set up a pricing framework for different types of ebooks within its store? Why wouldn’t they? And how’s that tangibly different from the pricing structure publishers have put upon books forever now? Or is it just sheer random coincidence that books of similar style and form all seem to be priced within a few dollar range of one another? In fact, I’d argue that most of the more dramatic swings in pricing you see come from the retailer discounting or otherwise setting their own pricing. In this way, it could be said that the retailers ability to control prices has prevented publishers from establishing a hard and fast pricing codex, as you call it, of their own. The healthier, more competitive market, in my opinion, is when the retailer has more power over the consumer-facing prices rather than the manufacturer.

“* Amazon buys MOST of its E-books via wholesale, not agency. Amazon wants to stop agency pricing because it want to gain control over the E-book pricing structure. I neither condemn nor approve them. This is business. But their pricing box is part of that strategy. Again, I describe the motivation of both sides on my blog.”

I think you’re missing my point here. I’m not disputing whether Amazon is getting ebooks from publishers under wholesale, agency or any other terms. My point is that when you say they’re buying ebooks wholesale, that’s not correct. You could get me to agree that they’re buying licenses wholesale or they’re paying an agreed wholesale price with each license they sell, but they are not buying the ebooks. Ebooks aren’t sold, they’re licensed for use. You say they’re buying ebooks wholesale like they’re buying a pallette of print books and that isn’t the case. It may amount to the same ends but the difference between a sale and a license has huge implications for use and buyers’ rights. Amazon is clearly getting some sort of right of resale but they’re not getting it through first sale like they would if they were buying physical books. They’re getting it as part of the terms of the contract or the license they are acquiring to sell the end-user ebook licenses to consumers. What no one at any level is doing is buying the ebooks; wholesale, retail, agency or otherwise.

I think too many people play fast and loose with the term “sale” when discussing ebooks (myself included, sometimes). A sale has implications of title transfer and relating use and resale rights. None of that exists with ebooks. Now I’ve often argued that they should because the ways ebooks are distributed through retailers is nearly indistinguishable from a genuine sale. I think the licensing arrangement is a bit of a scam designed to both give the supplier more power and restrict the rights of consumers. But right now, that’s how it is. That doesn’t mean the basic differences between a sale and a license should be conflated. Especially when it directly impacts the rights one party in the transaction has with respect to future use.

“* Amazon’s pricing box HURTS indies. I’m not going to break it down in detail here; I’ll do that on my own blog. But you don’t have to be a marketing genius to figure out what’s wrong with a seven dollar pricing box.”

I’m not sure I agree with you here. There is a case to be made that heavily researched nonfiction work combined with Amazon’s pricing strategy can be problematic. Even Amazon said so. That sentence from them seems to be the basis for you codex theory. I just said it too. Am I tying to institute a pricing codex? It’s a fact that seems self evident. Ebooks are an extremely young market. Not every sector or contingency is properly served as yet. This is one of them, in my opinion. There are situations where $9.99 may not be adequate.

However, for the vast majority of writers, a $7 per book cut is more than sufficient and in most cases, downright great. In fact, that number amounts to several dollars more than a traditional author will be bring in per book on a $25 hardcover. That’s more than adequate. When you subtract the actual physical production/distribution costs with print, it’s more than most publishers’ take on that same $25 hardcover.

The $7 box you refer to constitutes a sizable range with margins from $2 to $7 per book. Indies writing strictly fiction aren’t harmed by that at all. In fact, it’s the range many of us, independent from Amazon, feel that the books should be priced. Even if I had total pricing control at 70% up to any list price I want, I still wouldn’t be putting up $12 or $15 works of fiction. That barrier at $10 isn’t even relevant to me because exceeding that price isn’t a consideration. It’s not harming me because it’s not even a factor.

I believe you could argue that by encouraging indies to stay in an optimal pricing range, they are actually increasing your overall margins on a book with the multiplier effect of increased sales at lower prices. For some nonfiction works, I agree, this can be problematic. For fiction, though, the $7 box isn’t destructive or harmful. It’s what most of us would be doing anyway.

“* The big publishers DO NOT have to live in that pricing box. Only indies do.”

Yeah, so? They have infinitely more influence, money and leverage than your average indie does. They can negotiate out of it. Or not, possibly, from what I hear. There’s some speculation that the S&S/Amazon deal has some sort of descending cut at higher prices. Still very likely better than having your take cut in half at $10, but enough to be a serious consideration in pricing. Besides, the “ceiling” of that box doesn’t matter when your best case for maximizing revenue doesn’t even approach that figure. If and when that factor changes, the discussion does too.

“* 30% points to use a downloading service is a very steep price to pay. Amazon’s NET margins on indie sales is close to 30 points because E-book publishing and distribution are electronic. No warehousing and shipping. Now, of course, you are free to not use their service. But it is accurate to note that 30 point margins are incredibly wonderful in most channels, never mind book channels. 65 point margins are beyond awesome but for an indie, ruinous.

Fortunately for the publishers, none of them are paying 65 point margins. Only indies face it. How nice for us.”

Fortunately for us, we’re not paying any kind of marketing fees or anything like that. Is 30% too high? Not really. Is 65%? Yes. I’m in complete and total agreement with you on that. As I said in one on my comments, I’d rather see a sliding scale where the percentage declines gradually in proportion to the increase in price in a way that still serves as an inducement to generally keep prices low but also allows for books like what you describe; higher production costs, a limited less-price sensitive audience, not likely to get a low price multiplier bump; to be able to collect a larger per book total revenue figure.

Amazon is providing access to millions of potential customers on by far the most popular ebook platform in the world. That’s worth something. I’m in the minority, though, who isn’t concerned that that percentage will drop. I actually think it will increase over time for two simple reasons. One, it’s a volume business. Higher volume means more sales means more revenue. That’s Amazon’s core belief. And two, anyone who wants to compete with Amazon in this space and attract quality work is going to have to offer a better cut, and that will drive an increase in the percentage available to indies. Don’t underestimate subscription services, either. If it comes to show that Kindle Unlimited makes some kind of dent in sales, Amazon may well have to sweeten the pot to keep writers and their books in the program.

“Amazon’s pricing strategies undercut the entire theme of your article. Let’s say you do want to write a piece of “literature” or perhaps a specialized history on a topic most people find obscure. That means you have a far more limited audience that someone writing about Vampire Love. Or Dating Werewolves. Or Bondage with Billionaires.

Yet, the time and effort to produce that work will be as great, if not far greater, than that required to do your research on the best way to flog a besotted masochist.

And then you are stuck in Amazon’s pricing box trying to sell a book that can’t pay back your time and effort at $9.99. The audience isn’t big enough to make up in volume what you’ve lost in revenue. And, of course, since you are an indie, you’re going to have pay for ALL the expenses incurred by having to market and sell your book. And you will have 30 points less revenue to do it because you will be paying that money over to Amazon right up front (and don’t forget the transmission fees, which you also pay).”

Here’s where I can see your point. The problem, though, is that if you have a book with an inherently limited market, good luck getting a publisher to fork over a sizable advance or do any marketing at all for it. If it’s a captive audience at a high price point who will pay $15 or $17 or more for the ebook, the assumption you’re making is that a lower price point isn’t going to increase your overall market. I’ve seen this argument from writers before with the notion that anyone who will pay $8 a book will pay $12 and you’re just leaving money on the table. I didn’t buy it then and I don’t buy it now, with very few exceptions. And those exceptions, in my mind, are almost entirely complex scholarly work. I don’t think that’s reasonable. That doesn’t mean I don’t think higher prices are justified for some work, just that I’m not sure that high prices combined with a publisher getting 70-80% of the proceeds (or more) is going to pay back your time any more than you keeping 70% at a lower price point. As for 30% percent being too much, remember, that’s the number the publishers themselves imposed on Amazon with their collusive agency deal. If it’s so egregiously wrong, why did they break the law to Institute it themselves?

“Indies in these markets are driven, by necessity, back to the major publishers who may be able to price your product at a level you hope will make your time and effort somewhat profitable. And relieve you of the cost of marketing. Because they don’t live in the box.

Or, maybe, they can apply to be a member of Amazonium Codexorum. If they can demonstrate the “legitimate” reasons to be on the approved list.”

I love the phrase “Amazonium Codexorum” by the way. Every time I see it, I can’t help but think of some dark tome bound in human skin and written in blood that Jeff Bezos is using to cast his evil black magic to raise the dead and dominate the world. You seem to be thinking that Amazon is planning to create some beurocracy that gives thumbs up or down like a Roman Emporer on a case by case basis on whether they’ll be allowed to price above $10. I don’t think that’s the case. I believe it’s far more likely that they’ll try to institute a pricing range, much like KDP, that aims to find an optimum price for maximizing revenue for these works and incentivizes it by paying higher percentage in the preferred range. Amazon won’t be deciding anything. Publishers will be self-segregating in those ranges because it’s in their best interest to do so, making the granular case by case decisions on their own, just like indies do.

As for high-cost-to-produce nonfiction, I’m not sure why you assume $9.99 isn’t sufficient to generate a good return unless you’re presuming a market with a hard ceiling, i.e., a strictly limited potential paying audience. But if that exists, publishers aren’t exactly going to be lining up to dump resources into it either. You’ll still be doing most, if not all, of the marketing and getting a far smaller payout at the end of the day.

But here’s the kicker, if what I have to do to be successful doesn’t fit with what’s available to me through Amazon, I won’t use them, or I’ll adapt what I’m doing in some way so what they offer serves my ultimate ends. Amazon is known for its commitment to low prices. If you have a project that needs high or, at least, higher pricing, the low price store may not be the way to go. If I had a high-end designer clothing line, I’m not trying to cut a deal to get my wares stocked in Dollar General unless I’m prepared to sell them at $5 a shirt. I’ll look to outlets that support my needed price and can produce the customers who will pay it. It’s entirely possible that neither Amazon in its present form nor the publishers in their’s are the best choice for this kind of work.

As I said, ebooks are an extremely young market. This is a potential class of books that’s underserved by what’s currently available to them. I’d dispute that you can’t make a good return on $9.99, considering you still retain the IP (control the capital). Maybe you can’t make it all from Amazon, but nothing is stopping you from exploiting that property in multiple ways. In my opinion, Amazon is best used as one stream of many. Some trickle, some roar, some are steady year round while other others run high and low seasonally. And some do inevitably dry up. If the pricing structure for one particular product form for your IP at one particular retailer, no matter the size, can make or break you, you need to get more baskets and spread those eggs out a little.

Dan Meadows is a writer living on the banks of the Chesapeake Bay. Follow him on Twitter @watershedchron

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Published in: on October 30, 2014 at 4:12 pm  Comments (7)  
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  1. +++ Generally speaking, a royalty is a negotiated percentage paid from the revenue (or some version of net) generated when you license a work for use. When I put something up on Amazon, I am licensing them to sell, reproduce, distribute, etc, the work. For that, under the terms of the license, I get 70% of the gross in defined price ranges and 35% of the gross in others. You can make a case that it is, at least, a form of royalty. +++

    And you can make a case that a pig is an eagle, yet the pig will never fly.

    The definition of royalties and the structure of the system in book publishing is about two centuries old. If you were involved in a tort action involving royalties owed you, an attempt to advance the above argument would get you laughed out of court in all 50 states. I suggest you not waste time telling your novel theory to the IRS either in the event they audit you as they will have some things to tell you.

    +++ Amazon still retains ultimate control over the pricing. As such, any price flexibility I have is at Amazon’s discretion. I’m not sure how much “agency” one can exercise when their actions are entirely at the discretion of another party. You can call it modified agency but when the modified part serves to restrict the agency part, it seems to be a bit of a misnomer. +++

    And S+S retains ultimate control over the pricing over their hottest, latest titles per contractual negotiations with Amazon. BTW, Hugh Howey calls what Amazon is doing to indies “Incentivized Agency” so I suggest you take it up with him. You can read more about it at the link below:

    http://www.rule-set.com/ricks-blog/hugh-howey-serves-up-a-turd-to-indies-but-does-polish-it

    +++ But Amazon could change it at any point and I’d have no recourse to stop them, other than to pull my material. That’s an option not available to me if I’m under contract to a publisher, by the way. Can’t just pull my book from them if I don’t like what they do for me. +++

    I’m sorry, but the above statement exemplifies that you just do not understand how publishing works. However, for those of you interested in why Dan’s statement is so misleading, this link will help you:

    http://www.rule-set.com/ricks-blog/what-hugh-howey-wont-talk-about-but-should-you-the-publishers-and-the-channels-part-iii-of-several-parts

    +++ I’m not sure what you’re point is here, that Amazon is trying to set up a pricing framework for different types of ebooks within its store? Why wouldn’t they? And how’s that tangibly different from the pricing structure publishers have put upon books forever now? +++

    My pont is that Amazon has announced they’re setting up a pricing codex. I want to know how Amazonium Codexorum will work. As I have asked repeatedly at:

    http://www.rule-set.com/ricks-blog/october-06th-2014

    Amazon has yet to explain how the codex works.

    +++ The healthier, more competitive market, in my opinion, is when the retailer has more power over the consumer-facing prices rather than the manufacturer. +++

    In my opinion, the healthier, more competitive market is when I, the writer, make my own decisions about how to price my books and learn from the market what works and doesn’t. In my opinion, it is VERY unhealthy when a $75B dollar companies price rigs a market because it’s involved in a fight with its major suppliers, who, has we have just seen, will be free to price their books as they see fit. If they price wrong, the market will swiftly punish them.

    +++ My point is that when you say they’re buying ebooks wholesale, that’s not correct. You could get me to agree that they’re buying licenses wholesale or they’re paying an agreed wholesale price with each license they sell, but they are not buying the ebooks. Ebooks aren’t sold, they’re licensed for use. +++

    This is not an area of settled law, so your point is not valid. Nor is it relevant. I have worked extensively in the software industry and am well aware of how retail channels can sell “licensed” products, yet still calculate margins and markups exactly as they do with other products.

    +++ A sale has implications of title transfer and relating use and resale rights. None of that exists with ebooks. +++

    Again, not an area of settled law. The issue is FAR from settled!

    “* Amazon’s pricing box HURTS indies. I’m not going to break it down in detail here; I’ll do that on my own blog. But you don’t have to be a marketing genius to figure out what’s wrong with a seven dollar pricing box.” **

    +++ I’m not sure I agree with you here. +++

    Then you have not thought the issue through. I have, and will be publishing an article up at http://www.rule-set.com/blog that explains the problem. Though you don’t have to be a genius to figure it out.

    +++ That sentence from them seems to be the basis for you codex theory. +++

    It’s not a theory. It’s up on Amazon’s website.

    +++ However, for the vast majority of writers, a $7 per book cut is more than sufficient and in most cases, downright great. In fact, that number amounts to several dollars more than a traditional author will be bring in per book on a $25 hardcover. That’s more than adequate. When you subtract the actual physical production/distribution costs with print, it’s more than most publishers’ take on that same $25 hardcover. +++

    You apparently have never heard of the old maxim “your time is money.” And you are comparing the apple to the orange. You receive no “cut” from Amazon. All they do is take. They are an expense. When they are done taking, you now have 30 points less to market and sell your book, all of which indies must pay for themselves out of their own pocket.

    +++ Indies writing strictly fiction aren’t harmed by that at all. +++

    Wrong.

    +++ Indies writing strictly fiction aren’t harmed +++

    I don’t write strictly ficition. Thanks for throwing me under the bus.

    +++ Yeah, so? They have infinitely more influence, money and leverage than your average indie does. +++

    Yeah, so? Then why they were asking me to sign petitions to be sent to Hachette pressuring them to settle with a $75B corporation on the $75B dollar corporation’s terms? Why involve us second class citizens in this fight? Why did Howey, Konrath, Gaughran, Passive Whatever and all the rest of AAAG carry water for Amazon and tell us to get involved in Amazon’s fight to strip large publishers of agency pricing while Amazon imposes it on us indies?

    +++ Fortunately for us, we’re not paying any kind of marketing fees or anything like that. +++

    Unfortunately, AGAIN you do not have a grasp of the facts. KDP is INDEED paid for by MDF. (And do you think, as an indie, you’re not going to be paying marketing and selling costs? Really?)

    Learn how here:

    http://www.rule-set.com/ricks-blog/what-hugh-howey-wont-talk-about-but-should-the-book-channel-part-vii-of-several-parts-mdf-and-the-big-slurp

    +++ The problem, though, is that if you have a book with an inherently limited market, good luck getting a publisher to fork over a sizable advance or do any marketing at all for it. +++

    Who cares? I have successfully self published narrow band business books for close to twenty years. I am about to introduce a second edition of one soon. I have forgotten more about my audience than you, or Amazon, or AAAG ever knew. I don’t need publishers and I don’t need a $75B corporation to price rig the market because it wants to keep pressure on the larger publishers, who will be able to price their books as they see fit while I’m placed in a stinking $7 roach motel.

    +++ I love the phrase “Amazonium Codexorum” by the way. Every time I see it, I can’t help but think of some dark tome bound in human skin and written in blood that Jeff Bezos is using to cast his evil black magic to raise the dead and dominate the world. You seem to be thinking that Amazon is planning to create some bureaucracy that gives thumbs up or down like a Roman Emporer on a case by case basis on whether they’ll be allowed to price above $10. +++

    Since Amazon has not explained how the codex will operate despite its announcement of it in July, we are free to speculate.

    +++I don’t think that’s the case. I believe it’s far more likely that they’ll try to institute a pricing range, much like KDP, that aims to find an optimum price for maximizing revenue for these works and incentivizes it by paying higher percentage in the preferred range.

    That’s nice. More price rigging, and the smaller my audience, the more Amazon screws me over with a higher retail usage fee. Wonderful. Amazon. For the indies. If any of you were dumb enough to sign that petition to Hachette, you should all be feeling rather used by now. Because you were:

    http://www.rule-set.com/ricks-blog/amazon-vs-hachette-its-over-and-what-really-happened-and-aaag-owes-indies-and-authors-an-apology

    http://www.rule-set.com/ricks-blog/hugh-howey-serves-up-a-turd-to-indies-but-does-polish-it

    +++ As for high-cost-to-produce nonfiction, I’m not sure why you assume $9.99 isn’t sufficient to generate a good return unless you’re presuming a market with a hard ceiling, i.e., a strictly limited potential paying audience. +++

    Because I, unlike you, have 20 years practical experience with the issue.

    +++ Amazon is known for its commitment to low prices. If you have a project that needs high or, at least, higher pricing, the low price store may not be the way to go. +++

    Then the next time Amazon runs around with a petition to be sent to Hachette, it needs to be honest with the me, the press, and everyone else and say that writers dealing with specialized markets aren’t welcome on Amazon and should ignore the petition and not introduce a phony “research” statement about how $9.99 is the optimal price for E-books.

    +++ I’d dispute that you can’t make a good return on $9.99 +++

    And I, and thousands of other writers who address particular markets, would dispute that you know anything about the dynamics of that class of publishing.

    Rick Chapman
    http://www.saasuniversity.com
    Author “SaaS Entrepreneur: The Definitive Guide to Success in Your Cloud Application Business”
    Read Excerpts from all 10 chapters at http://www.saasentrepreneur.com
    Author “Rule-Set: A Novel of a Quantum Future.”
    Author “In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters” (Apress, a Springer imprint)
    Author The Product Marketing Handbook for Software, all editions

    • “A payment made for the use of property, especially a patent, copyrighted work, franchise, or natural resource. The amount is usually a percentage of revenues obtained through its use.”

      That’s from an investor site. Let’s see, copyrighted work? Check. A percentage of revenue from its use? Check. Kinda looks like a royalty. The thing is, I don’t care. It’s 70% (or 35%) of the gross. Is it your position that Amazon’s cut is taxable income we should be reporting? But then it’s a business expense. That is, unless you’re a hobbyist then it’s something else entirely. If you want to discuss practical reality, I’m down with that. If you want to discuss the intricacies of tax preparation, call my accountant. I feel the same way about this as I do about lawyers. Anyone who represents themselves has a fool for a client. Anyone who does their own taxes with respect to this stuff has a fool for a client. Hire a quality professional. I’m not going to pretend to understand the conflicting intricacies of tax law. That’s what I pay them for. But if you’re asking me does Amazon pay a royalty or charge a retail use fee, it’s probably both. I’d have to see how they filed their taxes. Publishing’s royalty structure may be 200 years old but a company doing what Amazon is now wasn’t even a factor in that establishment. Settled law is only settled until it isn’t anymore. Lots of things have been settled law then became unsettled. Agency-type pricing, for instance, spent a good chunk of time as per se illegal.

      Could you kindly explain what world it is where I can walk away from a publishing contract in the time it takes me to click “unpublish” on Amazon with no consequence or restriction on what I can do with the work afterward? I read the article you linked to. I’m presuming your point is because there’s no exclusive or long standing title transfer, then my selling on Amazon is not comparable to a contract with a publisher, therefore my comparison isn’t valid? Otherwise I don’t know what you’re saying here. I know precisely how publishing works. That’s why I’m not signing those contracts. A position you actually advocated for in the very same article. Amazon’s non-exclusive license isn’t that different from, say, Hachette’s exclusive one. You seem to really like semantics.

      I agree with you that the areas relating to a sale of digital properties isn’t settled law. I hope not because what we have now sucks and it steals rights from consumers, mimicking the model software producers established. Thanks for that, by the way. But if I can’t argue that title transfer and resale rights don’t follow with a sale because it’s an area of unsettled law (even though it’s plainly obvious that’s what’s going on) then you can’t very well argue anyone is outright buying ebooks, wholesale or otherwise, for the same reason. Oddly, I’d prefer if they were buying wholesale outright. The licensing agreements are a scam that rips off customers. I sincerely hope those things go down in flames once this is settled.

      Amazon is selling the books. They are collecting the money. They maintain the store front. They handle returns. They are most certainly paying me a cut of the revenue. Is their cut an expense? Sure it is, in the same way a publisher’s 80% cut is an expense. That’s the cost to me to reach market depending on which way I choose. There’s no tangible difference between Amazon, who pays out on a sale by sale basis, and a publisher who gives you an advance, covers some production costs then retains your cut on a sale by sale basis to recoup it. It’s the same damn thing. You’re ultimately paying for everything through the publisher just like you are through Amazon. About the only good thing I can say about publishers is that they didn’t go full-music industry and demand repayment for uncovered advances in most cases.

      I didn’t throw you under the bus. I differentiated between indies who are strictly fiction and not. In fact, I said repeatedly that writers of the type of work you’re talking about are an under-served element of a young industry and that better processes for that kind of work still need to be developed. I suggested one such possibility, a sliding scale royalty instead of a cliff, but you didn’t seem to like that much. I don’t know what the answer is ultimately going to be, but you can bet it’s not going to be all sunshine and puppy dogs. Some adaptation and adjustment is going to be needed, just like with all of this stuff. There is no easy one-to-one transition.

      I’m not disagreeing with you about the petitions. I don’t support either. I’ve criticized both. It is unseemly, in my opinion.

      When you say writers of specialized work aren’t welcome, Amazon themselves contradicted that by saying they recognize some specialized books may need to be priced higher. You take that to mean they’re instituting some insidious codex for pricing. I take that to mean they recognize these books are under-served and are going to address that at some point. Maybe it will be as draconian as what you fear, maybe it won’t, but we won’t know until we actually see some specifics. I’m not willing to jump to the worst case scenario based upon one sentence that may or may even imply what you think it does.

      One last thing, I’m glad you brought up the old maxim “time is money.” I am familiar with that. I’m also familiar with an even older maxim, “don’t piss down my back and tell me it’s raining.” Time is money does not mean every minute you spend writing should be itemized and paid out in a dollar figure. It means you’re time is better used directed towards the ends of producing value. When you write something, your time is compensated for by the IP you create, which you can then exploit however you see fit to generate revenue. The only way you’re losing money is if you give up a sure thing job or some other paying activity to specifically use that time to write. And even then, it’s only a loss if you can’t exploit the IP you create in excess of what you gave up. Counting up the number of hours spent writing and acting like there’s an entitlement to be paid an hourly wage for that is baloney. If I’m employed by someone and they want me to work a 60 hour week, you can be damn sure I’m going to be paid for those hours. All of the value created from my work in those conditions goes to the employer. The only value I can extract from that is in a hourly wage form. When I’m putting in that time for myself, it’s sweat equity. I don’t owe myself a dollar figure and, if I’m doing it right, every minute I spend is, in fact adding value for me, be it in creating IP to exploit or exploiting IP I’ve already created. I believe in real figures, money actually spent out of pocket and money actually brought in through sales or what have you. Mythical notions of dollar values attached to time usage is of no value to me when I’m working for myself. What matters to me is if I’m using that time wisely in ways that produce revenue or provide opportunities to produce revenue in the future. Time is valuable but it’s only money if you can find a way to generate it from how you’re using that time.

      • +++ That’s from an investor site. Let’s see, copyrighted work? Check. A percentage of revenue from its use? Check. Kinda looks like a royalty. +++

        No, it does not. This looks like a royalty:

        +++ A royalty (sometimes, running royalties, or private sector taxes) is a usage-based payment made by one party (the “licensee”) to another (the “licensor”) for the right to ongoing use of an asset, sometimes an intellectual property (IP). +++

        Unlike Amazon’s licensing claims, in book publishing the issue of licensing is settled law.

        +++ The thing is, I don’t care. +++

        And the courts and the tax regulations are indifferent to your indifference. In the real world, your theory of “royalties” would be laughed out of court. For those of us who live in this universes, this is an issue of basic fact.

        +++ Could you kindly explain what world it is where I can walk away from a publishing contract in the time it takes me to click “unpublish” on Amazon with no consequence or restriction on what I can do with the work afterward? +++

        If you have a “standard” publishing contract, you can’t. Since Amazon is not a publisher and has never paid you any royalties, you can. This is the real world, not the alternative universe you postulate and which does not exist.

        You DO realize that you just made my argument for me?

        +++ But if you’re asking me does Amazon pay a royalty or charge a retail use fee, it’s probably both. +++

        And this is completely wrong. As you just demonstrated.

        +++ you can’t very well argue anyone is outright buying ebooks, wholesale or otherwise, for the same reason. +++

        That is exactly what lawyers opposed to Amazon’s licensing claims will argue. I don’t think they’ll check in to ask you if they can do that. We’ll see how it turns out.

        +++ Is their cut an expense? Sure it is, in the same way a publisher’s 80% cut is an expense. +++

        Wrong. Publishers are expected to provide services in return for royalties. You can argue the value of those services, but there is nothing to argue about with Amazon because nothing is what you get. Amazon does not publish indie books. It provides zero publishing services. It is an expense to your bottom line, that is all.

        This is not a disputable point in court, in tax law, and in the real world. As you have shown us.

        +++ I suggested one such possibility, a sliding scale royalty instead of a cliff, but you didn’t seem to like that much. +++

        Why should I like a a system that penalizes me for having a limited audience and takes more money from me the smaller my audience is, thus forcing me to price my book higher because it is specialized?

        No intelligent author would like such a system.

        +++ When you say writers of specialized work aren’t welcome, Amazon themselves contradicted that by saying they recognize some specialized books may need to be priced higher. +++

        I’m glad a $75B dollar corporation thinks it should price rig a market. As for contradictions, Amazon announced the codex, not me. Currently, I’m still stuck in the stinking $7 roach motel.

        When are they going to announce how the codex works? I can’t wait to find out the “legitimate reasons!”

        +++ Counting up the number of hours spent writing and acting like there’s an entitlement to be paid an hourly wage for that is baloney.+++

        What a nonsensical claim! Writers have to live. If my time doesn’t translate into real income and sales, I will be unable to write.

        +++ I believe in real figures, money actually spent out of pocket and money actually brought in through sales or what have you. Mythical notions of dollar values attached to time usage is of no value to me when I’m working for myself. +++

        And anyone who takes the above seriously is probably dead from starvation. And in high tech, anyone who doesn’t factor in the value of their time when calculating what their sales and marketing costs are usually referred to by such terms as “naive,” “newbie,” and “unemployed.”

        Rick Chapman
        http://www.saasuniversity.com
        Author “SaaS Entrepreneur: The Definitive Guide to Success in Your Cloud Application Business”
        Read Excerpts from all 10 chapters at http://www.saasentrepreneur.com
        Author “Rule-Set: A Novel of a Quantum Future.”
        Author “In Search of Stupidity: Over 20 Years of High-Tech Marketing Disasters” (Apress, a Springer imprint)
        Author The Product Marketing Handbook for Software, all editions

      • Funny, I’m not starving to death. I’m not sure how the software industry functions but I also said I’m not calculating my time into a dollar figure when I’m working for myself. That’s as a sole proprietor. I could do so, I just don’t see any reason to because it’s not relevant. I can work 20 hours this week or I can work 50. That has no bearing on whether or not the return I get from either of those is good or bad. Obviously, I’d have higher hopes for the 50 hour model but I may not get it. That doesn’t mean I’ll continue to indiscriminately dump time into things going nowhere. Time is valuable if used properly but there is a point of diminishing returns. I dont need a stopwatch to tell me that. What I’m saying is calculating that I spent 4 hours writing today at a $20 per hour rate means that I’ve now got to generate $80 more in revenue to break even is stupid and a waste of time. That doesn’t mean time is valueless or I’m ignorant of it, it means there’s no basis in reality for calculating time unless it’s for an expense report, a time sheet or some other method of recompense. You have no idea what the value of your time is for a specific product until after you’ve made sales. Anything before that is an estimate. One that has no meaning when I’m effectively billing myself. Why would the publisher me pay the writer me $20 an hour when I could pay him $8 an hour and keep the rest? Better yet, why couldn’t writer me decide he’s donating his time for free? It’s all my time and it’s all my money. If I need a figure for some paperwork or tax reason or a side job, I’ll figure it out. I already said, if I’m billing someone else for that time, then damn right, keep track of that. But strictly for myself, there’s no reason to. You seem to believe that every hour I spent writing is taking the place of an hour I could’ve been earning money in some other pursuit. That’s the same fallacy as every pirated download is a lost sale. Some of those hours, if not many, are time that would’ve been spent watching old Six Million Dollar Man reruns or some other such thing. That time was producing $0. Now it’s producing IP that I can use to make real money. Trying to attach a specific dollar figure to that is pointless unless, as I said, I actively walked away from something that was going to pay me during those hours. Not keeping a time clock in my living room doesn’t change the fact that the more efficiently I get a task done, the higher the rate of return is going to be. Again, time is valuable but it’s not actually money until you sell something or can bill your hours to someone else.

      • +++ Funny, I’m not starving to death. +++

        I hope not. That would be grim.

        +++ What I’m saying is calculating that I spent 4 hours writing today at a $20 per hour rate means that I’ve now got to generate $80 more in revenue to break even is stupid and a waste of time. +++

        I hardly think so. In fact, I’m going to put up a model on http://www.rule-set.com/blog and provide a basic spreadsheet that will enable you to do just that. Time is money. If you don’t measure your ROI and assign a value to your efforts, you’re making a mistake, IMHO. Once you see what your time “costs,” it helps you to understand what you’re doing and if it’s working.

        I’m going to let this be my last post in this thread! It was a pleasure talking with you and I hope the readers enjoyed the back and forth.

        rick

      • Yeah, man. I appreciate the arguement. I have to say, I think you’ve got me on the time thing. I was halfway through that second reply and it hit me, I got nothing to support this other than I hate clocks. And I suspect “I can tell how many hours I worked today by the position of the sun in the sky” wouldn’t be very effective. I think what I’m saying is that unless you have a good sample size to draw from, you can’t really know what the value of your writing time is in that sort of granular, hourly way. You can assign a value or estimate one from existing examples but it’s still basically a guess. An educated one, hopefully. Like Einstein said, time is relative. All writing time is not created equal. The value in it comes from what you later do with what you produce. I prefer to look at it as time spent acquiring assets. Taking those assets and turning them into cash is a different, later process, coming from a different mind-space. Both are crucial but I don’t want the one intruding on the other. Too much formality introduces concerns that otherwise wouldn’t be there at a stage of creation where, I believe, they shouldn’t be. That’s particularly important, I think, in situations where you’re wearing multiple hats. Sometimes there has to be clear lines of demarcation. For me, one of those is not putting a clock (or a specific dollar value) on my time spent writing. And it’s worked very well for me so far.

      • I don’t think you need to be overly complex. An intelligent person can make an informed decision on what they think their time is worth. Also, there’s a reason God invented the spreadsheet! Stick in your own values and see what you think. The basic model I’m creating will enable you to do that and analyze the results and make some personal decisions. Educated guesses, as you said.

        I think educated guesses are very useful.

        rick


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