by Raelene Gorlinsky
The financial picture for e-publishers and authors keeps getting more complex, as the digital market expands and develops. For a long time, ebooks were sold from the e-publisher's site and a few vendor sites such as Fictionwise and All Romance eBooks, to name just two. Then the BIG boys got in the game - Amazon Kindle, Sony Store, Barnes & Noble.
The complexity in this is the income a publisher and author get for sales, depending on where that sale took place. If your ebook is sold direct from the publisher's site, you as author normally get X % of the gross cover or sale price of the book, as defined in your contract. But third-party ebook vendors function just like print bookstores - they take a very large percentage of the cover price of the book. And by large, I mean typically anywhere from 40% to 65%. So that leaves a lot smaller net amount for the publisher to receive and then pay author royalties on.
You quick-minded and business-oriented authors should have immediately made the intuitive leap to understanding that this is the whole reason behind why ebook prices have become so high. In order to get the same money they used to get for direct sales from their own website, e-publishers (especially those with older contracts where royalties are based solely on gross cover price) have had to basically double their book prices to get that same income now that large percentages of their sales are at third-party vendors. But maybe that's a whole other post for another day.
Rather than try to give a bunch of examples of how the money works myself, let me point you at an excellent post on the topic. Author Moira Rogers (who is actually a collaboration of two writers) provides very clear explanations and numbers. Every author and aspiring author needs to understand how their income will work, so please go read this.
Why 3rd Party Royalty Rates Matter