Amazon Unveils New Kindle Royalty Option; Incentive To Keep E-Book Prices Down

As word spreads of book publishers talking to Apple (NSDQ: AAPL) about a possible deal for its anticipated tablet device, Amazon (NSDQ: AMZN) is taking a preemptive strike by offering a plan that gives content owners a greater share of the royalties for e-books sold through the Kindle. The new option completely reverses Amazon’s standard 70 percent take of the revenue split from Kindle e-books. This new pricing plan will become available at the end of June. Amazon is clear that this new pricing plan will be in addition to the standard revenue deal the company offers to authors and publishers and is not a replacement for it. The e-tailer also points out that e-book publishers who choose the new option will receive 70 percent of list price, net of delivery costs. In order to take advantage of the special revenue plan, authors and publishers will have to adhere to a strict set of requirements on pricing and features.

First of all, the new option covers only those books that are priced between $2.99 and $9.99. Also, the e-book’s list price must be at least 20 percent below the lowest physical list price for the physical book. Titles in this plan have to be available for sale in all geographies where the author or publisher has rights. Most importantly, Amazon will not allow books that are sold for less in other stores — both physical and electronic — to participate in the new plan.

Despite these restrictions, the additional royalty option is meant to soften some of the complaints from publishers who have felt that Amazon’s existing revenue share model is tilted to far in favor of the e-tailer.

In its announcement, Amazon points out that authors often receive royalties in the range of 7- to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books. It’s hard to say what impact Amazon’s plan will have on existing challenges from Sony (NYSE: SNE) and Barnes & Noble (NYSE: BKS). But it does show that whatever potential threat is coming from Apple, Amazon is already putting its defense in place. Release