Indie Author Pays Dearly for Misunderstanding Kindle Terms and Conditions

UPDATED 3 August 2014

It was reported that Amazon had updated its pricing policy and would now be paying 70% for books priced below $2.99 if the price were the result of price-matching a competitor (this is true). An indie author was blogging (read: bragging) how this new policy could be used to trick Amazon into paying a 70% royalty for a book normally priced in the 35% royalty category (ie., books priced below $2.99 or higher than $9.99): the trick, it was suggested, was to price one’s book at $0.99 on, for example, B&N and $2.99 on Amazon then have someone inform Amazon of the lower B&N price. Thus, when Amazon lowered their price to match B&N’s price of $0.99, the author would still be paid the 70% royalty and not 35%.

Instead, what happened was that Amazon booted said author off the Kindle site for violating its Terms and Conditions which state you cannot deliberately offer your book to a competitor at a list price lower than you offer your book to Amazon.

What makes the author’s actions even stupider was that she didn’t understand (or perhaps even read) the whole Kindle contract or the Kindle Pricing Page; scroll down to Section 5 and you will find this:

v. Non-Compliance: If at any time your Digital Book does not meet the requirements for the 70% Royalty Option, the Royalty for the Digital Book will be as provided in the 35% Royalty Option and we can adjust previously reported or paid Royalties based on the 35% Royalty Option.

If the price match is the result of deliberately lowering your price on another site, and this results in your book falling into the 35% category, that is what you will be paid. Amazon will only continue to pay you 70% if the lower price is not your fault; i.e., a retailer using the distributor discount model discounts your book to beat Amazon’s price. And if Kindle’s system accidentally pays you 70% for any reason, rest assured it will sort out its error and refund itself from your account.

This incident is yet another example of the dangers of trying to manipulate Amazon’s system and thinking a) that you can get away with it, and b) that system manipulation is a good substitute for a proper marketing plan. It isn’t.

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5 thoughts on “Indie Author Pays Dearly for Misunderstanding Kindle Terms and Conditions”

  1. Let me get this right. The new policy is that they will pay %70 on books that they previously only pay 35% ( 9.99) for in order to compete with the competition. But if, as a result of price-matching, your book goes into the 35% category, that is what Amazon will give you…even though they have changed their policy to pay 70% on books that previously fell in the 35% category? Am I not understanding something because it sounds like no one is going to get paid 70% regardless of price-matching or not. Which makes the new policy bogus.

    I need a clearer understanding of this policy.

  2. Hi Elizabeth:
    Amazon has not changed their policy. What happened was an author thought there was a new pricing policy, acted upon her misunderstanding in a way that violated Amazon’s Terms and Conditions, and was then foolish enough to blog/brag about it.

    Amazon’s pricing policy has remained essentially unchanged since inception: if your ebook’s price places it in the 70% royalty category ($2.99 to $9.99 in select territories) then 70% is what you are paid. However, if your ebook is offered for sale on a competitor site for a lesser amount and Amazon lowers its price to match and, in doing so, this brings your ebook into the 35% category, then you are paid 35%.

    For example, say your ebook is priced at $3.99 on Amazon and has a delivery fee of $0.08. You make a sale in the U.S., a 70% territory. You would be paid 70% x ($3.99 less $0.08), or $2.74.

    However, you decide to have a promotion on B&N and offer your book there for $1.99. Amazon’s web bots find the lower price on B&N and lower the price of your ebook on Amazon from $3.99 to $1.99. Since $1.99 falls within the 35% royalty category, any subsequent sales would pay you 35% of $1.99, or $0.70 (there is no delivery charge for books paid at 35%).

    Hope this clarifies things.

    Michelle

  3. Amazon now offers a service where Prime members can “borrow” a book for free. The company has set aside a six million dollar fund ($500k/month) to reimburse the authors, who must promise to give Amazon exclusive access to the book for a minimum of 90 days. The amount received will vary, and will almost certainly be less than the amount the author would have earned from a sale. Authors with a number of books can benefit by exposing readers to their work, but I believe if the writer only has one book available, there is little reason to sign up for it.

  4. Wow, I never realized Amazon boots people off KDP, but I understand. I’ve upped the price of books on other channels where it would take longer to update (especially through Smashwords)–and got the 70% rate for my book sold at 99-cents–but I was never trying to cheat the system.

  5. Hi Lewis: you may find at a later date that Amazon will adjust your earnings to deduct the additional 35% it didn’t need to pay you. I have found the Amazon system is quite quirky that way; there is a lot of automation that is later adjusted manually.

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