What readers pay, what writers make

I thought it would be fun to break down the dollars and cents of an ebook sale. Who gets what? What’s Amazon’s haul? What does that legendary 70% royalty really add up to?

Suppose you live here in Washington State in the bucolic Pacific Northwest, and you buy Outrageous Fortunes from Amazon.com (the numbers for other ebook retailers would be similar).

The price is $2.99.

But you notice that your credit card is charged $3.30. That’s the down side of Washington State: a sales tax near ten percent. So you have blessed the people in Olympia with 31 cents, so they can keep the schools open and the buses less late.

So Amazon kicks the $0.31 to Washington State, sends 70% of the $2.99 to me, and keeps the rest — $0.94 — for itself. Amazon’s cut, then, is a little less than a buck.

My 70%, on the other hand, is a hefty $2.05. This is a comparable dollar amount to what an author with a traditional publisher’s contract might receive for the sale of a $15 to $25 book — and there’s your indie revolution that Konrath and others have written so much about.

Hold on, there’s another player involved, and that’s the American government way over in Washington D.C. As long as I’m a sole proprietor, the IRS helps itself to 28% of my royalties, or 57 cents of that $2.05. That leaves me with a post-tax royalty of $1.48.

(The U.S. Government also gets a cut of the $0.94 that went to Amazon, since most of it ends up as income for Amazon employees or vendors. I would estimate 10% to 30%… let’s call it 20 cents, leaving Amazon with $0.74 and giving the U.S. Government a total haul of $0.77.)

The final breakdown of an ebook sale:
$0.31 to Washington State
$0.74 (roughly) to Amazon
$0.77 (roughly) to the United States
$1.48 to me.

All from the $3.30 paid by the reader. I think a better definition of “royalty percentage” would come from what I actually receive divided by what the reader actually pays, or $1.48 / $3.30 = 45%.

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4 Responses to What readers pay, what writers make

  1. Stefon Mears says:

    Also, Amazon deducts a “delivery charge” which varies, depending on the size of the e-book file. It amounts to pennies per copy, but over time, those pennies do add up…

    Mind you, it amounts to pennies for a novel, but novels tend to have few images. A how-to book with example illustrations might lose $0.10-$0.25 per copy. And now they’re trying to move into comics and graphic novels. I wonder how well they’ll be able to keep file sizes down to avoid losing a significant percentage to delivery charges.

    • Steve White says:

      Right… I looked at the numbers, and the delivery cost (which is $0.13 for image-filled Read No Evil) appears to be split between Amazon’s cut and the author’s cut. It looks like I pay about $0.05 of that $0.13. There are devils in these details.

      Thanks for stopping by, Stefon!

  2. Surfsight@aol.com says:

    Interesting breakdown. So the creator and the seller get about 50% and 25%, respectively, of the selling price with govts getting the balance. Considering that one doesnt know how much the retail cost would drop if there were no tax, I think you as author have a good thing going. Particularly since you appear to be making well over 100 K per year, judging from your assumed fed tax rate.

    • Steve White says:

      Hi Surfsight! I wonder if the retail cost would drop at all if there were no sales tax. It might even creep up a bit — but I doubt it. And alas, that 28% is paid by sole proprietors in the United States on even one dollar of business profit. I should probably itemize. Meanwhile, 100K a year is a very nice thought.
      Thanks for your comment!

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