Digital books have proliferated with the invention of e-readers and e-reading apps over the last decade. Many of these books come from self-publishing–authors who write and publish the books themselves, eschewing traditional publishing houses and print copies. Some people do it as a way to get their words out there, while others use it as a way to make money on the side.

Either way, it is a market that is quickly becoming oversaturated with books that aren’t always of the highest quality, and often contain typos, inaccurate information, and in many cases, are plagiarized from other sources. Facing negative feedback, Amazon is changing the way people pay for their books by creating a by-page payment system. Read on to learn more about Amazon’s latest self-publishing policy.

Self-Publishing on Amazon

Self-publishing represents a huge part of Amazon’s profits–nearly 31 percent of e-book sales come from self-publishing. Books start at just $0.99 and jump up from there, with many books offering free promotions or BOGO opportunities for serialized works, though most works hover around $2.99-$3.99. In Amazon’s current model, readers generally buy the books outright–that won’t change; however, what will change is the way the Amazon Lending Library works.

It isn’t just a huge opportunity for Amazon, but rather a huge opportunity for the writing and reading communities. People who may not have been able to find publishers or agents are now able to at least get their words out there. And who knows what will happen? Self-publishing was E.L. James’ first step toward huge success.

Problems

Amazon has said that the program wasn’t actually for the readers, but instead came from the outcries of writers, who previously were paid $1.29-$2.88 every time that their books were borrowed through Amazon’s Lending Library program.

We’re making this switch in response to great feedback we received from authors who asked us to better align payout with the length of books and how much customers read. Under the new payment method, you’ll be paid for each page individual customers read of your book, the first time they read it.

But certainly there were readers involved in the complaints as well. Many were complaining that books weren’t to the level they were expecting or that they weren’t quality publications. Many thought that the books were just packed with “key words” that would simply rank high on the search, but that the actual quality of the pages wasn’t high.

Pay by Page

The idea behind Amazon’s new policy of pay by the page is simple: authors will get paid simply for the number of pages that a person actually reads. The thought behind it is that books that aren’t quite up to the standards readers expect won’t have as many people reading them cover to cover, so authors are incentivized to raise their games. It also offers a great chance for writers to get feedback and see where people are leaving their work–which is great because authors can edit anything they’ve posted to Amazon.

Starting on July 1, authors who specifically publish through something called the KDP Select Program will start getting paid per page, which is quite a large change from what they used to do. With the old method of payment, Amazon would simply split up the money that they made among authors based on the number of times their books were borrowed through one of Amazon’s Kindle options–either Kindle Unlimited, which is a sort of library subscription that costs $9.99 a month, or the Kindle Lending Library, which is available to Amazon Prime members.

Now, however, authors are paid for the amount of time the screen remains up. Amazon isn’t forcing authors into the program, but they can choose to opt in.

Amazon has had to do some work to get everything ready for the new program, which is only available through the Kindle Lending Library, including a standardization of page lengths and text sizes. TechCrunch warns that long dedication pages or quotes at the start of your book won’t help earn you money, either:

We calculate KENPC (Kindle Edition Normalized Page Count) based on standard settings (e.g. font, line height, line spacing, etc.), and we’ll use KENPC to measure the number of pages customers read in your book, starting with the Start Reading Location (SRL) to the end of your book. Amazon typically sets SRL at chapter 1 so readers can start reading the core content of your book as soon as they open it.

The program, which does cap the amount of money an author can make at $3 million per month, is currently in the first few weeks of testing, and there have been few initial reactions.

Criticism of Pay by Page

The idea hasn’t exactly gone over well with some authors. Hari Kunzru, author of “The Impressionist,” revealed his thoughts that the new payment system “feels like the thin end of a wedge.” He later went on to explain that he felt like Amazon was trying to assert its dominance over small-time writers.

Peter Maass, author of “Love Thy Neighbor” and “Crude World,” offered up a valid point, writing, “I’d like (the) same in restaurants — pay for how much of (a) burger I eat.”

Authors may be making less per book. Inquisitr explains: “That means if a book has a KENPC of only 100 and someone reads it from front to back, an author make 60 cents for the entire download. If they only read the first 10 KENPs, then the author makes six cents.”

A nameless literary agent explained to the Guardian why this could be a problem: “A lot of self-published romance authors are disabled, stay-at-home mums, or even a few returned veterans who work in the field because a regular job just isn’t something they can handle. People are shedding a lot of tears over this.” The new model could very well mean that these people will get paid less, especially as they tend to be the people who writer longer, novel-length books instead of “how to” guides that many “Professional Self Publishers” work on.

Just like any other situation, there are likely to be people who are going to take advantage of the system. People may make books that are significantly longer to take advantage of the money, or they may post shorter chapters that have fewer words per page. Running with that thought, the Guardian highlights an interesting problem:

But now we’re getting into murky territory. It is impossible to write a book that every reader will enjoy. Donna Tartt’s “The Goldfinch,” close to 800 pages long, failed to keep many Kobo readers engaged all the way through; data showed that around 55 percent of readers did not finish it. Yet “The Goldfinch” won the Pulitzer Prize for fiction. Do the figures prove that Tartt needs to learn from her readers and write a “better” book next time, despite being awarded one of the highest literary honours? Should she follow the numbers, or write the books she wants to?

Which leads us right into another problem: Do certain books have an advantage over other books under Amazon’s new policy? It would appear so as it not only has to do with length, but also with the genre of story. Memoirs and thrillers–known as page turners–would have a clear advantage over historical books or criticism, as they tend to entice readers to stick around the longest.

Conclusion

So will Amazon’s newest system benefit writers and readers? It truthfully depends on who you are and your writing style. Readers have the most to benefit from the system, especially if they use the Lending Library and can just return the book. However, it could also push writers to become more serious about what they do.

As the program is still in its infancy, there is no data that can explain how the system is fairing for authors or Amazon; however, Amazon is likely not willing to give up a large piece of profit, so if there are problems, changes will be swift.

Resources

Inquisitr: Kindle Unlimited KENPC Explained: Self-Published Authors Could be Looking at Massive Pay Cut

Kindle Direct Publishing: Kindle Unlimited Pages Read

Live Mint: Thrillers at an Advantage in New Amazon Royalties System

Tech Crunch: Amazon Tweaks Kindle Publishing Royalties to Encourage Page Turners

Guardian: Pay-Per-Page: Amazon to Align Payment With How Much Customers Read

Business Journal: Self-Published Authors Hoping For a Real Page-Turner

Gizmodo: Amazon Will Soon Start Paying Authors Based on e-Book Pages Read

New Republic: Amazon’s Pay Per Page Deal is No Big Deal

Publishers Weekly: Surprising Self-Publishing Statistics

Reuters: Amazon to Pay Self-Published Authors Based on Pages Read

Smashwords: 2014 Smashwords Survey Reveals New Opportunities for Indie Authors

Atlantic: What If Authors Were Paid Every Time Someone Turned a Page?

Reader’s Digest: How Can the Average Writer Make Money Self-Publishing e-Books?

Noel Diem

Law Street contributor Noel Diem is an editor and aspiring author based in Reading, Pennsylvania. She is an alum of Albright College where she studied English and Secondary Education. In her spare time she enjoys traveling, theater, fashion, and literature. Contact Noel at staff@LawStreetMedia.com.

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One of the biggest hurdles to overcome in terms of providing education for lower-income American children is the sheer lack of resources and money that some schools and states have to spend on things like books and libraries. However, a new plan proposed by the Obama Administration–and involving the help of large book publishers and others–is aimed at closing some of those gaps. The new goal is to provide thousands of free e-books for low-income children.

The initiative was proposed by President Obama at Anacostia Library, part of a low-income neighborhood in Southeast Washington, D.C.

The plan has a lot of high profile players involved. In addition to the Obama Administration, the five major publishers–Verlagsgruppe Georg von Holtzbrinck’s Macmillan, CBS Corp’s Simon & Schuster Inc, Penguin Random House, Lagardere SCA’s Hachette Book Group Inc, and News Corp’s HarperCollins Publishers LLC–have all signed on to help. Overall, 10,000 books will be added to the list that will be provided to low-income children via an e-book format. The books will be chosen from volunteers from the Digital Public Library of America. Yet another organization lending a hand will be the New  York Public Library, which has agreed to develop the application through which the children will be able to access the works. Overall, the plan allots $250 million for the project.

Both libraries and schools are beginning to provide more hardware so that students can access the internet–presumably these e-books would be read on those. This is part of Obama’s ConnectEd program, which encourages using technology to promote and further the American education system. Additionally, tech leader Apple recently pledged to donate $100 million in tech devices to lower-income schools.

One of Obama’s domestic policy advisors, Cecilia Muñoz, pointed out how odd this push for e-books may seem to older American generations, stating:

It’s very different than from our generation. More and more, you’re going to be seeing kids using devices, and what we’re doing is making sure that there’s more books available on those devices.

That assessment does seem accurate. But given that low-income families have significantly less access to the internet and corresponding devices with which to access it, the move to incorporate schools and libraries into the plan is a good call.

The exact specifics of the plan seem to still be up in the air. Whether or not the books will only be accessible in some places, for example, such as libraries or schools, or whether children with accessible devices will be able to access them at home, doesn’t seem to be set in stone. Whether or not the books will be “loaned” like from a library, or distributed freely also seems undecided.

Regardless of how those details are sorted out, however, this certainly seems like a good move to provide more students with access to books. Moreover, the partnership with publishing companies and public institutions is laudable. Someday I hope we can reach a point where every child has access to all the resources he or she needs to reach educational success–this is a small, but great step, in the right direction.

Anneliese Mahoney

Anneliese Mahoney is Managing Editor at Law Street and a Connecticut transplant to Washington D.C. She has a Bachelor’s degree in International Affairs from the George Washington University, and a passion for law, politics, and social issues. Contact Anneliese at amahoney@LawStreetMedia.com.

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Last week, Federal Judge Denise Cote approved a class action settlement agreement in which Apple may begin paying $400 million dollars to as many as 23 million consumers. The suit regarded antitrust law violations that it committed when it conspired to raise e-book prices with book publishers.

According to Publishers Weekly, the settlement terms are as follows:

Apple will pay $400 million to consumers only if the liability finding survives the appeal process; it will pay $50 million if the liability question is vacated or remanded for further proceedings. If the liability finding is reversed on appeal, Apple will pay nothing.

The actions that precipitated the lawsuit started a few years ago. Before 2010, the big-6 publishers (now the big-5 publishers since the Penguin-Random House merger) used the wholesale model to sell e-books. Under the wholesale model, publishers recommended a retail price to a wholesaler and sold the book to the wholesaler for a certain percentage off the publisher’s recommended retail price. The wholesaler then sold the book to the retailer, who set its own e-book prices. For example, a publisher could set a recommended retail price for a book of $15.99, sell the book to the wholesaler for a fifty percent discount of $7.99, and the retailer could then sell the book at $10.99.

Amazon then began selling e-books at $9.99, and publishers initially had trouble competing. In 2010, Apple convinced the big-6 publishers to change business models, and the publishers entered into the agency model. Under the agency model, publishers set the retail price  of an e-book and use retailers as agents to sell the e-book. The retailer then receives thirty percent of the sales price of the e-book, and the publisher receives the remaining seventy percent. For example, a publisher can set a retail e-book price at $15.99, and the retailer must sell the e-book at $15.99; however, the retailer receives thirty percent of the sales price, and the publisher receives the remaining seventy percent.

The Department of Justice soon accused five of the big-6 publishers and Apple of fixing e-book prices to thwart Amazon’s $9.99 e-book price, and the publishers and Apple were later found guilty of violating the Sherman Act. Penguin, Hachette Book Group, Macmillan, HarperCollins, and Simon and Schuster paid $75 million, $31 million, $25 million, $19 million, and $17 million in damages respectively to e-book consumers, for a grand total of roughly $167 million in damages.

The potential $400 million class action settlement with Apple is in addition to the $167 million paid in damages by the publishers, so all eyes in the publishing industry will be focused on the Second Circuit on when it hears Apple’s appeal on December 15..

This class action settlement comes at an interesting time in the book publishing industry.  As part of the original DOJ antitrust settlement, Hachette, HarperCollins, and Simon Schuster ended their contracts with e-book retailers like Amazon and allowed retailers to renegotiate the contracts. Moreover, the settlement allowed retailers to return to the wholesale model, and the three publishers also agreed to not interfere with price discounts for two years. Now, Hachette and Simon and Schuster have entered into separate agreements with Amazon concerning e-book prices.

Apple and the publishers are undoubtedly hoping for a reversal, but I don’t think that is likely.  We will just have to see what happens.

Joseph Perry

Joseph Perry is a graduate of St. John’s University School of Law whose goal is to become a publishing and media law attorney. He has interned at William Morris Endeavor, Rodale, Inc., Columbia University Press, and is currently interning at Hachette Book Group and volunteering at the Media Law Resource Center, which has given him insight into the legal aspects of the publishing and media industries. Contact Joe at staff@LawStreetMedia.com.

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For a few months now, retail giant Amazon.com, and book publisher Hachette have been feuding. The most recent development in their fight came on July 30, 2014, when Amazon pushed for Hachette to allow the sale of e-books at a cheaper price of $9.99. The math behind Amazon’s reasoning is laid out clearly on their website. For every book priced at $14.99, Amazon would sell 1.74 more copies if the book was priced at $9.99.  As the saga stretches onward, Hachette’s bargaining power continues to erode, and it’s looking like this will turn into a clear win for Amazon.

The Background

The battle began earlier this year when readers logged on to Amazon only to discover the pre-order button for certain Hachette books, like J.K. Rowling’s “The Silkworm,” had disappeared. Amazon began understocking Hachette books. Customers reported the books they ordered took extra time to arrive. The website recommended users buy a non-Hachette book instead.

Some observers cite these tactics as instances of bullying by the retail giant. Many saw it as a new low, since the company was actively damaging the customer experience. More than 900 prominent authors have staked their positions against Amazon. Stephen Colbert, carried by Hachette, is not just mad, but “mad prime.”

E-book pricing disputes are nothing new. Book publishers have long pushed for an “agency” model of pricing, where the publishers dictate pricing. Amazon instead advocates a “wholesale” model, where retailers set the retail price and can offer discounts. Publishers aren’t fans of these hefty discounts which can give one retailer–like Amazon–a huge advantage.

The “big five” publishers–Hachette, HarperCollins, MacMillan, Penguin Random House, and Simon and Schuster–thought they found a way out of the issue when they signed contracts with Apple in 2010 to ensure an agency pricing model for e-books. Amazon was not happy. The Department of Justice’s Antitrust Division rushed to Amazon’s aid and brought a suit against these companies for price fixing. The publishers all settled out of court, but Apple was found guilty of price-fixing–a decision it is still appealing. Since the settlement, Amazon has been allowed to discount e-books up to 30 percent. But any discount by Amazon comes from their own pocket, which obviously isn’t preferable for the company.

A Lawsuit in the Works?

With the 2012 settlement set to expire this year, it is likely the recent dispute is Amazon’s attempt to open a new window for pricing negotiations. Amazon wants to buffer its own earnings rather than taking a hit from out-pricing competitors. Publishers are fearful Amazon will dominate the market even further, demand lower wholesale prices, and squeeze profit margins to zero.

Despite Amazon’s questionable tactics, it is difficult to see how Hachette could win in an antitrust suit against Amazon. First, Amazon is not a classic monopoly. If anything, Amazon would be a monopsony. While a monopoly occurs when a dominant seller can raise prices of what it sells, a monopsony occurs when the buyer of goods can unlawfully lower the price of what is buys. Both can distort the market, and both can violate antitrust laws.

Amazon controls more than 60 percent of the e-book market and more than 40 percent of new book sales. But simply dominating the market is not an antitrust violation. The precedent for pushing a monopsony case against Amazon does not look promising. There has never been a case in U.S. competition law where a single company was declared a monopsonist. Most scholars today agree the Amazon and Hachette dispute is just that–a typical business dispute–rather than an antitrust violation.

“Dominant Power”

Section Two of the Sherman Antitrust Act, the 1890 Act which regulates anti-competitive business practices, outlaws monopolistic power in the relevant market acquired or maintained through exclusionary or anti-competitive behavior.

By bringing a lawsuit, Hachette would first have to prove Amazon is the dominant buyer in the “relevant market.” It is unclear if the market would be defined as the market for e-books, for Hachette books in general, or for Hachette books online. For Amazon to be the dominant power in the market, Hachette must have no other viable options to sell their e-books. Since publishers do have the freedom to sell e-books through other websites, many argue Amazon cannot be considered a monopsony.

“Anticompetitive Practices”

Secondly, Amazon must have engaged in “exclusionary or anticompetitive practices,” such as refusal to deal or predatory pricing. “Refusal to deal” involves restricting the supply of goods or the methods of buying or selling goods. By partially cutting off Hachette from the market in recent months, the argument could be made that Amazon is refusing to deal. However, courts narrowly interpret “refusal to deal” and are unlikely to see Amazon’s acts as an antitrust violation.

A lawsuit could be brought on the grounds that Amazon is engaged in predatory pricing practices by setting low prices to drive out all other competition. However, the bar to prove predatory pricing is very high. It would be hard to prove Amazon is not simply engaged in legitimate price competition. Since antitrust suits aim to help consumers, low prices are not typically seen as a problem.

Proving predatory pricing usually means proving that suppliers are forced to sell books at such a loss that there is decrease in the overall supply of books for consumers. So far this has not been the case. There has been no reduction in the variety of new books, nor has Amazon driven out all competitors to later jack up prices themselves.

The Upshot

Book publishers realize how little power they have against Amazon, so the recent trend in the industry has been to merge for greater bargaining power. Penguin recently merged with Random House, and HarperCollins bought Harlequin. Bigger publishers mean greater power plays and a better chance for even pricing negotiations with Amazon.

Ultimately it isn’t likely that Hachette has a case against Amazon on its own. If anything, the legal battle may be whether Amazon engaged in deceptive sales practices by saying certain Hachette titles were unavailable. For now, Amazon’s market power itself isn’t hurting consumers’ wallets, and Hachette can still sell e-books through other vendors. The pricing wars will continue, but don’t expect Hachette to win an antitrust suit anytime soon.

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Alexandra Stembaugh is a senior at the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

Featured image courtesy of [Karin Lizana via Flickr]

Alexandra Stembaugh

Alexandra Stembaugh graduated from the University of Notre Dame studying Economics and English. She plans to go on to law school in the future. Her interests include economic policy, criminal justice, and political dramas. Contact Alexandra at staff@LawStreetMedia.com.

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