June 15, 2012

What does it cost to deliver an ebook?

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In a much-discussed post at Boing Boing, Cory Doctorow focuses on author Andrew Hyde, who recently “wrote and self-published a great-looking travel book” via the usual ebook retail channels but later experienced “sticker-shock” after learning that Amazon was charging huge fees to deliver the ebook to customers.

Amazon’s total fees ate away almost a third of Hyde’s royalty: The book retails on Amazon for $9.99, and under the 70% percent royalty plan Hyde imagined he would get $7. But Amazon charges $2.58 per download to deliver the ebook, with the author’s royalty being calculated on what’s left after the delivery fee is deducted. Hyde’s total file was just 18.1MB.

The download fees are of course part of Amazon’s fine print, which explains here that to get its Kindle Direct Publishing “70% Royalty Option”:

Delivery Costs are equal to the number of megabytes we determine your Digital Book file contains, multiplied by the Delivery Cost rate listed below.

Amazon.com: $0.15/MB

We will round file sizes up to the nearest kilobyte. The minimum Delivery Cost for a Digital Book will be $0.01 for sales in US Dollars, £0.01 for sales in GB Pounds, and €0.01 for sales in Euros, regardless of file size.

What struck Hyde as unusual is that few of Amazon’s competitors charge such steep fees (see the chart above) and, perhaps more confoundedly, Amazon retails various online file delivery services separately at a much lower cost than what it passes on to users of its Kindle Direct Publishing program. According to Hyde, “Use Amazon to run your website: .01 to download a file. Use Amazon to sell your book: $2.58 per download + 30% of whatever you sell. Amazon’s markup of digital delivery to indie authors is ~129,000%.”

In the comments section of Doctorow’s post, there are a number of interesting readings of these fees.

Commentator Nathan Hornby writes that Amazon just has “the biggest wedge of cheese, and [they] are very good at selling things—which to me at least has value, value that results in more income—which is a good thing for everyone.  The commission rates you see above are perfectly normal in the digital asset marketplace world.”

To which Doctorow retorts: “Presumably many of those costs are also present in S3 [an Amazon hosting service] which charges 1/12,000 of Kindle rates for delivering bits on like-for-like networks (I’d bet good money that S3 is the back-end for Kindle delivery).”

Perhaps, one reader asks, the fees cover the cost of adding DRM to the ebook file?

And how much do you think it costs to encrypt an 18Mb file?

Let’s say an 18MB file takes 2 seconds to encrypt (that’s a conservative estimate).  You can buy an hour of computing time on Amazon’s EC2 for 8 cents.  Ignoring that Amazon can probably get a discount on EC2  time, the cost of encrypting an 18MB file is approximately $0.00004.  (or 4 cents for each thousand books sold).

Not worth considering.

Commentator Chris Drouin suggests that the fees are shared with—or cover the cost of—Amazon’s free-for-consumers 3G cellular network, Whispernet.

I suspect that the ‘delivery fee’ is for their 3G Whispernet service and that at least a portion goes to their cellular partners.  Granted, I also suspect an awful lot of books are delivered via wi-fi now (particularly on the Kindle Fire and the wi-fi only Kindles), so this may be the modern equivalent of the RIAA’s “record breakage” surcharge on album sales.

Another commentator proposes a simpler explanation: that Amazon knows the value of being on Kindle and charges top dollar for access:

It’s reasonable to assume that the 30% they charge is not for the delivery of bits, but rather for the Amazon website access. They have a lot of overhead to run the site. And they have a significant market presence, so people looking for ebooks are drawn to the Amazon site.

Raw bits cost about $.000000000001 each to deliver. Amazon knows that. We know that.

 

Kelly Burdick is the former executive editor of Melville House.

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