Amazon Publishing? Kindle Direct?

ChatGPT Answers.

I decided to choose this route for my publishing journey and was met with a long convoluted Service Agreement. To be fair I am not going to read it, and I bet you did not read it either. This is one of the few exceptions where ChatGPT is your friend. I ran the entire agreement through it. Getting a simplified summary. I then asked a couple questions, that we as publishers may want to know.

Give me a summary of the agreement:

This agreement governs the terms for publishers participating in Amazon's Kindle Direct Publishing (KDP) program, which includes distributing both digital and print books. It outlines the relationship between the publisher and Amazon, covering several key aspects:

1. General Terms

• Acceptance: By using the KDP program, the publisher agrees to follow the terms. If they disagree, they must withdraw their books from the program.

• Amendments: Amazon can modify the agreement, and the publisher must review any changes. Some changes (like royalties or rights) require 30 days' notice, after which the publisher can withdraw their books if they disagree.

• Termination: The agreement is ongoing until either party terminates it. Amazon may suspend or terminate the publisher's account for non-compliance.

• Account Registration: Publishers must be 18 or older, provide accurate information, and maintain only one account.

• Book Distribution: Publishers must ensure their content meets program policies, and Amazon has the discretion to accept or reject books.

2. Publisher Responsibilities

• Book Withdrawal: Publishers can remove books with 5 business days' notice, but Amazon may still fulfill orders and sell remaining inventory.

• Reformatting: Amazon can reformat books but isn't liable for any errors during the process.

• Marketing & Promotion: Amazon handles all marketing but is not obligated to continue promoting books.

3. Pricing & Royalties

• Pricing: Publishers set a list price, and Amazon may adjust it for different currencies. Royalties are based on the sale price minus taxes and refunds.

• Royalties: Publishers earn royalties based on sales, with payment made approximately 60 days after the sale. Royalties may be withheld or offset under specific circumstances, such as refunds or rights disputes.

• Taxes: Amazon handles tax collection, but publishers are responsible for any income or other taxes on their earnings.

4. Rights & Ownership

• Grant of Rights: Publishers grant Amazon non-exclusive, irrevocable rights to distribute and sell books globally through various platforms. Amazon also has the right to use the publisher’s metadata and promotional material.

• Digital Rights Management (DRM): Publishers can opt for DRM, but Amazon is not liable for its effectiveness.

• Geofiltering: Amazon may restrict book distribution in certain regions.

5. KDP Select Program

• Exclusivity: Enrolling in KDP Select grants Amazon exclusive digital distribution rights for the book during the 90-day enrollment period. The publisher can't distribute it elsewhere.

• Benefits: KDP Select offers benefits like inclusion in Kindle Unlimited and eligibility for Kindle Countdown Deals and free promotions. It also provides a higher royalty rate for sales in certain countries like Brazil, Japan, Mexico, and India.

6. KDP Pre-Orders

• Publishers can set up pre-orders up to 365 days before release. Royalties from pre-orders are paid 60 days after the release date, and the Pre-order Price Guarantee ensures that customers pay the lowest price if the book price changes before release.

7. Kindle Vella (For U.S. Publishers)

• Kindle Vella allows publishers to release stories in installments called "Episodes" (600–5,000 words each). Readers unlock episodes with tokens, and publishers earn 50% of the token price. Royalties are paid 60 days after a month’s episodes are unlocked.

8. Legal Terms & Liability

• Confidentiality: Publishers cannot disclose the terms or Amazon’s confidential information unless required by law.

• Limitation of Liability: Amazon limits its liability to the amount it has paid the publisher in the last 12 months.

• Force Majeure: Amazon is not liable for delays due to unforeseen events like natural disasters.

9. Dispute Resolution

• Disputes are resolved via binding arbitration, not through the court system, and the agreement is governed by U.S. federal law.

How much do we as creators get paid?

1. Royalty Rates for Digital Books

• 70% Royalty Option: The publisher earns 70% of the list price for each sale, minus taxes, refunds, and delivery fees. This is available for books priced between $2.99 and $9.99 and sold in eligible countries.

  • For books outside this price range (either too high or too low), the publisher earns a lower royalty rate.

• 35% Royalty Option: For books priced below $2.99 or above $9.99, the publisher earns 35% of the list price (minus applicable taxes, refunds, and delivery fees).

  • In some cases, if the book is part of Amazon's Kindle Unlimited or Kindle Owners’ Lending Library, the royalty rate may be calculated based on the number of pages read rather than the sale price.

2. Royalties for Print Books

For print books, the royalty calculation is a little different because it involves printing costs:

• Royalties for Print Books: The publisher earns royalties based on the list price minus the printing cost. Printing costs depend on factors like page count, trim size, and whether the book is in color or black-and-white.

  • The royalty is calculated as:

    • Royalty = List Price - Printing Cost (this amount is then subject to the royalty rate, usually around 60% for standard print books).

    • Amazon’s printing costs are deducted before calculating royalties.

3. KDP Select Royalty Rates (Special Program)

• Kindle Unlimited (KU) and Kindle Owners’ Lending Library (KOLL): Publishers in KDP Select earn royalties based on the number of pages read.

  • The exact payout depends on the KDP Select Global Fund, which is determined by Amazon each month based on customer reading habits. Amazon allocates a pool of money, and authors earn a share based on how much of their book is read.

  • Countries like Brazil, Japan, Mexico, and India offer 70% royalties if the publisher follows certain pricing rules. Otherwise, the rate drops to 35%.

4. Payment Timing and Withholding

• Royalties are paid out approximately 60 days after the end of the month in which the sale occurred.

• Amazon withholds royalties under certain conditions (like refunds, disputes, rights issues, etc.) and can offset them against future payments.

5. Pre-Orders

• For pre-orders, royalties are still paid after the actual release date, but Amazon follows the same royalty structure (70% or 35%) based on the list price.

6. Taxes and Fees

• Sales Taxes: Amazon handles the collection and remittance of sales taxes, but the publisher is responsible for any income tax on earnings.

• Payment Currency Conversion Fees: If the publisher’s royalties are paid in a currency other than the one they’ve chosen, Amazon may apply an exchange rate.

To summarize:

• Publisher's Earnings: The publisher generally earns 70% of the sale price for digital books priced between $2.99 and $9.99 and 35% for others, minus any taxes or applicable fees.

• Amazon's Cut: Amazon takes the remaining percentage (typically 30% for 70% royalty books and 65% for 35% royalty books), plus any delivery costs for digital books or printing costs for print books.

So, a $9.99 digital book on a 70% royalty option would result in the publisher earning $6.99 (minus taxes and potential delivery costs), and Amazon would take around $3.00.

If the publisher is part of KDP Select, they can earn additional royalties from Kindle Unlimited and Kindle Owners’ Lending Library based on how much of their book is read, but this royalty pool is shared with other authors in the program.

Anything in this agreement that is concerning for the creator?

1. Exclusivity in KDP Select

• KDP Select requires your eBook to be exclusive to Amazon for the duration of the enrollment period (typically 90 days).

  • Concern: You can’t sell the digital version of your book anywhere else (e.g., on other platforms like Apple Books, Barnes & Noble, or your own website) while enrolled in KDP Select.

  • Upside: This exclusivity does come with benefits, like eligibility for Kindle Unlimited (KU), Kindle Owners’ Lending Library (KOLL), and promotional options like free promotions or Kindle Countdown Deals.

  • Risk: If you plan to distribute your book widely or want to retain flexibility, this could limit your sales potential on other platforms.

2. Royalties and Pricing

• The royalty rate and pricing structure are fairly straightforward, but Amazon has the power to change the royalty rules or modify the pricing structure at any time (with 30 days' notice for certain changes).

  • Concern: You’re dependent on Amazon’s pricing and royalty decisions, and if your book's price exceeds the specified thresholds, it may be adjusted to match their rules.

  • Upside: The 70% royalty rate (for books priced between $2.99 and $9.99) is competitive, and Amazon handles all the payment processing and customer support, which can simplify the publishing process.

3. Book Content and Rights Issues

• Amazon can reject your book if it doesn’t comply with their content guidelines, which include restrictions on offensive or illegal material, intellectual property violations, and issues with book formatting or metadata.

  • Concern: You must ensure that you hold full rights to your work. If a third party claims copyright infringement, Amazon may suspend your account and withhold royalties.

  • Action Tip: Always verify that you have the necessary rights to distribute and sell your work before uploading it, especially if it involves images, music, or third-party content.

4. Termination Clauses and Account Suspension

• Amazon can terminate or suspend your account at any time for reasons like non-compliance with their terms or even for low sales performance (although this is unlikely to happen).

  • Concern: If your account is suspended or terminated, you could lose access to your books, royalties, and any data associated with your account.

  • Action Tip: Make sure you comply with KDP’s guidelines, and always keep an eye on updates to the terms of service. Regularly check your account for any warnings or changes.

5. Marketing and Promotions

• Amazon handles marketing and promotions for your book, but this is largely at their discretion. You’re not guaranteed to be promoted, and Amazon can choose to pull a book from promotions at any time.

  • Concern: Amazon doesn't actively market every book equally, and you're not paid for any marketing efforts they do.

  • Upside: On the flip side, if you’re enrolled in KDP Select, you may have access to free promotion days and Kindle Countdown Deals, which can boost visibility.

6. Control Over Pricing and Distribution

• Although you set the list price for your book, Amazon can convert this price to other currencies and adjust it if it falls outside their acceptable price range.

  • Concern: Amazon controls the final customer price, so you may have little control over regional price variations or promotional discounts.

  • Upside: You have the ability to set different prices for different regions and currencies, but it’s important to make sure your book is priced competitively.

7. Rights to Your Work and Metadata

• While you retain copyright and ownership of your book, you grant Amazon the non-exclusive, irrevocable right to distribute, display, and sell your work through their platform and associated channels.

  • Concern: Amazon has wide-ranging rights to use your metadata, product descriptions, images, and trademarks for marketing purposes.

  • Action Tip: If you want full control over how your book is marketed or distributed, you may want to review the rights and opt out of certain programs like KDP Select or specific distribution channels.

8. Potential for Refunds and Chargebacks

• Refunds and chargebacks may impact your royalties. If a customer returns a book or disputes a charge, Amazon will adjust your royalty payments accordingly.

  • Concern: If your book gets a lot of refunds or chargebacks, it could affect your earnings. Amazon may also withhold royalties until any disputed issues are resolved.

  • Action Tip: Keep an eye on your earnings and be proactive if any customer disputes arise.

9. Taxes and Withholding

• Taxes are handled by Amazon, but you’re responsible for reporting income from Amazon in your own tax filings. Amazon will withhold taxes on your payments if required by law, particularly for international sellers.

  • Concern: You need to be aware of tax obligations in your country of residence and ensure you comply with any reporting requirements.

  • Action Tip: Make sure your tax information is accurate when setting up your KDP account, and consider consulting a tax professional if you’re unsure about international tax requirements.

10. Long-Term Impact of KDP Participation

• Potential Future Restrictions: If you get accustomed to the KDP Select program (exclusivity), it can become difficult to move your book to another platform after the enrollment period ends. Some authors find themselves “locked in” due to the convenience and promotional benefits, even if they want to leave.

  • Concern: If your book becomes successful on Amazon, but you later want to distribute it elsewhere, your success with KDP Select could restrict your ability to expand your audience outside Amazon.

  • Action Tip: Make strategic decisions about exclusivity, balancing long-term goals for wider distribution with short-term benefits like Kindle Unlimited royalties.

Key Action Steps for Creators:

• Read the Terms Carefully: Always stay updated on any changes in the KDP terms and guidelines to avoid unexpected surprises.

• Set Realistic Pricing: Ensure your book's pricing aligns with the royalty options available and the competitive market.

• Diversify Distribution: If exclusivity in KDP Select isn’t right for you, consider diversifying your publishing across multiple platforms (e.g., Draft2Digital, IngramSpark) after the KDP Select term expires.

• Monitor Sales and Feedback: Keep track of your book’s performance, reviews, and any issues related to royalties or payments.

Conclusion:

Amazon KDP offers a great opportunity for authors, but it’s not without its trade-offs. The main concerns are the control over your distribution, the terms of exclusivity, and the potential limitations on income due to the royalty structure. It's important to weigh these factors carefully and decide how much you want to rely on Amazon’s ecosystem versus retaining full control over your work across multiple platforms.