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From the author of Calculating Profit—or Loss

Calculating Profit—or Loss

When you publish your book, you set the book’s list price. This is the stated retail price for the book; if a retailer sells the book with no discount to customers, it’s the retail price that’s paid.

When it comes to a CreateSpace book, the list price is used as a base to calculate various fees. Amazon charges a sales channel percentage on each book sold; this percentage differs by sales channel, as shown in Table 2.

Table 2: CreateSpace Sales Channel Percentages

Sales Channel

Percentage

CreateSpace eStore

20%

Amazon.com

40%

Expanded Distribution Channel (Pro Plan only)

60%

Think of the sales channel percentage as Amazon’s gross profit on a book. That is, if you sell your book through Amazon.com, Amazon keeps 40% of the list price as its profit. That’s not far off than the profit margin earned by traditional retailers, who typically buy books at 40% or so off list price.

So if Amazon keeps 40% (for Amazon.com sales), you get 60%, right? No, not really. That’s because you also have to subtract Amazon’s fees for printing your book. In particular, Amazon charges a fixed fee per book, along with a per-page charge (for books with higher page counts). Table 3 details these charges.

Table 3: CreateSpace Fixed and Per-Page Charges

Form Factor

Fixed Charge (per book)

Pro Plan Fixed Charge (per book)

Per-Page Charge (per page)

Pro Plan Per-Page Charge (per page)

Black and white books with 24-108 pages

$3.66

$2.15

None

None

Black and white books with 110-828 pages

$1.50

$0.85

$0.02

$0.012

Full-color books with 24-40 pages

$6.55

$3.65

None

None

Full-color books with 42-250 pages

$1.75

$0.85

$0.12

$0.07

Taking these charges into your account, your real profit per copy sold—what Amazon calls your royalty—is calculated as such:

List Price

- Sales channel percentage

- Fixed charge

- Per-page charge (for higher page-count books)

--------------------------------------------

= Your royalty

Let’s calculate a simple example. For this example, assume you’re selling a 250 pp. black and white book with a list price of $14.95, and sales are through the Amazon.com channel—and that you’re not on the Pro Plan. This book format has a $1.50 fixed charge plus $0.02 per-page charge; the Amazon.com channel has a 40% sales channel percentage. The calculation is as follows:

$14.95 (list price)

- $5.98 (sales channel percentage – 40% x $14.95)

- $1.50 (fixed printing charge)

- $5.00 (per-page printing charge -- $0.02 x 250)

---------------------------------------------

= $2.47 (your royalty)

So, in this example, you net $2.47 per book sold. In traditional publishing terms, this equates to a 16.5% royalty on list price, which isn’t bad.

Your royalty, however, does not equal your net profit. That’s because you have to subtract the CreateSpace fees you incurred to publish the book. Let’s say you paid for the Author’s Advantage Book Publishing Solution, which costs $499. At $2.47 per book, you have to sell a little over 200 copies just to break even. (And that’s not factoring in the cost of your time to write the book in the first place!) Let’s say you end up selling 500 copies of the book. At $2.47 per copy, you gross $1,235. Subtract your initial $499 cost and you end up with a $736 net profit.

But what if you bought a more expensive publishing plan? The Total Design Freedom Advanced plan, for example, costs $2,567. If you used this plan and only sold 500 copies of your book, you’d register a net loss of $1,332.

The question, then, of whether Amazon CreateSpace is a good deal depends on several factors—the cost of the plan you sign up for, the list price you set for your book, the channel(s) in which your book sells, and how many copies you sell. That’s not unlike traditional publishing; you have to get the right mix to be profitable.

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