# CreateSpace Royalty Math

## CreateSpace Royalties

When you self-publish a book with CreateSpace, you set your own list price and your Amazon royalty is based on the list price that you set. In this way, you have the freedom to determine your own royalty rate.

Unfortunately, the formula that CreateSpace provides to calculate royalties for Amazon sales is a little roundabout:

(For a more direct formula, see the section below entitled “Amazon Royalty.”)

CreateSpace’s share is the sales channel percentage (40% of the list price for Amazon sales) minus the author cost. The author cost includes two parts: the fixed charge of the book plus a per-page charge. The fixed charge also depends on the page count (add one page if needed to make an even page count):

• For black-and-white interiors with up to 108 pages, the fixed charge is \$2.15.
• For black-and-white interiors with more than 108 pages, the fixed charge is \$0.85 plus 1.2 cents per page.
• For color interiors with up to 40 pages, the fixed charge is \$3.65.
• For color interiors with more than 40 pages, the fixed charge is \$0.85 plus 7 cents per page.

Example: Consider a book with a black-and-white interior with 200 pages. The author cost for US sales is \$0.85 + 200 x \$0.012 = \$0.85 + \$2.40 = \$3.25. CreateSpace’s share for US Amazon sales is \$3.25 + 40% of the list price. If you set the list price at \$8.95, CreateSpace’s share is \$3.25 + \$8.95 x 0.4 = \$3.25 + \$3.58 = \$6.83. In this case, your royalty would be \$8.95 – \$6.83 = \$2.12.

Fortunately, there are a couple of simpler alternatives to this calculation. However, you need to know your page count. To do the calculations by hand, you’ll still have to determine the author cost first.

## Royalty Calculator

However, CreateSpace does provide a convenient royalty calculator: https://www.createspace.com/Products/Book/#content6:royaltyCalculator. It’s worth playing around with it.

While the royalty calculator is fun and handy, there are actually a couple of formulas that may still be useful.

## Amazon Royalty

Here is a more direct formula for determining your Amazon royalty for CreateSpace paperbacks:

Example: You set the list price at \$7.95 and the author cost is \$2.50. Then your Amazon royalty is \$7.95 x 0.6 — \$2.50 = \$4.77 — \$2.50 = \$2.27.

One thing you can see from this formula is the effect of changing your list price. Once you have a tentative list price in mind, consider raising or lowering your list price by one dollar. For every dollar you add to the list price, you would earn 60 more cents per book; for every dollar you subtract from your list price, you would lose 60 cents from your royalty.

This can be an important figure. For example, suppose you were thinking about pricing your book at \$4.95 and had determined that your royalty would be 40 cents. By raising your list price to \$5.95, your royalty would be \$1.00 instead. You would have to sell 2.5 times more books at \$4.95 compared to \$5.95 for the lower price to pay off. For every person willing to pay \$5.95, do you really see 2.5 or more people walking away who would instead buy the book if the price were \$4.95? This is unlikely, unless you happen to be in a unique market where most of the similar titles are selling for less than \$5.95.

Let’s look at a second example. Suppose you’re planning to set the list price at \$9.95, for which you’ve determined that the royalty would be \$3. If you raise the price to \$10.95, your royalty would be \$3.60. In this case, if you can sell 20% or more books at \$9.95 compared to \$10.95, it would be more profitable to go with \$9.95. It’s just a dollar less, but looks like a one-digit number instead of a two-digit number of dollars. Here, I’d be inclined to try \$9.95. You could also consider \$8.95, for which the royalty would be \$2.40. Most customers who would be willing to pay \$8.95 would probably also be willing to spend \$9.95, so the lower price might not draw the extra 25% of sales needed to make it pay off—unless, for example, there are many similar books selling for \$8.95.

## Royalty Rate

Something else you can do is pick the royalty rate that you’d like to make, like 25%, and see what the list price would be. I’m not saying you should set your list price this way, just that it’s worth exploring.

The following formula tells you what list price to set in order to make a given royalty rate. For this to work, express the royalty rate as a decimal. For example, write 25% as 0.25 (just divide the percentage by 100). Remember, this is for Amazon royalties for CreateSpace paperbacks.

Example: The author cost is \$3.00 and you wish to earn a 25% royalty rate. Set your list price according to \$3.00 / (0.6 — 0.25) = \$3.00 / (0.35) = \$8.57. This gives you a royalty of \$2.14, which is 25% of the list price, \$8.57.

## Research

You shouldn’t just base the list price on the royalty amount or royalty rate that you’d like to make. You should look at these numbers, but they alone shouldn’t dictate your list price.

It would be wise to research similar books on Amazon. Don’t just compare prices of books similar to yours in terms of topic, but also compare the page count, the depth and range of content, the quality of writing, and other factors that customers are likely to explore when shopping. If your book is noticeably below or above the typical range for comparable books, it may greatly deter sales.

Underpricing doesn’t always create more sales, and even if it does, it takes many more sales to generate more royalty (e.g. you might make more money selling 200 books at \$8.99 than you would selling 250 books at \$6.99). Many customers believe that you get what you pay for, which is why lowering the price doesn’t always improve sales frequency. Quality of content, good packaging, and effective marketing are often more important than price, provided that the book isn’t significantly underpriced or overpriced compared to similar books.

Another consideration is the Expanded Distribution channel. If you have a large page count or color interior, for example, adding the Expanded Distribution channel (which is now free) raises the minimum possible list price. Opting out of the Expanded Distribution allows you to set a lower list price. For most books, you should be able to set a fair price and draw a healthy royalty with the Expanded Distribution; the exception usually applies to books with large page counts or color interiors, where comparable books have competitive prices.

Think of your CreateSpace paperback as a trade paperback, not as a mass market paperback, when comparing prices of traditionally published books.

Finally, note that Amazon often sets a sale price below the list price, offering customers a discount. This is good for you because CreateSpace still pays the royalty based on the list price, not based on the sale price; if anything, the discount will probably help sales, not hurt them.

## Publishing Resources

I started this blog to provide free help with writing, publishing, and marketing. You can find many free articles on publishing and marketing by clicking one of the following links:

Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers

By chrismcmullen

# Kindle e-book Prices and Royalties

## What Is the Best Kindle Price?

That’s the million-dollar question. The answer also varies from book to book.

A recent article from TechCrunch points out that the \$9-10 price range is the most profitable list price for e-books in the United States, evaluating sales data for all books—i.e. it includes both traditionally and indie published e-books. Click here to check it. It’s short and makes some informative points for both US and UK pricing.

However, the article doesn’t make a few points that may be particularly significant for indie authors:

• Thousands of traditionally published e-books are priced at \$9.99 and sell frequently because the authors are quite popular. Think about it: If a hardcover is selling dozens of copies per day at \$35 or if a trade paperback is selling frequently at \$25, then \$9.99 is an enticing e-book price.
• Many e-books that would be priced between \$10 and \$20 are selling at \$9.99 because the publisher actually makes a greater royalty with a \$9.99 list price. Kindle offers a 70% royalty on books with a list price of \$9.99, so the royalty on a \$9.99 e-book can be as high as \$6.99 (it will be somewhat lower due to the 15 cents per Mb delivery fee). A Kindle e-book priced at \$19.99 draws the same royalty of \$6.99 because the royalty rate is 35%. Think about it: Would you rather sell your book at \$9.99 or \$19.99 if either way the royalty will be \$6.99? Therefore, the \$9-\$10 price range is selling many, many more e-books than other price ranges above and below this—it’s kind of like ten price ranges in the same slot.
• Technical nonfiction—especially, textbooks—tends to sell for higher prices.

I’m not advocating cheap e-book prices. I’m just warning that e-book prices of \$7.99 to \$9.99 might not turn out to be as profitable as this article might suggest for newbie fiction authors.

## Low Prices

The article also shows that many e-books sell at low prices. One reason is that there are tens of thousands of books selling for free, 99 cents, \$1.99, and \$2.99. These are very popular price points, especially among indie authors. New authors often feel that they have a better chance to get discovered with a more enticing price. Others use this strategically, hoping that readers will get hooked and check out the author’s other books.

There is something important to note about low prices:

• Kindle e-books priced 99 cents to \$2.98 earn a 35% royalty. A 99-cent e-book earns a royalty of 34 cents and a \$1.99 e-book earns a royalty of 69 cents.
• A Kindle e-book priced at \$2.99 which qualifies (public domain books, for example, do not) for the 70% royalty and has a small delivery fee earn royalties of up to \$2.09.
• In this case, you would have to sell 6 times as many e-books at 99 cents as you would at \$2.99 or you’re losing profits.
• Similarly, you would have to sell 3 times as many e-books at \$1.99 as you would at \$2.99 just to break even.
• Amazon seems to have made recent changes to the sales rank algorithm to factor in list price. This would make sense, as Amazon would prefer to sell 100 books at \$2.99 than 100 books at 99 cents.
• Books enrolled in KDP Select can benefit from Countdown Deals. Books priced under \$2.99 aren’t eligible for Countdown Deals.

## Perception

Most authors expect to sell more books at lower prices and fewer books at higher prices, but it doesn’t always work out that way. Many customers believe that you get what you pay for, and this perception affects the economics of e-book sales. Even if you do sell more e-books at a lower price, you might make more profit at a higher price (since you draw less royalty per sale at the lower price).

Some authors have actually raised their prices from \$1.99 to \$299 or \$2.99 to \$3.99, for example, and started selling books at a higher frequency. This doesn’t happen for all books, but it does happen for some.

It depends in part on the value that your book provides, how it appeals to the target audience, and on the buying habits of your specific subgenre or subcategory.

There are many customers who have been disappointed with e-books that they purchased for 99 cents to \$2.99, who now shop for e-books priced from \$3.99 to \$6.99.

Another factor is marketing. If you market your book effectively and reach potential readers on a personal level, they may be willing to spend more money on your book.

## Suggestions

Here are some things to consider when deciding on the price of your Kindle e-book:

• Research books that are very similar to yours, including top sellers. Buyers will know what the typical price range is. If your book seems underpriced, they might wonder what’s wrong with it, and if it seems overpriced, it might not seem to be worth the money.
• Consider the length of your e-book and the value it provides. Customers like to feel that they are receiving good value for their money.
• Most e-book buyers want to save at least 50% off the print price.
• Some buyers will also purchase both print and e-book editions through MatchBook. If you use MatchBook, set your list price high enough that the MatchBook price may seem like a compelling option.
• A boxed set may help to create the perception of value. The \$5.99 to \$9.99 price point may be more profitable for a boxed set than for a single volume by a new fiction author. Ideally, the individual volumes would be priced so as to help the boxed set seem like a good value.
• Technical nonfiction books that provide significant content are generally worth more to buyers.
• If you succeed in selling multiple print books per day priced \$20 or higher, you have much better prospects for selling e-books at a \$9.99 list price.
• Authors who will be signing up for Kindle Select have an incentive to price their e-books between \$2.99 and \$9.99 in order to take advantage of the Kindle Countdown Deal. This allows you to create a short-term sale to help stimulate sales.
• Amazon’s algorithm for sales rank may currently factor in the list price. Only Amazon knows for sure, but some authors have expressed recently that this seems to be the case now, and this is consistent with my observations, too.
• If you have several similar books for sale, a compelling price on one book may help to generate interest in your other books.
• If you have a series, offering the first book cheap may help to hook readers in the series.
• How professional does the book look, in terms of both content and formatting? A higher price does command higher expectations.
• What is the demand for your book? If the content is very specialized, this may warrant a somewhat higher price.
• What are your specific objectives? Is your goal to draw the most royalty? Is your goal to maximize your readership? Is your goal to get on a bestseller list? When a higher price may draw a greater net profit, if you’re more focused on sales than royalties, then a lower price may fit your objectives better.

## Publishing Resources

I started this blog to provide free help with writing, publishing, and marketing. You can find many free articles on publishing and marketing by clicking one of the following links:

Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers

By chrismcmullen

# The Great Paperback Hangover

Sales of most print books peak in December because paperbacks and hardcovers make for great holiday gifts. Any book that would make a suitable gift tends to see a considerable improvement in sales frequency during December.

Up until Christmas Eve, that is. Then the happiest time of the year for print book sales is followed by the great paperback and hardcover hangover.

People are busy spending time with family, traveling for the holidays, checking out their new presents, and enjoying their vacations to buy books. Besides that, they’re broke from all the holiday shopping they just did. Therefore, few print books sell between December 23 and January 1. Sales may slowly build after that, but probably not like they were in mid-December, except for seasonable books that do well in January, like academic books.

CreateSpace authors are likely to see little activity between December 23 and January 1, and it’s not just from the lack of post-Christmas sales. This has to do with holiday returns.

More sales in December means more returns. It’s even worse since many people who receive gifts return or exchange them, or simply prefer or need the cash instead.

So even if a few books do sell shortly after Christmas, there is a good chance that they will be filled with returned books rather than by printing new ones, in which case no royalty will be reported.

This is a great time to focus on family, spend time writing, and avoid checking your stats for a week or two.

## Good News?

However, there may be good news if you sell e-books. While the sale of most print books drop off in late December, the sale of most e-books are on the rise. The effect is probably not as pronounced as it had been in recent years, but some people did receive new e-readers this holiday season and are looking for e-books. The residual of this effect may last as long as the end of February or so, though the most significant impact will likely be seen just thru January.

I started this blog to provide free help with writing, publishing, and marketing. You can find many free articles by clicking one of the following links:

Chris McMullen, Author of A Detailed Guide to Self-Publishing with Amazon and Other Online Booksellers

By chrismcmullen

# Where Are Your CreateSpace Sales?

Every week, I see multiple questions on the CreateSpace community forum regarding “missing sales” and “reporting problems.” I also see blog posts and articles across the internet about this issue.

I have monitored my sales ranks and royalty reports for several different titles for five years, and I see a very close correspondence. I see no evidence of reporting issues. However, I am aware of various reasons for reporting delays.

When authors (and indie publishers) suspect that a royalty hasn’t been reported, very often it’s due to one of the following explanations.

(1) CreateSpace reports the royalty when the book is printed, not when it sells. (A couple of years ago it was the other way around, but not anymore.) Depending on sales volume and maintenance issues, sometimes the book prints the same day as it is sold while often it prints 2-3 days after it sells.

Therefore, most royalties show up within 2-3 days of the sale. However, there are significant exceptions, as noted below.

(2) Returns and exchanges are fairly common, even though returning a print book by mail seems inconvenient (it’s actually pretty easy and painless once a customer learns how), although cancellations are simple.

CreateSpace never shows a return or exchange on your royalty report. Rather, Amazon waits until the next order comes through and simply uses the returned (or canceled) book to fill that order. Since the book had been printed previously, you’ve already been paid the royalty.

So here’s what might happen. A customer buys a book and returns it. Now the author’s friend buys a book, but no royalty shows up. The author freaks out. But that’s because the author didn’t know about the return.

(3) This point probably accounts for most of the missing royalty concerns. Amazon sources occasional orders through third parties (instead of using CreateSpace). Perhaps this happens when CreateSpace is unable to keep up with demand, but there may also be other reasons.

When Amazon sources the order to a third party, the royalty doesn’t show up for 1-2 months (maybe even 3). CreateSpace reports the royalty when Expanded Distribution royalties are reported (which can take a couple of months). The royalty correctly shows as an Amazon royalty, but is reported when Expanded Distribution royalties are reported.

Note that this happens whether or not your book is enrolled in the Expanded Distribution channel.

Although I said it happens occasionally, it is significant. Every month, when Expanded Distribution royalties are reported, I see several other sales reported at around the same time (in both the US and the UK, so it happens with UK sales, too).

A couple of years ago, CreateSpace used to send us an email and report these royalties as an adjustment; this is how we know about this issue.

(4) If your book is enrolled in the Expanded Distribution channel, a customer may order the book through a third-party seller instead of Amazon. In this case, the royalty reports as an Expanded Distribution royalty in a couple of months.

(5) After you’ve sold some copies, it’s possible for customers who have your book to resell them on Amazon used. You don’t receive any royalty for such re-sales. For most books, customers tend to prefer to purchase new copies directly from Amazon, so this is unlikely. This is more likely with books that have very high list prices, or books that have sold numerous copies.

(6) Some people say that they bought your book, but either didn’t buy your book or they canceled the order (or the credit card didn’t go through). It happens.

(7) Amazon may choose to stock up on your title. When Amazon does this, CreateSpace prints several copies in advance. You’re paid when these copies are printed. When they subsequently sell, you don’t receive a royalty because you already have.

Two ways that this might apply to you are as follows.

About a week into December, CreateSpace prints several copies of the hottest sellers and ships them to Amazon. From the data I have available, it looks like if you sold about 4 or more copies per day (on average) at Amazon US in November, on around December 10 you may have noticed an order for 50 (or much more, depending) copies of your book. From around December 8 until the time at which Amazon runs out, you won’t see any royalties from what is ordinarily your hottest-selling book. (Last year, CreateSpace sent an email about this.)

Amazon may stock books in Canada in a similar manner, printing a few up front to stock in their warehouse. Therefore, you may see your sales rank change at Amazon Canada (any time of the year), but don’t see a royalty report (if your book was in stock in the warehouse in Canada, you were paid when the book was printed).

## Transparency

This method of royalty reporting isn’t transparent. If the royalties instead always reported when a sale was made, it would be much easier to see the correspondence between sales and royalties.

Publishers who sell large numbers of books are more likely to see a close correspondence between sales and royalties. Authors who sell a small number of books each month are more likely to notice a couple of royalties that haven’t yet reported due to one of the above explanations.

(If you happen to have several orders on a day when Amazon is, for whatever reason, fulfilling them through a third party, then it can seem like many royalties are missing. Or if you suddenly had a large number of returns, it could seem this way.)

## Trust

I use CreateSpace because I have come to trust Amazon through several years of experience dealing with Amazon because CreateSpace is an Amazon company. I suspect that many other authors use CreateSpace for a similar reason. (It’s not the only reason; e.g. it’s convenient and the prices are good, too.)

Amazon has a reputation to uphold. If there were any royalty reporting inaccuracies, publishers who sell thousands of books per month would see large discrepancies between sales ranks and royalty reporting, and there would be many more complaints out there.

You shouldn’t just trust, you should also verify. You can monitor your sales rank through Author Central, for example, and compare this to your royalty reports. After you sell hundreds of books, you’ll probably see that there is very good correspondence, but there may be occasional delays according to the reasons noted above.

If you’re concerned about a possible missing royalty, the best thing is to contact CreateSpace and inquire about it. If you can get the printing number from the last page from the customer, that will make it much easier to track the royalty.

If you don’t trust Amazon or CreateSpace, or you believe you’re missing royalties, you should consider looking for another print-on-demand service.

Personally, I would be more suspicious of other services. (However, Ingram’s two services, Lightning Source for small publishers and Ingram Spark for indie authors, I would be willing to trust.) Even if you publish traditionally, you must still have concerns about the accuracy of royalty reporting (in fact, I see articles about this online, too).

## A CreateSpace Author

I’m Chris McMullen. I’ve published several paperbacks using CreateSpace since 2008 and I’m pleased with my decision to use CreateSpace. But you should decide for yourself.