Click on the image above to learn more about Amazon's new lending program.

There’s been quite a ruckus in the book publishing world lately. Amazon.com has recently announced its long-anticipated foray into lending e-books.

Kindle owners who are also Amazon Prime members, in addition to getting free two-day shipping on their orders and “unlimited instant streaming of thousands of movies and TV shows,” can also borrow books to read without an additional payment (Amazon Prime membership costs $79 per year). There doesn’t appear to be any limit on how long a book can be borrowed but only one book can be borrowed at a time.

Amazon says its lending library offers over 5,000 titles including 100 New York Times bestsellers. This is a far cry from the millions of print titles available on Amazon or the hundreds of thousands of e-books available as Kindle editions, but it is a toe in the water and publishers, authors, and literary agents are nervous.

How’s it work?

Amazon Prime members who are also Kindle owners are now presented with a “Borrow for Free” button next to the “Buy” button on selected books. When the member chooses to borrow a title, Amazon credits the publisher’s account with the same dollar amount as if the e-book was sold rather than loaned. At this point, the Amazon Prime member gets to read the book as a part of his or her yearly fee and the publisher effectively gets a full-priced sale.

So, why the controversy?

This sounds fair to me. I’d sign The Write Thought titles up. So why the hubbub?

I think the concern from the publishers—most publishers with titles among those available for loan weren’t notified that their titles would be included in this program—is that they haven’t agreed to Amazon “lending” titles even if Amazon pays as if they sold it.

Also, apparently Amazon plans to report revenue from this program to publishers as a lump sum leaving the publishers to allocate this revenue their authors. Amazon is said to be basing this lump sum by looking at the 12-month sales history of titles included in the program. A rather nebulous reporting method at best.

I think the Authors Guild and the Association of Authors’ Representatives (literary agents), two groups that have spoken out about this, are concerned since most contracts between authors and publishers have a set royalty paid to the author based on revenue from each e-books sale, say 25% of net revenue and a different amount on revenue generated from rights sales, say 50% of net.

The question being, which is this? Revenue from the sale of a book or revenue from a subsidiary right? And, of course, how is a publisher to properly allocate each of its author’s revenue share if Amazon doesn’t supply a complete breakdown by title?

Another concern, of course, is if this is simply Amazon’s first salvo into the world of lending books; will Amazon attempt to morph the program into something else. For instance, can Amazon purchase one copy of an e-book and “lend” or “rent” it as many times as it likes? Pay the publisher once and rent or loan it many times. Libraries do this now and many years ago so did bookstores.

The world is still hazy when it comes to e-books.

Just a write thought.

DROID by Motorola showing Kindle App

To reuse a couple of ‘graphs from my previous blog, “Book Pricing, Finding the Sweet Spot”:

One grand thing about e-books is, since there is no printing involved, once edited, designed, typeset, and formatted, the cost of an e-book is zero. Another is that the retail price a publisher sets can vary day to day.

But, with these two advantages, what does a publisher need to be concerned about when pricing an e-book? Vook, the innovative company that melds books with video, has issued a splendid white paper that goes a long way toward answering this question.

Here are Vook’s Golden Rules of Pricing annotated by yours truly:

1. Zero variable cost means it’s OK to significantly lower prices to maximize revenue.

Week to week—or even day to day—price changes are easy, as are limited-time specials.

2. Optimal pricing is highly content specific.

Business books may command a higher price than books on how to write.

3. Certain pricing thresholds trigger psychological “automatic” purchases.

Lower prices increase impulse buying.

4. Categorization has a large role in optimal pricing and discoverability.

A book that lists calories in popular packaged foods is likely to be found by readers more often if it is placed in the category of “Health Care and Fitness” rather than “Reference.”

5. Merchandising whole catalogs is more effective than single titles: “A rising tide lifts all boats.”

The Write Thought publishes a catalog of writing titles under the Classic Wisdom on Writing series. It is our hope that we will see a synergistic effect on revenue because of this grouping.

6. Containers are critical to driving upsell in App environment.

My understanding of the term “container” as used here is the same as “series.”

7. Lift effects through savvy launch promotions have a profound impact on sales.

For instance, it is suggested that a publisher may wish, when launching a title, to place a low price on it for a period of a few days to a couple of weeks in an effort to get sales to a level that will be noticed by a retailer’s algorithms. Books that stand out sales-wise are used to populate “you may also like” recommendations generating additional sales creating a cyclical effect.

8. In general apps cannot support as high price points as eBooks.

Apple has begun declining apps that are effectively unenhanced e-books, referring publishers to the iBookstore. This basically leaves the android app market for plain Jane e-book Apps.

9. Real‐time sales tracking is necessary to adjust pricing in a dynamic eBook world.

Just like any data, you have to watch what’s happening and adjust accordingly.

10. For each retailer there are distinct best practices to maximize discoverability and revenues.

Pricing doesn’t need to be the same for each retailer. The sweet spot for an e-book in Apple’s iBookstore may be higher than the sweet spot for the same title in Amazon’s Kindle Store.

It’s a new world out there full of challenges and rewards. Sharpen your spear and forge forth.

Just a write thought.