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Wednesday, January 20, 2010, 08:45 am PT (11:45 am ET)

As Apple tablet looms, Amazon Kindle adopts App Store revenue split

Amazon announced Wednesday that its share of revenue from some content sold for its Kindle e-reader will be more akin to Apple's iPhone App Store business model, with a 70-30 split in favor of the content provider.

The new deal will take place June 30, offering publishers a much higher share of revenue than the current system. When factoring in the cost of delivery at 15 cents per megabyte, Amazon said the average $8.99 book would earn the content provider $6.25. Under the previous plan, they would have taken just $3.15.

Those who opt in for the new 70 percent pricing must meet a specific set of criteria as defined by Amazon:

  • The author or publisher-supplied list price must be between $2.99 and $9.99
  • This list price must be at least 20 percent below the lowest physical list price for the physical book
  • The title is made available for sale in all geographies for which the author or publisher has rights
  • The title will be included in a broad set of features in the Kindle Store, such as text-to-speech. This list of features will grow over time as Amazon continues to add more functionality to Kindle and the Kindle Store.
  • Under this royalty option, books must be offered at or below price parity with competition, including physical book prices. Amazon will provide tools to automate that process, and the 70 percent royalty will be calculated off the sales price.

"Today, authors often receive royalties in the range of 7 to 15 percent of the list price that publishers set for their physical books, or 25 percent of the net that publishers receive from retailers for their digital books," said Russ Grandinetti, vice president of Kindle Content. "We're excited that the new 70 percent royalty option for the Kindle Digital Text Platform will help us pay authors higher royalties when readers choose their books."

The 70-30 share of revenue happens to be identical to the business model employed by Apple with its App Store for the iPhone and iPod touch. With more than 3 billion total downloads and over 100,000 applications available, Apple has found great success.

That success has also been profitable for the developers who sell software on the App Store. One upstart company, Tapulous, now makes more than $1 million per month in total sales.

Amazon is not the first to adopt the 70-30 revenue model popularized by Apple. AT&T has announced it intends to take a 30 percent cut of software sold via its new app platform, and Intel's AppUp Center for Atom processor-powered netbooks will also employ the same split between it and developers.

Recent reports have said that Apple intends to continue that strategy in providing content for its forthcoming tablet, which is expected to serve as a multimedia device that can, among other tasks, be used for reading printed content. HarperCollins and other major publishers are said to be in talks with Apple to provide their content for the tablet.

While speculation suggests Apple's tablet will not function solely as a device intended for reading, its alleged ability to display e-books has had some dub it a "Kindle killer." In an interview last September, Apple CEO Steve Jobs said he believes "dedicated devices" like Amazon's Kindle will remain niche products while multi-purpose devices like the iPhone "will win the day."