The price of your ebook is an integral part of its proposition. Price it too high and you won’t make many sales, price it too low and you won’t make any money.
Amazon recognises that the price of a book can act as a key point of difference in what is a commoditised market, so it incentivises you to keep the price of your book(s) low enough to drive sales but high enough to provide a decent margin.
So how do they do it?
While Amazon’s standard royalty rate is 30%, the company offers a much larger royalty (70% be precise) to authors who retail their books at a price point between $2.99 and $9.99 (or currency equivalent) and which is set at least 20% below the lowest price at which the book is available in hardback or paperback. (N.B. The customer must be in one of the following countries: Austria, Canada, Germany, Lichtenstein, Luxembourg, Switzerland, United Kingdom, United States.)
This means you need to price your book at $23 before you can begin to receive the same revenue you would receive from selling your book at $9.99. That’s quite an incentive to keep your book’s price below $9.99.
By keeping the price of ebooks relatively low, this encourages people to buy devices on which they can be read. The result: Amazon sells more books and more devices – a smart move.