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Could Bitcoin help me cut out the 40% that Amazon takes to sell my book?

There are two reasons for my crowdsourced case study:

I understand that nobody other than myself is interested in that objective. The only reason why I think that Fintech people will be interested is reason # 2.

I started this crowdsourced case study last week with a headline that was misleading. I asked if Bitcoin could help me sell more books and that, quite rightly, led to suggestions that I hire a publicist and focus on marketing to increase my top line sales. My case study experiment was really concerned with gross margin and net profit rather than top line sales. So I changed the headline this time.

I have also now dropped mention of Micropayments. I am intrigued by Micropayments, but looked at from my narrow use case perspective I decided that it would be counterproductive. The Micropayments theory is that rather than asking somebody to pay say $10 for a digital version of my book I ask people to pay 50c by the chapter. Then after buying a few chapters they buy the book or I just make money selling by the chapter.

I get the parallels to the music industry when ITunes broke the mold by offering to sell just a single rather than the whole album. However I have 3 problems with this theory:

  1. There is massive friction difference between free and a tiny payment like 50c. That is not logical, but it seems to be true. The Freemium model is too well established in the world of both content and code. People expect a chapter to be free because a chapter is too close to free articles/blog posts.
  1. In music, we are moving from paying for a song to all you can consume streaming subscriptions. Music leads the way for other creative industries because it has been in “the eye of the digital storm” for the longest.
  1. When billions of people have digital wallets and get accustomed to paying “by the drink” Micropayments could be viable. For now, it feels like a pipedream.

So, what I need is a payment service that will cost me less than the 40% that Amazon charges me.

Here are the unit economics for my book (in US$):

Selling Price 28
Print Cost 3.08 11%
Gross 24.92 89%
Royalty 13.72 49%
Distribution Cost 11.2 40%

I obviously don’t begrudge Amazon their print costs. It is the Distribution cost that is annoying. If that really included marketing, it would be OK. As an aside this is why businesses that process payments in niche markets (Uber, AirBnB, iTunes, etc) are so massively profitable. Just being able to offer a simple way for people to buy is a huge win for the seller. Now, we should enter the era when this becomes cheaper and the gatekeepers take a smaller slice.

Those unit economics surprised me too. It is possible that there is some simple switch in Createspace or Amazon that cuts that 40% down to something more reasonable. If that is the case, I will feel stupid and then happy when I see how easy it is to solve my problem; I will then close down this crowdsourced case study immediately.

Assuming Amazon is really charging 40% to take a payment, I am curious to find out why they can get away with this and I came up with three reasons:

My theory is that for a digital version in the long tail of authors on niche techno biz subjects (where I reside), a Bitcoin based payment service for a digital product could change these reasons:

“Phase 2. Attracting rich Bitcorati for legal products. This is the phase we are in today. The merchant logic here is very simple. If a rich person wants to pay me in some unusual currency, I am motivated to accept that currency. Enough people got rich speculating in bitcoin or mining bitcoin in the early days for this to be a real niche market. These Bitcorati are bitcoin enthusiasts, so if they see two objects they desire equally and one says “we accept bitcoin” then that rich Bitcorati will choose the merchant who accepts bitcoin. This is fundamentally different from phase 1 because a) it is legal and b) we will start to see merchant success stories akin to the merchants who were early adopters on the Internet.”

Three requirements are critical for me:

Without the MultiCurrency needs I would just use any merchant payment processor. It is the MultiCurrency need that made me think of Bitcoin.

Now it is time to start creating my short-list of vendors. I am only one small user, but I am approaching this like any business would by first defining requirements and then creating a long list of vendors and then reducing that to a short-list.

The simple integration made me think of solutions like Stripe and Braintree (PayPal). They have all added Bitcoin (or at least announced intention to do so). Paystand is added to that list, because they have an announced product.

There are also the Bitcoin native offerings such as Coinbase and Bitpay.

So, my long list currently is

Stripe

Braintree (PayPal)

Paystand

Coinbase

Bitpay

Have I missed any vendors?

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