Will Amazon.com (AMZN) Stock be Affected by New E-Book Author Royalty Plan?

NEW YORK (TheStreet) -- Amazon.com (AMZN) will reward self-published authors on its e-book platform by paying them based on the number of pages of their book that have been read by customers beginning July 1, according to CNBC.com.

"We're making this switch in response to great feedback we received from authors who asked us to better align payout with the length of books and how much customers read," Amazon.com stated.

Previously, authors who used Amazon.com's Kindle Direct Publishing were paid by how many times their books were borrowed, or how many times they were downloaded.

For their new payment model, Amazon.com is now using a complex calculation to work out royalty payments to ensure authors get paid the appropriate amount, CNBC.com added..

The e-commerce giant's new royalty policy on books published through the Amazon Lending Library or Kindle Unlimited follows music streaming service Spotify's policy where artists are paid per listen rather than by albums sold. 

In Tuesday's early morning trading session, shares are falling 0.15% to $435.62.

Separately, TheStreet Ratings team rates AMAZON.COM INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate AMAZON.COM INC (AMZN) a HOLD. The primary factors that have impacted our rating are mixed, some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its solid stock price performance, robust revenue growth and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including deteriorating net income, disappointing return on equity and feeble growth in the company's earnings per share."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, AMZN's share price has jumped by 31.40%, exceeding the performance of the broader market during that same time frame. Although AMZN had significant growth over the past year, our hold rating indicates that we do not recommend additional investment in this stock at the current time.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 18.8%. Since the same quarter one year prior, revenues rose by 15.1%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • Net operating cash flow has increased to -$1,499.00 million or 40.08% when compared to the same quarter last year. Despite an increase in cash flow, AMAZON.COM INC's average is still marginally south of the industry average growth rate of 40.75%.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Internet & Catalog Retail industry. The net income has significantly decreased by 152.8% when compared to the same quarter one year ago, falling from $108.00 million to -$57.00 million.
  • Current return on equity is lower than its ROE from the same quarter one year prior. This is a clear sign of weakness within the company. Compared to other companies in the Internet & Catalog Retail industry and the overall market, AMAZON.COM INC's return on equity significantly trails that of both the industry average and the S&P 500.
  • You can view the full analysis from the report here: AMZN Ratings Report

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