Self-publishing for e-readers has been very lucrative for a small a small group of authors in the last few months. However, for the vast majority of authors trying to sell books, self-publishing won't bring much exposure and it won't earn them much money.

The case-studies for self-publishing success are J.A. Konrath and Amanda Hocking. These two authors have been very good at self-promotion and their books are better than virtually all their self-published competition. These authors distinguish themselves from commercially-published authors on the basis of price; their books cost $3 or less.

Amazon pays a 70% royalty to authors who self-publish on Kindle and sell their books for between $2.99 and $9.99. By contrast, a hardcover royalty is usually 10-15% of the cover price and a mass-market royalty is usually 6-8% of the cover price. That means a royalty on a $3 e-book is close to the same as an author earns selling a $15 hardcover (which has a $25 cover price).

$2.99 was a great opportunity when very few people were selling books in that price range. This high royalty made it very easy for self-published authors to undercut the price of commercially-published books, because these authors were able to keep a much larger percentage of their readers' money. This arrangement was also very beneficial for Amazon and BN because it attracted a huge cadre of value-conscious consumers to e-reader platforms. However, Amanda Hocking's success story is now common knowledge, and everyone with an unpublished novel believes they can replicate that success.

These authors don't have the imprimatur of New York publishers. They don't have authoritative praise from critics or famous authors. They don't even have professionally-designed book covers. So they use price to compete.

That means it's very hard for an unknown self-published author to price a book at $2.99 right now; most other self-published books that are ranked high in Kindle sales are priced at $0.99. But if you sell a book at $0.99, you get only a 30% royalty, or 33 cents per copy. It's very difficult to earn a substantial amount of money at that price, with that royalty, and the 70% royalty is no longer the game changer it seemed to be six months ago because most authors can't earn it.

E-book growth has been huge in the past few years, but we shouldn't overstate its market-share. For a published author, bookstores are still roughly 70% of the market, and e-books are only about half of online sales.

That means that, while a $.99 cent self-published John Locke title may be selling as many e-books as the new Michael Connelly, the Connelly book is selling the same number in hardcover as it is in e-books on Amazon. And brick and mortar bookstores represent nearly triple the total online sales.

Meanwhile, the attractive 70% royalty rate doesn't benefit Locke, because that rate only applies to books priced between $2.99 and $9.99. An author of a bestselling hardcover like Connelly makes ten times Locke's per-copy royalty, and sells five times as many copies.

Locke claims he sells an e-book every ten seconds. If that's true, he'll sell about three million copies in a year and he'll earn a million dollars. That's ten times as many copies as a commercially published author has to sell to make the same money.

Self-publishing on Kindle, for most authors of fiction, is likely to become a stepping-stone to real publication rather than a viable business in its own right. The model going forward will most likely force authors to price at $0.99, in hopes of garnering significant sales that will attract an agent and publishers, and then a real book deal.

Nearly everyone who can publish with a commercial publisher goes that route, especially in fiction. And there are good reasons why this is the case.