Wonder why anyone questions why so many people have questions? Or why
anyone would think this does not damage others who want to go into DP.

http://quartetpress.com/blog/about-quartet-press/another-look-under-the-hood-of-the-startup-more-than-a-feeling-edition/

I repeat: You got lots of hype from respected people, you expected us to be wowed and trust you and now it's 'sorry, no can do' with some bullshit vague blah blah.

I was one of the people cheering very loudly for QP, but I don’t ever remember them going around trumpeting themselves as the latest and greatest. I was incredibly excited when I heard about QP, because I’ve been reading Kassia’s Booksquare for as long as I can remember, and that led me to Kirk Biglione’s Medialoper, and between them there is so much knowledge and intelligence about digital technologies and publishing in general. And I retain my respect for the talent represented among the QP principals.

That doesn’t mean anyone else should automatically trust or respect them, or that hard questions aren’t going to be asked (I had several online conversations about transparency with Don Linn, so I certainly understand and share the curiosity about why it didn’t work), but I also don’t think it’s completely fair to indict the QP folks for the praise I, for example (I won’t speak on behalf of anyone else), publicly heaped on them.

I've never seen so much confusion over net and gross. Authors are independent contractors and should not have to endure the cost of doing business. Sure, they are in partnership with publishers, but in so far as one cannot exist without the other and that's it.

More specifically, though, authors are giving control of rights they would otherwise own to publishers in exchange for monetary compensation. At the most basic level, authors can publish their own work autonomously, but publishers cannot produce and distribute work they do not have the rights to. So the party who, theoretically, should be in the power position, has, in many cases, come to see themselves as powerless and at the mercy of publishers. IMO, the more authors know about how publishers calculate royalties, that is, the more they understand how the publishers are valuing the rights authors grant them, the more negotiating power you will have in the long run. Or, in the short run, the more incentive to band together in some kind of engaged advocacy for your own interests.

nice try aiming to deflect from the issue at hand by implying those of us not happy with the so-called ‘explanations’ are looking for sensational scandal.

I repeat: You got lots of hype from respected people, you expected us to be wowed and trust you and now it’s ‘sorry, no can do’ with some bullshit vague blah blah.

Let’s just say, I sincerely hope none of you ever try your hand at e-publishing again. And what I’m the most annoyed about is that this unprofessional behavior has now made it harder for any other e-pub start up that might want to try to do a good job for readers and authors.

They’ve even published a novel by Michael Boatman, who played Carter on “Spin City.”

but I haven't found many non-erotic romances through other epublishers that work for me. There are only three companies I can think of that even offer them-Samhain, Wild Rose Press, and Cerridwen.

Dancing Fools Press does. :) The first book we released this summer is a non-explicit m/m mystery/romantic suspense and we have two (also non-explicit) romance anthologies (m/f and m/m) coming out later this year.

Annie Mullin
Publisher
Dancing Fools Press

Constant revisions of a financial plan are smart and necessary. But to suddenly shut down operations two weeks before the grand opening and to blame the financial plan…let’s just say there’s something fishy in the water and we all smell it.

I’ve never seen so much confusion over net and gross. Authors are independent contractors and should not have to endure the cost of doing business. Sure, they are in partnership with publishers, but in so far as one cannot exist without the other and that’s it.

If a publisher promises an author a 40% royalty and the book costs $6.99, the author should expect to see $2.80 for every book sold from that publisher’s site. When a publisher receives a check for whatever amount earned from each distributor for that same book, the author should expect that publisher to cut h/her a check for 40% right off the top. Yeah, there are negotiations with distributors and greed is working overtime, but an author is not an accountant and not a publisher, should not need to carry a calculator with them and not want to. Sure, they can do the math if need be, but should not have to. It’s not an author’s responsibility and whatever amount the distributor charges is the cost of doing business with the publisher.

But all that is just too simple, isn’t it?

The problem with all this net vs. gross is that too many people are trying to find too many ways to pay authors less. Publishers can’t squeeze anything out of distributors, so they squeeze it out of authors. And distributors don’t give a damn. Someone said we needed a professional organization to intercede on our behalf and also said it would not happen (paraphrasing here). I agree. We have organizations in place already that could do this, but won’t. They worry more over big splashy conventions than anything else.

But at the end of the day, net and gross meant the same thing it did yesterday. Distributors and publishers are just muddying the waters.

This does mean a publisher like Samhain will earn less on sales from retailers like Amazon who demand a 65% discount than they will on those who demand a much more reasonable (but still, ouch!) 50%. And yes, that sucks for the publisher. It sucks to put in all that work and make a measly 5% while the retailer rakes in 13 times that amount.

However, publishers are the ones who negotiate with retailers. Publishers (and yes, Amazon’s got them by the short and curlies) are the ones who decide “will we or will we not hand over 65% of our money to these assholes?”.

And the more you give them what they want, the more they’ll take it and grow fat on what they take directly from your plate–both in the form of those discounts, and in your own decreased direct sales as retailers bite the hand that feeds them and undersell the very people supplying them with those books.

And as they get stronger, the publisher gets weaker and weaker. The authors are helpless. They have no negotiating power (real or theoretical) with these retailers. They have no power to make the decision, “Will I make my book available to these assholes?” So why should they take the same hit the publisher does?

Here’s a scenario for net I might be able to live with:

35% on net from the pub’s site: Customer pays $5.99 to publisher, author gets 35% of that amount, about $2.10.

50% on net from retailers:

Customer pays $5.99 to third party, third party remits 50% of that ($3.00) to publisher, author gets 50% of that ($1.50) (better than a buck-five)

Customer pays $5.99 to Amazon, Amazon pays publisher 35% of that ($2.10), author makes 50% of that ($1.05) (better than $.73)

But I’ve gotta say, after all this discussion of net royalties and retailer discounts, I’m seriously starting to think about sending flowers to Crissy Brashear. Or chocolate. Or wine. Or my firstborn. Because 30% on gross in this industry is freaking blammo. Maybe I’m spoiled, but I’d like to stay that way…

First, of course, we are talking about royalties, which are generally not defined in accordance with GAAP, so while Denise’s definitions are useful (they are!), they include cost of sales, which are COGS or direct costs, and rarely included in the calculation of royalties. If we were talking about a participation, as suggested in the recent deal for Glenn Beck (I believe it was him), then they would applicable. We’re essentially talking about a percentage of receipts/revenues.

Generally, the calculation of royalties, as several have noted, is clearly defined in the agreement, and those definitions are negotiable to a degree, which makes them all that much more fun. Still let’s try some simple examples, and I’m basing them on the QP contract. Your publisher may vary.

Example One — Direct Sales (via website):
Customer pays $5.99 to publisher. Author receives 35% of that amount. That’s about $2.10.

Example Two — Third Party Sales (pick your poison):
Customer pays $5.99 to third party. Third party remits 50% to publisher. Publisher pays 35% of that amount to author. Approximately $1.05 is paid to the author.

Not included in these calculations (and should never be included in a royalty calculations as they are generally absorbed in the amounts retained by the publisher): editorial/overhead, distribution, storage, marketing, and any other costs, though there may be an exception for commissions or certain taxes. These are also missing print-related deductions like reserves for returns, bad debt, etc.

The first example is best for the author and publisher. However, the second is a growing segment of the market, and needs to be factored into financial models. It also needs to be considered by authors, because as several have noted, retailers are aggressive and there is little room for negotiation on the part of publishers. However, you have to be where customers shop, and any publisher who expects readers to find their website and buy books is taking a chance. So one more example, using Amazon’s DTP program to illustrate why paying on the “cover price” isn’t necessarily optimal in the digital marketplace:

Example Amazon DTP:
Customer pays $5.99 to Amazon. Amazon remits 35% to publisher, approximately $2.10. Publisher pays 35% based on “cover price”, approximately $2.10. Net to publisher, zero.

Kirsten, in various comments, has basically broken down my example two to specific percentages (35% of 50%), and while I agree that spelling out specifics in an agreement would be lovely, it’s also messy, from a contractual perspective. The publisher would have a) include all third party retailers and then b) issue amendments for any subsequent deals while c) amending for any changed terms.

For the record, while we’re throwing around terms, many publishers define the calculations I’ve done above as “net sales” or “net receipts”. Still no costs being taken, but that’s the terminology used. I prefer “actual amounts received” (which is what is outlined in the examples above, and accurate as the retailers do not deduct any manner of distribution expenses), rather than trying to guess what each listener/reader’s definition of gross, adjusted gross, net, net receipts, net sales might be. I think I’ve been consistent in my phrasing.

So yes, when someone says “net”, I say define your terms. I did this stuff for far too long, and if I ever said “It’s a standard net calculation”, it was only because the other party involved had a clear understanding of what was meant that phrasing. So far today, I’ve seen many different definitions of what might be meant by a term I never used (anyone who knows me knows it’s like pulling teeth to get me to use the word “net” all by itself). People have “heard” that we intended to pay on net, but from whom? And what did that person mean?

It’s moot from my perspective, but perhaps highlights a bigger issue: anytime someone says “net”, it should be clearly defined. There are publishers who charge expenses before calculating royalties, and maybe that’s cool for you. It’s your career. But you should know what someone means when they use these terms.

I know you have, which is why some of your comments seem incongruous with what I’ve seen you post before here. Some of what you ‘said’ kind of rubbed me wrong as a faithful e-buyer and e-reader. I don’t want the digital publishers to try and conform to NY standards. I can afford 3.99-6.99 for an ebook. I can’t afford, nor do I want to afford, 14.99-34.99+ for print books. And I absolutely would not pay 10 bucks for an ebook, I don’t care if it contained the recipe for the Midas Touch.

And I kind of think it’s obvious why NY would want to push for net, especially now. Make authors cover more operating costs in the down economy. Further, I would think it would be obvious why NY would be glad to see e-publisher’s like QP trying to push net as the digital standard.

As I said before, a full on move to net payments, especially royalties on net profit, would likely cripple epublishers because writers wouldn’t be able to afford to keep writing on nickles and dimes. And while the e-industry is ‘touted’ as still being small, it has continued to grow and grow and grow. NY has been shrinking and shrinking. And trust me, NY is noticing they’re downswing and e-pubs upswing. NY would like nothing more than for the e-pubs to go away, it means less competition in a market they would, I’m certain, love to dominate the way the big NY presses have dominated print.

And really, definitions of net or gross… It doesn’t matter what you add to the words. Net means less costs – whatever they may be or however those are spread out. Gross means the full amount received. Some of the other gross/net pairings I’ve read here wouldn’t fly with any successful e-pub anyway because anywhere you look in authors/writers forums you’ll find that any pub that isn’t paying on cover price/list price is to be avoided at all costs.

And I’m betting that’s why P&E, Absolute Write, and many other well respected venues where authors gather to share information and wisdom red flag entities that offer payment on net. And I hope they will continue to do so. Payments on the net are easily manipulated in favor of the business and not the employee.

My point was merely that it is not new epubs or old epubs that are considering paying on the net but that there is a movement for the NY pubs to move to net. I’ve actually blogged about this topic and we talked about it at the Rogue Digital Conference about how the net term is different and how more authors need to be aware of this term and what it means for them.

It does not always mean less and it doesn’t always mean more. In other words, “net” in and of itself is not de facto a loss for the author.

in regards to the comment that NY pays crap digital royalty rates:

So? That may have something to do with why NY digital offerings are barely a ‘blip on the radar’. Digital publishers have built the e-book industry into something thriving and successful exactly because those who are still successful realized e-publishing isn’t print publishing and they built up an entirely new, and immensely effective, business model.

Which includes paying authors a fair royalty rate, instead of using authors to support the costs of doing business – which is unbelievably cheap when compared to not only traditional publishing but any traditional business. And when I say a fair royalty rate, I should clarify that e-publishers are very aware that the chances of a single title selling ten thousand copies in a year, let alone a month (which can happen in the print world) are relatively slim. What author, other than maybe some who simply want to see their words in print, would think $.032 per copy sold (figuring 8% on a $3.99 cover price) is worth it? Especially if they may only sell a few hundred copies? Heck, even a thousand copies? Two thousand copies? That’s 64 bucks for 2,000 copies sold. Could they even afford to continue to write, professionally, for those sorts of wages? No, they couldn’t.

Sure the houses would make out pretty damn good, but without writers to write, there’s no product to sell… I’m sure everybody knows the rest.

E-publishers understood this immediately. IF they wanted to make their new business ventures viable, they had to start over from scratch. They did, it’s worked out fabulously, and if anything NY needs to gravitate more toward digital standards (especially in re of their products in said medium) instead of vice versa.

In short, I guess, I don’t care if NY tries to get digital rights at their crappy royalty rate. The longer they keep messing it up, the longer I’ll get to enjoy the talented e-authors who deliver books I love to read, who are getting paid well enough to keep doing so, in a medium that is easier for old hands to enjoy. And as NY tries to woo e-authors and more and more of them either demand better royalties or don’t switch over at all, I figure with supply and demand, NY will give. Maybe a little, maybe a lot, but they’ll have to give if they want to compete.

And the way I understand net, at least from the authors I’ve asked about it:

Net= monies flowing away from author to support business expenses
Gross= monies flowing toward author to support writing

Look at it this way, Robin. I’m going into this knowing that retailers usually demand discounts of 50-65% on list price. So I know if I get paid 35% on net, I’m going to get somewhere between 12.25 and 17.5% per copy.

15% gross on list price would get me roughly the same money–but it would prevent my royalties from getting smaller and smaller as more retailers decided a 50% discount isn’t enough for them.

Plus, I wouldn’t have to spend three hours with my calculator figuring out 35% of a buttload of different percentages for different retailers, either. I’ve already done the math. I don’t want to keep doing it every bloody month.

I’d prefer to earn 15% gross rather than 35% net because I’m aware of the vagaries of the system. It’s like locking in your mortgage for five years when interest rates are low, or one year when they’re high. No one’s going to tell me that it would be a bad idea to lock in my interest rate if prime was at an all time low. If they did, I’d call them not too bright.

Right now, retailers are trying to gouge publishers for every dime they can, and their position to make demands only seems to be getting stronger. Their discounts aren’t going to get lower than they are anytime soon, and in many cases could get higher.

You lock in when conditions are favorable. Now, if retailers all decide tomorrow to play nice and voluntarily lower their discounts to 30% on list price, I’m going to look like an idiot. But I don’t think so. And even if that happens, I’m still earning 15% on list–a figure I thought was fair or I wouldn’t have signed in the first place.

I’m not sure asking for more simplicity in the “bottom line” is an advantage to authors in any way. Because, as Kassia has pointed out numerous times, publishers are doing these calculations and whatever an author can negotiate is going to be dependent on how the publisher structures royalty rates relative to costs and pricing. How can you really know what the bottom line number means in terms of value if you don’t know the details of the royalty calculations? It seems akin to leasing a car and paying attention only to whether the monthly payment is affordable and ignoring the interest rate, the cap costs, amortization, lease length, mileage allowances, etc., all of which must be understood to know whether that bottom line figure is a good deal and/or truly affordable in a practical sense.

If every online store out there can offer a publisher’s books for 2/3 or less the cost from the publisher’s site? It won’t matter what royalty the pub offers on direct-from-site sales, ’cause no one will be buying them. Both publishers and authors will end up with less of the pie.

Of course, I don’t know what the solution is, other than to have publishers form a professional organization and fight it en masse…which will probably never happen.

How is “net” anymore nebulous than any other term in your contract?

I am a ‘bear of very little brain.’ I just want to know how much I’ll be getting at the end of the day, not minus this and minus that. Honestly, my maths is minimal. I can’t add up a column of figures and get the same answer three times running. I just spent days making a simple list of income and outgoings for my accountant and today I have a migraine.

Gross is nice. I like it, obviously. But I also like a little longevity in the publisher holding the rights to my books. And if the choice ends up being gross, but only sold through the company store, or gross on what the retail price was through FW, BoB, AMZ, etc (which, to me, is neither gross nor net, but I don't know them fancy words) I'm thinking the latter is better.

Gross is not necessarily better–that is, it doesn’t necessarily mean more money for the author.

The epub could pay 35% net on second party sales, in which case you could receive anywhere from 12.25% (65% discount) to 17.5% (50% discount) per copy.

A royalty of, say, 15% gross on those same sales might actually earn you less, depending on how many books sold where, but at least your expectations as far as what you’ll make are clearer.

So I’d ask why would a pub pay “35% on net” rather than “15% on gross” for second party sales? It amounts to pretty much the same thing–one just looks like more.

As far as discounted/book club sales and direct from publisher vs. retail sales, yes there are different royalty rates. But as far as I can tell, it’s only remainder, cheap edition, export rights, etc, that pay on net. And in those cases, the publisher may be hardly making anything at all…