Romance, Historical, Contemporary, Paranormal, Young Adult, Book reviews, industry news, and commentary from a reader's point of view

Harper Collins New Studio to Test New Author Paying System

There was a Publishers Weekly alert about Robert S. Miller, former head of Hyperion, moving to HarperCollins to create a new “publishing studio.” I ignored it because it didn’t seem very interesting but three authors emailed me the story this morning so I thought I would post it.

I admit I don’t really understand all the implications of this new publishing studio idea. The marketing is tightening and the economy is slowing down. HarperCollins has decided to test some unique sales strategies out.

First is that the unit will share profits with the writers while lowering the advance. This pushes risk from the publisher onto the author, much like the epublishing business does. Second the studio won’t accept returns.

The way I understand how royalties and advances are paid out now, I can’t see this being something authors will jump for because epublishing authors receive monthly or even quarterly payments while a print published author might not see another dime until a year or so after her release.

The print published author is paid an advance for her book. Let’s say the advance is $5,000.00. That money is paid up front, either at the time of the contract signing. The book then goes for sale. A paperback author earns a little more than $.50 per book sold. In order to “earn out” the advance, the author needs to sell 10,000 books. Any book over 10,000 that is sold is $.50 earned for the author.

Assume that the author sells 20,000 books with a $5,000.00 advance and has a 30,000 book print run. The author will be owed $5,000.00 in royalties but the publisher holds those royalties against returns. I.e., because there are 10,000 books out in bookstores that could possibly be returned, the author won’t get that royalty payment until more units are sold or all the returns are in. (Feel free to correct me authors).

What HarperCollins new studio seems to be proposing is a) removing the return, b) lowering the advance and c) profit sharing. Now whether the author will share in her own profit or the entire studio’s profit is unknown.

Again, like an epublishing company, the new unit is going to focus on internet promotion instead of paid in-store promotion.

The Wall Street Journal has a good article on this. Thanks for the hat tip, authors.

Jane Litte is the founder of Dear Author, a lawyer, and a lover of pencil skirts. She spends her downtime reading romances and writing about them. Her TBR pile is much larger than the one shown in the picture and not as pretty. You can reach Jane by email at jane @ dearauthor dot com

10 Comments

  1. Anion
    Apr 04, 2008 @ 18:37:11

    You’re basically correct, but most publishers only keep a certain percentage of royalties against returns–30% or so in my experience (but of course deals vary). Not the whole thing.

    I think this is a “wait and see” thing personally. I don’t love the sound of it but I don’t hate it either–it’s too soon to tell. It’s possible royalty payouts will come on a much faster schedule under this system, for example.

    It’s only one experimental new line, 25 books–and if memory serves Penguin tried something similar a few years back and it failed–so I don’t think the uproar is really justified yet.

  2. DS
    Apr 05, 2008 @ 18:11:08

    It’s also pushing the risk onto the bookstore as well.

  3. Maya Reynolds
    Apr 07, 2008 @ 14:26:13

    Of course, we don’t know enough yet to make an informed decision, but I’m a bit more optimistic about this.

    Right now advances are in the range of 7.5% for paperbacks and on a sliding scale for hardcover: 10% for the first 5,000 copies sold, 12.5% up to 10,000 copies sold, and 15% on all copies sold after that.

    If, as Friday’s Publishers Lunch said, Miller is talking about a 50/50 split, I might be willing to take that risk–provided I was comfortable that we had nailed down the accounting method for calculating profits and IF–a big “if”–my efforts at publicity and marketing also went into the expense side of the ledger so that I was reimbursed for my out-of-pocket expenses.

    Like the people who wrote you, I am VERY interested in this. I think it is just the start of the new publishing models we’ll see floating around over the next few years.

  4. Allison Brennan
    Apr 07, 2008 @ 14:28:10

    I’m coming in late, but I wanted to explain a bit how advances, royalties and returns work–at least in my experience. I’m going to use nice round numbers because it’s easier for me :)

    An author gets a $20,000 advance for a mass market original. The pub does a good job and the buyers order in decent numbers and the first printing is 100,000 (we’ll just assume all those shipped.)

    After one year, the author sold 50,000 copies. These are actual, known sales. There are 30,000 copies returned. That means there are 20,000 copies no one knows anything about–they could have been sold, they could still be on the shelves, they could have been stolen. These copies will likely trickle in over a couple years in both the sold and stripped columns.

    But the author SOLD 50,000 copies. On a $6.99 PBO, that’s .56 per copy, or $28,000. This means that the author should receive a royalty check for $8,000–no matter what’s going on with those 20,000 outstanding copies.

    The “reserve against returns” is, essentially, holding a reserve against those 20,000 unknown copies. That means that the publisher isn’t going to pay royalties on those books yet. Those are held usually a year (though I’ve heard some publishers hold them longer) then most are released based on whatever formula the publisher is using, most likely a historical analysis of returns by that author and/or those type of books.

    I have heard of one publisher who holds reserves against future returns on books sold even when the author has earned out her advance. I don’t understand that, but I’m not an accountant.

    If I’m wrong, maybe someone else can correct me, but I believe this is the way it generally works.

  5. Maya Reynolds
    Apr 07, 2008 @ 15:22:03

    I just re-read my post and realized I said “advance” when I meant “royalty” in the second paragraph.

    Sorry.

  6. diagonal thoughts » Blog Archive » Economies of the Commons Report
    Apr 18, 2008 @ 06:44:38

    [...] be reconsidered. Economic uncertainty is driving everybody to look for new models. For example, Harpers Collins recently announced a new “publishing studio” to test some new sales strategies. Basically, [...]

  7. feener44
    Jul 19, 2008 @ 07:31:53

    as a former director of finance for a publishing company, harper is looking to the future. I think the key problem is RETURNS. You do realize that B&N could send books back to a pub house even if they are 2 years old. No other industry has that. It is antiquated and something needs to change. I would love to do a profit and loss for everyone to help better understand the economics both for the author and for the pub house. Feel free to contact me directly at feener44atgmaildotcom

  8. somenath chatterjee
    Aug 18, 2008 @ 07:23:16

    I am writing a book on distance education, probable name ‘Distance Education – An In-depth Study’. If you are interested I may send you my book proposal.

  9. draft-blogher « Diana’s Blog
    Dec 17, 2008 @ 14:04:01

    [...] a wider base and more sales. More recently, Harper Collins has also opened a new division called Harper Studios testing new profit sharing models and has made ebooks available on the Nintendo DS.   BlogHer [...]

  10. draft2 « Diana’s Blog
    Dec 17, 2008 @ 14:55:33

    [...] a wider base and more sales. More recently, Harper Collins has also opened a new division called Harper Studios testing new profit sharing models and has made ebooks available on the Nintendo DS. BlogHer would [...]

%d bloggers like this: