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Harlequin’s Response to Royalty Concerns & Contract Issues

I asked Harlequin about a couple of things regarding the new royalty rate as well as whether Bob Mayer’s claims that Harlequin was inserting a non compete clause in its new contracts to prevent authors from self publishing. Here is their response (from Donna Hayes, CEO of Harlequin)

Concern: These new rates aren’t actually better than what we were already earning — maybe worse.

Response:

Series: on a $5 book, a series author receiving 6% of cover would earn royalty of 30 cents per copy; at 15% of net receipts, she’ll earn 37.5 cents per copy ($5 x 50% discount to distributor = net receipts of $2.50. 15% of $2.50 is 37.5 cents).

Single Titles: on an $8 book, a single title author receiving 10% of cover would earn royalty of 80 cents per copy; at 25% of net receipts, she’ll earn $1.00 per copy ($8 x 50% discount to distributor = net receipts of $4.00. 25% of $4.00 is $1.00).

The net receipts calculation is transparent and we are comfortable moving to a net receipts model for digital sales.

Concern: Some authors are included and others are not.

Response: We had to select an effective date for the new rates to be implemented. Some programming work will need to be done for Harlequin to move to this new net receipts royalty model. We chose Jan 1, 2012 as the effective date. So authors who are active Harlequin authors at that time, will receive the revised digital rates. And the new digital rates will apply to front and backlist units sold as of Jan 1, 2012.

Concern: If a Harlequin author leaves Harlequin after Jan 1, 2012 , the digital royalty rates will be reversed or reduced to what they previously were.

Response: No. Obviously we hope that authors will continue to publish with us, but if they stop publishing with us they will continue to received these new digital rates when we sell their digital copies.

Concern: Series royalty of 15% of nr is less than the single title royalty of 25% of nr.

Response: The series royalty is less than the single title royalty because the Harlequin brand is an important purchase trigger for readers. We invest heavily in the Harlequin brand and the brand is a key influence in the purchase of series books. In single title fiction, the author becomes the brand and sells the book and in nonfiction, the author platform and subject matter sell the book.

The difference between series and single titles exists in the print cover price model of royalties as well.

Concern: Harlequin is asking authors to agree to a self publishing non-compete clause.

Response: No, Harlequin has not asked for this or included it in contract negotiations.

The changes we have announced provide all current authors with higher royalty income than we are contractually obliged to provide. If Harlequin authors want clarification on these points or any others, we encourage them to contact their editor to discuss them.

Saturday Midday Links: Harlequin Raises Its Digital Royalty Rate, Kind Of

Saturday Midday Links: Harlequin Raises Its Digital Royalty Rate, Kind Of

Tor Books is launching an “Author Voices” digital initiative.  Starting with RWA, Tor will be releasing free content exclusively for convention goers via a QR Code at the Tor booth and then after to the general public (for free) as an ebook download at most etailers. Amazon has a link up already.  This free content can be found at http://us.macmillan.com/ and Tor.com

Tor/Forge Author Voices Vol #1 will release at RWA via a QR code at the Tor table and will take fans to a landing page allowing them to download roughly 400 pages in a pdf or epub file. The volume will contain excerpts from upcoming books by section: Urban Fantasy/Horror/Paranormal; Science Fiction/Fantasy; and Thriller/Mystery/Women’s Fiction and Historicals; author articles previously published in the newsletter throughout the previous year; and an original short story by RITA nominated Deborah Coonts, (Lucky Stiff, Forge 2011). An essay titled “5 Tor/Forge Editors talk about Writing, Publishing and Falling in Love” will round out Vol #1.

A QR Code is a black and white code that you take a picture of with your camera and the code launches a website or something else to lead you to the download link.

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Wattpad is a writing and community platform.  They have a robust romance community (although I haven’t checked it out).  Wattpad reached out to let the DA community know about a new summer project by author, Heather McGhee.  The novel “Old Flames” is halfway complete and McGhee outlines where she wants to go and the readers can weigh in on how the characters would feel for potential plot turns and twists.  Readers can leave their comments and ideas and read other readers’ input.  You can find out more here.  My understanding is that this sort of interactive fiction is very popular with teens and YA readers.

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From reader Merriam is an Australian report about how Australian people are interacting with each other and businesses via social media.  90% of Australians have internet access and 62% of them use social media according to this Sensis social media report.  Other notes of interest:
  • Blogs and reviews have a notable influence on buying decisions with 63% of social media users reading reviews before making a purchase decision.
  • On average people read six reviews before making a decision.
  • However only 24% of online users post blogs or reviews, so reaching that 24% of ‘influencers’ is key for marketers.
  • Books formed only 5% of the products or services researched on social networking sites.
  • When it comes to providing online ratings only 3% of products or services rated were books (this is customers making comments on the products they have purchased).

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Harlequin is to make a number of big announcements at RWA including reorganization of its lines and a new Harlequin digital royalty rate. Courtney Milan cited the low 8% digital royalty rate for her single title books as one of the reasons she decided to self publish.  Five years ago, I wrote about how the low digital royalty rate was effectively allowing Harlequin to experiment with digital publishing at lower cost.

The problem with this model is not just that it is inequitable but that it requires the author to be a capital investor in a venture from which she will not see any benefit. Essentially, Harlequin is asking authors to take a lower rate now so that it can recoup its technology investment. While it says that “Once eBooks becomes a profitable business Harlequin will re-evaluate the eBook royalty rates we are offering vis-a-vis that of competitive publishers” what motivation with Harlequin have to revise and pay a higher rate? It’s not in the contract. The contract has a flat rate and there is no provision for re-negotiation based upon the profitability of the ebook venture.

What has happened in the intervening time is that technology is making it easier for authors to compete directly with publishers.  I suggested that Harlequin category authors try epublishing, either by themselves or through a digital publisher:

Why not pay an independent editor to edit your book, invest $2000 in marketing for yourself and sell the book yourself or through the Sony Connect Store for $200. Or even to Samhain or Ellora’s Cave. Will Harlequin still be a player in a few years with its inequitable contracts or is its investment in ebook technology built on the sales of current authors be its saving grace? And if so, what will Harlequin do to repay them?

Barry Eisler told the Guardian that self publishing equation should not take in the immediate returns but the long term ones:

Because the question isn’t whether I can make $425,000 in three years in self-publishing; the question is what happens regardless of when I hit that number. What happens whenever I hit that point is that I’ll have ‘beaten’ the contract, and then I’ll go on beating it for the rest of my life. If I don’t earn out the legacy contract, the only money I’ll ever see from it is $142,000 per year for three years. Even if I do earn out, I’ll only see 14.9% of each digital sale thereafter. But once I beat the contract in digital, even if it takes longer than three years, I go on earning 70% of each digital sale forever thereafter.

Harlequin has responded that it will pay any authors ACTIVELY writing for them a 15% digital royalty off an undefined net for category books and a 25% digital royalty off an undefined net for single title books.  25% off the net is kind of an industry standard at the present.  Category authors have privately and publicly shared that this is not acceptable but my guess is that Harlequin believes that the line is more important than the author which is why the category authors are paid less.  How many authors leave the lines for self publishing or digital publishing remains to be seen.  You can see the actual emails sent to authors here.

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Speaking of Courtney Milan and her self publishing endeavors, Unlocked has caught the attention of Amazon.  In a mailer that went out on Thursday, Amazon suggested to its romance readers that Unlocked was a “top rated” romance book.  (Click on the screencap taken by Sarah Wendell)  Prior to this mailer, Unlocked was at a very respectable 68+ on the Kindle bestseller list.  Within hours, Unlocked moved to the #2 overall position, sitting right behind Janet Evanovich’s Smokin’ Seventeen which sold 100,000 digital copies on its first day of sale.  It’s #4 today.  With its Sunshine Deals and this type of direct marketing, Amazon has shown it can move the needle for books that it profiles. This will be the new end cap in the digital age.

Of course, the question that is raised in my mind is why Amazon isn’t doing more to promote its upcoming authors for Montlake or Thomas & Mercer?

I have a lot of concerns about self publishing, Amazon’s venture into publishing, and the like because even established authors– whom I believe should know better–are putting out really crappy product.  This is one reason I am thrilled with Milan’s success. She’s put a ton of effort into putting out a quality product and she appears to really respect her readers.  Other authors, authors who have been in publishing for a long time, are putting up stuff like this.

The castle buzzed with activity. Floors were mopped, privies limed, larders stocked, bedding laundered. Carpets were beaten, faces washed and new tapers set in place of the old, even if the old were not yet burnt out. All of this was being done because Rob Macalduie, the young Laird of Barras’s, would-be bride was on her way to inspect not only his holdings, buildings, and his people to see they were worthy of her. In addition, she was coming to look over the young the laird himself with much the same purpose in mind. If she liked what she saw, they would be wed three days hence. If not, she would leave.

For as well as being a very rich girl raised in the French courts and fostered by the powerful Duke of Gordon, Jeanne Forbes and was one of the king’s favorites. As such, even though a marriage between he and Rob would unify their two Highland clans –clans that had been fighting for generations– the duke had given her the unprecedented prerogative to deny Rob’s suit if she didn’t find favor with him. It was not a pronouncement that anyone in the clan, their wealth and manpower depleted by years of contention, liked.

(Link to screenshot)  I won’t link to the book or name the author but I’ve been struggling with both sadness and frustration that we are seeing this sort of thing from an established author. This author is actually someone who I really enjoy reading.  I’ve recommended her books to others. I don’t know what good conclusions can be drawn from something like this.

I mentioned to others that I wonder if this is some insidious campaign by traditional publishers to prove to readers that low priced books can’t produce a quality product.

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If you are a print published author, the April sales news is utterly depressing.  Mass markets were down 41.6% as were all other sectors except digital books.  But the increase in digital sales were not enough to make up for the loss of paper book sales revenue.  Source Publishers Weekly.