Harlequin e-Book Royalties

A little bird told me that Harlequin is now offering 6% royalties on e-Books. Apparently, this is non-negotiable.

The typical royalty rate for other e-publishers? 30-50%.

Now, I’m wondering: why the discrepancy? Also: is the royalty rate for books that are offered both in paper and e-book format, or is it the rate for books that are going to be offered primarily as e-books, a la Ellora’s Cave? If the former, 6% would be pretty typical for paperback books, but if the lattter—well, that’s pretty Scrooge-a-riffic.

Anyone willing to skool Candy yet again on what’s going on? A lesson on the intricacies of the royalty system would be appreciated too, by the way. I only have the vaguest idea of what’s going on here, but I’d love to know more.

Categorized:

News

Comments are Closed

  1. 1
    E.D'Trix says:

    Well, I don’t know about how Harlequin does thing, but I do have a bit of insight into the e-book biz…

    The 30-50% royalty rate for e-book pubs is pretty accurate and is offered for a variety of reasons:

    1)The cost of producing an e-book is much less than a traditional book (no printing costs, the art *posercoughposer* is way cheaper as well as the editing fees, etc.) as a result the publishers profit margin in the books is way bigger. They often only have to sell 100-150 copies, in some cases less, to pay for their investment—all money after that is gravy.

    2) Most e-pubs (possibly all) do not offer advances to their authors. The larger royaly percentage helps to make up for this lack.

    In most cases it is because the companies are small and have little ready cash to play with as far as advances are concerned. In the case of *big* e-pubs, the no advance rule tends to be maintained because the authors prefer it.

    Why? Some e-pubs pay monthly. Many authors prefer a steady monthly check rather than an initial lump sum and a guessing game as far as when that advance will earn out and they get more money.

    Anyway, like I said, I have little knowledge about Harlequin, so I can’t guess their reasoning, but from my end it seems that since they are selling a product at virtually no expense to themselves (the books are already edited and have cover art, and the cost of converting the books into various formats is a drop in the bucket) and are probably netting close to 100% of the profit, offering authors 6%, non-negotiable is a bit of an insult.

    Although, sounds to me that many of the older books may not have had electronic rights granted to them, in which case they will find it a bit hard to get the authors to sign a deal like that!

    Hope this helps clear the issue a bit!

  2. 2
    fiveandfour says:

    E.D’Trix, as a complete novice when it comes to intellectual property rights, I have a question based on this statement that maybe you can answer:

    Although, sounds to me that many of the older books may not have had electronic rights granted to them, in which case they will find it a bit hard to get the authors to sign a deal like that!

    I seem to recall reading something on this subject in relation to the music world.  In that instance, I think the thing was that the owners of the music (i.e. the music companies), due to the fact that older contracts didn’t reference media types that were invented after the contracts were signed, had the ability to publish the music in new formats without needing to re-negotiate with the musicians and possibly without the need to pay them any royalties on money earned via the new media type.

    Is it possible the same kind of thing has occurred with Harlequin or in publishing in general?  That is, the original author contracts referenced printed/bound/manufactured books, so through a loophole, publishing the stories electronically means they aren’t subject to payment of royalties to the authors?

  3. 3
    E.D'Trix says:

    GAH! Curse you, long comment that just deleted…*whimper*

    Anyway, as I deja vu…Good question, 5&4! I knew there was a reason I went into editing rather than law…

    In my opinion contracts, for all that they are legally binding documents, can always be a slippery slope. A lot depends on implication, etc. Sometimes the detailed nature of early contracts can work against them. If for instance a contract from 20 years ago explicitely stated multiple methods and ways in which they could sell the book, but did not incorporate anything mentioning “future technologies”, then it could likely be argued that because it is so detailed in all other ways, this was a deliberate exclusion.

    I do know that many new contracts do have a “future technoligies” clause, so perhaps Harlequin had one 20-30 years ago, you never know! I doubt that any clause in the contract included information on royalties the authors would receive on the books, so they are likely trying to come in like the BMOC and intimidate the authors into what, in my opinion, is a insultingly low royalty rate.

    Again, not a lawyer, but this is just what it seems to me.

  4. 4

    I think 6% royalties on ebooks is a little low. I’ve seen from 8-25% in contracts I’ve looked at; I wonder if the 6% is only for a specific type of ebook? It just seems really low.

  5. 5
    Candy says:

    E.D’Trix: Thanks for the perspective and the scoop on why royalties for e-books tend to be so much higher. Makes sense to me.

    Question: Maybe the scale of distribution figures into the low royalty rate? Because Harlequin has much more widespread brand recognition and marketing push than Ellora’s Cave, Loose-ID, New Concepts Publishing, etc. etc. etc. Or they figure that the e-book rate should correspond directly with the paper book rate without taking into account the costs?

    Interesting points about the future technologies clause, too.

    Also, I’d also like confirmation that Harlequin IS offering the e-book contracts at this non-negotiable rate.

  6. 6
    Ellen Fisher says:

    I don’t pretend to be an expert, but I understand that the higher rate of royalties was originally set by e-pubs because they knew they wouldn’t sell as many copies as large publishers, and they were trying to offer an amount that would make an e-pubbed author’s earnings comparable.  As it happened, that didn’t really work because sales figures were so low in the beginning, so most e-pubbed authors haven’t made anything approaching New York rates until recently.  But New York publishers have absolutely no incentive to give higher royalty rates to their authors for a different format, so I would expect them to pay a rate similar to what they pay for mass market paperbacks.

  7. 7

    Woo Hoo Candy you’re fast,
    Since I’m the evil bitch with all these questions I’ll wade in with some vague facts/speculations.

    Please note I only have the merest knowledge of a Harlequin contract (or any contract for that matter, but hey, if any editor would like to give me first hand knowledge I wouldn’t cavil)… but I digress, back to contracts. Please take any of my contractual terminologies with a grain of salt.

    Rumours are flying around ehar wannabe writer’s community about Harlequin seriously looking at epublishing. What isn’t known is what form this will take.

    Harlequin already has an electronic transmission/alternative publication clause in their contracts. My understanding was that to date this hasn’t been much of a concern because Har didn’t do ebooks. We’re talking audio, magazine condensed type of reselling here. This clause was for a lower royalty percentage than the regular print royalty.(see note above, I haven’t actually seen one of these contracts, just heard about them)

    But if the rumours are correct (and I have no reason to doubt them, they usually pan out in one form or another) it begins an interesting era for authors.

    On the one hand you have established epublishers offering handsome percentages to authors with an option to go to print later. (depending if the sales go well?). On the other, traditional print publishers branching into ebooks but offering far less to authors.

    It’s this discrepency, and justification for lesser percentages that has me searching for answers.

    The growth of the ebook market in the last 3 years alone is impressive and (I’m sure) part of the reason traditional print publishers are now branching out. I firmly believe epublishers will continue to expand their market share and become a real threat to print publishers.

    So that leaves an author with two choices. Sell to print with it’s huge overhead, and crappy third party redistribution deals… or sell to epub with an option for print later down the road (at much better rates).

    Some may scoff at my predictions about epublishing, but I think the market growth speaks for itself. So authors BEWARE… those electronic clauses in your contracts will become a huge deal one day. Maybe today.

    X

  8. 8
    Candy says:

    Thanks for weighing in, Ellen.

    C’mon, party people: nobody wants to post anonymously and confirm/deny the fact that Harlequin is going into e-publishing at a scandalously low rate?

    *bats lashes*

  9. 9

    In consultation with my savvy savvy critique group, here’s the most likely scenario we came up with.

    Suzie Writer, sells to Har. Her advance is $2000. Suzie has a contract guaranteeing her 6% of royalties, on sales (print and electronic). Har prints 75,000 copies of Suzie’s book. The shelf life of Suzie’s book (retail $4.25) is one month, and in that time half are sold.

    Suzie makes a grand total, including her advance, of approx $9,500.00. (oh, and btw there’s been a 2-3 year interval between her advance cheque and her final payout).

    But now Suzie’s book goes into e-format, with an endless shelf life. In the years since she originally sold, Suzie’s website and fan base have grown and generates a lot of sales for her backlist copies. So let’s speculate that she sells an additional 37,500 copies over the next 3 years. She still only makes an additional $9,500, instead of the potential (at 35%) $55,000 approx.

    I realise these sales figures may be wildly exaggerated, I’m just using them to illustrate the differences in percentages.

    X

  10. 10
    Ellen Fisher says:

    Exactly, Christine.  Why should Harlequin give away all those profits to the author when they don’t have to?  They don’t care what small presses do—they’re a huge company, not a small press.  Authors are not likely to refuse to sign a contract with Harlequin just because of low ebook royalties. There’s no incentive at all for Harlequin to emulate the higher royalties given by e-publishers, and a lot of incentive for them not to.

  11. 11

    True Ellen,

    So long as traditional pub houses print books, they have a certain justifaction for the low royalties. However, if the e-market continues to grow (as I feel it will), these houses may rely more and more on the e-format, greatly reducing their print runs, perhaps even switching to POD (horrors!) for some lines. (I am of course looking far into the future here).

    And that’s the danger as I see it. The future. That tiny little clause, that doesn’t mean much today may become the industry standard tomorrow. If all the print houses decided tomorrow to stop printing books, and switch to e-format, their authors are locked into a 6% royalty deal.

    X

  12. 12

    It just occurred to me (and I realise I’ve been unbelievably naive), but could the reason that no authors have commented on this be due to confidentiality clauses in their contracts?

    If so it’s really annoying. How else can we learn about the industry if no one is allowed to talk about the inner workings.

    X

  13. 13
    Jeri says:

    It’s not that we’re not allowed to discuss it (my HQ contract has no confidentiality clause), it’s just that we prefer not to publish the terms of a legal contract on the internet, for the same reasons one wouldn’t publish the details of a divorce agreement or house sale for the whole world to see.  It’s a private matter among writers, editors, and agents. 

    Each contract is a negotiation with individual authors or their agents, so even within the same line or imprint the deals may be different.  Another Luna author might have gotten a better or worse deal than I did for the same number of books, but I really don’t want to know that information.  Okay, I do want to know, but I shouldn’t, and I don’t want other authors knowing what kind of deal I got. 

    That being said, buy me a few drinks at next year’s RT and we’ll talk.  :cheese:

  14. 14

    I can’t help but wonder if this reluctance to discuss terms and conditions isn’t somehow… well, detrimental to the interests of writers as a whole? In another field of work, finding out how much someone else made or if they’re being paid the same for the same work wouldn’t be so fraught with problems. Of course, part of the problem is that writing and the creative endeavor is subjective when it comes to the cash valuation thereof… but reading the above, I am forcibly reminded of the American reluctance to discuss salary that makes it easier for employers to, say, pay a woman less than a man for the same work.

    Mind that I’m not saying this is the case; I would just like to maybe discuss this some more. Thoughts, anyone?

  15. 15
    Jeri says:

    Good point, Lilith.  What I’d like to see in romance, and what the sf/f community is trying to do now, is a survey of advances. 

    Or, remember how in college, they’d post the grades outside the prof’s office, with the last four digits of the students’ SSN’s or some other unique, anonymous identifier?  I’d love to see something like that for the different lines of the major publishers.  It might affect which houses we decide to submit to, and therefore create a fairer labor market.  (Microeconomics flashback: A truly free market assumes all players have perfect information.  Ugh, end flashback.)

    With either system, the publishers wouldn’t hold all the information and the power that comes with it, but the individuals involved would retain their anonymity and privacy.

    Hmmm, advance survey…sounds like a job for RWA.

  16. 16
    Amy E says:

    Karen Fox has a website that does exactly that.  http://www.karenafox.com/money.htm  It’s a little out of date, but you can still get an idea.  When my Loose-id and Changeling stories come out, I’m planning to send her my figures to help her keep up-to-date.

  17. 17
    booksquare says:

    Oh my, this is a discussion that, quite literally, makes my heart race. I love, love, love talking royalties and contracts. This was my former, misbegotten career. I do not know where to begin. Actually, here’s a link to an older post on this topic:
    http://www.booksquare.com/archives/2004/05/28/203/

    I do want to address a few issues. There are many agreements that are silent on the issue of royalties for electronic rights. While I am more familiar with how motion picture studios handled this issue when videos came into existence, what I have seen, is that publishers treat ebooks in the same manner that they treat other ancillary rights. Which is to say they are reported at a lower royalty rate than “real” books.

    This type of legacy reporting has spilled over to current contracts. This is wrong—when Random House (who previously had very author-favorable language) lowered their ebook royalty a little over a year ago, the Author’s Guild raised the issue; RWA was bizarrely silent. I won’t link to my post on that topic. Ebooks do have fixed costs associated with production and distribution. These costs are significantly lower than those associated with producing physical media.

    Yours Truly,

    Loves Royalty Discussions in Pasadena

  18. 18

    I’m not sure we’re asking for personal financial information. We’re asking for general contract information. How the contractual clauses are implemented. In the changing market, are these clauses beneficial to authors or should authors be fighting to have them ammended?

    In Harlequin alone, I’ve heard figures on royalties of 4% (for some category lines) to 12% for ST… The clause in question (distributing the book in formats other than print) I’ve heard of percentages as low as 3%. In fact I understood it was standard that secondary distribution rates we’re always lower than print royalty rates.

    I’m always keen to learn more about how the industry works.

    X

  19. 19
    Jeri says:

    My understanding is that e-book publishers still don’t offer advances, so they have to give authors a high royalty rate.  So to compare HQ or any other print publisher’s e-book royalty rate isn’t taking into account the whole picture.  When contracts are negotiated, different bits are traded off.  For example, one might give away more rights and/or take a lower royalty rate in exchange for a higher advance. 

    An author selling a category romance without an agent probably has little choice but to take the boilerplate contract HQ offers.  But for single titles, everything is negotiable, theoretically.  It all depends on how much power the author has—how much the pub wants the book, how well they’ve sold before, how good their agent is, etc.

    Does that help?

  20. 20
    Ellen Fisher says:

    It’s true that ebook pubs almost never offer advances.  (I haven’t heard of one doing so, at least.)  Most of us who write for epubs get paid almost immediately—it can take only a couple of months from acceptance to publication, and we usually get paid monthly or quarterly, with no waiting around for years while the publisher sorts out “returns.”  So I’m not sure advances would really matter much in e-publishing. 

    Furthermore, huge advances are nice, but they’re a double-edged sword.  Advances are paid against royalties—you get paid a chunk of cash, then don’t earn any more till you’ve earned your advance out. In theory this makes the publisher feel more invested in you, so that they’ll put more promotion into your book.  But conversely, if you don’t earn out your advance, that can seriously screw up your chances of getting further contracts. 

    It’s true that agents can negotiate for various provisions in a contract, but I understand contracts for category romance aren’t usually very flexible.  Harlequin’s single title lines might offer more room for negotiation.  Even so, I can’t imagine anyone in New York seriously suggesting a 35% royalty on ebook rights.  Most agents don’t handle small press ebook contracts (no advances, and few clauses worth negotiating in the contract), so they may not even be aware that small press pays this much, nor would they care.  It’s a whole different animal, really.  I could see an agent negotiating that percentage up to 8%, but 35%?  Not gonna happen, IMHO.

    Of course, I could certainly be wrong *wry grin*.

  21. 21
    Jeri says:

    Ellen, I agree with your last point that no one will negotiate an e-book royalty with a NY publisher up to 35%. 

    But I can’t agree that not getting an advance is somehow better than getting an advance.  An advance is money in the bank, the only money you’re ever guaranteed to get.  If the company or line folds before publication or decides not to publish your book or to not put ad dollars behind it, you still keep the advance.  Shit Happens in the publishing world, and much of it is beyond the author’s control.  But once that advance check is in the bank, it’s never coming out unless the author fails to deliver the novel.

    This is why organizations like SFWA don’t even qualify e-published novels for membership, because they believe that giving an advance is part of treating an author right.  Otherwise I could have joined them years ago when I was e-published rather than a few months ago when I got a Luna contract.

    IMO, instead of complaining that HQ and other print publishers are giving lousy royalty rates, we ought to be complaining that e-publishers still won’t pay their authors upfront.  (Actually, we should be complaining about both.) But the Big Boys (and Girls) are easier to bash.

  22. 22
    Ellen Fisher says:

    I’m not saying there’s anything wrong with advances.  But negotiating a really big one can be risky.

    I’m really not convinced advances are that big an issue, however.  Advances exist because of the long waits in New York publishing.  A major publisher signs you, then you wait twelve to eighteen months to see the book released.  After that, it’s still at least six months before you start seeing royalties.  In the meantime, you need something to live on (rolls on floor laughing at own joke:-) and to pay for promotion.

    Conversely, I can sell a book to an e-publisher, get it on the market, and get paid in a matter of a few months.  And that’s for units I actually sold.  Certainly the publisher could go under (happens even to well-regarded publishers), but otherwise, I’m getting paid pretty quickly.  Admittedly there are e-pubs out there taking twelve to eighteen months to release books now, which happens more and more frequently.  In those circumstances, an advance would be nice.

    But the reason e-pubs aren’t paying royalties, IMHO, is because they can’t yet figure out exactly what a book is likely to earn. Earnings for a lot of e-pubbed authors are all over the map.  For an erotic paranormal, an e-pubbed author might earn as much as she would for the average romance from a New York publisher, whereas for an unsexy contemporary she might earn a hundred bucks.  I suspect this makes it extremely hard for e-publishers to pay advances—they simply aren’t sure what they’re going to earn on any particular book.  New York publishers, OTOH, have a much better idea of the bare minimum their books are likely to earn.

  23. 23
    Ellen Fisher says:

    In the first sentence of the last paragraph, I meant “the reason e-pubs aren’t paying ADVANCES.”  Sheesh.  Never type one-handed while holding a squirming baby!

  24. 24
    Jeri says:

    I totally agree with what you said (and have typed one-handed with a sleeping puppy on one arm, so I can sort of relate—what they say about letting sleeping dogs lie counts ten times for puppies).

    A huge advance can definitely backfire, but they’re the exception.  The typical advance for a first genre novel would be in the four or low-five digits.  Not enough to live off of unless you write more than one or two a year, but it’s a serious chunk of change that comes when the contract is signed.

    (Yeah, right.  Even the best publishers take 6-8 weeks to send the check after signing.  And usually the advance is split into two or more parts.  And then your agent takes a hopefully-much-deserved 15%.  And don’t forget taxes.)

    I think it’s great that writers can make decent money off of e-books.  That wasn’t the case when I had mine in 2001, and we were only paid royalties twice a year, just like the rest of the publisher’s authors (it was the e-pub arm of Warner).  So my personal experience may be outdated.

  25. 25

    could the reason that no authors have commented on this be due to confidentiality clauses in their contracts?

    No, though it can seem that way. Authors don’t like to reveal the details in print, email or on the web. But they’ll talk about it in person.

    See, it’s a business deal. Authors don’t want a reputation of being difficult to work with or money hungry or whatever. They may some day need to change agent or publisher, and you don’t bite the hand that feeds.

    I would like to see anonymous posting of advances and royalties, as mentioned above, but I don’t see it happening. Publishers won’t go for it. It feels too much like a union. The minute the money goes public, you’ll start seeing those confidentiality clauses.

  26. 26
    booksquare says:

    An advance is merely money against future earnings. It represents a publisher’s estimate of the minimum a book would earn (a low estimate). The higher the advance, the more you are likely to make in the long run. Given the intricacies of collecting and reporting earnings on a book, advances for print publishers are the only compensation an author sees for a very long time. Until the publisher actually starts collecting enough money to recoup its costs (including advances), the publisher is in a negative position on the title. You need to have sufficient money to make this type of negative dollars work for you, and I’m not sure all epubs have that much extra cash that this expense helps them.

    Ebook publishers have a different distribution stream—no physical inventory, no extensive out-of-pocket costs (manufacturing, shipping). They collect directly from the consumer in many cases. In other cases, there’s a more streamlined process (no physical returns to accrue, release, etc) for distributing money. That being said, I wouldn’t be surprised if more financially successful epublishers start offering advances to entice top notch talent.

    As for taking a higher advance in lieu of a lower royalty rate? Doesn’t seem like a good idea to me. The lower rate would mean the advance is recouped more slowly (your advance is not applied against the *publisher’s* earnings—it’s applied against yours). Publishers will, of course, be happy to pay you less in the long run, especially as their ongoing costs for this distribution stream are negligible.

  27. 27
    an author says:

    My electronic-version royalties of my print publisher are 25%. Harlequin’s 6% seems low, but perhaps they are matching whatever the print royalties are?

    And all these surveys mentioned are anonymous. No one is going to put their contract info up on the internet.

  28. 28
    Candy says:

    The leeriness to discuss earnings is a cultural thing—I didn’t notice this sort of attitude in Malaysia, for example. That said, a lot of us aren’t interested in gory details or the nitty-gritty of the contract. Just some simple numbers posted anonymously would more than suffice, such as what An Author did above: Type of publisher (small press, large press), format (e-book, paper book), advances and royalties.

    It’s not just to satisfy my unseemly curiosity (and I admit that my curiosity is unseemly), but I imagine it’d be very helpful for other authors, too.

  29. 29
    Robin says:

    “But the reason e-pubs aren’t paying royalties, IMHO, is because they can’t yet figure out exactly what a book is likely to earn.”

    I always thought about advances (I’m assuming you meant that rather than royalties in your sentence) as part or beginning performance of the contract for the purpose of 1) good faith that the publisher will fulfill it’s end of the deal, and 2) insurance that the writer can’t back out, because publisher has started performance, even though full performance is quite a bit down the line.  Is that inccurate?

    Here’s my question, though:  do agents or publishers explain the basics of contract law with writers?  Like, is there an understanding of all the necessary elements of a contract—consideration, performance, K implied in fact, K implied in law, option K—and the basic rules of contract interpretation, i.e. that the plain language of the contract prevails, or that many jurisdiction have strict “four corners” rules (i.e. who cares about what was said before K was signed—all that counts is what’s on the face of the K), or that, for example, if you reside in LA, your system of law is entirely different from the other 49 states?

  30. 30

    Kinda sorta began a similar post on my blog, and in a response (finally), my arguments/concerns with this issue crystallised. to wit,

    >>Knowing the rates most e-pubs offer their authors, I have to say I was shocked (as in gasphorroroutrage) at the low percentage rates Harlequin was offering. I’ve since learned that this is a pretty standard clause amongst the publishing houses.

    Still my argument remains… when these clauses were introduced e-publishing was the ugly step-child, and wasn’t a consideration (to either the author or the pub house) as a subsidiary right.

    Times change. And it seems foolish to me that this clause isn’t being revisited, or e-books aren’t being separated from that clause and renegotiated< <

    X

Comments are closed.

↑ Back to Top