Impulse Buying

Today, Avon (the division of HarperCollins, not the makeup distributor) announced the launch of its new digital imprint, Avon Impulse. In addition to digital books, at least some of their titles will be available as print-on-demand.

This move comes as absolutely no surprise to me, as I suspect almost all of the traditional print presses are going to have digital-first imprints in the works, if not up and running, by the end of this year. The digital market is simply growing too quickly for publishers to overlook it as a source of revenue.

I know a lot of writers are very excited by the availability of this new market, particularly since it has Avon’s “brand” associated with it (unlike Carina Press which, though owned and operated by Harlequin, does not have the Harlequin brand in its name). Like most digital publishers, they are not paying an advance, but their website says they are paying 25% royalties on the first 9,999 copies sold, then 50% on every copy over 10,000. That sounds pretty decent (although it’s not very likely that a large percentage of titles will ever sell 10,000+ copies and achieve the 50% rate), but we have already found the catch–to wit, this percentage is on net, not either gross or list price.

In my humble opinion, this is not a good deal. Most of the digital publishers I’ve worked with or my friends have worked with pay their royalty percentages on gross or list price, at least when the book is sold through the epublishers’ own website. When the book is purchased through third party sites (like Amazon or B&N), the royalty rate is either reduced somewhat or the percentage is the same but paid on net. And in most cases, when digital publishers are paying on net, they are paying 30-45% from the first copy sold, not demanding that the author sell a buttload of copies before achieving a higher royalty rate.

My traditional publisher is paying royalties on my novella anthology at 25% of list price. I strongly suspect Avon is paying digital royalties to their traditional print authors on list price, as well, although I don’t know what the current percentages are. So why are they offering to pay LESS to authors who are foregoing an advance? The only way the no-advance digital model can work financially in the author’s favor is if the royalty rate is higher than it would be in the advance-paying print market.

How much of a difference is there going to be between 25% on net versus 25% on gross/list price? I can’t be sure, but my understanding is that most of the etailers take a cut of 30% or so from the list price of the book. (Depending on whether or not agency pricing is involved, they may or may not be taking that full 30%, since if they are discounting the book, they still have to pay the publisher 70% of list.) Then there is the question of what else the publisher will fold into the cost of producing and distributing the book. Net means “how much we made on each copy after paying all the costs associated with creating it,” so they could conceivably take a cut from each sale to cover the cost of the cover art, editing, etc. They might not, but until we see the contracts, we won’t know either way what all is included in the difference between list price and net.

Even assuming the only cost being skimmed from the list price is the 30% for the etailer, the effect of paying on net is that they’re really not paying 25%, but 17.5%. Only after the 10,000th copy do they start matching the typical epublisher royalty rate of around 35%.

All in all, I can’t say I’d recommend Avon Impulse at this point. I don’t have an issue with publishers paying on net, per se, but if they are going to pay on net, they have to pay at a MUCH higher rate (35-50%) and on EVERY copy they sell.

In other words, buyer beware!