Caught in the Net that Is “Net”

Since last week, the online publishing world has been ablaze with the news that Harlequin is changing the royalty rates it pays its authors from 6% of cover for category romances and 8% of cover for single title books to 15% of net and 25% of net. This change is retroactive and applies to authors who are “actively writing for Harlequin.”1 Authors do not need to sign an amended contract to accept the new rates; rather, they must contact Harlequin if they want to turn down the new rates.

There has been a LOT of angst about what this “means” to authors. Is 15%/25% of net more per copy than 6%/8% of cover? Less? About the same?

Harlequin’s stance in the letter is that for most authors, the new terms represent an increased royalty rate, but there’s some evidence that whether that’s true might depend on lot on when the contract in question was written/signed. Elaine English did an analysis for NINC of multiple Harlequin contracts and concluded that in some cases, the royalty paid under the new terms for some books would actually be only 2%-3% of the cover price. Clearly not an improvement. That said, Harlequin has responded via Angela James to some of these concerns on Dear Author this morning, and this analysis of how net is calculated supports the notion that the change is an increase, not a decrease. Even so, individual authors would be wise to review their contracts with their agents to determine whether the change is or is not to their benefit.

But here’s the real kicker in the whole story, at least as far as I’m concerned. Authors have been signing contracts for 25% of net on digital sales FOR YEARS. It’s pretty much the standard rate in the industry. Harlequin has been bagged on for years for offering “only” 8% of cover on single title works, but now that they’re moving to offer the “industry standard” rate, their authors are up in arms, wondering if Harlequin is trying to pull a fast one on them. It’s ironic, don’t you think?

In a post back in March on the Avon Impulse line, I said I thought 25% of net was a pretty terrible royalty rate for digital-first/only books, because it meant you were, at BEST, being paid 17.5% of the cover price. When you compare that to the royalty rates being offered by the digital-first small presses, which are typically around 35%-40% of either the sale price or of net (depending on whether the book is sold directly through the publisher’s website or through a third party), 25% of net starts to look pretty crummy.

However, when you get right down to it, the problem with being paid on “net” isn’t the percentage itself; it’s the fact that it’s typically not clear or disclosed how net is calculated or how much net will be. Angela James’ post on Dear Author (referenced above) seems to indicate that Harlequin’s “net” is calculated on 50% of the cover price, but I know from my own royalty statements from Kensington that my “net” is all over the map–it seems to depend not on the cover price of the book, but the the actual sale price less the distributor’s cut and who knoews what all else.

I’ve never understood, to be honest, why the prevailing terms for digital royalties seem to be based on the net receipts rather than the cover price. Print royalties have ALWAYS been based on the cover price. It doesn’t matter how much the retailer actually sells the book for; the author still gets a predictable royalty on every single copy sold. Why should digital books work differently, especially when the publisher in question is agency-pricing, which means the publisher is getting a predictable portion of every single sale? In theory, if the publisher is agency-pricing your digital books, 25% of net should mean a predictable royalty, but that’s only the case if you know for sure what’s getting netted out AND your publisher never puts a digital special on your books (as both Avon and Hachette did for some backlist titles earlier this month).

I don’t expect to be signing another contract with a publisher any time soon, but more and more, I truly dislike net calculations for royalties because they are so potentially fungible and unpredictable. If and when I’m in that position again, I may well try to negotiate either for digital royalties based on the cover price (although, obviously, I would not be asking for 25% of the cover, but more like 15%) or for a clear disclosure in the contract of exactly how net will be calculated. And that’s partly because, if the publisher later decides to change its terms, I don’t want to have to guess whether the new terms are more or less favorable to me. Which is the net many Harlequin authors feel caught in right now.

1From my perspective, the most puzzling thing in the whole announcement wasn’t the royalty change–it’s what the heck “actively writing for Harlequin” means! Are you only actively writing for them if you have an uncompleted manuscript under contract? Do revisions and copy edits consistute “actively writing”? If you’ve completed the last manuscript under your existing contract and have either not yet submitted an option book or don’t have an option clause, are you no longer active even though you have books that have yet to be released? Are you no longer active if you turned down a contract offer from them, even though you still have unreleased books? It’s really very puzzling, and a clear definition of that term would certainly have been helpful!

Who’s Published (Are You Listening, RWA?), Part 1

As of this morning, I reached an interesting milestone on sales of my self-published short story. I’ve now earned $1,000 from it. That amount is a net, including the $250 advance I was originally paid by the editor of the anthology it first appeared in, less the cost of the cover art.

The reason this is interesting is because the $1,000 threshold has meaning within Romance Writers of America. An author is considered “published” for the purposes of joining RWA’s Published Author Network (PAN) when he or she has earned a minimum of $1,000 from a single published title. There are a couple of caveats to this. The first is that the work must be novel (40k+) or novella (20k-40k) in length. The second is that it must be published by what RWA terms a non-vanity, non-subsidy publisher.

I met the minimum requirements to join PAN when I sold Behind the Red Door to Kensington for a $2,500 advance back in 2008. (I’ve since earned about $800 more in royalties from that book, mostly thanks to digital sales.) This means RWA considers me published pretty much forever. I never have to sell another book to a publishing house to remain in PAN or stay on the list of published authors on their website or get the “Published Author” moniker on my conference name tags.

But here’s the thing. It has long been a precept of the professional writers’ organizations (not just RWA, but also SFWA, MWA, and, I’m sure, others) that all monies in publishing should flow toward the author. This means that authors are cautioned from signing with agents or publishers who charge any fees (other than, of course, the percentage they take of the book’s earnings or the author’s royalties). For a long time, RWA and other organizations hewed to the notion that it was critical not only for the author not to pay anything upfront to publish a book, but also to receive an advance on royalties, thereby effectively ensuring that author was never paid less than that amount for the work.

Of course, the digital publishing model came along and threw that logic into a cocked hat as authors began to earn good money. Although the sales numbers were lower, the royalties were significantly higher, which led to more money in the author’s pockets. The digital publishers also paid more regularly, sometimes as often as monthly, which meant that although the author didn’t receive any money upfront, the actual payout of royalties beyond the amount that might have been advanced was much quicker. But the recognized digital publishers still followed the primary tenet of writers’ organizations–the author was never charged upfront for cover art, editing, or distribution. All monies still flowed toward the author, albeit at a different point in the publishing process.

Even so, digital publishing was viewed askance for quite a long while in writers’ organizations. Although it seemed some authors made a LOT of money at it, the majority of authors didn’t (and probably still don’t). Moreover, there persisted a persisted a perception of a “quality gap” between ebooks and print books (although that divide between digital and print has narrowed because pretty much every print book issued now has a digital counterpart). Notwithstanding, there’s still a certain “sniff test” factor out there, and I imagine a lot of us still suspect that if you submit to enough digital publishers, eventually you’ll find one that’s willing to publish even the crappiest manuscript.

Now, we have the new age of self-publishing. Digital self-publishing is so cheap and easy1, everyone really can be published. And let’s face it–this fact, that everyone CAN be published, even the worthless hacks–is a huge bone in the craw of professional writers who’ve been at this a long time and feel they’ve “paid their dues” and shouldn’t have to share the status of “published” with authors who haven’t proven themselves through the gatekeeping structure of agents and editors. It just doesn’t seem “fair” somehow.

But it’s time for the writers’ organizations to get real. The fact that authors got published through the gatekeeping structure has never been an objective measure of quality or talent or skill. The fact that an author has earned at least $1,000 from a single title is no guarantee that the work isn’t a worthless piece of trash. The writers’ organizations like RWA have set up a system that is TRYING to control for quality by demanding the existence of a gatekeeper, but the reality is that this has never actually worked. When a relatively unknown author like me (I can’t even call myself midlist) can earn more money by self-publishing a short story than by selling a short story of twice that length to a major publisher (my advance from Harlequin for Grace Under Fire and Taking Liberties was $800 for each manuscript, and I will almost certainly never see another dime from them since the royalty rate is only 8% per copy sold) AND hit the Amazon top 100 with that self-published story, it’s difficult to see any reasonable rationale for steering authors (even previously unpublished ones) away from self-publishing.

Quite simply, RWA and other writers’ organizations have to stop pretending that the PUBLISHER matters. Authors who have published a book and earned the prescribed minimum from its sales should be treated as published authors, regardless of how the book was published. And yes, I’ll go so far as to say that even if there is a vanity/subsidy publisher involved (rather than the author acting as the publisher), that should be the case.2 If there are upfront costs to the author involved in publishing the work, perhaps those figures should be netted from total revenue to ensure that authors aren’t earning $1,000 on a book they paid $5,000 to publish, which isn’t exactly a winning strategy for a career, but that should be the only real difference between the self-published and the publisher-published book.

“But, Jackie,” you’re saying, “what about the Ritas? What about the horrible books that for inexplicable reasons sell thousands and thousands of copies? And ONLY $1,000? Shouldn’t it be more?”

To which I say, read Part 2, which I imagine will be up sometime early next week. (I was going to try to do this all as a single post, but this one is already too damned long!)

1I am not saying it’s easy (or necessarily cheap) to create a high quality product through self-publishing. But if you don’t care about having great cover art and you think your critique parts are editors (hint: they aren’t), you can publish a book for an upfront investment of less than $100. Doing it right is going to cost you a lot more than that–I anticipate spending around $500 to publish The Lesson Plan, which I’m expecting to release toward the end of October. That’s because I paid for a professional cover design (although really, that was very inexpensive) and I expect to pay my content/copy editor a nice chunk of change for her efforts. I won’t put out a book that’s not professionally edited. I just won’t.

2Given that several well-respected epublishers, most notably Ellora’s Cave, started in large part to publish books written by their founders, the distinction between author and publisher becomes even sillier, doesn’t it?

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!

We’re ALL ePublished Authors Now

I’ve been asked to be on a panel at the RT Booklovers Convention in LA in April of next year. The topic is money and digital publishing. I’m really excited about this because I have to qualms about talking openly and honestly about money and writing (and how much there is or isn’t).

However, I think it’s about time we dispensed with the notion that there are “epublished” authors and “print-published” authors, and that these are two separate and distinct animals. Because the reality is, we’ve long passed that point. These days, pretty much every author is epublished; there are differences in the payment models for those who are published in both print and digital and those who are published primarily or only in digital, but the bottom line is that no author in today’s market can afford to ignore the “e” side of the business.

And yet, apparently a surprising number of authors still think digital doesn’t matter to them. Kristin Nelson noted in a blog post the other day that her authors’ digital sales represent a tiny fraction of total sales (although I don’t think she meant to suggest this means digital royalty clauses or the availability of books in digital format is irrelevant), and I suspect for many, many authors and books, that will remain true for some time, especially if print copies of their books continue to be available on the shelves.

But here’s the thing–books only stay on the shelves for a certain period of time, particularly mass-market paperbacks. Unless you happen to be a perenially bestselling author, chances are pretty good that only one or two of your most recent books are readily available in print at any given time. Back in the days before ebooks, if readers wanted to get copies of your backlist after reading the currently-available book, they had to ask the retailer to order a copy or (if it was totally out-of-print) go combing through used bookstores. In more recent years, they could go to Amazon or other online retailers and hope a copy was in stock or availabled for purchase used. And, of course, they can still do that–if they really want your book in print.

Nowadays, however, there’s an alternative. It’s called the ebook. And it is a wonderful, wonderful thing for authors…if they don’t squander it by allowing themselves to believe it doesn’t matter and that they shouldn’t be aggressive about their digital rights clauses. Because ebooks are the “long tail” of your publishing career. Your book may be out of “print” but it’s always available in digital format, and that is a huge benefit to you because it means you can continue selling copies of that book virtually in perpetuity. Sure, at the front end of your contract, your digital sales may represent only a tiny proportion of the total. But over the long haul, it’s the digital books that are going to keep bringing in the money. Seven years from the date of your books’ release, the only copies you may be selling are digital, but guess what? Those put money in your pocket. Money you wouldn’t get otherwise at all.

On the other side of that coin, however, is this potentially damaging fact: if your contract says your book remains “in print” so long as it is available for sale in any format, including digital, before your rights revert, you can be stuck with a publisher who has locked you into poor digital royalty terms, practically for life. (ETA: Just after this posted, Bob Mayer posted a Twitter link to this post on exactly this topic! Am I allowed to say great minds think alike?) It used to be that, in order to retain the rights to their topselling authors, publishers had to rerelease their backlist in print every seven or so years. But look carefully at your contracts today. Is that still the case? My bet is for a lot of us who signed contracts in the past few years, all the publisher has to do is ensure a digital version is available for sale. There may not even be a requirement that a minimum number of copies sell in order for the publisher to retain those rights.

You can see, I think, why none of us can afford to ignore digital publishing, digital royalty rates, and rights reversion clauses. Ebooks are here to stay and we need to embrace that, whether the bulk of our sales today are digital or not.

Told You So: Why Digital Royalty Rates Matter More Than Ever

A little over a year ago, I wrote a post on Digital Rights for the New Millenium, in which I urged authors (especially the bestselling ones with clout) to push their New York publishers for a bigger cut of digital royalties. I said it was important to establish a higher threshhold on these royalty rates or we’d all live to regret it.

I hate to say I told you so*, but with today’s announcement that Dorchester Publishing is converting to an ebook first followed by trade POD structure beginning in next month, I have to say I think I’m looking kind of prescient. How many authors out there have contracts with Dorchester specifying very low digital royalty rates (<25%)? I'm betting a TON. Whether they are authors who have only backlists with Dorchester or new books coming out with them, these folks are in a lot of trouble financially unless they can get Dorchester to renegotiate their royalty rates. The Dorchester situation should be a wake-up call to authors. We've known for a while that Dorchester was having financial problems--they sold a lot of their backlist authors to HarperCollins and were recently banned from holding editor appointments or a publisher spotlight at the RWA National Conference due to non-payment/late payment of royalties. But I don't think it's remotely safe to assume that Dorchester will be the last of the "traditional publishers" to go this route. In fact, I'd lay odds that other publishers will follow suit and that, within the next ten years (if not sooner), the vast majority of publishers will be using this model for all but their bestselling authors/books. So, I'll say it again. Digital royalty rates matter. A lot. Even if the majority of your sales TODAY are in print, the same may not be the case tomorrow. And your publisher might, at the drop of a hat, decide to go the way of Dorchester and begin releasing your books in digital only followed by a POD months later. Do you really want to be in the position of taking 15% or 20% of net in this situation? I sure as heck don't.

*Okay, actually, that’s a lie. I LOVE to say I told you so.