Pub Rants

Doing The Math on Harlequin’s Move to 25% of Net Receipts but on Wholesale Model

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Status: It’s official. RWA in New York has just begun. Most awkward moment today? Sitting on a panel that also had editors and being asked the question: what is a fair electronic royalty rate. Grin.

What’s Playing on the XM or iPod right now? BAILAMOS by Enrique Iglasias

Last Thursday, Harlequin sent out a press release announcing that for single title romances on their list, they would be switching to 25% of net receipts starting Jan. 1. 2012.

But before you begin celebrating that finally Harlequin is getting in line with the other major publishers, take a moment to look at the fine print or in this case, what isn’t there. What Harlequin didn’t mention in their press release is that as a Publisher, they are currently not on the agency model with their digital distributors—Apple iBookstore being the one exception.

So in short, this move to 25% of net is def. better than the paltry 6 or 8% of retail that they were offering but it’s not necessarily equal to what Publishers pay via the Agency Model.

Here’s why. Let’s do some math boy and girls.

Let’s say your single title Harlequin royalty rate is 8% of retail and the retail price for your romance novel is $7.99.

8% of 7.99 = 0.64 of royalty per sale to the author

That’s the baseline. Now let’s look at what 25% of net receipts from Harlequin looks like on the wholesale model.

$7.99 is the retail price but because Harlequin sells wholesale, they give (on average) a 50% discount to the seller. That would look like this:

7.99 – 3.99 (discount) = 4.00 of net receipts to Harlequin

25% of 4.00 = $1.00 of royalty per sale to the author

Well, that’s definitely better than 64 cents given previously!

But the whole reason why Big 5 Publishers moved to the net receipts royalty rate is because of the agency model. In this configuration, the Publisher gives 30% to the distributor and receives 70% as net receipts. So it would look like this:

30% of 7.99 = 2.39 to the distributor

Now deduct that commission:
7.99 – 2.39 = 5.60 of net receipts to publisher

If author gets 25% of net receipts on agency model, that would be:

25% net receipts of 5.60 = 1.40 of royalty per sale to the author.

Not quite the same.

Now keep in mind that the above calculations are not taking into consideration any other deductions a Publisher on Agency Model might possibly be taking before calculating the author’s share. So that is a possible factor to consider.

But in general, Harlequin’s move to 25% of net is not, on the surface, the same as what other houses are offering.

And from what I’m hearing via chat in the blogosphere, the other Harlequin royalty rate of 15% of net to series authors (which was also announced in a separate press release) is going over about as well as a lead balloon.

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18 Responses

  1. Carrie said:

    I was hoping you would address Harlequin’s changes. I always value your insight, Kristin. Thank you for sharing it with us!

  2. Bob Mayer said:

    Thanks for doing the math. HQ pretty much does what it wants, since it has an unending supply of authors willing to give up their firstborn to be published by them. Frankly, I think e-royalty ought to be 50%, which is what my publishing company does, but I’m a writer, so I tend to take that side.
    I blogged on this, trying to get people to see the bigger picture.

  3. Lisa Scott said:

    Kristin, how does the 15% net for series authors compare to what it was previously? They requested a full from me for one of their lines. Is this a better or worse deal than in the past?

  4. Janet Tronstad said:

    As a series author with HQ, it needs to be noted that under the old formula series authors received 75% of what single title authors did — under the new model they receive 60%. This is going backwards!

  5. Lilian Darcy said:

    Really appreciate your insights and analysis, Kristin. Looking forward to having you at our conference in Australia, if you survive RWA NY!

  6. Olga Walker said:

    HI there

    I have just found your blog and have already started to learn more about writing and publishing. As a mature woman I have just ocmpleted a university course which now leaves me time to get back into my writing – so it is great so be able to follow blogs that deal with literary issues:):)

    Olga from

  7. Angie Cothran said:

    The math was making my head spin. If anyone asks me again why I want an agent I will tell them to read this post! I’m glad you have it figured out so writers can write 🙂

  8. Anonymous said:

    Question: Are publishers as bad at calculating net profits as the motion picture industry is? Because if they are, then really, no matter what the percent or how it is calculated, you’ll end up with zero. Movies almost never show a profit so they don’t have to pay the points on net. I think their accountants use smoke and mirrors and maybe a Ouija board to balance the books.

  9. Cait said:

    Kristin, please cover the topic of “actively writing”, the header for the Harlequin letter. Even tho not actively writing, those books are out there and reissued regularly, plus bundled. That 15% in lieu of the 50% our older contracts covered of Cover price, is a big bite.

  10. Cait said:

    Kristin, please cover the topic of “actively writing”, the header for the Harlequin letter. Even tho not actively writing, those books are out there and reissued regularly, plus bundled. That 15% in lieu of the 50% our older contracts covered of Cover price, is a big bite.

  11. ART+MONEY said:

    Publishers should receive 30% and nothing more. Then the author should get 70% for producing content these suckers can publish. Why would ANY of you take 25% and give the rest to “publishers”? Someone commented on here that the math was making their head spin & all they wanted to do was write. You have to learn the terminology and contracts so you won’t sign your life away with the stroke of a pen. There’s a photographer’s agency in NYC called ART + COMMERCE. I love the namej it’s not just about the art, it’s about the money end of it, too-the business side of creating art.

  12. Kairee Taylor said:

    Hi Kristen,
    I have been reading some of the posts on Harlequin and I have a question about the publisher:

    Has anything changed regarding their reputation through RWA and MWA? I am asking because, as a new author, I want to make good decisions that will progress my career. I have noticed that a lot of the romance novels I’ve read recently have been published by Mira or Berkley.

    Well, I was just wondering if there were any new developments on this particular topic.

    Thanks for all of your posts! They are so informative.