Pub Rants

Category: Publishing Deals & Contracts

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

by Kristin Nelson

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.

Going Public

by Kristin Nelson

Status: Most of today I felt like I still had BEA brain. And the Brenda Novak Auction is ending tonight!


What’s Playing on the XM or iPod right now? ROSEALIA by Better Than Ezra


Many weeks before several authors started making headlines about their choice to self-publish, my author Courtney Milan, with my blessing and support (not that she needed it!), had already made that decision. She walked away from an offer on the table from her publisher Harlequin. There were several reasons for this decision but it will come as no surprise that it mainly hinged on the electronic royalty rate that had been offered. It’s no industry secret that Harlequin is well below what has become the “industry standard.” And it’s also not a secret what I think about Publishers’ current industry standard of 25% of net.


What was secret is that Courtney didn’t announce it—until now. Today she launched this new publishing direction with a novella entitled UNLOCKED in her Turner Brothers series that began with Unveiled & Unclaimed which will release in September.


In four short days, I can already tell you two important things about this digital revolution.


1. Pricing is everything. Pricing a title appropriately will move a great number of books in a short period of time.


2. Publishers are under-reporting electronic book sales in any given period on the royalty statements we are seeing.

That’s a fact.

Tales From The Contract Wars

by Kristin Nelson

Status: It’s pouring rain and the temps feel anything like spring but I’m eating ice cream right now anyway.


What’s Playing on the XM or iPod right now? DON’T GIVE UP ON ME NOW by Ben Harper


Today we officially wrapped up our negotiations on the new Macmillan boilerplate contract. It only took 6 months, 2 weeks, and 3 days from start to finish. It was worth it to get a decent contract.


Oddly enough I was excited to sell yet another book to a Macmillan imprint. THAT contract will only take several weeks. All the heavy lifting is done.


Then I get a new Random House contract in. Basically the same except for 2 rather key clauses that come at the very end of the contract but are referenced throughout.


Great. Publishers will certainly let you reserve rights but are now inserting clauses that hamstring the author from exploiting those reserved rights.


This seems to be the latest fashion.


In The Spring An Agent’s Fancy Turns To…

by Kristin Nelson

STATUS: Yesterday Angie and I were reviewing one client’s statement and to sum it up. What a hot mess.

What’s playing on the iPod or the XM radio right now? SWAY by Dean Martin

Love of royalty statements.

Yep, it’s that time of year again. April and October are NLA’s biggest royalty periods which means that the month of May and November are consumed by hours reviewing those statements.

So, in an effort to empower authors about their statements (because I promise you that a lot of agents don’t spend nearly the time they should on reviewing them), here’s another tidbit to file away in your knowledge bank.

If your publisher holds World rights and is selling your titles abroad, it’s important to track where the projects are sold to and when they will be released.

Why? Because if you don’t know that info, how do you know when the monies are supposed to appear on your royalty statements? Also, do you have a copy of the licensing agreement and the latest foreign royalty statement from the territory in question?

Most agents insert a clause in the contract allowing the author to receive such info—usually upon request. Without it, it’s impossible to review a statement for accuracy. What? You gonna just take the Publisher’s word for it?

Considering the number of errors we see in EVERY royalty period, that’s a lot to take on faith.

And there’s another facet to this. If Publisher has World, did they sell UK rights to separate publisher or was it done by a sister house in England? If a sister house, then UK royalties are specified in the US contract and should show on the US statement.

You don’t want to know how many times this information has just been plain missing from the statement or just wrong.

Knowledge is power and as an author, you have a right to a copy of those licensing agreements so ask for them. I would say that in the last several years, NLA has recovered well over $100,000 in missing royalties—money clients would never have received if we hadn’t pestered Publishers about info missing from the statements. In fact just last week, a client got $8000 because we argued that the wrong royalty rate was being used to calculate certain sales listed on the statement. And per the contract, we were right and they paid up. But if we hadn’t pointed it out…

Well, that’s a lot of money to leave on the table.

Absolutely No Need to Apologize!

by Kristin Nelson

STATUS: TGIF! I will not have to work on cleaning up files because of the computer conversion. We are done!

What’s playing on the XM or iPod right now? TAKE IT EASY by Eagles

Today Gail Carriger and I received an email from her Japanese translator apologizing for the delay in getting a copy of the Japanese cover art of SOULLESS to us.

She was emailing because the illustrator was currently in an evacuation camp but trying to finish it and because the Japanese editor on the project had also been impacted and hadn’t been able to be in the office.

Good Heavens. There is no need to apologize.

But this to me is an example of the incredible Japanese fortitude. In the face of dire circumstances caused by one of the biggest earthquakes on record, they felt the need to send us an email—and with an apology to boot!

On our end, we were just relieved to hear some news that they were safe. We have not gotten a lot of information on our Japanese counterparts as of yet.

And I’m Still Talking About Derivative Works

by Kristin Nelson

STATUS: My goal today is to work through ALL emails in my inbox. I probably have 8 hours of work ahead of me just on that. It’s very sad when I get a little behind on it.

What’s playing on the XM or iPod right now? WHO’S CRYING NOW by Randy Crawford

I do find it funny that when I talk about contracts, I get the fewest number of comments to the entry. Now I understand that folks may still be reading the blog entry even if they aren’t commenting but I do equate number of comments with general interest in the topic.

But I’ve got one more entry on derivative works before I lay this topic to rest (for a little while anyway). And that’s to talk about fiction. For me, I rarely do nonfiction so I wasn’t as worried about the ramifications of this clause in regards to that. It’s also more conceivable to figure what could be considered a derivative work in the NF realm.

I do fiction. So I’m particularly interested in what might be considered a derivative work in this realm. I had a sneaky suspicion that I already knew.

And I was right.

For fiction, it could be conceivably argued that a comic book or graphic novel is a derivative work based off of the original novel.

Not that I agree even remotely. But it could be argued and that’s exactly what I did not want to hear.

Because to make it clear whether it would or would not be considered a derivative work, my guess is that would have to be challenged and determined in a court of law.

Once again, let me add my disclaimer that I’m not a copyright attorney, and I’m not dispensing legal advice or legal opinions here. These are simply my musings on how this clause could be interpreted.

Let’s Continue Talking About Derivative Works

by Kristin Nelson

STATUS: Two years and two months after initial publication, HOTEL ON THE CORNER OF BITTER AND SWEET cracks the top 10 again on the NYT list. Time to celebrate.

What’s playing on the XM or iPod right now? YOU NEEDED ME by Anne Murray

I can tell by the overwhelming number of comments on my last post that discussing copyright is definitely whipping my blog readers into a verbal frenzy.

How many of you used the copyright act as a sleep aid on Monday?

But I do think it’s worth continuing the discussion. As I mentioned Monday, I could see how derivative works could be created for nonfiction work.

For example, and this is just off the top of my head and probably not the best example out there but I think it will give you a sense, is to think of a nonfiction work on decorating for the holidays. In this work, let’s say there is one chapter on table place settings. The publisher than decides to take one aspect of holiday place settings from this chapter and create a whole new gift book on holiday place settings.

That would be a derivative work, created by the publisher and they would own the copyright (at least according to this clause 6.b. in the Macmillan contract.)

In talking to my lawyer, we discussed at length how a derivative work could be a book trailer. Definition of derivative work is based on one or more pre-existing works, such as translation, musical arrangement, dramatization, fictionalization, motion picture version, sound recording, art reproduction, abridgement, condensation, or any other form in which a work may be recast, transformed, or adapted.

In talking with Macmillan, this is an example they gave as something they could create that would be covered under this clause 6.b.

More on fiction tomorrow. Hopefully I won’t run out of time.

So Let’s Talk Derivative Works

by Kristin Nelson

Status: These dang computers. I want to bang my head on my desk.

What’s Playing on the XM or iPod right now? MARRY ME by Train

About two weeks ago I mentioned that the most problematic issue in the new Macmillan boilerplate was the new clause 6. b. that granted the publisher the right to the copyright in any derivative work created by the publisher.

Just for the record, I’m not a copyright attorney and I don’t pretend to be one on TV or if I stay at a Holiday Inn Express. In other words, I’m not dispensing legal advice here; I’m simply sharing with you my general musings regarding the clause.

Since I don’t have the expertise, I sent it to my IP attorney. Now he’s not a copyright attorney either but his law firm certainly has an expert in-house so we looped him on the conversation as well.

A virtual copyright party at NLA!

His biggest concern was the broadness of the clause and how derivative works is not clearly defined. If you’d like some light reading before you go to bed tonight, feel free to click here. This will link you to the copyright act in all its glory. You’ll want to click on Chapter 1 and peruse sections 102 and 103 that particularly discuss derivative works.

He also let me know that there are currently lawsuits in process that examine the scope of derivative works and what can or can’t be defined as such. Fun.

So two thoughts:
1. It’s obviously better to remove the clause and any reference to derivative works from the contract. And, if you have leverage, it can be done. But if you don’t…

2. How best to restrict this clause in such a way to make pursuit of derivative works impossible without expressed approval of the author?

Now we’re talking. My lawyer gave me some good insights and if you want to pay my lawyer fees, then I could share them on the blog. *grin*

This is why you have agents by the way.

My other big question was this: I get how a derivative work could be done fairly easily with a nonfiction project, but I wasn’t certain how it would apply to fiction. Now I am.

More on that tomorrow. Stay tuned.

More Train music on iLike

Quick & Easy Answers

by Kristin Nelson

Status: Doing Client reading.

What’s Playing on the XM or iPod right now? IS THIS LOVE by Bob Marley

1) What happens if you can’t sell a book to a publisher?
If we have exhausted all possibilities, I’ll put aside and concentrate on the author’s next work. If the next sells, that always allows us to revisit the prior novel. Sometimes the decision is made to let the past be the past and simply move forward.

2) How do you know if a writer’s idea is a good one?
Not a clue really. All I know is what I like and what really resonates with me. I’ve had the good fortune of having what I like generally match up with what editors like and are willing to buy. Just like every other agent in the world, I’m not 100% right all the time. Sometimes I love a book and can’t sell it.

3) If Hollywood has bought the film rights, does the author get a share in the profit?
The sad news is that in general, the author does not get a share in the profit. Although all film deals will have the standard “5% of 100% of net,” most Hollywood films will never show a profit because of how studios manipulate the accounting. It’s worse than the mafia. So agents often build in a lot of ways for the author to make money on the film deal that aren’t tied to “profit” so loosely defined. The option price, the purchase price, bestseller bonuses, box office bonuses etc. These are payments that are not contingent on the film making money.

However, some authors do get a share in the profit. That is not a percentage based on net but a percentage based on a cashbreak point on gross.

A very different thing. Also, it is possible to put merchandizing in a separate pool with a separate percentage. Good money to potentially be made there as well.

4) Can you publish your book yourself or do you have to have a publisher?
Of course you can publish a book yourself! That’s not the right question though. Anyone can self publish; the question is distribution and how to get folks to read what you self publish.

5) How do you decide if the cover art is good?
I have to say that cover art is not my strength as an agent. I have no background in art and not much of a creative vision. However, I do know what I like and what I don’t like. If I don’t like it and neither does the author, I fight like crazy to get it changed.

6) Do publishers show animation for cover concepts?
No. But wouldn’t that be cool?

7) What happens if more than one publisher wants the book?
Then you have an auction my friend! As an author, it’s always the best place to be. However, I do think that writers have a misconception that all auctions equal big money. That is not necessarily true. You can have modest auctions that are in low five figures.

By Far The Biggest Issue

by Kristin Nelson

STATUS: It gently snowed all day—which made Anita and I feel quite cozy here at the office.

What’s playing on the XM or iPod right now? BLUE SKIES by Tom Waits

In the new Macmillan contract is clause 6. (b) Copyright on Derivative Works. To state bluntly, this clause gives the Publisher the right to create “derivative works” based on the work they are buying from the author. And to add insult to injury, the publisher owns the copyright to any of these “new works.”

Eyebrow raise.

Yes, it is as bad as what you are thinking it means.

First, this is actually in direct contradiction to US copyright law and can’t be legally enforce but hey, what do I know.

Second, no way an author can sign a contract without amending or deleting this clause although I know some poor soul is going it alone and will end up doing just that.

For goodness sake, at the very least, get in touch with the Authors Guild before doing anything so detrimental to your intellectual property rights.

More Tom Waits music on iLike