Friday, July 20, 2012

Harlequin Fail Part 2

Three authors have just filed a class action suit against Harlequin. Here's the full complaint.

It's about time.

For those who read a guest post by Ann Voss Peterson last month, you were aware Ann wrote a book that Harlequin published, and she made 2.4% royalties per copy sold. One of the reasons for this was:

First, while most of my books are sold in the US, many are sold under lower royalty rates in other countries. In this particular contract, some foreign rights and -ALL ebook royalties- are figured in a way that artificially reduces net by licensing the book to a "related licensee," in other words, a company owned by Harlequin itself.

Now I'm not a lawyer, but I'm pretty sure this means Harlequin contracts state they'll pay authors 50% for foreign and ebook royalties. This 50% is based on the amount they receive. But then they took those rights and sub-licensed them to another company for 6%, which means the author got 3% of the wholesale price, not 50%.

Confused? Here's an example.

Harlequin has an ebook it lists for $3.99. It sells that to Amazon at a wholesale price of $2.00. The author should make $1.00 for each $3.99 ebook that Amazon sells.

But instead of selling direct to Amazon, Harlequin sells the ebook to Company X for 12 cents. So the author only gets 6 cents. Company X than sells the same ebook to Amazon for $2.00, but because they are a sub-licensing company, they don't have to pay the author anything.

Sub-licensing is common. My publisher, Headline in the UK, sold book club rights to my novel AFRAID. The book club paid Headline a flat fee, and HEADLINE gave me 50% of that fee, according to my contract. The book club wasn't required to pay me royalties on each book club edition is sold. Just like Company X isn't required to pay authors anything.

This is all fine and legal. So why are authors suing Harlequin?

Because Harlequin and Company X are the same company.

In other words, it is sub-licensing the rights it holds to itself. Then it only has to pay the author 3% instead of 50%.

That's seems pretty shitty. It also doesn't seem like something a judge or jury will casually dismiss, even if Harlequin made sure it kept the two companies separate through an umbrella company.

No publishing company would ever sub-license rights for a paltry 6%, unless it was selling the rights to itself. Does Harlequin really expect a judge to believe that it sells a $3.99 ebook and only makes 6 cents? And according to the complaint, the 6% was not equivalent to the amount reasonably obtainable from an unrelated party, as required by the publishing agreements.

Ya think?

Hey, Harlequin! You poor dears are getting ripped off by sub-licensing e-rights for only 6%! How about I give you 9% for all of your e-rights sub-licenses? I'm a nice guy willing to help out, and you'll make more money!

What? You won't do it? Why not? I'm giving you a waaaaay better deal!

Do publishers have such a sense of entitlement, and do they believe that authors are so beneath them, that this is a fair and honest business practice?

Hopefully, not only will Harlequin have to pay its authors what it owes, but the judge will slap huge damages on the bastards.

Here's how Harlequin responded to the suit:

The publisher wishes to make clear that this is the first it has heard of the proceedings and that a complaint has not yet been served.

"Our authors have been recompensed fairly and properly for their work, and we will be defending ourselves vigorously," said Donna Hayes, Publisher and Chief Executive Officer of Harlequin.

Now that's not much for me to fisk. But it still reeks of bullshit.

this is the first it has heard of the proceedings

Huh? Again, I'm no lawyer, but I'm pretty sure that before a class action suit is filed, the plaintiffs and their lawyers approach the defendant and request to settle. That's Law School 101.

Our authors have been recompensed fairly and properly for their work

I'm not sure what Donna's definition of "fair" is, but I'll guess a jury won't think it is fair that a writer earns 6 cents on a $3.99 Harlequin ebook sale when that same ebook would earn a non-Harlequin author 70 cents on a 3.99 ebook.

In other words, Harlequin authors make only 9% of what the other authors make.

I suggest Donna Hayes back up her statement and stand by her words. Immediately, and retroactively, going back to when she was originally hired by Harlequin, she should take a 91% salary cut. Who cares what other publishing CEOs make annually? If Harlequin is fair in paying its authors 91% less than the rest of the industry, it should pay its executives accordingly.

If you'd like more info about the case, visit http://www.harlequinlawsuit.com.