Is Harlequin’s ebook royalty suit the tip of the iceberg

Posted on Wednesday 25th July 2012 11:00

Last week the publishing industry was rocked by news of the class action lawsuit that three authors are filing against Harlequin for digital royalty depravation. But this is not the first time that digital royalties have come into the limelight in this way, and it most certainly won’t be the last.

In this particular case, where authors are querying the ebook royalty calculations and subsequent payments offered between 1990 and 2004, the discrepancy between the 50 per cent royalty payments promised by the publisher and the 6-8 per cent that the authors claim to have received from each book sale is startling. It’s startling, however it is not new, nor surprising.

It is no secret that publishers and authors have long been grappling over royalty percentages on digital products, an issue which is far from being resolved as the pendulum swings between the 50 per cent mark and anything below it. Many authors are somewhat perplexed as to why publishers should retrieve such a substantial cut from ebook sales when costs associated with labour, production and distribution no longer need to factored-in. There is also much confusion, as the Harlequin case highlights, surrounding royalties calculated through the “net receipt” method.

It is important to emphasise that in most scenarios publishers are not actively setting out to cheat authors out of royalty payments, as much of the media coverage would suggest. The problem lies in the fact that they are often unable to measure and manage sales revenues and subsequent royalty payments on digital products correctly, which can often result in miscalculations and disputes.

The Harlequin case bears an uncanny resemblance to that of the lawsuit that rock band Toto filed against its music label, Sony. And despite most publishers being reluctant to draw comparisons between the music industry’s somewhat messy transition to digital and its own, one can’t help but feel a sense of déjà vu and wonder whether the same mistakes are being made all over again, and even whether any lessons have been learnt at all.

What has become clear is that digital royalties are a fiercely contentious issue that is threatening to damage the relationships that publishers, authors and agents have spent centuries building up. So what needs to happen, sooner rather than later, to prevent further deterioration and libel cases?

    An industry-wide standard needs to be agreed and established to clearly set out how all publishers will calculate digital royalties, manage the process and pay authors
    Publishers need to invest in tools that will enable them to calculate, manage and pay royalties more accurately and efficiently. This is currently a major problem as the more ebooks created and digital channels being exploited, the more complex the royalties fulfilment process becomes
    Publishers need to become more transparent. Amazon’s effective reporting has led authors to expect a similar level of granularity in approach from their publishers. Authors will demand more consistent sales data and reporting from their publishers on a more regular basis and publishers will increasingly feel the need to be compliant by providing this type of service

Resolving digital royalty issues should be a major priority for all concerned. Nothing can be done about the way this side of the publishing business has been managed to date, but amendments can be made to ensure confusion is eradicated and to avoid further lawsuits in the future. With relationships between publishers, authors and agents hanging in the balance and looking increasingly fractious, there has never been more at stake or a better time to take positive action.