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NINC DIGITAL RIGHTS GROUP

RE: Consultation with Elaine P. English, PLLC, on the subject of Harlequin's claims to digital rights

NOTE:  When, in her analysis, Elaine, at times, refers to a specific contract by year, that contract is the representative 'model' contract we sent her (please see chart).

Letter to Harlequin from Ninc

The following letter was written and sent on behalf of Novelists, Inc. in response to the letter Harlequin recently sent to agents regarding a proposed change in royalty rates.

To:

Ms. Donna Hayes, Publisher and CEO of Harlequin Enterprises Ltd.
Ms. Loriana Sacilotto, Executive VP, Global Publishing and Strategy, Harlequin Enterprises Ltd.

Dear Donna and Loriana,

While we at Novelists, Inc. applaud Harlequin’s decision to adjust e-book royalty rates in the face of enormous changes in our business, we are concerned that the adjustments have not gone as far as they should.

First, we feel very strongly that the royalties for series works should be consistent with the standard in the industry, which is currently 25% of net receipts. While we can appreciate Harlequin’s position that the Harlequin brand has provided an enormous benefit to series authors over the years, we fail to see how this justifies paying series authors a lower royalty, especially given the considerable cost savings involved in digital publishing. In addition, while the Harlequin brand still offers significant advantages on the print side in terms of both display and direct mail, the same is not true in the online bookselling world, where there is no easy way to search for new Harlequin titles by brand and consumers are much more likely to search by author or by genre.

In addition, we are very concerned that the term “net digital receipts” is too vague. We would encourage Harlequin to adopt the policies of several other publishers in setting out a clear definition of this term. We suggest the following language:

"Net Digital Receipts" shall mean all income actually received by the Publisher from sales of e-book versions of the Work minus any applicable taxes, handling or processing fees paid by Publisher. No deductions shall be made for normal overhead expenses and no third party shall be engaged to broker sales between the Publisher and the primary bookseller. 

Finally, we believe that, in the same spirit of acknowledgment of a greatly changing industry, Harlequin should take this time to revise its out-of-print clause to address how digital publishing has made its current o/p clause less relevant. Since digital books are perpetually “in print,” the current o/p clause makes reversion virtually impossible, regardless of how many copies of the work are actually being sold. We do not believe it was Harlequin’s intention to impose such restrictions on its authors, and we do not believe that most authors signed their contracts with the belief that the reversion clause was essentially impossible to execute. Therefore, we suggest the following language:

If, three years from the date of the Publisher’s first publication, the Work shall not be available for sale in any edition by the Publisher or any of its licensees, the Author may request that the Publisher revert its rights to the Work. A Work shall be considered available for sale if the author’s earnings in the Work total more than $500 cumulatively over the two consecutive royalty periods prior to the Publisher’s receipt of the Author’s reversion request.

A representative from Novelists, Inc. would be happy to discuss any of the above points with Harlequin.

Sincerely,
Novelists, Inc.

Harlequin Response:

October 3, 2011

Dear Novelists, Inc.:

Thank you for your recent e-mail and your feedback regarding our proposed changes to digital royalty rates.  Since our initial mailing communicating new digital royalty rates to authors and agents, we have had much discussion internally, as well as with numerous agents representing authors and their feedback.  After careful consideration, we have made many changes to our offer, including:

  • series digital royalty rates
  • territories
  • reversion clause

The new terms will be reflected in the amendment letters that will be mailed to agents and authors later this month.

We will also reconsider the wording of the definition of "net digital receipts" based on the example you have included below.

Best regards,
Donna Hayes, Publisher and CEO of Harlequin Enterprises Ltd.
Loriana Sacilotto, Executive VP, Global Publishing and Strategy


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