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Originally Posted by speakingtohe
Thanks for the reply.
Cannot still grasp the concept. If they signed with harlequin, and Harleqin transferred the rights to a subsiduary or other company would they stilll not get what they signed for?
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Try this scenario:
The authors and agents were dealing with Harlequin and the contracts they signed called for certain specific royalty rates.
At the time ebook rights were lumped in with other subsidiary rights (like movie, TV, etc) at a 50% royalty.
For tax purposes all the contracts Harlequin negotiated were signed not by Harlequin Enterprises (whose employees did the negotiation) but with their swiss subsidiary, which then licensed the book rights to the parent company.
For print books (which had low negotiated royalties to start with) Harlequin's self-licensing terms were comparable to what an outsider would pay. (Which is apparently a legal test of validity.)
For ebooks the agreed-upon royalty rate was 50% of net *publisher* recipts.
In order to avoid paying the agreed-upon rate, Harlequin set the self-licensing terms at ~10% of their real world value and paid the royalties based on that.
The lawsuit claims that by that practice Harlequin is cheating the entire class of plaintiffs and is breaking the terms of the contract as negotiated.
To prevail, the plaintiffs have to prove that Harlequin switzerland (5 employees) is not the real publisher but just a front for Harlequin Enterprises which is the actual publisher of the books (both e-and p-) so that the net receipts cited in the contract should be the actual wholesale price and not the artificially low self-license price.
To prevail, Harlequin merely has to convince the court that licensing an ebook that sells for US$4.99 for $0.50 is a perfectly reasonable thing to do.
Which they might do, given the right lawyer and the right judge.
Stranger things have happened.
The thing to remember is that the class in the legal action at issue includes not just the named authors but the majority of Harlequin authors. (And that the ones not under the 1990-2004 contracts have their *own* separate issues with Harlequin practices.)
As wikipedia notes, Harlequin practices have been frowned upon for years:
http://en.wikipedia.org/wiki/Harlequ...prises#Current
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The company is considered one of the most profitable in publishing. Over $585 million worth of books sold in 2003, for gross profits of $124 million and a profit margin of 21%. Its large profit margin can be tied in part to the amount of advance that its authors receive. These advances are often smaller than the industry average, and can total to only a few thousand dollars for a series romance.[1] Despite its profitability, and a 37.2% pay hike for Harlequin President and CEO, Donna Hayes in 2011,[40] there is controversy with its royalty program for authors. In 2011, the Romance Writers Association sent a letter to all members to "exercise due diligence in reviewing contracts" with Harlequin because "several members of RWA have expressed concern regarding" Harlequin's digital royalty rate changes and non-compete clauses.[41] This is not the first time Harlequin had been called out by the Romance Writers Association regarding Harlequin's treatment of their authors. In 2009, Harlequin was called out by the Romance Writers of America, Mystery Writer's Association, and the Science Fiction Writers Association for schemes of making their authors pay for publishing.[
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The real issue here is not so much whether Harlequin's practices are legal (unless you are one of the affected authors, poor souls) but that the practices are now public.
Twenty years ago, ten years ago, even as recently as 2004, aspiring romance writers had little recourse than to swallow Harlequin's "standard" rates if they wanted to be published.
That is no longer true.
The authors have alternatives and are exercising them.
Harlequin could easily "win" this legal fight and lose the war for the future of the romance market.