Too Many Pieces Of Not Enough Pie

Romance is supposed to be the biggest selling category of fiction, but quantity isn't a guarantee of the biggest publishing profits.

Harlequin, a name synonymous with all types of romantic fiction, has reported a drop in 1st quarter revenues. They have been reporting declines for some time now, in part due to the economic squeeze that leaves its readers with less money to spend on books, and in part due to unfavorable exchange rates of dollars Canadian vs. dollars American.

This most recent filing, however, puts part of the blame on their authors, and the amount of royalties those writers are receiving.

Like all other publishers, Harlequin faces competition from the many places their print authors can go to publish electronically. For an author holding digital rights, she (rarely, he) can take a Word document to Amazon's Kindle publishing site and do it themselves. With equal ease, they can use Smashwords to crank out the digital version of their steamy novel and reach those with Sony, Apple or Nook devices.

Then the author sets the price, with an eye on the percentage of sales that comes back to them as royalties. The seller gets a cut, and there is no other publisher acting as middleman to claim their share of the publishing pie.

As Harlequin is discovering, there is not enough of that pie to slice up into enough pieces to cover everyone at the party.

To keep an author from going solo, Harlequin has been forced to increase the royalties they pay. They are still faced with the limits of public tolerance for high prices, and cannot significatnly raise the price of their e-books to compensate. That means they have to take a smaller piece, but that smaller piece has to be shared with all the employees at corporate headquarters, who aren't eager to see a cut in their wages.

And you know that whoever is the latest version of Fabio isn't going to accept a reduced fee for his cover art.

How to return to increased profitablity?

Cut the number of pieces of pie that have to be shared with employees who will have to do more work for the same sized serving. You can call it restructuring or realizing synergies, but it comes down to a shrinkage of the workforce.

Things were so much easier before, weren't they? The authors made the pie, and then got only the crumbs. Now they have other places to go if they want a more fair share from their own hard slogging. Competition doesn't grow the pie, but it sure alters its distribution.