Nadia Lee | NYT and USA Today Bestselling Author of Contemporary Romance » Money Matters

Archive for the 'Money Matters' Category

DOJ Antitrust Treble Damage Math Examples

I thought it was cool that Courtney Milan talked about what kind of damages (treble damage) could be imposed on the Settling Three if they fought and lost.

I thought maybe the concept was still a bit vague for some to grasp without a concrete example or two, since antitrust isn’t something you see on TV all the time, so here is some basic hypothetical math (simplified for easier understanding; the actual calculation may have other variables involved):

Hypothetical Scenario One:

Big Pub prices all its ebook editions of HC cover releases at $12.99.

If Amazon had been able to discount, many of those ebooks would’ve been sold at $9.99, since Amazon sold all major bestsellers at $9.99 before the Agency stuff.

So the difference between the agency price and the pre-agency price is $3. That is the harm that’s been done to ebook buyers.

Since this is a price-fixing case, which makes it antitrust, the treble damage rule applies.

So the publisher pays $9 for every copy of an ebook sold that Amazon would’ve discounted (as in, all of its major bestsellers that were released as hardback or trade during this time).

Let’s see if these damages are affordable for this publisher.

Under the agency model, the publisher gave 30% of its cover price to ebook retailers.

30% of $12.99 is $4.20.

So the publisher received $8.79.

Out of that, the publisher paid 25% to its authors ($2.20). So the publisher netted a total of $6.59 per ebook.

Forget the attorney’s fees or the rent, utility, employee salaries, etc. Let’s even assume that all those are $0. Even then the publisher loses $2.41 on every e-book copy sold at $12.99 that would’ve been discounted to $9.99 under the wholesale model.

Hypothetical Scenario Two:

Big Pub prices all its ebook edition of MMPBs (mass-market paperbacks) at $7.99.

Amazon routinely discounted those to $6.39 (about a 20% discount), regardless of their bestseller status.

The difference between $7.99 and $6.39 is $1.60.

If you triple this amount, it’s $4.80 (the treble damage for antitrust).

The publisher received only $5.59 from ebook vendors. Out of that, it paid $1.40 to the authors, which leaves the publisher with $4.19.


So no matter what price you use, the publisher is set to pay more than it ever made on ebook sales under agency if it loses the price-fixing case. And no, they can’t say, “We’re too poor to pay, so give us a break.” It doesn’t work that way.

That’s why some aren’t willing to fight the lawsuit — because a settlement does not require them to pay damages that can destroy them (ie, will probably bankrupt them).

You may wonder why the other three are fighting. Maybe Penguin and Macmillan think they have a real chance at winning and so are willing to risk it. As for Apple, it has more money than it knows what to do with, so it’s probably not a big deal to lose. (And e-book sales was never its main business.)


Writer Beware: Web Designers & Graphics

I’ve seen so many writers who got into difficult situations with their webmasters. It could be anything from the webmaster going MIA, doing shoddy work, whatever. In the eventuality that you want to break up with your designer / webmaster, you should always ensure that your website design (including CSS, graphics, header, buttons, everything) is yours to take with you, and that you don’t have to continue hiring the designer / webmaster you no longer find “professional” in order to be able to use the template, etc. you’ve paid for.

BTW — don’t let your designers register your domain for you. Domain registration is easy. A few clicks of the mouse and you’re done. If your designers / webmasters did it for you, make sure to get it transferred to you as soon as possible. Transferring a domain name when your tech people go missing can be very time-consuming and stressful. Go to a place like 1and1.com and register it yourself. It’s not that expensive, and 1and1 gives you free private registration.

P.S. In case you’re interested, the ever-amazing Frauke from CrocoDesigns is doing a free author website workshop right here.


Reading Fees and #AgentPay

Some of you are aware of the discussion Colleen Lindsay started about how agents get paid, and you know how I feel about raising agent commissions to 20%.

Wylie-Merrick agents seem to support reading fees. I think it’s fair to charge low industry-standard reading fees. Let’s say…about a buck or two per query / synopsis and the first five pages. I don’t think writers should pay reading fees for requested partials or fulls, because agents have said they wanted to see them.

So here’s why I think it’s better to charge a very low reading fee for a query / synopsis and the first five pages than raising agent commissions from 15% to 20%.

These days, it’s so easy to fire off an email. It’s also very easy and cheap to mass-produce hard copies of a query letter. A lot of queries aren’t very well-written. I’m not saying this to be a jerk, it’s just a fact. I brutalized the query that helped me sign with my agent for months before I thought it was ready. I had the thing workshopped at various different venues, including Evil Editor and BookEnds LLC‘s Jessica Faust.

Evil Editor was truly evil. He mocked my title (in retrospect, it really sucked) and made fun of my pitch. But who cares? He gave me really good pointers: change the title and simplify the pitch!

Jessica Faust was the last one to critique it on her blog. I sent her a query letter containing a 158 word-long pitch. I thought it was ready for prime time but wanted to make sure. Jessica thought the pitch part was too long. Ouch. So I condensed it down to 57 words. (No, that’s not a typo. I cut 101 words — practically two-thirds — out of the pitch I sent to Jessica to critique.)

I know a lot of writers who don’t spend much time or effort on their query. Now, a few people are just naturally gifted and can write amazing pitches in one try. But for most people? Just not possible.

If people want to spend their money on sending out query letters that they spent an hour on, it’s their prerogative. But it’s a thankless job that agents must do, and the probability of them finding something worthy of a partial / full request is pretty slim. So why should agents’ clients bear the cost of agents reading unsolicited mails (among other things) by paying higher commissions? It doesn’t make any sense.

If reading fees are low (like a buck or so in my example), standard and industry-regulated, then there will be much less potential for abuse.

Now there’s a possibility that some writers will fail to do their research and send hundreds of dollars to scammers. I sympathize, but at the same time I don’t see how we must keep everything status quo just because some people don’t want to do their homework. There are so many resources out there about the agent-hunting process that it’s getting increasingly hard to justify why someone “didn’t know any better”.

What do you think?


Writers: Math Is Your Friend

Hypothetical Scenario:

Suzy just received an offer of publication. She wishes to be paid 10% royalties, but Publisher says it can only pay 8%. Publisher says it’s only a 2% difference. So Suzy agrees to the offer.

Later, Suzy writes another book and receives an offer of publication from Publisher. She wants to get paid 8% royalties, but Publisher says it can only pay 6%. Publisher says the economy’s really bad, and that it really can’t pay 8%. It tells Suzy that the royalty difference is only 2% just like before, so why not play the ball?

Suzy, feeling like it’s only 2% just like before, signs the contract.

How much total earning potential Suzy gave up in both contracts? (Please calculate in percentages!)

.
.
.
.
.

Ready?

Answer: It’s not 2% for both cases. In the first case (10% to 8%), Suzy gave up 20% of her total earning potential. (If Suzy were to have earned $500 if she were getting 10%, then she would get $400 at 8%. The difference from $500 to $400 is $100, or 20%.) In the second case (8% to 6%), she gave up 25% of her total earning potential.

So Publisher’s assertion that it’s only 2% lower for both cases appears correct only if you’re thinking about the total revenue that the book will make, which of course doesn’t really matter to Suzy because she’s never going to see that total amount of money. All she should be worrying about is her cut, and her cut is being cut by 20% (or 25%, depending on the scenario).

Why am I “lecturing” on math?

Recently I saw a discussion on Twitter about agent pay (#agentpay). Victoria Strauss, for whom I have great respect, said maybe the agent commission could be changed. You can read her entire post here.

The comments from some writers showed that some of them aren’t thinking about the issue in the right way.

If agent’s commission were to jump from 15% to 20%, it’s not a 5% increase. It’s actually a 33.3% increase. Look at Emily’s math here.

This is probably the same reason why people think that giving up a few percentage points here and there in royalties affects them very little. But it’s actually pretty significant.

So don’t throw away your earnings, thinking it’s only 1%. It’s not! Do yourself a favor and punch in some numbers on your calculator before agreeing to anything.


How to Book an Awesome Honeymoon for Less Than $1,000

Hero Material and I are going on our eight day-long honeymoon at the end of the month to Thailand. He’s been there once or twice, but this is my first time in South Asia, so I’m very excited.

We booked our trip for less than $1,000 (USD), including all our flights (business class), shinkansen, resorts / hotels and taxi fare. The key here isn’t just looking for the best deal, but having credit cards and so on that earned us miles and points on Star Alliance Airlines and Starwood Hotels. If you put everything on your credit card, you’ll eventually have enough to book a nice getaway after about two years or so, although it really depends on how much you spend each year. (I do not recommend putting all your points and miles in domestic low-cost airlines because you can’t use them for international trips. Of course, if you have zero desire to travel outside the U.S. feel free to disregard my advice. :) )

Also we almost always fly on Star Alliance Airlines — thankfully it’s very easy to do — and we usually stay at Starwood Hotels. This gives us even more points / miles. Basically it’s an exploitation of airline and hotel loyalty programs. I know that it can be a bit unnerving at times because so many airlines cry “Woe is us!” and talk about their impending financial doom, blah blah blah. What if you have all your miles with an airline and the airline goes under?

In my experience and observations, it’s highly unlikely that your miles will disappear. Big international airlines, such as United, Continental, ANA, BA, etc., have millions of customers on their mileage programs, and many of those customers are very loyal to the brand. When I was a management consultant, United was the most convenient airline for me, and I always flew on United or other airlines that had code-sharing and/or alliance partnerships with United so I could pool all the miles in one place (United Mileage Plus). It was the same for my colleagues even though their airline of choice was often something other than United.

All big airlines know that a mileage reward program is a valuable loyalty- and consequently revenue-generating asset, so long as its rules and so on remain intact. If your airline becomes liquidated (god forbid), others will buy up the reward program and give you incentives to maintain your brand loyalty.

Anyway, that’s it for my tips on how to book a nice honeymoon for very little money. Feel free to share your own experiences / tips and ask questions if you’d like.

P.S. I’ll be posting some pictures from our trip in April. :)


Harlequin Horizons = Vanity Press

I’m sure many of you have heard that RWA has decided that Harlequin Enterprises, as a whole, is no longer a non-vanity / subsidy publishing house.

So many people seemed confused about why many writers are unhappy about the Harlequin Horizons situation. I do not believe that Harlequin Horizons is a true self-publishing house. It’s really a vanity press, no matter what Harlequin calls it.

Let’s look how Harlequin Horizons works — I’m going to use an example to illustrate the situation. (Judging from what’s going on in the Blogsphere, using a poor new unpublished writer seems to muddy the water…)

Harlequin Horizons Scenario Explained — in layman’s terms:

Let’s say you’re a salsa maker. Your dream is to distribute your salsa so everyone in the world can buy it from supermarkets, etc.

So you go to…Pace. Pace says, “Your salsa recipe isn’t good enough to add to our Pace lineup, but you should consider taking your salsa recipe to Pace Self-Salsa. If you sell a lot under that brand, we may considering adding your salsa to our main lineup.”

So you contact Pace Self-Salsa (PSS). PSS says you have to pay them money to make and bottle and label your salsa. For every bottle of your salsa that sells, PSS gets to keep half of the profit and you get the other half. So — after paying Pace a bunch of money up front — you have to split the profits with PSS 50-50.

You decide to pay PSS because you figure you can use the Pace brand and its distribution and marketing power to sell your salsa. But later you learn that PSS has no intention of associating its Pace brand with your salsa. Pace tells you that the brand “Pace” is the “gold standard” in salsa and that it will not be “compromised” to help you sell your PSS salsa. Nor does Pace plan to allow you to use their distribution network to sell your salsa. (But you can, for an additional $12K or so, get access to the Pace mailing list. This will allow you to spam 10 million Pace customers with entreaties to try your judged-to-be-not-up-to-snuff salsa all you like. And for extra $20K, you can make a commercial video that you can upload to YouTube and other social networking sites to promote your salsa (but nothing on TV channels).) And your PSS salsa will not appear next to Pace salsa on grocery store shelves. You have to do all the legwork, etc. and you have to split any profits 50-50, even though — remember — you paid a lot of money at the start for the bottling and labeling service.

That’s vanity. And, frankly, it’s exploitation. There’s virtually NO CHANCE that you will recoup the cost of investment (the bottling & labeling fees and so on). But PSS makes lots of money because it charges you and other salsa makers a premium for its bottling & labeling services, and it gets to keep 50% of profit made on each bottle of salsa sold. Just in case you missed it: Pace will make money up front, even if you never sell a single bottle of salsa. You, on the other hand, will need to sell a hell of a lot of salsa just to break even.

The true self-publishing model can be explained using a similar example:

Again let’s say you’re a salsa maker. Your dream is to distribute your salsa so everyone in the world can buy it from supermarkets, etc.

So you go to…Pace. Pace says, “Your salsa recipe isn’t good enough to add to our Pace lineup.” So you decide you’re going to make your own salsa company, just like Pace.

So you put in your money to bottle and label your own salsa by either contracting it out to an independent bottler or learning how to do it yourself. You study how to distribute your salsa, and you get some of your local supermarkets, etc. to carry your salsa.

People try out your salsa and buy some.

You may lose money because you can’t sell enough salsa. But if you do make profit, you keep 100% of the profit.

(If you’re very very successful, your salsa may become a worldwide bestseller. And who knows? Some big company (like Pace) might buy you out. Again, you assume the financial risk and you keep all the losses / profits.)

So that’s the difference, ladies and gentlemen. That’s why I do not consider Harlequin Horizons to be a viable option for anyone who’s serious about being a career-minded writer.

Disclaimer: I like Pace salsa a lot. Pace did not pay me to use its name or to say that I like their salsa. The above are just hypothetical examples I made up.

Any questions or comments?