I think the confusion comes from the fact that this is a profit sharing model, as opposed to a model in which the author gets a set percentage of the list price. The author doesn't pay for marketing out of royalties--the royalties are calculated as a percentage of the net profits.
Kate, not to put too fine a point on it, but when you first came to this thread, you never mentioned anything about a profit-sharing model. You stated that you pay on net - then went on to explain what "net" meant:
We pay authors a percentage of royalties on net ... The contract states:
" Net sales are defined as the Total Dollar amount received by the PUBLISHER from the wholesale or retail sale of the WORK minus the printing expenses, costs to produce, costs to sell, costs to market, costs to ship and/or distribute, and total dollar amount of any returns of the WORK. "
What this looks like to me is that you're socking it to the author for your hard costs - printing expenses, production costs, selling costs (?), shipping/distribution costs (?), and returns. But in
this post you say that you cover pre-production costs. How do you calculate pre-production costs out from production costs - which you ding the authors' royalties?
Can you see where this looks washy?
The author gives APPROVAL for the marketing plan (discussed PRIOR to signing), as well as for specific campaigns. We don't run campaigns that the author doesn't approve, but market in other ways.
All publishers discuss their promo plans with their authors. But where this goes off the reservation is that your authors are footing the bill (at the back end) for whatever promotion you do.
Publishers who do charge-backs to the author for printing, production, selling, shipping, distribution costs are operating under a vanity type setup. You said that money flows to the author, but I don't see where. They are shouldering all the risk of being in business with you, and you get a rather large bite out of whatever sales they have. Compounding the problem is that you have no distribution, so how are you going to make sales?
As for profit-sharing, I see the author having to share a great deal with you before they ever see a dime. If this is the way you want to do business, then that's your call. But it's important for authors to fully understand the implications of being in business with you.
Lastly, I'm sorry my posts have shaken you, but this is a Bewares Board and everyone is in the habit of asking hard questions because writers work too hard to see their books circle down a drain of anonymity. Everyone wants to go into any venture with their eyes wide open - hence the tough questions.