I think if this was the wave of the future we would all be underwater by now.
Most Authorhouse books sell in double digits--you might make money of authors running at a loss, but Harlequins core business will remain mass-market paperbacks. In fact I suspect this venture will not last, or at least it will not thrive. It is effectively a no-investment parasite on their brand.
I think it is important to stress, this
is not an AuthorHouse strategy, but that of its parent company Author Solutions who already control a very sizeable control of the author solutions market through AuthorHouse, iUniverse, Wordclay, Xlibris and Trafford.
All large publishers' core business is fundamentally mass-market if they can help it, Harlequin are no different, and I do not believe they are doing this as some form of short-sighted profit-making venture to get them through any sort of economic rocky patch. As has been already pointed out on this thread, Harlequin is by no means feeling the financial pinch in the way that some other like-sized publishers are. I do agree, for Harlequin, Thomas Nelson and the others who will follow, there clearly needs to be a risk assessment on their own publisher branding. Clearly, that risk assessment was done, and the decision was made that the gains would be greater than the short-term losses in author and industry perception.