Expert publishing blog opinions are solely those of the blogger and not necessarily endorsed by DBW.
What is the revenue potential of licensing at your organization, and how well are you capitalizing on it?
Through my work providing rights solutions for MetaComet Systems over the last 16 years, and as the former co-chair of the Book Industry Study Group’s Rights Committee, I have learned that the value of rights operations varies widely from publisher to publisher. For some, rights income makes up only a fraction of a percent of overall revenue. For others, it may be 10-20 percent or more.
No matter the volume of rights transactions, a rights management system will help maximize your licensing revenue. In this article, I will explore this opportunity.
In Part I, I’ll identify the five areas where a rights management system adds value, and then dig deeper into the first of those areas. In Part II, I will examine the remaining aspects of rights management that can be enhanced through such a system.
Where’s the Value?
To start, by “system,” I do not necessarily mean a “commercial off-the-shelf” (COTS) product. In organizations with rights revenue under about $20K/yr., it is hard to justify a COTS product: the return on investment (ROI) is simply not there. If you are over that threshold, then the COTS equation begins to flip, and the ROI can become strongly positive. Even if you do not go COTS, though, you can still incorporate processes, spreadsheets and custom databases into your operations to help ensure many of the same results. They require more discipline and flexibility to maintain, but they still offer value.
By “value,” I mean revenue generation, author relations and brand. Revenue generation is the easiest to measure and the most obvious return. It drives most publishers’ decisions whether or not to implement a COTS product. That will be the main focus of this article. But the other value components—author relations and brand—benefit as well.
There are at least five areas where a system will help add value (revenue) to your existing operations:
2. Identifying Opportunities
3. Identifying Expiring Agreements
4. Progressing Existing Deals
5. Analyzing Results
When it comes to rights, there is one question that stumps the majority of publishers that I have asked: what percentage of your licensing royalties are you actually collecting? In other words, of all the licensees with whom you have agreements, how many have sent your royalties or at least royalty statements?
Interestingly, after acknowledging this deficit, publishers typically have one of two reactions:
1. Good question. I don’t know.
2. It doesn’t matter because I know all the agreements that generate any revenue and I keep an eye on those.
In the case of smaller publishers, response #2 may be legitimate. If a publisher is only licensing 5-10 deals a year, a COTS system to track them is overkill. A spreadsheet and some year-end discipline to update and review it will solve any problem.
So let’s start by examining how to help in the first case.
Most licensing deals can be broken down into two types:
1. Permissions, or one-time licensing deals with a flat royalty.
2. Subsidiary rights, or recurring licensing deals with a royalty component and an expiration date.
A good system tracks both types of deals and the corresponding income. Because it also knows the start date and the frequency of required payments (just once for permissions), it can easily show you who has sent you a royalty statement and who has not. Just having a report of past due statements could pay for a system itself.
Taking it to the next level, a good rights system can actually generate dunning letters enabling you to send an email to the licensee reminding them about payment due on a particular title or titles.
With discipline it is possible to track this with Excel or a similar spreadsheets application. For this to be effective, though, one must rely on their spreadsheet as the central database of all their rights deals. At a certain point, however, it is just too much information and data entry. For example, when you enter rights revenue into your rights management system, it should be able to automatically calculate royalties, record the date of receipt and know that this agreement is not past due. In Excel, this requires entering identical data into multiple systems (your Excel rights spreadsheet, your royalty system or spreadsheet and your Accounts Receivable). There reaches a point when this becomes too time-consuming.
Many organizations license rights from publishers, and many of these organizations may not be paying. Collecting this money represents a win both for the publisher and its authors.
In part II of this article, I will explore the remaining areas of rights management. In the meantime, if you have any questions, please feel free to contact me directly or visit our site for more information.
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