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The Importance of Royalty Software – Part I

Technology hasn’t “killed the book,” but it has made the business of books far more complex. The publishing industry is operating in an economy that may or may not be recovering, and simultaneously in a Brave New Technological World; there is both less economic wiggle-room, and an explosion in the number of ways a book can be sold.

Among the few certainties in the environment publishers face today is that the simple number of royalties calculations factoring in to any contract has risen dramatically.

In this first article in a series on the importance of royalty software, I will extrapolate a bit on this point:

Complexity of Contracts in the Current Publishing Environment:

Once upon a time, book royalty contracts stipulated royalties based on a simple percentage of all books “sold,” and royalty accounting was a minor part of a big publisher’s overall accounting workflow. Now, the sheer number of calculations involved in figuring out royalty amounts, plus when these royalties need to be paid, are mind-boggling. In each of the basic categories of hardcover, trade paperback, and mass-market paperback, there are separate calculations for print, e-book (both wholesale and agency), physical book (again, both wholesale and agency).

Simply keeping on top of all of this royalty accounting is hard for even the largest of publishers, who often have entire departments dedicated to royalty management. Consider the experience of the large publisher Rowman and Littlefield, whose Vice President of Customer Service, Carla Quental recently said after the company began using royalty software:

“Before MetaComet® Systems, royalty tracking and reporting was a nearly insurmountable challenge. We now have a very smooth process which enables us to meet the needs of our authors, editors, and CFO…It has been a great investment.”

Indeed, large publishers have long realized that dedicated royalty software is the only way they can realistically meet their royalty accounting needs, with accuracy and efficiency. At Harcourt Education, Assistant Controller Mark Silverman recently said:

“Accounting for royalties is incredibly important and also incredibly difficult because we have literally tens of thousands of contracts with authors, and each one needs to be tracked in a timely and accurate manner.”

The biggest book publishers have the most complex royalties contracts to negotiate, but also typically have largest amount of resources to devote to managing their rights and royalties contracts. A quick look at how the big publishers have chosen to manage this issue shows that they have virtually all elected to use some version of purpose-built royalty software. In our next feature, we will explore how smaller publishers, who face many of the same rights and royalties challenges, can utilize royalty software that fits their needs.





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