If you’ve been following the PRH/S&S merger trial, you might have seen this quote
“50% of published books sell fewer than 12 copies”
which was amongst many slightly odd statistics to have come out of the proceedings. It has received a fair amount of attention on social media and there have been some great responses including this one from Lincoln Michel and additional comments from Bookscan’s Kristen McLean which help to shed some light on the stats quoted.
What has been absent from a lot of the talk about publishers’ revenues however is the additional income streams that accrue from rights and licensing. When people wonder how publishers can stay in business if they only sell a relatively small number of copies, then surely part of the response has to include the contribution of rights revenue. In an article Richard Charkin wrote for Publishing Perspectives in 2020 he wrote
“It’s a truth almost universally acknowledged that the net profit of a general book publisher is invariably smaller or equal to the net rights income received.”
The financial accounts of publishing businesses are set up in such a way that rights revenue goes straight to the bottom line as profit and so it can make a huge difference to a P&L and as Richard suggests in many cases IS the difference between ‘P’ & ‘L’.
It isn’t just publishers that benefit from licensing revenues. For authors selling less than 1000 copies in a year (according to McLean’s BookScan stats this would equate to 66% of frontlist books sold by the top 10 publishers in the year to August ‘22) quite an ordinary foreign rights deal could mean doubling royalty earnings. Even a few permissions requests can make a significant contribution to an author’s royalties. If you combine a couple of permissions with a few foreign rights deals, the money authors earn from rights sales can really start to add up – there is a good reason that agents negotiate hard over the granting and percentage shares from subsidiary rights income in their negotiations with publishers. We would love to know if there are any statistics available that show what proportion of an author’s royalty earnings come from product sales versus rights income (do comment if you’ve seen any).
Let’s not forget either the revenue that comes from collective licensing which is managed in the UK by Publishers’ Licensing Services (PLS) who distributed £38.5 million from collective licensing revenues to publishers in 2020/2021. This is in addition to the almost £37 million that the The Authors’ Licensing & Collecting Society distributed to their members this year.
The Publishers Association’s annual Industry Insights report puts the rights revenue of UK publishers (excluding collective licensing and co-edition revenue) at £262 million, about 4% of the total sales revenue it reports or 5% if you include total collective licensing revenue. This is not an insignificant amount. However, I think it is very likely to be an underestimate given the difficulties publishers have in extrapolating accurate rights data from their financial systems and the fact that the base data from which these figures have been derived only covered an estimated 55% of publishers. Remember too that whilst these numbers reveal the share of revenue that comes from rights sales, the contribution to profit is significantly higher. Whether the addition of PRH & S&S rights revenues to the figures delved into during the trial would have make a difference to any of the arguments made, who knows? For rights professionals perhaps the more pertinent question to consider is why rights and licensing revenues are not even part of the conversation?
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