At the end of last year, the newly re-launched Rights Together network gathered to answer the question: Is it possible to find a Royalties Remedy?
Amy Joyner, from Kogan Page chaired a discussion between Kris Kliemann, of Kliemann and Company and Chair of the BISG Rights Committee and Christina Noren, of Grupo GEN in Brazil. Here we report on what was discussed.
A significant impact on rights and royalties teams
Ask any rights or royalties person what their most dreaded job is, and chances are that dealing with incoming royalty statements from licensees is definitely right up there.
Recent research from the Book Industry Study Group (BISG) Rights Committee found that 63% of respondents were receiving more than 100 statements a year (2 statements a week +). Statements are submitted in multiple formats, including paper and PDF versions that can’t be manipulated in Excel or ingested into other systems easily. Reviewing and processing incoming licensee royalty statements is an enormously labour intensive, time-consuming, analogue task, yet it is a necessary one. It’s an issue that has for too long been put in the “too difficult” basket and ignored but it is an issue that really needs addressing.
Is it possible to find a Royalties Remedy?
An increasingly complex, yet vitally important data set
Amy opened the meeting by setting out the royalties landscape we find ourselves in today. Where statements were once fairly simple documents, built primarily for accounting for print sales of a single edition, the complexity of them has grown exponentially with different format types, different types of licensing, new business models and new kinds of licensing partner.
For licensees trying to track and compile this information, it is a particular challenge. Their systems may not be able to support the granularity of reporting required, the manual preparation of statements may be undertaken by people who don’t speak English and who may not have in-depth knowledge of rights and licensing.
For licensors, who are receiving statements, there are challenges too. They receive a multitude of incoming reports from different sources that come in different formats with different information. Interpreting each of these and checking through them can take a lot of time, and there are often queries. Yet everyone involved in the rights management process knows how useful royalty statement data is. It can help us make better business decisions as rights professionals. For example, by helping us to see the value of licensing partners over the full span of an agreement, and it can help the broader business too, for example, commissioning editors can identify trending genres or topics across a global market.
In a world where our resources are being squeezed more than ever, how do we find a way to manage royalty statement processing effectively and efficiently?
Processing royalties statements
Kris Kliemann outlined the work of the BISG committee, and the survey they conducted which revealed the impact on publishers and agents as a result of time-consuming, manual, royalty statement management practices.
The survey revealed that a lot of time is spent querying statements. 58% of respondents queried 1 in every 3 statements as they don’t include sufficient information. Queries could be due to missing the original language title or author name, balances may not match, there may be queries over exchange rates, royalty rates applied or not being clear which formats of a work are being accounted for, amongst other things. All of this adds to the time burden associated with processing in-bound royalty statements and has a further impact in terms of opportunity cost as that time could be spent on revenue generating activity. In the survey, 77% of the respondents reported that they had spent a full day or more on a single statement! For co-agents who receive, collate and then send out statements, the effort is more than doubled.
Working towards a remedy
Kris explained that the BISG Rights Committee set out to try and come up with a set of standard fields that everyone submitting a foreign rights royalty statement could provide in order to alleviate queries and claim back time in the process. The standard contains 44 fields in total, grouped into 4 categories – Contract information, Statement fields, Remittance fields and some conditional fields that may only apply in particular circumstances. In addition there is a definition for each field, a helpful list of synonyms (because the terms used may differ) and best practice advice. Each field has an alpha-numeric code to enable identification of a field even if the field label is in another language. It also provides a way to share statement information digitally.
You can review the Standard here on the BISG website: https://knowledgecenter.bisg.org/226a2o7/.
The hope, is that in future there won’t need to be a person reviewing statement data row by row, as machine to machine transactions become possible once the data is standardised. The committee are keen for licensors to reference the standards in their agreements with licensing partners for foreign rights deals and to start conversations with them about working towards including the fields in the Standard in their statements.
A licensee’s perspective
Christina Noren shared her perspective as a licensee providing royalty statements. Christina explained that a licensee has a single royalties system that has to work for their regular local author statements AND those they are required to send to their licensing partners. This can make it hard to accommodate data that is specific to licensees but may not be relevant to authors. There are also challenges around providing data like exchange rates because that is data that has to come from the bank after the payment has been made, which is likely after the statement has been sent out. Christina was sympathetic to those receiving statements and felt there would be scope to incorporate fields from the standard into their royalty reports, and where that wasn’t possible, it might be that supplementary information could be provided separately. She would encourage licensors to make adherence with the new Standard a suggestion in agreements, rather than a contractual obligation and that licensees could gradually add more information, as they iterate their royalty systems and processes over time.
Given the challenges with non-English speakers handling contracts and royalty statements, Christina would find it very helpful if licensors could provide a contract summary to accompany contracts being sent out, to make it easier for a licensee to identify key contractual terms. Such a document could also include additional information like who to pay, where to send comp copies and where and how to send payments, especially where agents are involved as well. Christina pointed to the value of trusted partnerships between licensors and licensees and the role of such partnerships in easing some of the difficulties. Even with the limitations of the systems at our disposal, there are always ways we can help each other!
Additional challenges
In the Q&A, there were some interesting comments about other elements of the royalty statement process that can present challenge. These included statements coming from no-reply email addresses, which make it harder to know who to have a discussion with, especially if they have come from agents. There were examples of paper statements being sent to registered addresses on the contract rather than to the entity who has to deal with them (licensor or agent) which effectively means they are just not received. The chain of entities involved in submitting and receiving statements can also be complex, with potentially every party also having an agent! That’s a lot of people that can be involved in the same data needing to go in and out of different systems! The lack of Work level identifier was also problematic, and an issue long debated in the publishing standards space. Rights are sold at a work or contract level yet often format level ISBNs are the only identifiers available to distinguish one work from another. That can cause all kinds of issues, not least because rights are often sold prior to ISBNs being allocated!
Establishing a standard for royalties statements to unlock a digital future
Everybody who has worked on the Standard is aware that wide-spread adoption will not happen overnight. Kris hoped that people will see a value to it over time, and adopt it, as they have with standards in other areas of publishing, like ONIX. Every time two more fields are added to a licensee’s statement, or data is provided in a supplementary report, it marks an improvement and over time we will make progress.
Ultimately the big dream would be a scenario where royalties data could be communicated machine to machine via APIs, which would strip out a huge amount of the labour-intensive keying, verifying and processing that currently takes place. Whilst that seems a little way off, it does seem crazy that in this day and age we have people manually keying data from an output of one system into another. The introduction and adoption of a royalty statements standard is the first step towards reducing some of that manual effort and making a fully digital transaction possible.
Want to be part of the The Royalties Remedy discussion…and more
If you enjoyed reading this summary of our Rights Together: The Royalties Remedy event, and would like to join the conversation, do make sure you are signed up to Rights Together:
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About our Rights Together November Speakers
Christina Noren has been managing rights licensing across STM, professional legal titles. She’s worked in developing internal royalty systems as well as the program that generates contracts, addendums and communications.
Kris Kliemann advises global publishing companies on strategies for maximizing reach and revenue through rights, royalties and new technologies. Previously Kris was the Vice President, Director of Global Rights at Wiley. She is the current Chair of the BISG Rights Committee
Amy Joyner has over 20 years experience working in international copyright licensing, rights management, copyright protection and international sales. She is currently Rights and Licensing Director for Kogan Page.