Royalty Software Selection

How do you select the right royalty software? For many royalty paying companies it is based on;

  • How much they want to spend
  • The size of their company
  • The royalty rules used in their contracts
  • Whether they are looking for a stand-alone royalty solution or an integrated royalty solution
  • References from users of the software

1. How much they want to spend.

If your company has sales of $10M or less you should aim to spend no more than 0.5% of sales for standalone royalty software. This is about $5,000 for a company with revenue of $1M and $50,000 for a company with revenue of $10M.

There are three tiers of pricing for royalty software;

  1. Low – $500 to $10,000
  2. Medium – $10,001 to $100,000.
  3. High – $100,001 or more. For companies with sales of $50M+.

2. The size of their company, how many royalty products they have today and will have tomorrow.

  • A small organization will look at Easy Royalties – which can handle 5 simultaneous users and up to few thousand products.
  • A medium sized organization will look at hosted solutions such as Elan (from Media Services), Klopotek, and Royalty Tracker. These hosted solutions can handle tens of thousands of products and are more affordable than the stand-alone versions of the same software. Two to three user pricing tends to run at about $12,000 to $15,000 a year for a hosted solution.
  • A large organization will be more inclined to look at software such as Klopotek, Advance (from Publishing Technologies), Royalty Tracker(from Metacomet) or Alliant(Real Software Systems). These highly scalable solutions offer internal controls that are Sarbanes Oxley compliant and can handle royalty processing for tens of thousands to hundreds of thousands royalty contracts while accommodating thousands of users. Pricing tends to be about $100,000+ USD.

3.Which software can handle the royalty rules that your contract use today and will use in the future.

Can the software handle the royalty rules used by your company?

Common royalty rules include;

  • Accural or cash based royalties. Accural royalties are earned when the book is sold, cash based royalties are earned when the invoice is paid. (Most royalties are accural based).
  • Royalty advances are deducted from royalty earnings until the advances are earned out.
  • Royalties accrue only after a specific level of sales has been achieved.
  • Format based royalties. Do you pay a different royalty for print and digital products?
  • Customer based royalties. Do you pay no royalties on sales to author or artists?
  • Royalties are based on suggested list price, net receipts, gross profit or net profit.
  • Royalties on sales made at below cost. Many organizations do not pay royalties on sales made a below cost.
  • Royalty escalators based on price, quantity or word count.
  • Event based royalties. Does the author receive a bonus payment if there book is listed on the New York Times best seller list?
  • Royalties are shared by 2 to 400 authors. (i.e. Hymn books will have royalty recipients for each song).
  • The royalty statement will report lifetime sales and current stock levels for each product.

4. Whether you want a stand-alone solution for only royalties, a standalone solution for rights and royalties, an integrated solution, an expandable rights and royalties solution or an integrated ERP solution.

Integrated Royalty Solution Example:

An integrated royalty solution automatically updated royalties expense and royalties payable as each sale is made. You do not have to import sales information into your royalty software or import payment files into your accounting software.

KnkPublishing offers users of Microsoft Dynamics NAV (Navision accounting software) a Microsoft certified royalty and rights management solution that is seemlessly integrated with Dynamics NAV.

Integrated ERP Solution Example:

For publishers with revenue of $2M to $30M USD an integrated solution such as Acumen Book(with 180+ clients) provides a single software solution for royalties, rights, accounting, sales, marketing, inventory and ecommerce. You make a sale and your royalty expense and royalty payable accounts are automatically updated. You publish a book and the system automatically calculates the unit cost and alerts you when inventory is low. This system can send title information in ONIX format to your major customers; such as Amazon, Barnes & Nobles, Ingram and Baker & Taylor. The system automatically updates your website with pricing and availability information, downloads website orders and sends customers order receipt and shipping notices. It offers an integrated email mailing list option that faciliates the mananagement of targeted email marketing campaigns. With Acumen you can sell digital products directly to consumers.

5. References from users of the software

A deciding factor in the the software selection are customer references.

  • Do the people using the software like it?
  • How do they rate the customer support received from the vendor?
  • How long did it take to implement the software?
  • Would they purchase the royalty software again?