Royalty Software Selection for Book Publishers

Royalty software selection is an art. You want to purchase the software application that will best meet your current and future requirements.

  • Budget
  • Royalty Rules
  • Scalability
  • Expansion Options

Royalty Software Budget

The first criteria to examine is your budget. If your resources are limited or you want to minimize your expenditures EasyRoyalties will be your likely choice. Their prices range from $500 for (50 titles) to $18,000 (for 3,000+ titles) and implementation costs are minimal. If you can afford $10K to $30K a year for royalty software Metacomet’s Royalty Tracker, Klopotek and Virtusales offer royalty solutions that are more scalable, will process royalties faster and; in the case of Klopotek or Virtusales, offer a wide range of optional modules such as title information management and production management.

When looking at cost, look at the three year cost of ownership. The three year cost of ownership is the total cost of software, hardware, implementation and support services for a three year period. [Read more…]

How to Show Free Copies on Royalty Statements

Many publishers provide free books to potential reviewers. Publishers that are part of Kindle Select may offer the Kindle version for free to raise awareness of a book series or gain reviews for a new title. A publisher that uses a marketing service such as Bookbub to promote “free” eBooks can distribute several hundred to several thousand books in just a few days. [Read more…]

Royalty Software Payments Export

Our royalty software can export a file with the amounts owed to each royalty recipient. Importing this file into your accounting software eliminates the need to manually enter the amounts into your accounts payable system. A task that could take an accountant several hours to perform is reduced to just a few minutes. [Read more…]

V4 – Royalty Schedules

In our royalty software every royalty contract is attached to a royalty schedule.

The royalty schedule determines 1) when royalty statements are generated, 2) the royalty statement format, 3) where PDFs of the statements are stored and 4) what email template is attached to emailed royalty statements. [Read more…]

V4 – Reserve for Returns

The royalty software supports a royalty contract clause that allows the licensee to hold back a portion of royalties earned to cover future returns from sales made during the royalty period. This is referred to as a reserve against returns.

A book publisher’s reserve for returns clause may allow the publisher to withhold a “reasonable reserve” or it may specify the reserve as a percentage of the royalties payable to the author.

The reserve clause for a publisher paying royalties semi-annually or annually may state that the reserve will be withheld for no longer than one royalty period. For a publisher paying royalties quarterly this clause usually allows the publisher to withhold the reserve for two or four royalty periods.

Example:

“The Publisher may maintain a reserve against returns of ten percent of the amount due to Author, and Publisher shall indicate such reserve, if any, on the Author’s statement of accounting. The reserve will be withheld for no more than one accounting period.”

“The Publisher may maintain a reserve against returns of 25 percent of the amount due to Author for the first two royalty periods. Thereafter the reserve rate shall be based on the actual returns rate for the period. The Publisher shall indicate such reserve, if any, on the Author’s statement of accounting. The reserve will be withheld for no more than one accounting period.”

“The Publisher may maintain a reasonable reserve against returns from the amount due to Author. The Publisher shall indicate such reserve, if any, on the Author’s statement of accounting. The reserve will be withheld for no more than one accounting periods.”

Royalty Software Implementation

In the royalty software this is handled from the royalty contract’s reserve rules menu item.

Royalty Software Reserve for Returns

A royalty contract can have one rule or several returns for reserves rules.

Each rule can apply to specific product formats, sales type or only earnings from a specific royalty rule. Many publishers do not withhold as reserve on eBook sales.

Example

The example below shows a reserve for returns rule that applies only to earnings from sales of hardcover and paperback editions. No reserve is withheld from sales of the eBook edition.

1. The reserve rule applies to hardcover and paperback editions.

2. The reserve rate is based on royalty earnings.

3. The reserve period field specified for how many royalty periods the reserve is held. Publishers paying royalties annually or semi-annually tend to hold back reserves for one royalty period. Publishers paying royalty quarterly tend to hold reserves for 4 royalty periods (1 year).

4. The recovery period field specifies the number of royalty statements over which the released returns are paid to the author. A value of 1 means that 100% of the reserves are released in one statement. A value of 4 would release 25% of the withheld reserve each royalty period.

RoyaltyReserve02

Royalty Statement Options

The royalty software has an option to include a schedule of withheld reserves for returns and their release date(s) on the royalty statement. To show this schedule from the royalty statement document’s totals tab select show reserve account summary.

Royalty Software Reserve Schedule Print Option

 

Kindles Sales Import

A new Tech Note describes how to import the multi-currency Amazon Kindle KDP royalty report into Easy Royalties.

To do this in Easy Royalties you;

1. Go to your Amazon KDP (Kindle Direct Publishing) dashboard and download the royalty report (an Excel .xls file) for the month.

2. Scan the report for any foreign currency transactions and enter the exchange rates for these currencies in the Easy Royalties foreign exchange table located under the Options, settings & lists menu.

3. Then go to File > Imports > Amazon KDP to import your royalty file. This import requires V3.11.248 or above. Licensed users can download a free update from the Easy Royalties customer portal.

Royalty Escalators

Escalators clauses are frequently found in royalty contracts. An escalator clause states that the royalty rate increases or decrease once specified levels of a specified metric. Frequently used metrics are quantity sold, revenue, royalties earned and retail price.

The examples below illustrate three types of escalators from our royalty software.

1. Quantity escalator has royalties increase at specified levels of quantities sold.

royaltyescalator01

2. The retail price escalator shown below has a royalty rates that decreases for higher priced products.

royaltyescalator02

3. In the example below the royalty rate is based on life to date revenue (receipts) for sales in the specified format (paperback, hardcover, etc.)

royaltyescalator03

Escalators may be based on sales for all products covered by a royalty contract. They may  be limited to sales of a specific format; such as print or eBook,  sales of a specific product or sales covered by a specific royalty rule. They may also be based on products covered by 2 or more contracts; i.e. a group of contracts.

A common oversight is including all sales in escalator tallies. For book publishers this means excluding eBook sales and free books from escalator quantity totals. You can tell the royalty software to include sales for a specific rule; such as eBook sales, by selecting DO NOT include sales or activates that fall under this right in the escalator tally.

royalty software escaltor exclusion

Escalator Strategies

Licensees have two reasons for using escalators in royalty contracts.

First, escalators reduce your royalty expense until a specified metric is achieved. For book publishers a lower royalty rate at the beginning allows the publisher to recover his investment faster. After his costs are recovered the publisher pays a higher royalty to the author. Typically, a print book has three escalator levels based on quantity sold. An eBook may have an escalator based on life to date revenue.

Second, its used as a tool to close a deal with a licensor. By offering the possibility of a higher royalty rate the licensor; an author for a book publisher, may be induced to sign a contract with the licensee. Would you rather sign an agreement with a publisher that offers a flat 10% royalty or one with a publisher that offers a 10% royalty on the fist 5,000 copies, 12.5% on the next 5,000 and a 15% royalty if the quantity sold exceeds 10,000 copies? For many authors the upper escalator break level will never be reached.

In writing contracts it is very important to specify what is the escalator is based on an what is excluded from escalators. A book publisher’s contract will often specify that the escalator is based on print sales and that it excludes 1) books sold at less than unit cost; including remainder copies and 2) free promotional copies. Some contracts specify that sales at discounts greater than a specified discount level; 70% for example, are excluded.

Royalty Software Implications

When evaluating royalty software you want to be sure that it supports the rules that you will use now and in the future. This includes support for your escalator metrics; quantity, revenue, invoiced price and retail price. You want to insure that the escalators support your qualifiers; contract, rule, format and product (ISBN). A product qualifier includes only sales from a specified ISBN in the escalator. A format qualifier would include only sales from products of a specified format; such as print or digital.

We find that the option to print summary of the escalator rules is an important royalty software functionality. This allows the user to see a printed summary of their eBook rules by title. Another feature to look for is the option to exclude sales of a specific type from the escalator tallies. For book publishers the biggest escalator problem is including remainder sales and free promotional copies in the quantity tally. A publisher does not want to include quantities from which it derives no revenue or minimal revenue as this can boost the royalty owed to the author.

Royalty Cash Flow Forescasts

An important aspect of royalty accounting is forecasting future cash flow requirements. This includes forecasting when and how much cash is required to pay royalties due and royalty advances. These forecasts are revised each month, based on year to date results and updated information from stakeholders. [Read more…]

Amazon eBook Sales Imports

Amazon Kindle Direct Publishing provides publishers with a multi-currency sales file. There is a separate section for each currency – CAD, EUR, GBP, JPY, etc. Each row has the Amazon ASIN; not the ISBN, as the product identifier. Download this document on how to import Amazon sales or read our how-to summary below. [Read more…]

Large Royalty Software Implementations

In New York City I met with consultants that implement royalty software for large companes; i.e. companies that have over 100,000 royalty contracts. This discussion highlighted client critical requirements for a successful implementation:

1. A good project manager that knows how to communicate with the key stakeholders and keep a project on schedule and within budget is key. Too many projects fail because they lack a good project manager.

2. A solid grasp of customer requirements. Ideally, you want zero unplanned software modifications. Unplanned modifications cost money and will delay the project completion date.

3. Client commitment to the project. The client needs to assign his most knowledgeable people to the project.

4. Modern IT Hardware. Old hardware leads to a slower system that takes longer to calcualte royalties and generate statements. Where possible the royalty software data should be stored on a dedicated server or NAS; network attached storage, device.

5. Employee training. Companies tend to skimp on employee training in an effort to minimize costs. This leads to excessive calls to costly technical support liness. Having a realistic plan for training employees is key to minimizing ongoing support costs and maximizing client satisfaction with the software.