Mangement Reporting

Information from your royalty software can create a royalty activity report to update management on important trends and activities. It tells them how much cash will be needed to pay royalties. It alerts them to unexpected increases in royalty expenses. Trends in unrecoverable royalties can tell management if royalty advances are too high or the reserve for returns is too low.

The typical royalty activity report is a one or two page document that takes presents actionable information on:

  • Cash requirements
  • Royalty expense trends
  • Royalty advance commitments
  • Unrecoverable royalty expenses
  • Rights Income
  • Compliance issues
  • Data protection

Sample Royalty Management Report for a Book Publisher

Royalty Activity Report January 1 through April 30th, 2011

Summary

Cash requirements for the June 30th royalty statements; which are payable on August 31st, is estimated at $1.2m.

Year to Date ($000): 2011 2010
Royalty Expense $560 $480
% of Sales 12% 10%
YTD Advance Commitments $100 $110
Total Advance Commitments $210 $250
Unrecoverable Advances $25 $10
Unearned Royalties $45 $20
Unrecoverable Unearned Royalties $20 $10
Rights Income $150 $100
% Change 50% 11%
New Contracts 134 110
New Licenses 14 12

Royalty Expenses

01. Year to date royalty expenses of $560,000 are running at 12% of sales. This is a 20% increase over the 2010 royalty expense ratio of 10%. The increase is due to a larger than expected increase in the sale of digital products. The royalty rate on eBooks is 20% of net, vs. 10% of net on print sales.

Royalties Payable

02. Royalties payable for the period ending June 30th are projected to be $1.2million. This amount will be due and payable on August 31st. 03. Unclaimed royalties; older than three years, of $28,000 were remitted to the state unclaimed property office. We have another $44,000 in unclaimed royalties that are less than three years old.

Royalty Advances & Unearned Royalties

04. Royalty advances contracted for the year to date are $100,000. This is $10,000 below the year to date amount for the prior year.

05. Advances due for payment within the next two months total $25,000 with a further $90,000 due in the next quarter upon the publication of the fall titles.

06. Unearned royalties for the year to date have increased from $20,000 as of December 31st to $45,000 as of April 30th and unrecoverable royalties expense of $20,000 increased by 100% over the prior year. These increases are due to higher rates of returns on mass market novels; 55% for the year to date vs. 40% in the prior year. The sales manager expects that this trend will continue into the foreseeable future. The unearned royalties balance and the associated unrecoverable royalties expense for future titles can be reduced by increasing the contractual reserve for returns.

Subsidiary Rights Income

07. Subsidiary rights income increased by 50% over the prior year to $150K from $100K.

08. Ten licensees have not submitted sales statements as per their license agreement.

09. A review of German language publications available on Amazon.de showed the availability of two titles from a publisher that did not have German language rights. The company told us that they purchased the translation rights from a French publisher. The French publisher had no right to sublicense translation rights. We signed a licensing agreement with the German publisher and requested that the French licensee remit to us all payments received from the German publisher; about $12,000 USD.

Royalty Contracts

10. We added 134 new contracts and 84 new authors during the period.

11. 5 authors lack tax identification numbers.

12. A review of new royalty contracts encountered a royalty rule; guaranteed minimum royalty, that our royalty software does not support. It will cost $5,000 to add this functionality to the software.

Data Protection

13. The royalty software’s on-line backup system was tested on March 30th and no problems were encountered.

14. We verified that all 134 royalty contracts and 14 new license agreements for the year to date have been scanned, indexed and stored in a digital format.