Royalties Without Stress: An IPG Podcast

MetaComet President and Co-Founder David Marlin appeared on the Independent Publishers Guild podcast in 2022 to discuss how to eliminate stress from royalty management. The transcript is below.

Tom Holman / Royalties aren’t always easy to manage—especially for newer and smaller publishers who might not be automating them. What are the main stresses you see?

David Marlin / Stress is a good word to describe royalties. They typically create that very strong emotion, along with things like anxiety, uncertainty and dread… the list continues. It’s caused by several factors including inefficiency because it’s such a time-consuming process: publishers can easily spend days, weeks or even months on royalties every period, often with multiple resources working on them. Because it’s only an occasional need and because they’re so complex, every time you sit down and do it, you have to get your head back in the process. That anticipation is very stressful.

Because royalties are so complex, they can also be overwhelming. It’s hard to keep track of all the details and manage them in a methodical way—and that leads to uncertainty too. We’ve had situations where publishers had grown rapidly and their founders hadn’t really anticipated the operational needs of that growth. Royalties basically became full-time jobs with an extremely high level of stress.

Tom Holman / What are the significant risks in all of this? What are the big dangers?

David Marlin / Accuracy is probably one of the biggest business risks. If you’re not using a state-of-the-art system, you’re very likely making mistakes—and if you’re doing it manually in Excel, you’re almost certainly making mistakes. When we set up new customers and do parallel runs on their royalties, they invariably find errors in their old statements.

These mistakes have a real reputational risk. If authors start to doubt that you’re paying royalties accurately, they question whether they can really trust you. There’s also the financial risk. You can overpay, in which case you as the publisher are out financially; and you can underpay, in which case you might have to make it up to authors later.

Tom Holman / So those are the stresses and the risks—but let’s talk about the solutions. How does automation eliminate them?

David Marlin / This is the fun part! We’ve been focused on all the negatives, but the great news is that royalties can absolutely be a worry-free, stress-free part of your business operations. In fact, they should be. Royalties aren’t why publishers got into this business: they want to publish books and get content out there and spread the words of their creators. Royalties should be a simple back-office operation like accounts payable and accounts receivable.

To go back to the example I mentioned, one publisher went from working full-time on royalties to a couple days a month, and she now has total confidence that her statements are accurate. She loads her sales in, runs our sales reconciliation report which shows up issues and fixes them, and then hits the send button. All her authors get their royalty statements, and then you can send payments through a payment automation system—we work a lot with Tipalti—or to your accounts payable if you are using an accounting system. The stresses are gone and she doesn’t even have to do it herself—she can delegate it to someone else.

Tom Holman / Those benefits of accurate, efficient, stress free royalties are great, but in business it often comes down to the cost. How much do you think a new system can save you in terms of money, person-hours and other resources? How can you be sure that the investment’s going to repay itself?

David Marlin / That’s a good question. There are a lot of different ways of looking at return on investment, including how much time you’re spending on work and how you value that time. In my experience, most publishers undervalue their time and don’t realize the importance of their efforts. They’re wasting their time on royalties when there are much more productive and revenue-generating things they could be doing. When we implement our systems we typically see about a 90% reduction in labor—sometimes as high as 95%.

There are also more subjective ways of looking at the return on investment, like the elimination of financial risk and the benefits to the author-publisher relationship. It goes from authors worrying about whether their statements are accurate and whether they’ll be on time to being excited to go online and see all their statements. That’s another thing that’s tough to measure in financial terms, but it’s a positive return on the investment in automating royalties.

Tom Holman / And finally: for any publishers who can see all these benefits and the need for good practice, what should they look for in a new system? As with any investment, some solutions are better than others, aren’t they?

David Marlin / It’s hard. Even though I’m in the software business, it’s still hard even for me to pick good business software. Probably the biggest thing to consider is the experience level of the company you’re looking to work with. We work with close to 200 companies now, and our capabilities and reliability are so much higher—we have a much deeper bench of people supporting clients. That experience and positive track record is crucial.

Reputation in the industry is another important thing. Look at companies’ customer bases to see if they have experience with similar types of publishers to you. For example, university press contracts tend to be quite different from traditional trade publishing, so you must make sure that an automated system can handle your types of contracts.

Security is very important these days as well. You have all of your revenue data, confidential contract information, and sensitive author information in your royalty process. We used to talk about how our data was hosted on the most secure platforms, but that’s just a small part of it. We’re now SOC 2 Type II certified here in North America—very similar to ISO 27001 in Europe. Those are the two main security standards. The key thing is for a platform to have official certification, and to not just take the company’s word that they are “secure.” To compare it to running a marathon, certification shows you’ve put in the months and months of training and effort and have had an official person check to make sure you were running it legitimately. Otherwise it’s just aspirational—like saying we intend to become secure.

There are so many aspects to security and you hear about breaches all the time. Your employees must be trained, because one of the biggest weaknesses is phishing attacks and your team has to be trained to recognize and avoid them. And to maintain your certifications, you have to test, and hire a third party to try and hack into your software and tell you all the weaknesses that they find so you can close those doors. Not just saying you’re secure, but having certification from an outside party to prove that you’re secure, is very important.

Learn more about royalty automation, or contact us to find out how MetaComet can help you save royalty management time, money, and stress!