Tis the season, right? Agent Kristen at Pub Rants is certainly caught up in the spirit, and has the decorations to prove it: a desk full of royalty statements. Yes, it’s high royalty season – the period in late Fall, before the close of the fiscal year, when publishers are tallying volumes and percentages at a sometimes fevered pace. Kristen shared a few interesting experiences in royalty processing from an agent’s view on her blog this week; her experiences highlight a part of the royalty processing cycle that we probably don’t pay enough attention to.

In her first of her royalty processing pieces, “Top 3 Culprits,” Kristen examines the top three sources of error in royalty statements that she receives from publishers – and we quote:

“1. Returns at a price point that didn’t exist with the original published edition.
If a book was published for let’s say $13.99, then returns have to be at $13.99. Any other number is a clear error.

2. The wrong percentage recorded for electronic books
This can happen in a variety of ways. Perhaps the royalty is supposed to be on retail price and it’s showing on net or it’s just the wrong percentage altogether.

3. A royalty escalator has kicked in but the statements don’t reflect it.
In deals, there are often royalty escalators at certain break points. For example, for an adult hardcover, a standard is 10% to 5000, 12.5% to 10,000 and 15% thereafter. The royalty statement might have an error putting all copies at 10% but let’s say 6000 copies have sold so 1000 of those copies should be at the 12.5% level.”

The room for error here is obvious, and as you may know, small royalty processing errors can become immense royalty processing errors over time ($55M immense, in one recent case in Australia).

Kristen’s second royalty processing post recounts what she does, as an agent, when she does come across errors. It’s an odyssey of unnecessary work: multiple calls, follow-up emails, spreadsheet data correction, regenerating spreadsheets…and this isn’t just a hassle for the agent – the publisher is the one on the fixing end (which, if this situation is at all familiar to you, may be something you already know).

The book business has it’s realities, and multiple verticals, a complicated web of retailers, and the inherent complexities in escalator clauses are all facts of life. Plus, within the book supply ecosystem, there are multiple families – authors, agents, publishers, retailers – who work closely together, but not perfectly together.

In our work making royalties processing simpler and easier, we deal with these complexities every day – and chances are, you do too. Kristen’s experience is informative in showing two points: first, we all love the book business, but it’s far too complicated to rely on manual data entry or manual calculation – we need smart automation software to reduce errors. Second, is that when errors do occur, they ripple outwards. Because our industry is an ecosystem made up of several distinct functional parts, a decimal point error in one area can have an exponential effect in others. Thankfully, royalty caculation errors aren’t the kind of thing that can kill the book industry (there are probably a few bigger threats to worry about there…). But royalty errors most certainly are the kind of thing that can put individuals – publishers and agents included – out of business.

Playing it safe in this business means reducing exposure to errors that cost you money, hurt productivity, and, as in Karen’s experience – make you a less-than-optimal business partner. Check out Pub Rants for the agent’s perspective, and if you want to avoid getting those error calls next year, let us know.

David Marlin

David Marlin is the President and Co-Founder of MetaComet® Systems, a prominent provider of royalty automation tools. Since founding the company in 2000, David has spearheaded the development of a suite of best-in-class systems that effectively facilitate royalty processes for nearly 200 publishers. David has also served as the chair for The Book Industry Study Group’s Rights Committee and Digital Sales Committee.

Before establishing MetaComet Systems, David served as a technology consultant for renowned publishers, collaborating with notable companies such as Random House, Penguin, HarperCollins, Holtzbrinck, Macmillan, Scholastic, Time Warner, and many others. David holds both an MBA and a BA from Columbia University in New York.