What is Royalty Management and why does it matter?
As with all financial matters, diligence is absolutely key to good order and the avoidance of potentially catastrophic errors and omissions. Anyone who owns, assigns or licences intellectual property and is due a royalty (even when recouping an advance) is in need of Royalty Management.
As you receive royalty statements of account, it is not just about the bottom line. How do you know that the statement is a correct reflection of the agreed contractual terms and is accurate, complete and inclusive? The standard approach to this is a full Royalty Audit, usually carried out several years after an agreement is signed (post recoupment of an advance, or because of delays over cost considerations, etc.) and often too long after an agreement is signed to address errors going back further than the standard 3 year audit clause.
A complementary, affordable and highly effective approach is to review the statements in detail and in real time upon receipt and to deal with issues as they arise. This is Real Time Royalty Management.
So what are the benefits?
Prudence & Protection
Once the system is in place, you are safe in the knowledge that every statement is considered when it is rendered. If there are systemic errors, omissions or perhaps different interpretations of contractual provisions leading to potentially serious accounting errors, these are picked up without delay.
Relationships
Contracting parties need to get along. There is a saying which goes as follows:
“Conflict is inevitable, combat is optional”
Real time analysis is a benign practice that builds better relationships, fosters understanding and avoids unnecessary conflict.
Without prior Real Time Royalty Management, a full royalty audit can take months to get off the ground and even longer to complete to submission and eventual settlement. With Real Time Royalty Management in place a client can move to complete a full audit very quickly and effectively.
Lower Costs
Royalty audits tend incur significant fees but much of this stems from the fact that very little prior attention has been paid to the type of Real Time Royalty Management set out here. The more active diligence in advance the lower the overall fees paid. Better still the cost is spread out over a long period of time.
Lower Risk
A regular question asked of royalty auditors is for there to be guarantee of recovery in excess of the fees paid. Simply put, there are no guarantees and that isn’t really the point anyway. Diligence in all financial matters is essential be it business or personal.
The good news is that risk is generally reduced as fees are reduced through real time Real Time Royalty Management.
Knowledge
Many deals are based upon advances. It is widely accepted that royalty investigations are put off until recoupment has occurred. This somewhat misses the rather obvious point that recoupment can take much, much longer if the accounting is incorrect. Carrying a sizeable unrecouped debit balance can also be problematic. Perhaps there is a need for tour support money for an artist at a crucial stage and the current debit balance impacts on the money given (or not given). Or perhaps a renegotiation is in progress; wouldn’t it be better to be nearer to recoupment and command better new and future advances and a better overall deal? What if the client is close to being dropped owing to a wrong impression of the accounting thus far? Financial diligence through Real Time Royalty Management is all about knowing where you are at any given time and being able to use that knowledge in the most effective way possible.
Accumulation of Data
All statement information goes into an ever evolving database that builds over time.
Insurance
Another way to view Real Time Royalty Management is to consider it as insurance at the very least. Just as any insurance offers peace of mind and protection, the same is true of Real time Royalty Management.
Royalty Management
Royalty Audits - Royalty Investigations - Music Business Advice - Recording Industry Services - Admin