In today’s world of global multi-channel content distribution, lifetime royalties can often add up to a lot more than what artists, actors, authors, and their ilk, earn in the first few years of creating a piece of intellectual property (IP). 

Sadly, most creative types don’t realize that they may be losing out on a big chunk of the royalties owed to them. This is where a good royalty management expert can boost your earnings by making sure you’re caught up on past dues and receive your fair share going forward.

Broadly speaking, royalty management covers the gamut from digital distribution, licensing, merchandising and publishing to film, television and video production and distribution… and it’s a must-have for anyone who seriously creates rights-eligible content for a living – recording artists, songwriters, actors, authors, athletes, etc.

Take This Royalty Quiz

To see how well you’re managing your royalties, consider the following questions:

• Do you truly understand the royalty rights in your contracts?
• Do you know what percentage you’ve collected on past due royalties?
• Do you have a system for auditing who has paid on time, and who still owes you royalties?

• Do you have an invoicing and collections process to recover unpaid royalties?
• How confident are you of your current system for the handling of royalties?
• Do you fully understand the various channels that your content is distributed in?
• Are you confident that you’ve always gotten the best possible royalty deal in negotiations?

• Do you have a comprehensive, tax-ready database of royalties collected to date?
• Are you confident that you’ve filed taxes in every jurisdiction that you may have earned royalties in?

If you feel good about your answers, you either have only a few simple royalty agreements, have a really good royalty manager by your side or are in DIY mode and do not realize that you could be missing out on royalties owed to you.

Royalties Are Far More Complex in Today’s Multimedia World 

Gone are the days when royalties were relatively straightforward and restricted to just a few channels. Royalty contracts are getting increasingly complex in today’s multimedia world. Tracking digital royalty rights is far more granular and data-intensive because it involves multiple channels across the globe, across millions of devices.

For instance, songs are sold on vinyl, CDs, or downloadable digital MP3 files; streamed through apps such as Spotify or Apple Music; watched on YouTube; used worldwide as background music in games, commercials or movies; played over the radio, satellite radio such as SiriusXM, on television, at public venues, restaurants, airports, fitness and dance studios, etc.

In parallel, the calculations behind royalty payouts are tied to hard-to-track global metrics, which could lead to obfuscation and underpayment if you aren’t watchful. Hence, artists of all types need a royalty manager who understands this complexity, has deep and valued relationships with the distributors of content and can renegotiate royalty terms as your creativity evolves.

Complexity Necessitates Involving a Royalty Management Expert

This complexity of today’s royalty map also requires that royalty managers be tech-savvy enough to understand how new media is finding creative ways to track and distribute IP to a much larger global audience.

While the upside is that you have a much larger global audience and higher earnings potential, the downside is that there is significantly more complexity to royalty and licensing agreements. As a result, it’s virtually impossible for creative types or their Laymen managers to keep track of royalty deals, so content creators need a royalty management expert to step in and:

• Audit past royalty contracts to assess adherence to licensing terms, and check on what’s paid and what’s owed (licensees are more likely to fully pay up if they know they are being tracked by royalty professionals);

• Enforce contract compliance where needed;
• Negotiate new royalty contracts to comprehensively cover all distribution channels and offer fair payout rates per channel, using the right metrics;

• Negotiate new royalty contracts (and re-negotiate expiring contracts) so they are in the artist’s fair interests;
• Act as a buffer between the artist and the agency, record label, production company, etc.
• Maintain a database that tracks, invoices, and collects royalties as they come due.

Royalty contracts must include clauses that cover inspection, responsible accounting, audit rights and guarantees to make sure artists get their fair shake.

Contract negotiations can be a prickly process. An experienced royalty manager will know how to strike the right balance between auditing and enforcement so relationships aren’t destroyed but are nurtured for the future growth of the artist’s career.

Good royalty managers stay on top of their game. They keep up on royalty rates for various channels, have in-depth knowledge of royalty measurement metrics and payout calculations, take care of all the paperwork associated with filing copyright forms, register content with relevant organizations and obtain rights and other clearances as needed.

Value of Royalty Structuring & Royalty Management

Where artists do not have a good handle on their royalties, a royalty manager could deliver substantial value through the initial audit exercise alone. Then, after the initial audit, an experienced royalty manager delivers value through:

• the structuring and negotiation of expiring and new royalty contracts;
• the active monthly tracking, invoicing and follow-up on royalty payments owed;
• tax reductions in multi-jurisdiction federal, state and foreign tax filings related to royalty earnings and expenses.

Depending on your star value, your royalty manager may decide to either directly negotiate deals with major publishers, labels, webcasters, and streaming services, or use digital rights management (DRM) platforms such as SoundExchange or Public Performing Rights Organizations (PROs).

A royalty manager who’s actively involved on your account will also have a good handle on when royalty checks are expected to come in from various channels. This payment schedule information can help fine-tune the budgets that you build with your financial advisor, and keep your financial house in order.

Royalty management is the closest you can get to the gift that keeps on giving. That said, negotiating win-win royalty licenses requires deep industry knowledge and contacts. And tracking and collecting royalties requires high attention to detail, constant follow-up, and strong analytical and financial skills. Therefore, royalty management is best left to the experts while you focus all your attention on the creative process.