All publishers need to manage rights. But what value does effective rights management have to a publisher? Apart from the obvious value of legal risk avoidance, this question has gone largely unanswered for a very long time. Publishers say they want to improve their rights management capabilities, but they often don’t invest in new systems. The Book Industry Study Group (BISG) found this out back in 2017: it did a survey that revealed that while the majority of respondents saw the value in improved rights management, only 40% had plans to make investments in the coming 3-5 years.
The question has always been the same: how much is a better rights management system really worth? Senior management wants quantitative evidence of ROI, but such evidence has been hard to come by; most of it has been anecdotal. This question takes on more urgency as rights-related revenue—permissions, digital licensing, audiobooks, foreign rights, and so on—becomes a bigger and bigger piece of many publishers’ overall revenue.
Last summer, BISG commissioned my firm to undertake a study to find the financial benefits of rights management, to get credible and useful estimates of ROI. To do this, we worked with the BISG Rights Committee to create “ROI buckets” that we could assign to specific outcomes from implementations of new or upgraded rights management systems and processes. We learned about these from a series of in-depth interviews with rights executives from over a dozen publishers across most segments of the industry (as well as literary agencies), from small to very large.
We settled on eight buckets, five on the incremental revenue side and three on the cost efficiencies side. We worked with interviewees to quantify the benefits they were seeing and put them into each of the buckets. The results were published in October 2020 as a report that’s available on BISG’s website at https://bisg.org/store/viewproduct.aspx?id=17421021 (free registration required).
We found that while specific rights management applications vary from one segment of publishing to another, the financial benefits outweigh publishers’ investments in rights management systems by a wide margin. Here are just a few highlights of what we found:
- A midsize trade publisher was able to increase licensing revenue from 8% to 15% of total revenue over a period of 5 years, a gain in the low millions of dollars.
- A small agency has been able to complete more deals with its existing staff and increase annual revenue by 10-15%.
- Another midsize trade publisher used its rights management system to examine data on audiobook deals to determine their profitability; it discovered that it could increase total annual revenue by 3-4% by bringing audiobook production in-house.
- A large STM publisher started using an online licensing agency and experienced a multi-million-dollar increase in permissions sales, equivalent to what it would earn from an in-house staff of 15 at about half the cost.
- A large educational publisher is able to avoid paying for about 10% of the tens of thousands of assets that it licenses in per year, by using a rights management system to track the assets and the rights being licensed. This saves it several million dollars a year.
In addition to these data points—and many others—we found some particularly promising use cases in each segment. For trade publishers, the most beneficial use cases included increased subrights sales through data analysis to determine optimum pricing, and self-service web portals for increased efficiency in permissions sales. For agencies, the best use cases were more capacity to do foreign rights deals, and increased cash flow through automated payment reminders.
Three general themes emerged from our analysis. One was the power of data analysis: having lots of data about rights deals at your fingertips leads to better decisions on where to focus sales efforts and how to get the best prices. Another was that it’s important to look at rights management capabilities as sources of incremental revenue through capacity expansion instead of merely as cost reduction. The third was the increasing criticality of third-party licensing agencies as rights become a bigger part of overall revenue: licensing agencies enable faster expansion, usually at a much lower cost.
We also measured ROI as percentages of publishers’ overall revenue. The biggest percentages were at literary agencies, where investment in modestly-priced rights management systems led to high single digit percent increased revenue. Among the largest publishers, higher ed publishers experienced the most benefit, but even the large trade houses saw benefits that added up to millions of dollars a year. In many cases, the benefits on the revenue side outweighed the benefits on the cost-savings side by an order of magnitude.
Rights managers have always known that what they do is increasingly important to their companies’ bottom lines. Now they have some quantitative evidence to bring to senior management in support of investment in better systems and processes.
This article originally ran in Publishers Weekly, re-printed with permission.