Transcript: A New World of Subsidiary Rights

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Interview with Randy Petway, Publishing Technology

Webinar recorded August 11, 2015
For podcast release September 2, 2015

KENNEALLY: Long ago, publishers built the first global networks, even if they didn’t call them that. They were bookstores and warehouses. Publishing in 2015 still relies on interlocking networks and exchanges, but they are virtual and digital. Copyright Clearance Center is very happy to welcome you today for a special webinar that will help you identify markets and technologies to maximize the reach and return from your rights inventory.

Rights are the essential links in the new distribution networks. Which rights are most prized? Which markets are on the rise? Will demand for digital products make print extinct? What does it take to keep you safe from piracy? Books have always connected authors and audiences in a complex web of intellects and ideas. Today, nothing has changed, and everything has changed. We look forward to helping you unravel the story of what it takes for successful worldwide management of subsidiary rights.

We’re going to go through the basics of a rights portfolio audit, and then we will discuss some of the 21st-century solutions that are available today, relying upon technology, but making the point that subsidiary rights remains very much a personal business.

With all of that, I want to turn to Randy Petway at Publishing Technology. Welcome to the program.

PETWAY: Oh, thank you.

KENNEALLY: Randy Petway, we’re glad to have you join us. Randy Petway is executive vice president, global product strategy for Publishing Technology. Randy leads strategic development for Publishing Technology’s enterprise and digital publishing solution, including advance, pub2web, and ingentaconnect.

Jointly operating from Europe, in Oxford, the UK, and North America, with offices in Boston and Somerset, New Jersey, Publishing Technology was formed in 2007 following the merger of Ingenta, Vista, and Publishers Communication Group, and is listed on the Alternative Investment Market of the London Stock Exchange. Publishing Technology also operates locally in Brazil, India, China, and Australia, so very much a global perspective from your office there in Somerset, New Jersey, Randy.

We’re delighted that you can join us today, because you have written and spoken about the issues surrounding subsidiary rights and the increasing importance of intellectual property rights for publishers around the world. A point that you have made that this is a global challenge, but one that is finally getting the attention it deserves.

PETWAY: Yeah, certainly. I think that we’re in a time where a number of things have converged. We’ve got the shift to digital, as you mentioned in the introduction. We have the fact that the world is getting smaller every day, and borders in a lot of ways, in terms of how we conduct commerce and how we utilize content, certainly – borders are starting to shift, and the expectations of users and consumers of content are starting to shift. I think all of those things have converged to create a situation where rights, now more than ever, are, or should be, a focus of publishers and really any type of organization that creates content.

KENNEALLY: Right. Because in the past, Randy, I think it was true that subsidiary rights sales were mostly to foreign publishers regarding print books, print publishing. That was, relatively speaking, a small portion of revenue. But it is growing, and it has changed, as you say, so that we’re not simply talking about what could be a drop in the bucket, but a significant line item in revenue.

PETWAY: Oh, certainly. Even where subsidiary rights income was significant in terms of volume for a publisher, relatively speaking, to the revenue being created by the remainder of the publishing operations, it was still a small, small figure. In a lot of ways, the amount of attention paid to subsidiary rights and the investment in terms of both staff and technology to support the process just wasn’t there in the way that is today, and certainly in the way that we’d like to see it in the future.

KENNEALLY: Absolutely. I guess the point there, too, is that the focus of publishing has been on creating – acquiring books and publishing them. There was a sense that the rights department wasn’t creating much. But in fact, really it is creating value today.

PETWAY: Oh, absolutely. It’s creating value. It’s creating opportunity. It’s creating revenue. It’s creating opportunities for both the primary publisher and anyone to whom they might license rights. It certainly has shifted to the point of being a function that is creating value.

Also, I think the other thing worth pointing out – that from a financial perspective, as we look at the pricing squeeze that has come out of digital, it has forced publishers, and should continue to force publishers, to revisit how they go about maximizing the revenue from their assets. Obviously, the assets are made up of the content that you publish. You want to get as much out of that as possible. You don’t want to miss any opportunities to really leverage what you have and what you’ve spent a lot of time creating.

KENNEALLY: Right you are. The place to start with all of that is what I was referring to as a rights portfolio audit, Randy. I guess really what that’s about is trying to get some clarity – trying to understand as much as possible what a publisher really has – those assets you were speaking of, what the assets are, and what they can do with them. What this is doing, taking the time to conduct such an audit, is to shed some light into areas of the business that might’ve been in the shadows before. I suppose you don’t always find what you’re looking for. You find other things that are unexpected.

PETWAY: Yes, absolutely. It sounds like a fundamental concept – the idea of just knowing what your inventory of rights are relative to the content that you publish. Yet that’s a pretty significant task for most organizations, and some would say in their current state, it’s not achievable, either because they don’t have the resources or because they don’t have the tools or the combination of both.

The need to do so is definitely there, more so now than ever. But the ability to do so, the ability to accurately perform that audit and know what do I have rights to, in what context do I have those rights, how can I exploit those rights, where have I exploited those rights? Where I have licensed on to third parties, what is the status? Are they paying me for what they’re supposed to be? Is there anything that’s about to revert back to myself or to someone else? That audit and that inventory is so crucial to what we all do, yet it’s still a very heavy process to get through. Being able to alleviate that pain so that we can really maximize this and understand our situation, I think, is critical.

KENNEALLY: Right. There’s a legendary picture of the rights and permissions department in a publisher – a room full of shoeboxes and cartons where all the contracts lie. Probably that’s still the case, at least for some of the older relationships that publishers have, but we’re making that transition. We’re probably still working on that transition moving from paper to pixels.

PETWAY: Yeah, it’s definitely a work in progress. I doubt that there are too many organizations who say they are 100% where they need to be. Some are very early in the process of making that transition. Some are further along than others. But all, I think, would agree that there’s plenty of work to be done. We’re very reliant on paper. A lot of times, we don’t have all of the paper contracts, or interpreting them is challenging, or whatever the case might be.

A lot of this process is managed by what I’ve referred to in the past as tribal knowledge. Someone in the organization knows where to find that contract or what the terms of that contract are or who we’ve sold the rights to, as opposed to what I’ll call a global database, where you can look up those things, and you aren’t as reliant on that tribal knowledge.

KENNEALLY: We should make sure, too, that people in the audience, the publishers in the audience don’t feel sort of singled out here, because I can tell you, Randy, that I have spoken to a number of author-related organizations over the years for Copyright Clearance Center, and one of the questions I always ask of a group is how many of you have a publishing contract? All of the hands go up. And then I say, how many of you know where that contract is? All of the hands go down. This is something that really is, if you will, common to publishing, whether you’re an author or whether you’re in the publishing business side of things. And it’s important –

PETWAY: I’ll even go a step further, Chris. I’ll go so far to say that it is pervasive even outside of the publishing industry. We had a case recently – I shouldn’t say a case, because it didn’t become a legal matter – but a situation recently in the entertainment field, in the film entertainment field, where someone was writing a script for a particular movie and discovered that they didn’t have the rights to use the storyline that they wanted, because they didn’t own the rights to all of the characters. The film industry is much bigger than the publishing industry, and they’ve dealing with rights much longer. Even there, they have their issues.

KENNEALLY: Indeed. This is something – you mentioned the real-world example of what goes on in Hollywood. But just recently there was a British publisher that got in a bit of a jam after Patrick Modiano of France won the Nobel Prize.

PETWAY: Certainly. For those who aren’t familiar with the story, Patrick Modiano was a French writer and had been receiving literary awards in Europe since the late ’60s, but most, if not all of his books were published in French, translated into about 30 different languages, but English just happened not to be one of those.

In 2014, Patrick won the Nobel Prize in Literature. As you can imagine, all of a sudden, there was an explosion of interest in his content. At that time, despite the fact that he had been writing for nearly five decades, despite all of his awards, there just wasn’t anything out there in the English language – any English-language translations of his titles – with one primary exception. One of his titles was available as an English-language e-book, and the publisher was a UK publisher who had translated and published it.

To the embarrassment of a number of different people, both Patrick’s publisher and the UK publisher, they didn’t have the rights to publish the e-book. They had to go out and make a very public statement and pull back the e-book and direct people to the paperback, which they did have the rights to – or someone had the rights to, I should say.

You had a situation there where it was nothing nefarious, nothing deliberate, but a very high-profile author, a very high-profile title, that was being published as an e-book in English, and the publisher who did so didn’t have the rights. What brought it to light was all of the attention that it got.

Now, that was a situation that, again, led to a lot of embarrassment. It led to a lot of unhappy readers and customers, as you can imagine. But we have to look at this as not just that isolated situation, but the risk that you’re creating as an organization when you don’t have a very full understanding of what your rights are and what you can and can’t publish, and the opportunity cost you’re missing when you don’t understand the breadth of what you’re publishing.

On the one hand, we had a publisher who had published the English translation e-book of something they weren’t allowed to do. That comes with its own set of problems. But at the same time, you had, again, a Nobel laureate whose works were effectively not available in e-format in English. So imagine the work that everyone had to do within the publisher to figure out who owned the rights, what do we have the rights to do, and who can actually translate this and publish it in English, all needing to happen very quickly, because you want to ride that wave of attention.

I think everyone has to ask themselves – if they were faced with that situation, would you potentially be the publisher who inadvertently published something you weren’t supposed to, or could you be the publisher who’s scrambling around, trying to take advantage of a situation that, frankly, doesn’t happen that often, and not having the tools and the resources and the information to do so?

KENNEALLY: Right. Randy, it’s really about being prepared and being ready. The way to do that is to conduct this audit. What you want to do – you’ve started to speak about this – is identify where the gaps are and what your needs are. You’re not going to, as a publisher, need all the rights, although perhaps in some cases you might, if you are specifically focused on certain marketplaces or certain formats.

PETWAY: Yes. One of the important things is understanding your market and your target market. Based on what that target market is, what rights should we own? Which ones do we typically want to be able to exploit internally? Which ones do we want to be able to sell on to third parties? And then be able to do the audit and say, OK, against all of my titles, how do I stand relative to those objectives?

Some things you won’t be able to resolve, because you have a contract in place that prohibits you or restricts you from being able to do things in line with your overall strategy. Maybe it’s an older contract, whatever the case might be. But what you want to make sure of is that you actually understand what your position is against each one of those titles.

When you try to do that, you’re going to uncover two things. You’re going to uncover gaps in your rights portfolio relative to where you’d like to be. But you’re also, very importantly, going to identify gaps in your overall processes – information that you need but can’t find. Information that you can get to, but it just takes entirely too long, or it’s not consistent, or whatever the case might be. That audit activity is going to uncover business issues, process issues, and systems issues.

KENNEALLY: It seems like a really worthwhile endeavor, because it’s going to lead to some really tough decisions about where you’re going to put your investment in what are increasingly, if not scarce resources, at least resources under pressure. As the publisher goes through these steps, they need to be thinking about the end of that process, which is making decisions about where they’re going to invest in infrastructure moving forward. Up to now, that’s been spreadsheets and databases. But we’re talking about here something more significant than that.

PETWAY: Yes, absolutely. One of the challenges – I’m not naïve enough to think otherwise – is that when you’re talking about parts of organizations that have run fairly well, or at least seemingly run fairly well without a lot of investment from a systems standpoint and from a resource standpoint, it is difficult to be able to convince people to start investing in that area.

So what you need to be doing as you’re completing this audit is building a business case, and a business case that aligns with – what are the opportunities that we’re missing by not having certain systems and processes in place? What are the risks that we’re creating by not having certain systems and processes in place? And what is our overall objective as an organization? Can we get there without having these in place? For instance, can we truly be a global publisher? Can we truly create a network of global publishers to help us get our content out into the marketplace?

All of those sorts of things need to be part of that business case you’re building, so that you can get beyond – I think everyone needs to get beyond just being on spreadsheets and Post-it notes. Not everyone needs the same size system above and beyond that. But you do need the proper size system that can support your use cases as an organization, both in terms, again, of being able to maximize opportunities and also to limit your exposure, which we can’t overlook.

KENNEALLY: Right. The picture you’re painting there, Randy Petway, is one of an increasingly complex publishing world, interlocking networks and global transactions, but also a proliferation of business models. Again, understanding where the publishing house stands on rights prepares you for making decisions, and quick ones, about whether you can get into a new business model as it’s emerging.

For example, subscriptions have become the buzz term for 2015 around publishing conferences. People in the book world are thinking about putting their titles into various subscription services. You need to know if you’ve got the rights to do that.

PETWAY: Absolutely. I could do an entire session on business models and the implications for rights. But just using the example you mentioned and one other – you’ve got the subscription business model, which three years ago, maybe, if that, we weren’t even talking seriously about selling non-scholarly content on a subscription basis. But what’s happened is that so many other channels through which acquire things and particular content are done on a subscription basis, whether that be music or broadcast content or whatever the case might be, that now published content is starting to move in that direction.

So you have to ask a question, which is do our contracts and agreements with our licensors and licensees enable us to do that or prohibit us from doing that? Have we properly accounted for how everyone is going to be compensated? All of those things need to be taken into consideration. Subscription models are an example.

Another thing that’s had a lot of buzz over recent years is fragmentation. What happens when we take a completed book and we start to sell that as a chapter, or any other more granular component, and we start to license that content? Again, the same questions – can we do so? What are the financial terms? Who are the participants when we do so? What happens when we combine those fragments with other things? There’s a lot of questions that need to be asked and answered, and systems that need to be able to monitor those things. Once you get into that explosion or that proliferation, being able to do that, again, on spreadsheets, Post-it notes, and through tribal knowledge becomes highly problematic, if not impossible.

KENNEALLY: Right. We’re talking right now with Randy Petway, executive vice president of global product strategy for Publishing Technology, about the increasingly complex world of subsidiary rights. Randy, it’s not going to surprise anybody, but in your view, obviously, the key to controlling cost is technology, is automation. Talk briefly about that. Talk about the power of technology today to realize the potential of rights.

PETWAY: Yeah. The technology and the systems side of things, it offers the opportunity for tremendous benefit. I don’t think anyone has illusions that rights departments are going to grow in size in terms of headcount, are going to grow in size significantly. Yet the amount of work we’re talking about is going to increase. The way you solve those sorts of problems, where you have issues of scale, is through the implementation of systems. That’s about efficiency.

But systems also help you with opportunity. You’re much better off, I believe, if you have a system that can tell you as you’re preparing for Frankfurt who are all of the people, or all of the publishers, or rights-buyers who expressed an interest in a particular genre last year, or in the last five years, or expressed an interest in a particular author, and to be able to, for instance, schedule your appointments to meet with those people when you go to Frankfurt and be able to have an automated system that will help you follow up on any meetings that you might have, to send out any marketing copy that you might have.

The ability to streamline that process and allow you as rights professionals to focus on the art, the relationship, and the knowledge part of it and let the systems handle the process part of it, let the system remind you of things to do, or automatically do things, are key. The ability to be able to have someone – and I’m sure this will come up later in the presentation – have someone be able to come to a website and do a query and automatically find out what German translation rights you have available across your catalog in a very simple way that’s intuitive and that can be done over the web – things like that not only make you more efficient, but they allow you to seize opportunities much easier.

Then speaking to the other side of the equation that I mentioned earlier around risk mitigation, your system should be able to tell you, you’re about to license rights to someone, and you don’t have the ability to do so, either because you haven’t acquired those rights in the first place or because you’ve already optioned them to a third party, or whatever the case might be. The things that, again, we might rely on tribal knowledge and spreadsheets and Post-it notes for now, those things can easily be systematized and allow you, again, to make yourself more efficient, to be able to seize opportunities in a much better way, and make opportunities known to your – I’ll call them customers – in a better way, and also to protect yourselves in the same way that using technology benefits people in other walks of life and business.

KENNEALLY: That actually sounds like a fairly efficient way of going about it, Randy Petway. I like that suggestion a lot.

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