Rights: Cinderella of sales?

<p>The sale of intellectual property rights is an important activity in the UK publishing industry--a channel for making our content available in a wide range of languages, territories, formats and platforms. Yet all too often rights sales are regarded as the "poor cousin" of direct sales. </p><p>In some cases, rights deals are seen as being in conflict with those sales, as evidenced by the long-running issue of book club sales versus book trade sales, perhaps even more under the spotlight since the demise of the Net Book Agreement in 1995. Further afield, in markets with a high ability to read English, such as the Benelux countries and Scandinavia, there is often a perceived conflict between the sale of translation rights in trade titles and early export editions; while in the academic textbook market rights staff need to co-ordinate their activities carefully with sales colleagues in such markets to avoid cutting across substantial adoptions of the original edition.</p><p>The importance of rights sales to the overall publishing process varies, of course, from company to company. Rights revenue may be vital to the acquisition of a big trade title, or coedition sales crucial to the success of a lavishly illustrated book, but in the academic market rights sales rarely have an effect on the initial commissioning process. On the other hand, licensing such titles may be the best way to access difficult markets with low purchasing power, as was the case in central and eastern Europe and the former Soviet Union, and is now the case in the booming rights market of mainland China. Rights sales may also be an ideal way for a multinational publishing group to build publishing lists in local languages. </p><p>There is often a temptation to compare rights revenue (incorrectly) with sales turnover. The true comparison is the element of rights income retained by the publishing house after the author's contractual share has been paid with the net profit element of sales turnover. </p><p>In the dark</p><p>It is significant that although publishers are blessed with a wide range of industry statistics relating to direct sales--whether in the UK by sector or overseas by sector and market--we do not have easy access to accurate data on the value of our rights business. We do not know the number of deals negotiated, or the value of business achieved as an industry. This question was raised at the Publishers Association International Board strategy meeting in Windsor immediately before last year's Frankfurt Book Fair.</p><p>There are, however, some industry figures available on rights. These are derived from the Office of National Statistics/UK Trade in Services as part of their much larger annual "Inquiry into International Trade in Services" survey covering a wide range of industries. Figures relating to publishing appear as follows:</p><p> 1999 2000 2001 </p><p> Export &#163;376m &#163;372m &#163;291m</p><p> Imports &#163;168m &#163;188m &#163;146m</p><p>The report highlights the fact that the figures do not include revenue generated by literary agents. Even with this caveat, the figures appear low and the decline in revenue unexplained. Figures for 2002 will not be available until the next annual report in early 2004. </p><p>Not enough detail</p><p>What do these figures represent? Gross revenue generated from licences between the UK and overseas countries, or net revenue after payments of the contractual share to authors? Do they include revenue from coedition deals, a significant form of rights trading, some of which may be negotiated on a royalty-exclusive basis but many of which are royalty inclusive and hence may appear as export sales rather than as licensing revenue?</p><p>The figures are compiled from annual returns on a wide range of data from the publishing industry and other industries providing services. Companies returning data represent a selection of those known to have a significant amount of business abroad, but the constituency is not comprehensive, and figures are "grossed up" to some extent to allow for this. </p><p>The figures requested in the annual return fall into two categories: "payment for services" and "receipts from services". The statistics bureau which co-ordinates the returns confirms that the first category applies to royalties payable to authors resident outside the UK, and the second category covers royalties for the sale and purchase of rights, based on gross figures before the contractual share has been paid to authors. Although a geographical breakdown is requested from respondents, the value of licence revenue to and from particular markets is not reported, nor is there any analysis by publishing sector.</p><p>So many factors affect the ability to place rights that access to annual figures, with a breakdown by territory and type of publication, would be extremely helpful in assessing the growth (or otherwise) of rights business in particular markets. One has only to think of the recent years of recession in many territories in the Far East, and by contrast the current boom in licensing to mainland China; the impact on trading of a major currency collapse, such as that in Russia in 1998 which resulted in substantial debts on coedition sales as well as on traditional licences; the effect of consolidation of publishing companies in markets such as France and Germany (a topic of discussion at last year's Rights Directors' Meeting at Frankfurt); the success of particular books in particular rights markets (e.g. the Thomas the Tank Engine titles in Japan); or the big impact of particular bestsellers (referred to as the Harry Potter factor by Jo Henry of Book Marketing Limited in her overview of the UK trade market at the Independent Publishers Guild seminar in November).</p><p>The publishing industries in many other countries collate selected data on licensing activities through their trade organisations. Indeed, this was long a tradition of the socialist countries and continues to be a feature in mainland China. China reported a total of 10,235 licences acquired from abroad in 2002 (approximately 50% of these from US publishers), with 1,317 licences granted for Chinese titles, mainly to publishers in Taiwan and Hong Kong. The value of these licences was not quantified. But the statistics provided annually by the Chinese publishing authorities indicate how dramatically the rights market is expanding there, and also analyse shifts in the sources and destinations of rights acquisitions and sales.</p><p>Rights sales data bank</p><p>The UK book business uses data regularly on sales revenue to assess and analyse performance in particular markets and publishing sectors. Could we not produce similar data for rights trading in order to get a truer idea of the value of our activities in this area? The Office of National Statistics' figures are by definition incomplete, particularly given the absence of licence revenue from agents who handle licence arrangements for many of our bestselling authors. Many publishers with well-established rights operations are able to analyse their rights revenue in considerable detail and with relative ease. </p><p>More importantly, would a sufficiently significant number of publishers and literary agents be prepared to submit licence statistics, revenue for specific markets and publishing sectors (rather than title-specific data) to a trusted central body for collation, perhaps through their respective associations? It is a controversial issue, but without such data the area of intellectual property licensing is likely to remain undervalued. n </p><p>Lynette Owen is copyright director of Pearson Education Limited.</p>