When you make the investment to license intellectual property, the intention is naturally to monetize your investment to its fullest potential. However, because most licensees lack visibility into their contract terms and usage analytics, they are often hemorrhaging money that would otherwise be piling up in profits. Here are four of the biggest contributing factors to eroding revenues.
1. Overpayment. Many licensees deliberately overpay royalties due to lack of understanding of timing, terms, and royalty rates. While this practice avoids disputes, it is effectively an interest-free capital loan to licensors until the account is trued up. It also leads to inaccurate accounting and reporting to shareholders and regulators that will need to be corrected down the line—possibly damaging the licensee’s reputation if stakeholders feel misled.
2. Operational inefficiencies. Manually validating, accounting for and processing royalty payments is time consuming and can be error prone. Additionally, as part of that process often royalty accountants are required to put the statements into licensor-specific formats—another task that eats up time. Plus licensors typically impose audits that cause the royalty accountants to have to drop everything to gather up the information. Without a centralized system in place, satisfying these demands can result in unnecessary costs for operations that can easily be automated.
3. Missed opportunities. Without insight into IP performance, it is difficult to know exactly how you are performing against the contract, from whether you are meeting your minimum guarantees to which licensed properties are the highest performers. This lack of accurate sales-level data and business analytics leaves licensees at a disadvantage when negotiating contract terms at renewal time and generally when maximizing the company’s revenue potential.
4. Legal liability. Contract details such as license expiration dates, territory restrictions, and restrictions on asset usage are often stuck in siloed systems or even paper files in the legal department and not easily accessible to engineering, creative, marketing, operations or sales teams that will actually be deploying the IP. Incomplete information flow leaves corporations open to legal liability if licensed assets are inadvertently misused.
FADEL’s cloud-based solution empowers licensees to take control of agreements and automate payouts based on distribution rights. Users are able to gain visibility into their licensed content, from negotiation to payment. At-a-click reporting and analytics allow business leaders to identify trends for better strategic direction and more favorable terms. When it comes to payment, rights hierarchies, terms, and royalty rates are all figured in automatically, so payouts are accurate every time. Statements are even generated in the format required by each licensor. The system also shows a dashboard view of license status, including usage violations, so teams can take immediate corrective action.
For a birdseye view of how you may be leaving money on the table, take a look at the infographic Are You a Victim of Leaky IP?