An Insider’s Look at Royalty Systems: Q&A with David Marlin

If you receive regular royalty statements—whether from a traditional publisher, hybrid, distributor, or even another type of media company—there’s a chance that statement was generated by MetaComet software. The president of MetaComet is David Marlin, who founded the company in 1999.

I first met David in person at a publishing industry trade show prior to the pandemic and admire not just his longevity in the industry but his grounded, human approach to his very numbers-oriented business. MetaComet is built and maintained by an in-house team based primarily in the United States, Canada, and Brazil.

David and I spoke by Zoom in April. This interview has been edited for length and clarity.

The Hot Sheet: You’ve been doing royalty management work since September 1999. How did you end up in this specialized area?

David Marlin: I have always loved software since I was a kid. I taught myself how to program on a really old Texas Instruments TI-99 and before that a Commodore 64. And I took some programming classes in high school and computer science classes in college. After college, I was a ski bum for a couple of years. But my first jobs after ski bumhood were programming jobs. And eventually, I went to business school at Columbia. But I missed the technology.

I had an opportunity to get into programming again when somebody I knew had a very well-known publicity program called Publicity Assistant. I wrote tons of code, and I got an opportunity to work with all the big publishers. One of my customers was a gentleman named Richard Curtis, a prominent literary agent. And he founded E-Reads, which was one of the original ebook companies. In some ways he’s one of the founding fathers of ebooks. He had this insight of acquiring digital rights way before anyone else thought of this. And all of a sudden, he had to start paying royalties. He asked, can you help me with this? I said, okay, it’ll be $15,000, and I’ll write your royalty system. Little did I know I would end up getting paid 10 cents an hour by the time I was done.

Ultimately we went into business together to sell and promote it. At first we thought it was just going to be ebooks—we were both sure ebooks were going to be the future of the world. We quickly learned that was not the case. So we started selling it to traditional publishers. [Marlin bought out Curtis’s share in the company in 2003; they remain close.]

Today we have almost 200 customers. About 85 percent of our customers are still book publishers, but we also work with video game companies, online learning companies, some licensing companies. If you can handle publishing royalties, you can handle a lot of the royalty situations out there. And then we also started working with distributors like IPG because it turns out the distributor-to-publisher payment model is very similar to royalties.

I just stuck with it. And 25 years later, it’s still mind boggling.

Are you still thinking about skiing?

Oh yeah, I’ve got 32 days in this year, which isn’t quite as much as I would have liked. But yeah, skiing is still very much a part of my life.

So 85 percent of your customers are book publishers. Can you give us an idea of who they encompass?

Rowman & Littlefield is a pretty big one of ours. Open Road Media. We work with a lot of really small publishers, like 20 to 50 titles. We work with a lot of startup publishers, like Levine Querido. We work with publishers of all sizes. We have some really big publishers whose names I’m not allowed to say. I would say our average customer is probably about 1,000 titles. Some have 60,000 to 80,000 titles.

Okay, let’s go straight to current events: audiobook royalties. Everyone’s confused. I heard one professional claim, “Agents, authors, and people inside the publishing house have little clue how or even whether income from these audiobook deals will be feasible, let alone fair.” Really, people inside the publishing company don’t know this?

My experience is that the vast majority of publishers, like 98 percent, truly value their author relationships and are adamant about getting royalties right and doing what’s best for their authors. Customers that use our system—you know, maybe it’s a select group, maybe they’re more technologically capable than others—they have a really good sense of how much money they’re making on an audiobook. There’s no question about it.

One reason authors might be suspicious is that it’s really hard to share accurate sales data, and this goes beyond just audiobooks. This is really for any kind of book. It’s really hard, until it’s time to pay out royalties, to get accurate sales data. You’ll get preliminary sales data, but it’s going to change for totally legitimate reasons between the time when it’s first reported and when the publisher gets the payment. There are returns, all kinds of adjustments, all kinds of charges. So publishers don’t often have an accurate picture of what their true royalty-bearing sales are until they send out the statement. And they often don’t get paid [by the account] until 90 days after they have that true information.

Sales data is not as simple as it seems like it should be. There are so many different platforms—some publishers get close to 100 sales files every month. And every single one of those sales files is different; they all report the information differently. It’s more common to get a dozen, but some of them get many dozen. And the publisher has to consolidate those files every month to get a single view of how all their authors are doing. MetaComet has a great tool for that. If you don’t have a good tool for that, it’s really easy to make mistakes. Then you have the currency issues, the exchange rate. What seems like it should be really straightforward is amazingly complex. As digital content proliferates, I don’t envision that problem going away.

Authors working with traditional publishers often ask me why they can’t get more real-time sales data, and I guess this is why.

Publishers want their authors to know how they’re doing, they genuinely do. But they know that data is not final until the royalty statement goes out. If an author calls up with a question and the publisher has a good royalty system, they can look up an answer in a few minutes. But there’s this unfortunate dilemma where the more data you share, the more questions you create, and every question you create, it’s an effort to look up. Sometimes that research can be really tricky. I get where the authors are coming from, but it is really challenging to get that sales data right.

Some publishers pay monthly royalties, and it’s by far the minority. Many publishers tell me they would like to do that, but it’s just really challenging. Especially if it’s a small publisher, it’s a lot of work. Every batch of royalties is going to result in that X percent of questions coming back in, and royalty statements require verification. Most publishers do a fair bit of verification. I mean, you can get them highly automated, but it’s still a fair bit of work. I don’t want to say it’s impossible, but it’s really, really hard to get more granular than monthly sales data.

I think sometimes traditionally published authors look longingly at self-published authors, who can log into their KDP dashboard and see what’s happening day to day. But that’s very different than Amazon reporting sales into Penguin Random House.

It is very different. The amount PRH gets paid varies from what Amazon is reporting on that day, because invariably they’re not giving you final sales data. They’re just giving you temporary sales data.

Let’s go back to digital sales. That seems a more challenging area for tracking sales, let’s say from Amazon, Audible, or Spotify. There might be different rates of payment, or maybe it could change over time on a pooling model.

Retailers like Audible, they pay whatever percentage they pay. I mean, you can’t really negotiate, I don’t think, but I don’t know—I shouldn’t say because that’s not my area of expertise. If you’re the author, you’ve negotiated with your publisher how much of what they get you’re going to get. And that’s really the piece that you can control. So the publisher has to be responsible and make sure that Audible is paying them what they’re supposed to get paid. And that Spotify is paying them what they’re supposed to get paid. But there’s no standardized reporting. It’s tricky. It’s really tricky.

The basic rule for subscription revenue is you set aside a pool, and then you allocate revenue to each book in that pool. And you can base it on a million things, and it’s really up to each subscription service to decide how they’re going to break that out. We had to add pages read to many of our royalty statements when Amazon started doing that. But not everybody does it on pages read. That further obfuscates the sales data coming in. And it just goes back to the bigger point that the sales data is actually pretty complex, especially when you have to aggregate dozens and dozens of files together. It does create some legitimate challenges for publishers.

Let’s say your publisher has licensed your audiobook rights to someone else. Your publisher should still have access to sales data, right?

My experience is they do provide that data. We have 50 different royalty statements that our customers use, because we can customize the royalty statements to provide certain detail to their authors. I’d say a large percentage will break it out at that level of detail. But it depends on the publisher’s royalty statements.

I don’t think authors realize that publishers might have some choice about what the royalty statement looks like or how in-depth they might go.

It’s a really difficult thing for publishers. The only criteria they really have for how good their royalty statement is: how many authors are calling them up. Every time you send out 1,000 royalty statements, you’ll get X percent of calls, right? So a good metric for understanding how good your royalty statement is is how many of those calls you get. If you make a tweak to your royalty statement and those calls go up, you went the wrong way. But you’re never going to satisfy all your authors, no matter what you put on a royalty statement.

When you’re working with publishers, especially if you’re onboarding someone new, do you have best practices to help them reduce the number of calls? Or is it just too variable?

We tell them: Here’s a choice of our standard statements (because it’s pretty expensive to customize a statement), and which one do you think your authors will like the best? We have one statement that is used by the plurality of publishers. Over the years, it’s been refined and tweaked, because one of the nice things about doing this for 25 years is we’ve learned what works to give authors a nice summary snapshot without overwhelming them. Because it’s easy to overwhelm with information. And so there’s that balance.

I’ll share a pet peeve of mine with the royalty statement I receive. I really wish it would break out library sales. And I understand that there may be some problems tracking that—like the publisher might be working with a wholesaler who doesn’t offer that level of insight.

It goes back to some of the complexities of sales data. If sales aren’t broken out by account, you can’t pass that on to the author. Then there are a lot of older systems still out there running the publishing world, and they don’t have the capacity. So that’s part of it also. But I’m not super familiar with how library sales are reported, so I do have to plead ignorance.

What might motivate a publisher to do a better job on their royalty statements?

A lot of these older systems, they might not give the authors everything they want, but they’re working and they’re reliable. But some publishers do run a reasonable risk of there being errors in their statements. I have come across situations where publishers have never accurately paid out royalties—not by ill will, as it might come out as a loss for the publisher, right? They’re making as many mistakes in the author’s favor. But some authors are getting screwed. I can’t mention names, but I have a lot of stories. So there are situations where the publishers are—if they’re not using a relatively modern royalty system—they are probably making mistakes.

It seems like a huge liability not to know that you’re making those mistakes again and again.

Well, publishers don’t know, and that’s part of what scares them into getting a new royalty system: the uncertainty. There are four reasons companies want a new royalty system. One, it’s because the current system has become extremely inefficient. We had one customer that did semi-annual royalty statements spending four months every six months doing royalties. And they got it down to like a week. Reason two is risk of getting it wrong. A third is uncertainty of whether you’re doing it right and the associated stress. Again, the vast majority of publishers are really honest and want to treat their authors right. And that fear of making a mistake really scares them and freaks them out. Some of them are doing it manual in Excel, and they are definitely making mistakes. And the final reason is growth. They know that they’re growing too fast. So that’s kind of like risk. If you grow at a fast rate without a royalty system, that falls into the risk category.

What are some of your frustrations doing this work? Or what do you wish you could change about how all this works?

Honestly, the complexity is really good for business. But it would be great if everybody decided on a standard royalty sales report, a standardized sales report.

Also, I’d like a title identifier, which I know the Book Industry Study Group is working on. That would be helpful. Some people call it a work identifier. We have an ISBN for a product-level identifier, but it would be easier for systems to talk to each other with a work-level identifier. A work might be called The Good Book in one system, and in another system it would be called Good Book, The. And without a work identifier, you don’t know for sure that those are the same book. You might actually have two different books. Similarly, it would also be helpful to have a person identifier. There could be three Sarah Janes, and this book was written by which Sarah Jane?

This has been so eye opening. I hope it reassures people in the right ways and generates some understanding and patience, given what publishers have to deal with.

Thank you, and this is my opportunity for a sales pitch: If your publisher isn’t using an automated royalty system, they gotta call MetaComet.

I’ll definitely link to your site. Thank you, David.