RoyaltyShare Targets Publishers

When the music industry was transitioning from a bricks-and-mortar business to a digital one, former entertainment lawyer Bob Kohn saw an opportunity. Kohn, who in the 1980s worked for major music labels, initially cashed in with downloadable audio: he founded eMusic in 1997 and sold the company in 2001. Now Kohn is pushing his new entrepreneurial project—software that music labels use to process their digital sales—to book publishers.

RoyaltyShare, a 35-person company that Kohn launched in 2005 with the founding members of eMusic, is used by some 200 music companies. It offers shared software that generates graphs, pie charts and other visuals that break down where and how revenue is being generated from downloaded content. With a client base of mostly independent labels—companies without their own IT departments and internal sales processing software—RoyaltyShare, according to Kohn, offers a service that independent book publishers will need as more print content is sold through varied online transactions.

The shift in the music industry from CDs to downloadable music left the labels generating money—and needing to split royalties—in unexpected new ways. Consumers were buying music as single tracks on sites like iTunes and through subscription sites like eMusic. The shift meant profits that used to be split on $20–$25 transactions for CDs—with money going to the label, artist and other parties—were now being spliced on penny and dollar purchases. It also meant that the labels were generating revenue—small amounts here and there—in increasingly complex ways. The music labels, Kohn explained, “were dealing with hundreds of millions of transactions and revenue splits for each of those transactions.”

Kohn said RoyaltyShare's software shows where and how an artist's music is being purchased and how much revenue is being generated by those transactions. The software can also, Kohn noted, be adapted to books. Although he admitted that the book industry isn't bringing in the same kind of revenue from digital sales that the music industry is, he thinks the shift is coming soon. Pointing out that the music industry saw revenue from digital content jump quickly, Kohn envisions scenarios in which book publishers will see revenue from now-unknown uses of content that will surface as technology changes.

Kohn said RoyaltyShare can “quite comfortably process the data of the largest book companies” and, to that end, he has a series of meetings planned with publishers in September. “Book publishers, from discussions... are beginning to discover they have the same issue [as the music labels did]. This will become a huge issue [for book publishers] when [digital downloads] become as little as 5% of their revenue.”