#email #rough-draft #logos 

Hi all,

I have an update about this effort.  

The royalty calculator has been updated to produce additional information that takes order-level discounting into consideration.  These calculations are _not yet_ reducing royalties figures.  Our first step was to get the calculator spitting out the right numbers so that we could do some retrospective analysis on the potential savings we might find.  This will help us validate the original hope of saving $2million/year and the value of applying these calculations to royalty amounts.

I've shared a sheet link below, prepared by Justin Strandburg.  A couple of notes about this sheet:

1. The data in the sheet _only_ includes sales from orders that had order-level discounts
2. The past three months were queried.  So, this is data for May, June and July 2024.
3. Sheet rows are grouped by rightsholder, month and then royalty formula.  Because of this, you will see multiple rows for the same rightsholder.
4. Column H shows the potential royalties savings.  Summing Column H gives us the total, potential royalties savings for the past three months.
5. Column H _does not_ take any "can be discounted" configuration into consideration.  That is, these potential savings assume all rightsholders allow us to discount royalties for all resources.  We know this is not true. 

Summing column H gives us $71,342.11.  Extrapolating this number over a year gives us (very) roughly $300,000.  Considering that the past three months do not include increased sales from a launch year, we could generously double this amount to $600,000.  This brings us _extremely generously_ to only a quarter of the original hope of $2m/year.  We're assuming that the real savings will be considerably less than $600k/year.
[https://docs.google.com/spreadsheets/d/1d43TneMSwzg6ZzBUZzvJyiUG4kWXT009tIbM4KLE5MU/edit?usp=sharing](https://docs.google.com/spreadsheets/d/1d43TneMSwzg6ZzBUZzvJyiUG4kWXT009tIbM4KLE5MU/edit?usp=sharing)

Even if the savings-per-quarter are half of what the sheet shows (so, roughly $150k/year), I think this work is worth completing, especially as we move forward with subscriptions and look to implement "5% off for subscribers"-type discounting. However, we have one remaining hurdle: an accurate source of data for which royalties we are contractually allowed to discount.

The real source of truth is the large set of rightsholder contracts in LinkSquares.  Unfortunately, even with LinkSquares tooling, it's hard to efficiently plumb these contracts for royalty discounting clauses. The contract wording is not standardized and is not always a simple "yes" or "no".  

The Titles & Terms spreadsheet is a mostly-reliable proxy for our contracts.  However, it suffers from some accuracy concerns.  Primarily, a) it is manually maintained, b) in analyzing it, we have found contradictory "discountable" answers for the same resource, and c) as Jessica said below, the sheet's purpose is to inform base package building and, thus, the "discountable" values don't always mean "contractually able to discount royalties".  

We have two ways forward that I see:
1. Rely on Titles & Terms to inform the royalty calculator about which royalties can be discounted
2. Implement a "positive confirmation" approach, see below

In my opinion, basing our calculations on the T&T sheet comes with risks we don't need to take. The risk being that we end up violating our contractual obligations to our rightsholders while having no process in place to catch these errors except our rightsholders informing us so that we can fix erroneous payments. 

I believe the majority of potential savings can be achieved with no uncertainty by using a "positive confirmation" approach.  The sheet I linked-to above indicates that there are only a handful of rightsholders for which we could potentially save a meaningful amount of money.  For those rightsholders, I recommend that we manually review our contracts to confirm which of their resources can and cannot have royalties discounted. The process might look something like this:
1. Clear all "can be discounted" checkboxes in BusinessDesk for all active contract terms. This checkbox is, currently, purely informational and has no function in the royalty calculator. We can automate this.
2. Update the royalty calculator to honor the "can be discounted" checkbox for royalty discounting purposes.
3. Determine the top-savings-potential rightsholders from the sheet Justin produced and review the contracts we have for them.
4. Manually check the corresponding "can be discounted" checkboxes in BusinessDesk to accurately reflect contracts in LinkSquares.
5. Continue calculating potential savings in the royalty calculator and reviewing the output for non-yet-positively-confirmed rightsholders to trigger the positive confirmation process.

I apologize for the lengthy email.  I hope it's helpful for you all to guide us on the path forward!

Ben
