In the new digital economy the traditional approach to paying professionals to create content is changing. User-generated and crowd-sourced content require a new approach: the creatives may provide it for free up front, but they expect to be paid if it’s successful. Business models for sharing revenue are becoming more sophisticated and complex.

The model was pioneered by YouTube – which created a new generation of video producers and vlog stars, rewarding popular content with a cut of advertising revenues. Many other digital content sites have since sprung up, often based on user-created or freelance content with a variety of financial models.

For example, Medium.com provides a publication platform for longer-form writing.Lynda.com shares high-quality business, creative and tech training sourced from a wide range of thought leaders. Inkworthy is a start-up focusing on digital distribution of professional magazine content. Amazon enables self-publishing. Other sites provide platforms for unsigned musicians or stock-shot photographers.

A new approach to paying for content

The conventional publishing business relies on editors to select content, and authors paid advances to complete the work. The risk is carried by the publisher and depends on their skill in picking popular content. It’s a model that was designed for physical print – where publishing and distribution costs limited the number of titles that could ever be made available.

In digital, the shelf space is infinite and user recommendations and smart algorithms take the place of editors. Authors and creatives provide their material for free, hoping they’ll attract enough eyeballs to collect a slice of revenue.

A radically-different approach to managing royalties

This means the back-office systems used to manage content and calculate income and royalties look completely different from those in a traditional publishing business.

A new digital economy business makes its income from a mix of advertising, affiliates, personal and corporate subscriptions, micropayments, re-licensing – a whole range of revenue sources.

In turn, a contributor’s pay check can be based on a complex formula linked to many factors such as:

  • total number of site users and content streams
  • number of paying users in different tiers
  • overall volume of advertising revenue
  • site marketing and running costs
  • an individual contributor’s share of total streams
  • user ratings, shares and reviews received by each piece of a contributor’s content
  • promotional incentives

Innovation in the new digital economy is as much about business model as technology – so these calculations will continue to evolve and will become more sophisticated as digital publishers compete with each other to attract the best content.

Rights and royalties tools designed for the digital future

Legacy rights and royalty management platforms designed for print publishing and a small volume of transactions simply won’t cut it in new digital economy businesses. In fact they often cannot handle the complex calculations, and do not have the performance to support an extremely high volume of micro-transactions. Many are still on-premise solutions – totally out of step with the cloud-based content businesses they need to support.

Digital businesses are instead deploying tools to underpin their business model innovation and streamline high-volume, yet complex and flexible, royalty calculations. These next-generation content businesses recognize the importance of advanced business systems to support their fast-changing business and future growth.