Fast Track

Today it is possible to download a song from the Internet onto a recordable compact disc, thus bypassing record stores. But how do you then calculate the royalty payment owed the artist who made the song? That’s the kind of question that has created a business niche for Real Software Systems Inc. in Woodland Hills. With an explosion in the sources of distribution for creative content, the calculation of royalty payments to artists has become increasingly complex and that’s where the company’s software comes in. Real Software’s Alliant program can calculate royalty payments through any type of medium, be it Internet, television, publishing or something else. The accounting software essentially allows a company to keep track of who gets paid how much for intellectual property. “Keeping track of all things is where we come in,” said company Vice President David Aloisi. “It’s saying ‘If this happens and this happens and there’s a blue moon this month, then use this formula.’ ” For example, the British Broadcasting Corp., the latest Alliant user, will be able to calculate how much the inventor of the Teletubbies will get from the television show royalties, toy royalties, book royalties, clothes royalties and any other licensed Teletubbies product. Each product line and method of distribution bookstore, online, or elsewhere has different formulas for calculating royalties. All told, the list of who gets paid and how it is calculated can be as arcane as the U.S. tax system. Alliant tracks royalty payouts through various media outlets. And since its introduction, Real Software revenues have jumped from $1.5 million in 1995 to $4 million in 1998. Officials expect a 50 percent increase in growth for 1999. “It’s the integral part of a lot of business, the issue of divvying up money,” said Executive Director Rajan Samtani. “It’s a lot more complex, and there is more transaction volume with complex arrangements.” What used to be an industry-specific process has evolved into thousands of different deals and ways of computing the dollar value for content. An author of a book, for example, might have a contract to collect royalties on the book’s sales, special packages, calendars or other specialty products. The software also figures how much an agent, publisher, printer and anyone else involved in putting the book out to market would receive. Real introduced the software at a time when many companies that deal with royalties were upgrading systems and in need of new royalty accounting software that would work with a variety of newer software and computer systems. At the same time, entertainment, publishing and other companies have merged and expanded the types of products they sell and how royalties are calculated. The Internet is also driving the number of sales and adding even more complexity to dealing with content distribution. That’s because downloadable content can be distributed easily through friends and requires no manufacturing or production by the publisher or producer. “For us, it’s a huge opportunity,” Samtani said. “With this much change taking place in the economy, that much content being distributed, it will (impact Real Software.)” Bill Manassero, executive director of the Southern California Software Council, said Real is the type of company that can fall beneath the radar screen, but is in a niche with high potential. “This is one of the software companies that at first you don’t understand everything they do,” Manassero said. “One thing about software is, it’s sort of what oil was to the industrial revolution. It’s not glamorous, it’s a soup-to-nuts aspect.” Real’s software doesn’t come cheap, ranging from several hundred thousand dollars to the million-dollar mark. That’s because it serves as the nerve center of the royalty accounting process for media companies. Information from various computer systems that handle different types of media deals funnel information on sales and distribution into Alliant, which calculates who gets how much and sends the information out to a payment system. Many functions are things that used to be done by accountants, but have become too complex for all but experts. “If you can count it, we can pay royalties on it,” Aloisi said. Real Software started as a smaller company in the early 1980s that handled simpler calculations, mostly for entertainment studios. In 1993, Woodland Hills-based El Camino Resources Ltd., a technology leasing company, bought it as a subsidiary. At the time, the company chugged along producing accounting programs for entertainment giants. In 1995, it switched tracks and developed a one-size-fits-all program for royalty calculations that could be used across different media. Last year, it launched the Alliant program. Compaq Computers Corp. was the first buyer, but soon others followed including IBM, Houghton-Mifflin Co., IDG Books, Universal Studios, Walt Disney Co. and others. Real Software Systems Inc. Year Founded: 1993 Core Business: software development Revenue in 1995: $1.5 million Revenue in 1998: $4 million Employees: 25 Top Executives: David Aloisi, vice president, Rajan Samtani, executive director. Goal: To dominate licensing property in digital commerce Driving Force: The need to calculate more and more complex royalty payment systems and the growing distribution of content over the Internet and other new media