M+E Daily

By Larry Jaffee

With the recorded music industry’s recent focus on developing subscription and “freemium” services, it would appear that new MESA member Microgen plc is in the right place at the right time. The London-based company’s financial management solution organizes and simplifies the emerging digital supply chain’s monetization needs.

Consider the plethora of digital music services that have emerged in recent years. Their business models require new systems for rights holders to deal with the resulting royalty labyrinth. That’s where Microgen comes in. The company provides easy access to contract terms — making sure that rights catalogs are transparent and fully exploitable — and also streamlines royalties calculation (including residuals, participations, revenue shares, and settlements) as well as invoice and payment management.

“[Often in the media and entertainment business,] it has been all about the sale of the content rather than looking at achieving back-office efficiencies in trying to get cost savings in place,” explains Martin Redington, Microgen’s senior vice president of product management, who is based in London and Boston. Microgen opened its U.S. office in Boston about two years ago.

The company, which has about 300 employees globally, began life about 40 years ago as a microfiche and bill printing bureau service. Since 2007 the core business is comprised of two operating divisions: the “Microgen Aptitude Solutions Division,” based on a high- transaction-performance Application Development Platform (used by many large digital media and financial services companies throughout the world); and “FSD,” for offshore banking and wealth management sectors. In 2010, the MASD division experienced 30 to 40 percent growth, and it continues to build on that success.

Microgen was invited into the M&E space about two and a half years ago, when it started working with several financial systems integrators that were evaluating software services for M&E clients. “Knowing our pedigree within financial services, the systems integrators thought we might be of use within large enterprises in the media and entertainment business,” Redington explains. “So we were introduced [to M&E] through a couple of third parties. Two early opportunities subsequently became clients. It was a fortuitous thing and has now become part of our strategy.”

To date, Microgen’s solutions have been used primarily by a major digital music distributor, which must pay various international royalty collection agencies so that artists get paid. “You can imagine that gets quite complicated,” Redington notes. Several mobile phone device companies which offer music tracks directly to consumers worldwide are also using the tool.

Microgen expects the platform to soon be used by movie studio and cable network customers in the digital media realm. The company is talking with telephone service companies that plan to market movies, TV series, and other content; as well as to record labels seeking to make artist compensation more efficient.

Microgen Aptitude Based Solutions allow authorized users immediate access to contracts which otherwise can easily get lost in an electronic database, or worse, a rarely perused file cabinet. Microgen’s system helps clients identify missed royalties and calculate accruals. In addition, it detects when multiple collection societies attempt to collect for the same royalty. “You can be overpaying as well as underpaying,” Redington notes.

Typically, M&E companies have handled their contracts in a “fragmented” manner. “They’re global players, and they’ve had perhaps disparate systems in spreadsheets. A single platform didn’t necessarily hold everything they wanted. In some cases they have had existing applications for five or 10 years and were very limited in their capability, and it was costing a lot to maintain or change them as their business models changed. With the advent of digital distribution, the rate of change has increased exponentially—and existing platforms can’t cope with that.”

Besides joining MESA, Microgen, a few years ago, joined the board of DDEX (Digital Data Exchange), a standards organization set up to develop a single set of standard XML messages for the business-to-business communication of information between companies operating in the digital media supply chain.

“Digital media has become a volume game where every penny you can save on a back-office process makes a real difference to your P&L. All the supply chain partners need to get their back office much more efficient to maximize the profit and speed up cash flows,” Redington sums up.