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What are Royalties?

Royalties are a percentage of the profits that are gained from the sale of creative works like books, movies, or music.
Actors may receive royalties.
Books sometimes provide royalties.
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  • Written By: Tricia Ellis-Christensen
  • Edited By: O. Wallace
  • Last Modified Date: 29 September 2014
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Royalties are sums of money paid to a creator or a participant in an artistic work, based on the individual sales of the work. In order to receive this money, the work must generally receive a copyright or patent. In most cases, the amount of royalties received is negotiated by contract.

For example, a writer may contract with a publisher in order to have a book published. The writer often receives some money upfront for granting the publisher the right to publish the book. The rest of the money made on the book will be royalties, a percentage of the profits on each one sold. Sometimes this percentage is high, and other times relatively low. Occasionally, the upfront money is low, but the royalty money is higher.

Further, should the book be made into a film, the rights to the profits of the film may be negotiated as both a flat fee and as royalties. So a person might sell his or her idea outright to a filmmaker and receive an upfront fee. Alternately, the author might license his ideas to a filmmaker and receive a percentage of the film’s profits.

Even after a film has left a movie theater, the author might still continue to make money through the sale of DVDs or through licensing to show the film on television. Often, repetitions of licensing mean lower payments over time.

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An actor participating in a film might also be entitled to royalties through DVD sales or through licensing to show a film on television. Actors on television shows also often get paid when their shows are rerun. Sometimes, when TV shows go into syndication, this money continues to be made for a long time after the show has ended. Again, the amounts tend to decline as the show gets shown more often.

In some cases, people may go to court to sue for royalties when a patent or copyright is violated. The unlawful use of a song in a video, for example, might mean that the person who made it is sued for a portion of the profits. Some musicians declare their work royalty free, allowing anyone to use it and allowing them to get more airplay.

Instead of contracting for royalties, for example, the band OK Go decided to publish their first and second videos on YouTube. This gave access for all to the band's videos and to free downloads. The result was that the band became extremely popular and its sales increased. Occasionally, the decision to produce something royalty-free may actually result in more financial rewards.

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Discuss this Article

anon301802
Post 6

What can an inventor, based on royalties, expect to receive up front?

anon121123
Post 4

I am asking on behalf of my Dad. he is 82. My Dad has published about eight books and gets royalties, when he dies do his royalties go back to the publisher? or does he sign them over to my Mum?

anon76173
Post 3

This company is seeking singers, and they say the singer has to contribute part towards recording costs and the company also states that they will retain all royalties.

Is this correct or a con? If they retain all royalties then what exactly is the performer getting out of it financially? nothing then?

Advice, please?

anon22354
Post 2

Can an employee who under their contract of service produces manuals for their employee be entitled to royalties on the reproduction of those manuals or would the manuals become the property of the employer?

anon381
Post 1

Can a company making paper products (in this case scrapbook paper) limit it's use after a sale? It would be similar for a fabric company to control what the fabric is made into after the sale...it doesn't seem reasonable.

Thanks for considering my question.

Pete

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