Do you have fame but no fortune?
Do great thoughts spring fully-formed from your head like popcorn?
Do you ever wonder how celebrities make money once they are off camera?
There is a whole industry tied to “renting” ideas, pretty faces, and intellectual property. You might have heard the word, “royalties”.
What are royalties?
Copyrights, patents, trade names and more are protected intellectual property. To use the likeness of a person, a song or even a catchphrase, a company pays a rental fee called a royalty to the owner of the property.
Read on to learn more.
What Are Royalties?
The word “royalties” comes from the idea that it was the right of kings to exploit the value of all the land they owned. Often, there were precious minerals to mine on the king’s land. A “royalty” was a payment to the king for the right to remove part of the king’s property.
In modern times, the use isn’t too different. A royalty is a fee paid to the owner of a property, whether it is mineral or intellectual. Franchise fees are a type of royalty.
Take Bruce Springsteen’s “Born in the USA”, for example. The song was chosen by Ford to represent their automotive line of trucks. Ford paid a fee to license “Born in the USA”.
Bruce Springsteen earns a royalty fee each time the commercial airs and each time the song is used in public. Business owners need to think about . Royalties can be a great part of your plans.
How Do Royalties Work?
If you have protectable intellectual property, you have a couple of choices.
License the Property
This means you keep the ownership of your likeness, for example, a photo of Colonel Harlan Sanders, but authorize its use in exchange for royalties. Col. Sanders was a real person who took payment for his likeness to promote Kentucky Fried Chicken. Even though the Colonel has been dead many years, his estate still has a small income.
Sell the Property
If you sell the property outright, the buyer pays you a percentage of the revenue generated from that property, but you no longer control the use of the asset. For example, the Beatles famously gave up the rights of their songs to their publisher, who then sold the whole catalog to Michael Jackson.
How Are Royalties Valued?
Royalties are set up in different ways, each peculiar to its industry. They can be set up as payment up front, a portion of gross sales for a period of time or some percentage of use. Each type of royalty payment has positives and negatives for owners and users.
A company like https://www.royaltystat.com collects data on a broad range of industries and agreements to help people determine a fair price and value for their property.
Thinking About How to Make Your Ideas Work for You?
This article answered the question “What are royalties?”Now the question is “How do I make them work for me?”
Royalties could be one step towards financial independence. For more ideas and action items to put you on the road to freedom, keep reading. Maybe of your own!
