Royalties

The Rules of Royalties

Royalty payments are defined as a usage-based form of payment made by one party, referred to as the licensee, and another party, referred to as the licensor.

The licensor would be the artist or copyright holder of an intellectual property, though outside of copyright law, any real asset can be arranged to pay by a royalty system.

The actual royalty payments will consist of a percentage of the net sales, as derived from the use of an asset or intellectual property, or, at a fixed price per unit sale.

The royalty system is often seen as preferable to the more traditional form of simply selling licensing or publishing fees outright. Usually, in the event that the licensee and licensor agree to a royalty system, the initial fees paid will be much smaller, often times only for the actual work done rather than for any publishing or licensing rights. However, the royalty fees paid over time can wind up amounting to much, much more than a simple flat fee would have been. Not to mention that a royalties system is often seen as more fair, as an artist or inventor or other creator can be rewarded proportionately to the actual success of their work, rather than by simply taking the flat fee, and letting the publisher or distributor work out the rest.

Many young actors thank their lucky stars for having signed a royalties contract. When you’re just starting out, it can be difficult to find consistent work as an actor, but if an actor does even a bit part in a TV show, under a royalties system, then every time the show is syndicated, the owners of the show will send the actor a check. The check may be anywhere from fifty dollars here to a couple hundred there, depending on the money made per syndication, but as any struggling actor can tell you, a little here and a little there can really help out when you need to make ends meet.

Whether a royalty system sounds right to you or not, one thing that very few people really recommend is selling the copyright to your work, except on rare occasions. Writers often sell copyrights to their books directly to the publisher, but this means that your work will only make you that amount of money you just got for selling the copyright, and never a penny more. So if the publisher sells the movie rights to Paramount studios or MGM, you won’t see a penny. If they want to produce a sequel, they don’t need your consent. In the US, they can even take your name off of the book and publish it under a pseudonym. Certainly, many of the most famous authors in early pulp fiction in the early twentieth century did not even exist, rather, they were just a pseudonym for a collection of anonymous ghost writers, writing stories for the same characters, copying each other’s styles, and trying to pass it off as the work of a single author.

On the other hand, many talented artists and writers are kind of pushed into a corner. When selling the copyright is the only way you have of making any money, and, well, you have to eat, there may not be much to say for the virtue of holding out for royalty fees.

Comic books, until fairly recently, had long held the worst reputation for delivering royalty fees. Comic artists coming into the field during the sixties would be made “promises of work”, meaning that, as long as they remained exclusive to this comic publisher, they could be guaranteed work, on a flat fee per page basis. These comic artists were making anywhere from five to fifty bucks a page, and the average comic artist can only really draw about a page a day. Without a royalty system in place, nobody working in comics at the time was really happy with their lot in life.

Many artists and writers tried to organize their colleagues to strike, to form a union, to do something to improve the way the publishers treated them, but more often than not, they were met with laughter.

Today, artists do have a few more options than they used to. There are still publishers who would rather just buy property flat out, but if at all possible, royalty fees are really, really beneficial to the artist.