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.
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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.
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.