eli5, how do royalties work?


How do royalties on music or books work?

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2 Answers

Anonymous 0 Comments

It will very heavily depending on the specific contract you signed with the company that is publishing your work.

For books, the idea is that you are guaranteed a small percentage of the sale of every copy of the book. In practice, most writers are given an advance, a bunch of money up front which is basically what they expect the royalties of that book for the next few years to be. So you’re not earning extra royalties unless your book is an incredible success and is still selling copies years later.

My understanding is that for music, the royalties will vary immensely based on whether it’s something playing on the radio or streaming service or the sale of a CD or digital download, but the basic idea that a small percentage of the money someone spent on that music will go to the original artist should still apply.

Anonymous 0 Comments

When a book is sold by a shop, typically they will have bought it at a cost price from a distributor, and will sell it to the customer with a mark up in price and keep the extra cost.

The cost price of the book will cover the expenses to get that book to the shop in the first place – so the distributor will get $x which will cover their costs plus a certain profit margin. The manufacturer will get $y which will cover the cost of making the book plus a captain profit margin, and the publisher will get the $z left over, which will cover the cost of getting that book written, editted and so on.

As part of the deal, the publisher will have agreed to give the author a certain royalty for every book sold – so it of the $z the publisher earns, a set percentage or a set value will be given to the author as a royalty. The more successful a book is, and the more copies it sells, the more the author earns.

Traditionally recorded music bought as a physical item works much the same – when you buy a record, tape, CD or any other physical format, the price paid for that item is split between all the relevant parties, with a small percentage going to the artist.

With modern streaming services, the service pays the artists a set amount for every stream played – very roughly speaking, take the average monthly subscription cost, remove a chunk to cover overheads and profits for the streaming company and then split the remainder between the average amount of songs a user will listen to over a month and you will get the tiny fraction of a cent artists earn per steam.

Radio and broadcasting work in a broadly similar fashion to streaming – radio stations will record what songs they have broadcast, and pay a small fee for each of those to the companies overseeing everything, who then pay the artists a royalty depending on how much their music had been played (after the usual costs and profit margins are removed first naturally).