How do royalties on music or books work?
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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).
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