Royalties are sums paid to a creator or a participant in an artistic work, based on individual sales of the work. In order to receive royalties, the work must generally receive a copyright or patent. As well, often the amount of royalties received is negotiated by contract.

For example, a writer tends to contract with a publisher in order to have a book published. In most cases the writer 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 book sold. Sometimes this percentage is high, and other times relatively low. Occasionally the upfront money is low, but the royalties are higher.

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 their 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, as royalties.

Even after a film has left a movie theater, the author might still continue to make money in royalties through the sale of DVDs, or through licensing to show the film on television. Often repetitions of licensing mean lower royalties 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. Also actors on television shows often make royalties when TV shows are rerun. Sometimes when TV shows go into syndication, royalties continue to be made for a long time after the show has ended. Again, royalties 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. Thus, the unlawful used of a song, for example, might mean being sued for a portion of one’s profits. Some musicians declare their work royalty free, which allows them to get more airplay. This was the case with the 2006 surprise hit band, OK Go.

Instead of contracting for royalties, the band decided to publish their first and second videos on the site, YouTube. This gave access for all to the band’s videos, and to free downloads. The result was extreme popularity of the band and increased record sales. Occasionally, the decision to produce something royalty-free may actually result in more financial rewards.