The Royalty Trickle

royalty trickle

When you earn royalties, most people think of massive overnight rush, not a royalty trickle. The truth is that earning royalties is a difficult business, because it’s based purely on demand. Chasing demand is also elusive, because it shifts so quickly.

The truth behind most royalty creation is that it’s done via a “see what sticks” approach. In other words, massive amounts of trials are done looking for an idea that works. In addition, those ideas may only trickle in small amounts of royalties. This is the real trial of success in building royalties. Most people look towards the efforts spent vs. money earned and conclude it’s a bad deal. However, that’s not the proper benchmark people should have for royalties. Instead, it needs to be looked at as if it were an investment. If you earned $x per hour and put that into the stock market, what would be 7% return per year?

For example, say you spent a full month’s worth of maximum effort: 160 hours. At minimum wage ($11.5 in Washington) you would get about $1840. A yearly return of 7% on $1840 is $129. Then let’s divide that by 12 so you get the monthly return: $10.75.

That looks like a horrible deal! You spent nearly 160 hours in one month just to get $10.75? Well, that’s the same as if you were to stick the money in a more “honorable” method, such as the stock market.

For the royalty products I make (audiobooks, articles, etc), my hourly rate is about $35/hr. If I spent the same 160 hours, I would see $32 per month.

It’s easy to look at this from a service job perspective and go: $32/160 hours = $0.2 per hour. That’s not accurate though, because it doesn’t pay just one month. That’s the amazing difference between royalty and service jobs: one pays only once after direct work, the other pays regularly for work done awhile ago.