Royalties

Royalties are earnings on intellectual properties. In music, they are the earnings of the music composer, the performer and the producer and the recorded performance. Creators of films, books, software, and other artistic works or intellectual products are entitled to various forms of royalties.

Many royalties are collectively managed, like the musicians pay after radio or restaurant plays. Other royalties, like revenues of app developers, are directly or indirectly paid to them by the buyer of their products.

While the valuation of intellectual properties and their resulting fair earnings in the forms in royalties appears to be simple in economic theory, in practice it is very complicated.

In the last decade I have used many valuation methods to establish the fair (price) level of various royalties or the fair value of an intellectual property. Most of these assignments went around the value of music.