What Are Royalty Agreements?
Royalty agreements provide investors with a percentage of revenue generated from specific products, services, or intellectual property. Unlike equity investments, royalties don't involve ownership but rather a right to receive payments based on commercial success.
In Ghana's creative and innovation economy, royalty agreements are increasingly used to finance music, films, software, and product development while aligning investor returns with commercial performance.
How You Earn Returns
Revenue Percentage
Receive fixed percentage of gross or net revenue from specified products.
Unlimited Upside
No cap on returns if product becomes highly successful.
Example Return Scenario
Invest GHS 50,000 for 5% royalty on a music album. If the album generates GHS 2,000,000 in revenue over 5 years, you receive GHS 100,000 in royalty payments (200% return). If it generates GHS 5,000,000, you receive GHS 250,000 (500% return).
Types of Royalty Agreements
Intellectual Property
- • Music and entertainment royalties
- • Patent and technology licensing
- • Book and publishing rights
- • Software and app revenue sharing
Product Royalties
- • Consumer product sales
- • Mineral and resource extraction
- • Franchise and brand licensing
- • Manufacturing and distribution
Key Features
Performance Linked
Returns directly tied to commercial success
No Ownership Dilution
Founders maintain full ownership and control
Flexible Terms
Can include caps, floors, and time limits
Tax Efficiency
Often treated as business expenses for companies
Risks to Consider
Commercial Failure
Product or IP may not generate expected revenue.
Revenue Reporting
Difficulty verifying accurate revenue calculations.
IP Protection
Intellectual property rights may be challenged.