Tiered Royalty

Tiered Royalty: A tiered royalty structure is a payment model where royalties are paid at different rates based on specific levels of sales or Revenue. As sales increase, the royalty percentage may change, typically decreasing as sales volumes rise, to incentivize higher sales while managing costs.

Examples:

• In a publishing agreement, an author may receive a 10% royalty on the first 1,000 copies sold, 12% on the next 4,000 copies, and 15% on any copies sold thereafter.
• A musician might earn a 5% royalty on the first $100,000 in album sales, 7% on sales between $100,001 and $500,000, and 10% on any sales exceeding $500,000.

Cases:

• In the tech industry, a software developer may implement a tiered royalty for licensing a product, charging 2% on the first $1 million in Revenue, 1.5% on Revenue between $1 million and $5 million, and 1% on any Revenue beyond $5 million.
• A film studio might offer a tiered royalty agreement to a screenwriter, where the writer receives 3% of box office Revenue up to $10 million, 4% on the next $20 million, and 5% for Revenue above $30 million.