How royalties work and what rights authors are entitled to

Royalty rates across different sectors: how much are authors entitled to?

The royalty rates paid to creators vary significantly depending on the industry, the type of work and the contractual arrangements agreed between the parties. Understanding these differences is essential in order to protect one’s rights and secure fair remuneration.

• In the publishing industry, authors’ royalties are generally calculated as a percentage of the retail price of each book sold. This percentage is commonly around 10%, although it may vary depending on the author’s reputation, the type of agreement and the format of the work. Royalties on e-books, for example, tend to be higher, reflecting their lower production and distribution costs.
• In the music industry, royalties are mainly divided into public performance royalties, paid to authors when their works are performed or broadcast, and mechanical royalties, paid for the physical or digital reproduction of music. The applicable rates depend on local legislation and contractual arrangements. In the United States, for example, mechanical royalties are set by law at 9.1 US cents per copy, while rates may vary across Europe. It is also important to remember that, in addition to authors, performers and record labels also receive a share of the royalties generated.
• For visual artists, the artist’s resale right entitles the artist to a percentage of the resale price of their artworks. In Italy, this right is governed by Legislative Decree No. 118 of 13 February 2006 and provides for a rate of 4% on transactions of up to €50,000, with decreasing rates applying to higher amounts. This right ensures that artists continue to participate in the economic value of their works when they are subsequently resold.
• In the field of patents and industrial property, royalties are generally calculated as a percentage of the turnover generated by sales of products incorporating the patented invention. Rates, usually ranging from 2% to 10%, vary depending on the value of the invention, the relevant industry and the bargaining strength of the parties. It is also common to provide for a guaranteed minimum payment to the patent holder, irrespective of actual sales volumes.

Royalty rates are therefore the result of complex negotiations influenced by a wide range of factors. For this reason, creators should seek assistance from lawyers specialising in copyright and intellectual property, who can negotiate contractual terms that adequately reflect the value of their work and ensure fair remuneration.

Authors, royalties and contracts: what should you know?

Royalties are not determined automatically: they depend on specific agreements negotiated between the rights holder and the party wishing to use the work or product. Understanding the contents of these agreements is essential for authors, both to protect their rights and to ensure that their remuneration is adequate and proportionate to the economic value generated.

A well-drafted licence agreement should contain a number of key provisions:

• Scope of exploitation: specifying how, where and for how long the work may be used. A patent, for example, may be licensed only for a particular industrial sector, while a song may be authorised exclusively for use in a specific audiovisual project.
• Royalty rate: clarifying how remuneration is calculated, whether as a percentage of turnover, a fixed amount per unit or a combination of the two.
• Exclusivity clauses: establishing whether the licensee has exclusive rights in the work or whether the licensor may grant similar rights to other parties.
• Payment terms: specifying when and how royalties are to be paid – for example, monthly or annually – and how payments can be verified through financial reports.
• Termination and penalties: establishing what happens in the event of a breach of the agreement, such as failure to pay royalties or misuse of the work.

AGCOM Resolution No. 95/2024 introduces stringent transparency obligations for those exploiting protected works, confirming that authors must receive a report at least every six months.

This Resolution, which completes the implementation of the Copyright Directive, seeks to achieve a practical balance between the rights of authors and those exploiting their works, providing a basis for claiming additional remuneration where there is a clear disproportion between the profits generated and the royalties received (for further information, see Six-Monthly Reporting, Remuneration Adjustment and Protection of Authors (AGCOM Resolution No. 95/2024) – Canella Camaiora).

Indeed, Legislative Decree No. 177/2021, which implemented EU Directive 2019/790, introduced specific transparency obligations governed by Article 110-quater of the Italian Copyright Act (Law No. 633/1941). This provision requires those exploiting works to provide a detailed report containing:

• Information on the parties involved, including sublicensees.
• Methods of commercial exploitation, describing the platforms and distribution channels used.
• Details of the revenues generated, including revenues from merchandising and advertising.

Authors may therefore claim “additional, appropriate and fair remuneration from the party with whom they entered into an agreement” (see Article 110-quinquies of the Italian Copyright Act) where there is a clear disproportion between the profits generated by those exploiting the work and the royalties received by the author.

Another important principle is that, where transparency is lacking, the remuneration is presumed to be inadequate.

Thanks to these statutory obligations, authors can:

• Accurately monitor the commercial value of their works.
• Identify any discrepancies in payments.
• Seek adequate or proportionate remuneration where their work has been undervalued.

As highlighted in the article “Six-Monthly Reporting and Remuneration Adjustment”, the transparency required by the new rules is a fundamental safeguard and contributes to a fairer and more transparent contractual relationship.

Mandatory rules for agreements entered into after 7 June 2022

The Italian copyright framework has changed substantially in recent years, introducing mandatory safeguards that can make a significant difference for authors.

These rights are not optional and cannot simply be amended at will. They constitute overriding mandatory provisions – rules that cannot be derogated from and that prevail over any conflicting contractual clause. Understanding and making use of these protections is essential if authors are to achieve tangible results.

The overriding mandatory provisions introduced by Legislative Decree No. 177/2021 and implemented through AGCOM Resolution No. 95/2024 provide authors with an unprecedented level of transparency and apply to all agreements entered into after 7 June 2022. This means that:

• Clauses denying the right to receive reports or providing for lump-sum remuneration without transparency are ineffective, because the law nevertheless guarantees authors the right to receive detailed information.
• Reporting obligations automatically apply to agreements entered into after that date – 7 June 2022 – irrespective of any contractual provisions to the contrary (see Article 110-quater(7) of the Italian Copyright Act).

As explained in our previous articles, overriding mandatory provisions are designed to:

• Ensure transparency: the right to receive a detailed six-monthly report cannot be waived or excluded.
• Protect fair remuneration: authors may seek remuneration that is fair and proportionate to the revenues generated by their works, even where a fixed or lump-sum payment was originally agreed.

It is essential for authors to understand that these safeguards are practical tools that can actually be used. They are not merely abstract legal principles, but rights that can be exercised to monitor revenues and obtain appropriate financial treatment.

Authors are entitled to:

• Receive a mandatory six-monthly report containing information on the revenues generated and the ways in which their works are being exploited.
• Challenge contractual provisions that conflict with the law, such as clauses excluding reporting obligations or providing for disproportionate remuneration.
• Seek adjustments to their remuneration where the revenues generated by the work are disproportionate to the amounts they have received.

Navigating this complex legal framework requires the assistance of lawyers specialising in copyright and intellectual property. Lawyers can review agreements, assess the validity of contractual provisions and assist authors in seeking adjustments to their remuneration.

Understanding overriding mandatory provisions and using them effectively is key to ensuring that creative talent is properly valued. The law provides concrete safeguards for protecting and enhancing creative work. Being aware of these rights and taking appropriate action is the first step towards securing the results authors are entitled to.