“Passive Income” are the most important words in our financial vocabulary. These words help us separate ourselves from the act of making money. However, it takes hard work to build that initial product that will in-turn create passive income for us. I like to separate our passive income journey into four categories: Retirement (pension, TSP, 401k, social security), Real Estate (home rental, room rental, notes), Investments (dividends, interest), and Business (residual business income, royalties).
Today I want to focus on royalties. Royalties are income created when other people buy or use your products. Most people think that royalties are only made from books and music. However, there are other ways that royalties can be built. However, even us regular folks can build royalty income.
You can build royalties from any of your hobbies or businesses. Basically anything that you have knowledge of, or expertise in, can be leveraged into a royalty producing asset. Think of something that you are good at or something you enjoy doing. Then, take a step back. Next, create a way to slowly drip this information out to the masses.
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By creating a royalty-producing asset, you are also establishing expertise in your field. The more you write, the more videos and music you produce, or the more courses you build, the more your audience recognizes you as a subject matter expert. With this expertise, you also start to build word of mouth and brand recognition that will lead to even more people finding and supporting you.
I first want to review the types of royalties that we can create. Then I will show you my current plan. I will walk through a couple of scenarios that will help you visualize the ways that you can leverage royalties to produce passive income. The 5 types of royalties I will speak about are writings, music, video, online courses, and patents. I will use an example of a food brand to layout out a royalty strategy.
Writing. Yes, most people do not want to write. I understand that. I was the same and now I am here, six months after starting a blog, to tell you that it isn’t that bad. I actually rather enjoy it. I like to break down writing into 3 sizes. Articles, magazines, and books.
You can start writing articles at any time. You do not even have to publish them. Just keep building your inventory. It is incredible how these things start to compound. If you have a blog, ensure that you use your current articles to link back to your older works. For this example think of each article as 1 single food recipe.
Once you have enough articles, you can put them together into a magazine. This can be accomplished by using a simple Google Slides or PowerPoint template. You can then publish it as a pdf and put it up on your website. Once you have a magazine you can use it as a free gift to solicit email addresses from your audience. You can also put them behind a payment, in order to earn money on your website. You can also publish your magazine via Amazon Kindle or ISSUU.com. Think of your magazine as a collection of 10 recipes in the same category (say, Mexican).
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Now once you have enough magazines, you can gather them together into a book. Don’t worry about writing a book. You can also use a ghostwriter to write a book for you. Creating a book is the easy part. Promoting your book will be the hardest part. Hopefully, you have built an audience through the article and magazine phase. There are many places to sell your book. Also, Amazon has the Kindle Unlimited program, that puts your book into a profit-sharing model. Think our your book as a collection of magazines. (4-5 different categories of recipes: say Mexican, Thai, Japanese, and Italian)
Music. Most people are not musically inclined but do not let that stop you. The 3 ways to leverage music are songs, beats, and instrumentals.
Songs are the hardest and require talent. If you have this talent, you can use it. Remember we are not trying to become millionaires from our royalties, only create passive income. If you have the talent, make a website and sell your songs royalty free. For the privilege of using your music, people will have to pay you upfront. This is an okay trade-off. Paying upfront or over time is still passive income for you.
Beats can be made via different software. It takes talent, but I believe it is more of a learned skill. You can leverage the same model as songs. You can sell them for more money as royalty-free or have someone pay royalties per song play.
Instrumentals are similar to both. Instrumentals are great because most video content needs to have some background music. For our cooking channel, we can hire someone to make us instrumental music that we will own the rights to. We can bundle the songs together and sell them as a cd package on our cooking website, creating passive income.
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Video. Video content is now the most viewed on the internet. Younger people are obsessed with video content. Creating video content is a must for almost every content creator.
Most video content crosses, some way or another, through YouTube. When creating YouTube content try to make content that will still be relevant in 5 years. That is how you create content with a long tail (lots of passive income). If you create content such as “The Stock Market Today: Jan 24, 2021), then it usually won’t give you passive income for an extended period of time. If you create content such as “How to invest in dividend-paying stocks” then you are more likely to create lots of long-term passive income. Luckily, our cooking channel can be watched over a long period of time.
You can package your video content into a series or movie. That is why it is important that we organize our content via a roadmap. Then all we have to do is bundle them together, create an introduction video, and there you have it. A movie or series can be sold on your personal website. Think of this as a magazine, for video.
Blurays are a great way to build a collector’s item for your hardcore fans. You will have a few fans, say about 1%, that will buy everything you make available. Although Blurays aren’t bought by most people, making some Blurays will give your biggest fans access to a collector’s item. Make your Blurays unique and you will have an item that sells for a high margin.
Online Courses. Online courses are a great way to package all of your content into an easy to digest format for those that truly want to learn your skill or craft. If you created an extensive roadmap before you started your blog and video channel, you will have everything already set up to build your online course. There are platforms like Teachable, that can host your course. They have all the tools to make your course amazing. For this, they take a cut of your profits. You can also have a platform built on your website. It might cost you money upfront, but you can keep 100% of the profits. I guess it depends on how heavy you want to get into the online teaching space. Cooking is a great space to host online courses.
Patents. A patent is a right by an inventor that prevents someone from selling or reproducing their item or idea. If you have invented something, you can get a patent, and you will receive royalties when someone uses your idea or invention. This may be a good route if you have lots of ideas. If you create a patent while you are doing your cooking channel, then it would be even more royalties for you.
As you can see, you can leverage your cooking channel to build all sorts of royalty income. Remember, think of your goals first. I currently want to build $200/month of royalty income. I am starting my royalty journey through my writings. I have about 260 articles on my blog. I have published 5 magazines via pdf and Amazon Kindle. This is just the start. I am going to continue building magazines. Once I am satisfied with my magazines, I can create some books. Then I will start my video bombardment. As I create my videos, I can refer my audience to my articles, magazines, and books. Next, I can create an online course. These things stack unto one another, exponentially.
It is important to take a long-term vision for your brand. Do not expect your brand to take off right from the start. Being consistent over a long period is the best way to succeed. Answer these questions. What do you genuinely enjoy doing? What will you be comfortable doing first: writing, music, or video? How can you create a daily two-hour window for yourself to start building your brand?
Answer these questions and you will be well on your way to building royalties. Most people cannot make it past the first couple of steps, however, I know that you can. Good Luck.
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Disclosure: I am not a financial advisor or money manager, and any knowledge is given as guidance and not direct actionable investment advice. I am an Amazon Affiliate. Please research any investment vehicles that are being considered. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.
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