Market range royalty rates by industry
Article – April 2020 | RoyaltyRange
Finding the royalty rate for your industry can be a helpful starting point if you’re valuing your intellectual property or setting royalty rates for a licensing agreement. Comparable transactions can provide a useful benchmark to check your valuation or rates against. In this article, we’ll explain how to find accurate, up-to-date rates by searching for comparable transactions by industry.
Things to keep in mind when searching for royalty rates by industry
From a quick search online, you can find a number of articles showing average royalty rates by industry. But there are a few things you should consider before trusting rates that are published online. For example, when was the article published? Markets can change fast, and the arm’s-length royalty rate for an industry may differ from year to year. Here are some other factors to consider:
- Is the publication reputable? You need to make sure that the data you use is published by a reputable organization. Otherwise, it may not be reliable. Look for organizations that are associated with well-known industry bodies such as the OECD or World Bank Group.
- Are the calculations based on real data? Royalty rates are only accurate if they are taken from real licensing agreements. Make sure that any ranges you find have been calculated using real licensing data. This is why a royalty rates database is a good option.
- Is there a rate range, as well as a median? Keep in mind that, while the average for an industry could be 5%, the range of rates in that industry could be say 0.5% to 50%. As such, the 5% average doesn’t give an accurate overview of the royalties in the industry. Try to find the market rate range for your industry, as well as the median, as this means that you’ll have an accurate range within which your own royalty rates need to sit.
- Are the rates up to date? As we mentioned above, the rates you find need to be up to date. This means that they must be calculated from recent licensing agreements.
- Do the calculations reflect the specifics of your situation? Another thing to keep in mind when using industry averages is that they may not reflect the circumstances of your licensing agreement or transaction. Ideally, you want to be able to see the licensing agreements that the rates were calculated from, and adjust the range accordingly.
Where to find accurate royalty rates
The most accurate way to find representative royalty rates by industry is to order a professional benchmarking study. If you’re wondering what a benchmarking study is, here’s how it works:
- We’ll search for relevant licensing agreements in your industry: Our team of analysts will search for recent licensing agreements in your industry that reflect the circumstances of your agreement or transaction, using the latest data from our royalty rates database.
- We’ll perform a CUP analysis on the data: Our experts will conduct a CUP analysis to calculate the royalty rate range for your property in your industry. You’ll get a full comparison of the agreements, including a calculation of the minimum royalty rate, maximum royalty rate, upper quartile, lower quartile, interquartile range and median rate.
- You have a real royalty range for your industry: Once you’ve received our benchmarking study, you’ll have a real industry range that you can use as part of your royalty rates calculation. As it’s based on genuine data and adjusted to the specifics of your situation, you know you can trust it for setting royalty rates for your licensing agreement.
You can trust us to deliver up-to-date rates calculated from real licensing agreements. You’ll only ever see data that is relevant to your search criteria, meaning it’s suitable to use in your analysis. With our benchmarking studies, you’ll get a royalty rate range, as well as a median.
Let RoyaltyRange calculate the market range royalty rate for your industry
To find a relevant royalty rate for your industry, get started with a RoyaltyRange benchmarking study today. Simply enter your search criteria in the box on the right.