Typical royalty rates & factors affecting them
Article – November 2019 | RoyaltyRange
When you’re negotiating royalty rates for a licensing deal or carrying out a transfer pricing analysis on an intercompany transaction, it can be useful to see what royalties other companies charged in comparable circumstances. But before you start searching for typical royalty rates for your product or industry, it’s important to understand the different factors affecting them. Only then can you determine whether a typical royalty rate is relevant to your license agreement or transaction.
Factors affecting typical royalty rates
You might be wanting to find out about typical oil royalty rates or typical royalty rates for authors, or maybe you’re looking for pharmaceutical, food or fashion royalties. Or perhaps you want to know about typical patent royalty rates, or typical royalty rates for brand names. Whether you’re looking for typical royalty rates for your industry or intellectual property type, here’s how it works.
Just because two products are similar, that doesn’t mean that they’ll necessarily attract the same royalty rates. There are other factors that can affect how much a licensor can charge for the use of their intellectual property. As such, you cannot simply pick up an average or typical royalty rate and use it for your agreement or transaction. You can certainly use it as a starting point, but then you must consider whether the circumstances surrounding it are comparable to your transaction.
Here are some of the factors that affect royalty rates:
- Market size
- Market rate expectations
- Stage of development
- Market potential
- Upfront payments
- Strength of IP
- Product uniqueness
Find comparable data with a royalty rates database
The beauty of using a royalty rates database like RoyaltyRange is that the data you’re looking at is comparable to your transaction. This is because the experts that conduct your royalty rates search check each of the agreements for comparability. In fact, at RoyaltyRange, we check our data against more than 50 comparability factors. This means that you can confidently use the royalty rates we provide in our search reports as guidance for your own royalty rates or transfer pricing.
The importance of real data
Whether you’re setting royalty rates for a licensing agreement or using comparable royalties as a basis for your transfer pricing analysis, it’s essential that the data you use is relevant and comparable to your transaction. When you find generic averages online, you can’t always guarantee that these are accurate or up to date, let alone guarantee that they are comparable to your transaction.
Instead, you can use a royalty rates database like RoyaltyRange to find real royalty rates for your industry, product or intellectual property. It’s quick and easy – just enter your search criteria and you’ll receive the relevant royalty rate and license agreement data in a user-friendly spreadsheet.
Find real royalty rates here
Don’t settle for typical royalty rates. Find out what organizations are actually charging in comparable transactions. To start your search, simply choose from the options on the right.