Passive Income…
Passive Income: A Concept Critical in Copyright…
No smart writer sells any copyright. (Now this leaves out all stupid-as-a-post traditional writers.)
No copyright ever leaves the control of the writer.
Writer’s license the use of a story to another party. No copyright changes hands.
It really is that simple. But writers who do not understand copyright think they must sell their stories to make money. Nope.
All income from your fiction writing comes to you in hundreds and hundreds of ways as passive income, meaning you don’t have to do anything to the copyright to get it.
You have a reader buy your electronic book on Amazon (actually they licensed it from Amazon), do you have to go write another story to replace the one that the reader paid for? Nope. The copyright of the story that was purchased on Amazon still rests in your control and the money from the purchase is called “passive income.”
All licenses function in this fashion. Sure you may agree to not let anyone else use a story for a movie because you licensed it to Hollywood, but that license will expire and the entire time you still own the copyright.
No copyright ever leaves the control of the writer.
Maybe some of you might understand a stock market analogy. You buy a dividend-producing stock. Every month/3-months/6-months/year that company pays a percentage of its profits out to stockholders in dividends. Did you sell the stock to get the dividend? Nope. Passive income. In fact, if you sell the stock, you lose the dividend.
Copyright is like the base stock and depending on the use of the copyright, it can pay you passive income regularly for a very long time. And if you write enough and have enough passive income coming in from enough sources, you make a lot of money.
And this is about as basic as I can make this. And yes, this post came from a letter I got from a new writer asking how they should “copyright” their story to make sure they can sell the copyright to make money.
Some letters I just can’t make myself waste the time to answer. Delete is a wonderful function in my email.
7 Comments
Joseph Haines
Yup. I have one story, written in three hours, that has made me (so far) close to two hundred grand, that I still license out every couple years to somebody *else* and can continue to do so because I hold the copyright. When the streaming rights come in from multiple countries for the television series, the passive income continues to accumulate, all per the contract for the rights I licensened for a finite period of time to a Nordic Television producer.
And that’s one of the hundred or so stories I’ve sold over the years.
Most people have never heard my name. I’m a nobody in this business and am pretty happy with the extra income. Why? I listened to Dean and Kris and when I didn’t know what I was doing, I asked someone who did and spent a few bucks to get legal advice.
And then? I took the advice. Not rocket science.
dwsmith
Fantastic, Joseph. Got me beat. I have three stories now that have earned me over $20,000 each. Fun stuff, and thanks for the kind words. Well done getting the legal advice as well. Just super. Thanks!!
Vincent zandri
Great stuff Jospeh. I’ve enjoyed similer deals with publishers over the years, but I worked with an agent. I’m curious if you worked with an agent for the movie deal(s), or a lawyer, or were you approached on your own or did you somehow approach them? In any case, nobody knows who I am either, expect my mother and Dean and Kris…haha
VIn
dwsmith
My agent never once got me a license with anything. I started getting licensing deals of all kinds when I fired the crooked agency. Hmmm. Actually, I never really fired my agent, just threatened to send an accountant after them and their books as I had a right to do. They contacted every publisher under every name and released me and had the publishers only deal with me. Amazing what a threat of accounting can do. Actually, it was Kris who threatened it. They were far more afraid of her than me, (grin)
C.E. Petit
In the general sense, copyright royalties are “passive income.” Your accountant/tax attorney will object, however, that they are not. And that treatment is different (sort of, it’s complicated and all commercial tax programs get it wrong — don’t even think of going to a strip-mall chain tax-preparation service) for tax years in which work was performed to create or enhance the value of the asset that produces income. In tax law, “passive income” is a delayed payment from a completed transaction. Interest on a bank account is a good example — the completed transaction is the deposit(s) into the account, which has a contract associated with it (the account agreement).
Economically, or at least in classical/orthodox economic terms, creating and exploiting intellectual property is a mix of returns on labor and returns on (invisible) capital. The tax code for individuals… doesn’t like mixes, so parts of it get shoved into “labor” and parts into “other.” It’s actually simpler and cleaner for a business entity… hint, hint.
I’m saying this now because it’s important for tax planning for the rest of the year (and because if you took the automatic extension, your returns are due in two weeks). And because if you say “passive income” about everything relating to writing to your accountant/tax attorney, you’ll have a failure to communicate (homage to Cool Hand Luke intended, and all too appropriate).
dwsmith
And now you made what I was trying to make simple into far too complex for even me to understand. You might be right in the details, but the difference makes no difference at all.
Vincent Zandri
For sure Dean, I think I told you and Kris that other than my first big deal with Dell when I was a pup, I pretty much got all my deals on my own and brought them to the agent thinking it was the right thing to.do. Ironically, agents are very wary in 2026 over signing the likes of you and me. To them and to many publishers, we are outlaws. Although I kind of like the idea of that !
VZ