Minimum Guarantee on Sales- and Usage-based Royalties: Case Study

Authors

Andrew Bellomy, Brigham Young University - Provo
Jeff Wilks, Brigham Young University - ProvoFollow

Keywords

IP licensing, sales-based royalties, ASC 606 revenue

Abstract

The licensing of intellectual property (IP) is a common practice in the media and entertainment industry. For example, popular media companies such as Disney, Sony, and DreamWorks own thousands of valuable trademarks, logos, character images, etc. that can be licensed to external companies. Often, these licensing contracts include sales- or usage-based royalties. In these contracts, licensors may require a minimum guaranteed amount to limit the downside of the variable returns promised. The following case will analyze a hypothetical licensing contract for IP with sales-based royalties and a minimum guarantee under Accounting Standards Codification (ASC) 606: Revenue from Contracts with Customers.

Original Publication Citation

Minimum Guarantee on Sales- And Usage-Based Royalties Case Study (A. Bellomy and T. J. Wilks), RevenueHub, April 20, 2017. (7,003 unique views as of Jan. 13, 2023)

BYU ScholarsArchive Citation

Bellomy, Andrew and Wilks, Jeff, "Minimum Guarantee on Sales- and Usage-based Royalties: Case Study" (2017). Faculty Publications. 8661.
https://scholarsarchive.byu.edu/facpub/8661

Document Type

Peer-Reviewed Article

Publication Date

2017

Publisher

RevenueHub

Language

English

College

Marriott School of Business

Department

Accountancy

University Standing at Time of Publication

Full Professor

Copyright Use Information

https://lib.byu.edu/about/copyright/