A royalty agreement is part of the contract that the creator of the work negotiates with the business that seeks to exploit the creation. A royalty can be as simple as a fixed amount of money for each copy of a book or compact disc sold by the business. The payment amounts and frequency are discussed within the royalty agreement.

Royalties are typically agreed upon as a percentage of gross or net revenues derived from the use of an asset or a fixed price per unit sold of an item of such, but there are also other modes and metrics of compensation. A royalty interest is the right to collect a stream of future royalty payments.

This agreement also states record-keeping responsibilities of the party using the rights to the intellectual property. It contains all terms and conditions relating to the use of the intellectual property. Another feature of royalty agreements is that they normally state that if the property owner dies, the royalties transfer to an heir who is named in the agreement.