1. Is a Royalty a Tax? Where the Japanese Word for Book Royalties Comes From
In Japan, the money paid to book authors is called "inzei," which sounds like a tax. However, it is a shortened form of "stamp tax." The earliest known use dates to 1876, in the early Meiji era. Later, because authors had a habit of attaching a stamp (kenin) to their books, the term came to mean the money paid to the author. It is explained that the payment method resembled the stamp tax, leading to the name [2].
The English word "royalty" traces back to Latin for "of the king," through medieval French. By the late 15th century, it meant a privilege granted by a monarch to an individual or group. The meaning of payment for using mines appeared in 1839, and the meaning of payment to authors or composers appeared in 1857 [1].
In Japan, the first royalty contract is said to be the agreement made by Komiya Tenko with a publisher when he published a translation in December 1886. However, this is described as "said to be the first," so it is not stated as a definite fact [2].
Even though the word has existed for a long time, how much is paid is a separate issue. For books, who decides the rate, and how?
2. How Book Royalties Are Calculated: List Price × Copies × Rate in a Contract
Book royalties are generally calculated using the formula "List Price × Number of Copies Issued × Fixed Rate." The rate is said to be around 5 to 10 percent [2]. For example, if a book has a list price of 1,000 yen, 1,000 copies are issued, and the rate is 10 percent, the total is 100,000 yen. If the rate is 5 percent, it is 50,000 yen. This is a calculation example, not a story about a real book.
However, there is no public rule that sets this rate. The Japan Book Publishers Association notes in the explanation of their model publishing contract that payment methods vary depending on the publisher and the type of publishing. Therefore, their model uses a separate table for these details [3].
In a 2011 survey by the same association (requested from 455 member companies, with 105 responding), about 91.4 percent of books in the past year used the royalty system, while about 8.6 percent used a buyout system (including lump-sum royalty payments). Among the royalty system, about 71.0 percent applied the rate to the number of copies issued, and about 29.0 percent applied it to the number of copies actually sold [4]. This reflects the responses of member companies in 2011 and may not represent the current overall situation.
Additionally, the rate does not apply to "all copies issued." The model publishing contract states that no fee is charged for copies used for deposit to the National Diet Library, presentation copies, review samples, or promotion. A limit is set on the number of copies [3].
Books involve a one-to-one contract between the author and the publisher. So, what happens in the case of music, where tens of thousands of people use the songs?
3. How Music Fees Are Decided: Notification and Discussion with the Agency for Cultural Affairs
Music is a field with many users, such as shops, classrooms, and broadcasting stations. It is not realistic for composers and users to make one-to-one contracts. Therefore, managing operators like JASRAC create a fee schedule stating "how much to charge" and notify the Commissioner for Cultural Affairs. In principle, the schedule cannot be implemented for 30 days after notification; after that period, it can be implemented. The system changed from a permission/licensing system to a notification system [5].
The rules are not made solely by the managing operator. When representatives of users request discussions about the fee schedule, the managing operator (a designated operator under the law) has an obligation to respond. If discussions fail to reach an agreement, the Commissioner for Cultural Affairs makes a ruling upon application by the parties, and the schedule is changed based on that result [5].
The scale is also large. In fiscal year 2024, JASRAC collected 144.58 billion yen in fees (a 5.4 percent increase from the previous year, a record high), and the amount distributed to rights holders was reported as 142.33 billion yen [7]. The difference of about 2.25 billion yen is not all fees; it includes money to be distributed in the following year.
So, what actually happened in an example where discussions did not come together?
4. How Fees for Music Classrooms Were Set: A Delayed Start Date and a Ruling
JASRAC established three collection methods in its fee schedule for instrument classrooms. One method is to pay an amount equal to 2.5/100 (2.5 percent) of the "standard amount for calculating tuition income." If the standard amount is 100 yen, this corresponds to 2 yen and 50 sen [6].
Implementation was originally scheduled for January 1, 2018. However, objections were raised by the classrooms, and it was delayed by 3 months. Subsequently, a ruling by the Commissioner for Cultural Affairs decided that implementation would begin on April 1, 2018 [6].
The 2.5 percent here is the rate written in the schedule. It is not certain that all the amount classrooms pay is determined by this rate. This case was later disputed in court, and the scope of application was organized.
This is an example where the procedures seen earlier—notification, objection, delay, and ruling—actually took place. So, how are rates determined for things other than music?
5. How Patent Fees Are Calculated: A Rate Applied to Product Sales
Patent license fees are most commonly calculated by applying a fixed rate to the sales revenue obtained by the licensed company from selling products that use the patent. According to values shown by this site based on multiple survey reports, the average for all patents is 3.7 percent. Examples of rates by industry are: electricity 2.9 percent, chemicals 4.3 percent, pharmaceuticals 6.0 percent, and software 6.3 percent [8].
However, these are figures from a private patent utilization site, so they should be read only as rough guides.
Comparing the three scenarios, we see that the "base" to which the rate is applied differs by field. For books, it is the list price and number of copies; for music classrooms, it is the standard amount derived from tuition; for patents, it is product sales.
6. How You Can Look Up Royalties Yourself: Try the Math on a Book's List Price
What you can do today: Look for the list price on the back cover of a book at home, and calculate what 5 percent and 10 percent of that price would be on paper. If you also calculate what happens when you apply the rate to 1,000 copies, you will see that a difference of just one rate makes a big difference. Actual royalties are not always exactly as calculated.
If you want to read materials: The Agency for Cultural Affairs website has an explanation of the "Consultation and Ruling System" for fee schedules [5]. The explanation of the Japan Book Publishers Association's model publishing contract is also available in Japanese [3].