How to Earn Passive Income From Intellectual Property

Dr. Purushothaman
September 7, 2013

In the next several posts in our passive income series, we’ll explore a number of strategies for earning passive income. Let’s begin with one of my personal favorites…
Intellectual Property

Intellectual property refers to mental creations that are associated with legally recognized rights, such as material that can be copyrighted, trademarked, or patented. This includes articles, books, music, movies, artwork, photographs, comics, software, logos, and more.

Mere ideas do not generally qualify as intellectual property. It’s the expression of the idea that’s legally protected. You cannot claim the idea of poetry as your intellectual property, but you can copyright an original poem you’ve written, which gives you certain exclusive rights to that poem.

Since intellectual property is generally easy and inexpensive to duplicate, especially when it’s in digital form, it’s a great candidate for creating streams of passive income. You can deliver value to people simply by copying and sharing some data, and this process can be automated or outsourced.

To create a piece of intellectual property may involve a good deal of work, but that work need only be done once. After that, the property can be duplicated and shared with many people. You could potentially still be generating earnings 50 years from now for a piece of intellectual property you create today.

For instance, you can write a book once and then generate income from direct sales of the book or royalties from a book publisher. You can also earn income by selling the associated movie and merchandising rights.

Once you create a piece of intellectual property, one option is to sell it yourself and see if people will buy it from you.

This works well if you have a following or can build one. For people who are just starting out, it’s going to take a while to build that following, usually years. If you’re patient and persistent, this approach can really pay off though.

I used this approach with my games business. It took time to build a following, but I eventually got there. The only real way to fail is to give up, which is of course what most people do.

One of the leverage points for self-publishing is lead generation. This means finding a way to attract people who might be interested in your product. One way to do this is with advertising, but that can be risky and costly, so I don’t recommend it for most people.

My favorite method of lead generation is to give away a lot of quality free content. With my games business, I offered free game demos and submitted them to hundreds of game and software downloads.

Note that putting up free content on a website with no traffic is not lead generation. Nobody will see it. You have to get your free stuff into people’s hands, meaning that you have to put it where there’s traffic. If you don’t have the traffic, then put your free content somewhere other than your own website. The free content can then refer people back to your website, where they can buy something from you directly.

When you generate leads, don’t let them fizzle out. Try to collect them. People often need to be exposed to an offer multiple times before they’re willing to buy anything, so if someone visits your website but doesn’t buy right away, give them other options to stay in your communication loop, such as by subscribing to your blog or newsletter or by following you on Twitter, Facebook, or Google+.

As you generate leads over time, some of them will subscribe to one of your lists, so you can still communicate with them.

For my newsletter I use the service Aweber. I like this service and find it reliable, and the interface isn’t overly complicated. In a typical issue I provide a new article (that doesn’t appear on my blog — this is to reward subscribers), and there’s usually at least one promotional offer in my newsletter that can help generate income. Worst case I may just include a link soliciting donations.

Some people really push hard on the newsletters, sending them almost daily. I typically send mine about once a month, but I’m not perfectly regular about it. I’ve sent out 4 issues so far this year. If you wish to subscribe to see what it looks like — or to see what you’re missing — you can sign up here. Of course I don’t spam people or sell their email addresses, so all you get is the newsletter, and you can easily unsubscribe by clicking a link at the bottom of any issue.

To process sales you may need a merchant account and a shopping cart. It’s been years since I shopped for a merchant account, so I don’t know what kind of deals are available today. Try Googling “merchant account” to see if you can find a decent recommendation or review site for merchant accounts. You can also process orders via PayPal if you wish; they can handle credit card orders from non-PayPal customers, and their rates are competitive.

For my online shopping cart, I use the service 1ShoppingCart. That what I use to sell tickets to my workshops. You can also use them for doing newsletters if you wish. 1SC has tons of features, most of which I’ve never used, but those features can be helpful if you really want to go the direct sales route and optimize the heck out of it. I don’t use those advanced features because at present I earn more income from other sources than I do from direct sales.

Self-publishing is a long road. It’s definitely not a good choice for ADHD types. This is for the builders who enjoy creating something to endure.

The main advantage to self-publishing is that once you have it figured out, you’re pretty much golden. As you learn what works for you and what doesn’t, you can line up a string of repeat successes.

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