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- The Most Passive Business Ever
1,133 Words | 4 Min 43 Sec Read
Welcome to another issue of Passionate Income.
Today we’ll be discussing what is arguably the most passive business on earth. A business where you do the work once and get paid for life.
Let’s dive in.
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Imagine a job where you go to work Monday through Friday for one year, but get paid every two weeks for the rest of your life.
Sounds pretty amazing, right?
Well, while this type of job doesn’t exist, there is a business model that works almost exactly the same:
Licensing
If you’re unfamiliar with it, licensing involves selling companies the rights to use your intellectual property.
Sadly, this business model is almost never talked about in the digital entrepreneurship world. Why?
Because unlike freelancing, faceless pages and other more popular models, very few people know licensing exists.
Ironically, most of us contribute to the licensing economy on a daily basis.
From the software we use to the movies we watch, licensing plays a huge role in both the online and entertainment spaces.
So how does it work? And how can you get involved?
Without getting into super abstract examples, there are a handful of more common models you might want to consider (depending on your career background and skill set).
1 - Music
If you’ve never worked in the music industry, it would be easy to think the only way to earn a living as a musician is to become a famous artist (because let's be honest, cover bands at bar-mitzvahs aren't exactly raking in the moolah).
In reality, however, there are thousands of people who earn a full-time living from their music without anybody knowing their name.
That little jingle that plays in the background during a TV commercial? The sound effects you hear during video games?
All of these and more are created by musicians.
In some cases, the companies publishings/selling this stuff employ artists on a part-time or full-time basis. However, in situations where it doesn’t make sense to hire someone, they license an existing piece of music.
From there, the artist gets paid a small amount every time the media is viewed, published or sold (e.g. the commercial airs on TV, the video game is sold, etc).
Admittedly, you have to be able to create music in the first place for this model to work. But don’t worry: You don’t need to become the next Taylor Swift or Kendrick Lamar.
Instead, all you need to do is look at the type of music that’s already being licensed in your chosen niche and create something similar.
2 - Stock Photography / Video
Got a knack for shooting amazing pictures? Love shooting stunning videos?
If you’re good with a camera, you may have a future licensing your work.
Similar to the music example above, a lot of the footage you see in TV, movies and online was not shot/filmed by company that's publishing it.
Instead, where appropriate, both production companies and creators will license stock photography/video footage.
For example, one of the strategies we teach for creating faceless pages involves using B-roll (an industry term for stock video footage).
In some cases, clips can be purchased for a one-time fee (where the artist gets paid a percentage of the sale, similar to how eBay works).
In others, the clips are made available as part of a membership site, where the videographer is paid as part of a revenue-sharing model (similar to how Spotify works).
Once again, you’ll need to be skilled with the camera to go down this path. However, you don’t need to be the next Steven Spielberg.
From drone shots of Dubai to a simple video of a puppy running through a field, there are limitless options for licensing both photos and video footage.
3 - Software
As you may or may not know, software licensing agreements have created some of the wealthiest millionaires in the United States.
The reason this model is so attractive is because software can be incredibly costly to develop. Especially in niche industries where you don’t have thousands of developers all working to solve the same problem.
Meaning, if an entrepreneur creates a piece of software that would be valuable to other players in their vertical, companies interested in that software have two options.
First, they can acquire the company that created the software they desire. Second, if an acquisition isn't possible, they can license it.
From the entrepreneur's perspective, there are multiple benefits to licensing your work instead of selling your company.
While selling a software company can generate a huge cash windfall all at once, licensing the software creates a predictable revenue stream that can generate passive income for years and even decades to come.
Further, while many of the software licensing deals you hear about are high-profile, there are hundreds (if not thousands) of smaller deals that never make business news headlines.
From Chrome extensions to iPhone apps, there are a variety of ways you can create technology other companies might be willing to pay you for.
What matters is creating something that solves a legitimate problem in a niche where one (or more) of the following applies:
A solution does not currently exist
The existing solution is not readily available to a majority of players in the market
The existing solution is not affordable to the overwhelming majority of players in the market
Admittedly, creating a piece of software other companies find worthy of licensing will require a high level of both coding skills and business savvy (given you need to make sure you software solves a painful and previously unsolved problem).
That being said, if you can crack the code on creating a much-needed solution in a high-demand market, you could find yourself retiring at a very young age.
💡 Takeaway: While most businesses require you to sell a product or service on an ongoing basis, licensing is one of the only businesses where you do the work once and get paid for life. The caveat is that you'll need to create thousands of pieces of media - or an incredibly valuable piece of technology - before you'll ever be able to retire off royalty payments.
🎁 Resources:
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