Tuesday, November 27, 2012

The Misuse of Passive Income

I'm kind of tired of this.

People...usually writers...talk about 'passive income' all of the time. They claim income from their blog is 'passive income'. Or royalty income from a book they've written or contributed to, or income from article sites.

Wrong.

'Passive income' is money that comes in without you doing anything at all to earn it. If you write a book, you have to keep telling people about it or it won't sell (marketing). If you write a blog, you need to update it at least a couple of times a week, same with article sites. It's not passive at all.

The correct term for income that comes from doing work once and then selling it multiple times is 'residual income'. In the movie industry this is often shortened to 'residuals'. (My husband is still owed $10 from an indie movie company that was supposed to come out of residuals that never materialized). Comic publishers and creators talk about 'back end pay', to mean the same thing.

Residual income can keep trickling in years after you actually do the work, but it is not passive and you aren't doing nothing to earn it.

It's writers who make this mistake - and shouldn't we all know better? I think it's in danger of turning into one of those misused terms that eventually takes on the incorrect meaning. However, in this case, the wrong meaning is very misleading and gets people to assume they can just post their book on Amazon and forget about it.

That is not, remotely, true.