A royalty agreement is a legal document between two parties where one party agrees to pay the other party royalty fees based on sales of intellectual property. Royalties are monetary compensations to the owner of intellectual property rights. They are of a specialized nature linked to the knowhow, for instance, procurement of equipment, the setup of a production facility or training of licensee personnel, on-site and off-site. These costs would bear no relationship to the royalties, although they are most often provided by the licensor. The cost of such services arises from delineating the skill-mix and 'man'-hours of effort involved (domestic and expatriate personnel) and providing for supervision overhead. The costs of different skills is in the public domain and can be readily estimated. The overhead percentage, however, is a negotiated element. A stream is a file of continuous music listened to through a consumer's receiving device with no playable copy of the music remaining. When you start earning royalties, the licensee (the company who licensed the artwork) keeps the first $1,000 to repay the advance to itself. If the artist doesn't earn the $1,000 in royalties, the licensee takes a loss.