Royalty-free licenses contrast with rights-managed licenses, which usually allow buyers to use the content in very specific ways, with restrictions placed on things like period of time used, geographic region, industry, size published, etc. Rights Managed is so called because the licensor is specifically managing the publishing rights for the content.

For an image that has been licensed as royalty-free, the licensor is unable to provide a history of usage to a prospective licensee. This may negatively affect the licensee, because they cannot be assured specific content is not being used in a certain geographical region by a competitor, for example. There are examples of the same royalty-free content being used in large promotional advertising campaigns by competitors.

The concept of royalty-free comes from copyright, a statute that allows authors and publishers of works to be the sole arbiter of the exploitation of that work, and to set fees associated with that work. The economic incentives afforded by copyright give artists one way to make a living through their creative works.

Typically, the royalty charged for content under a royalty-free license is based on the physical attributes of the content. For example, the larger pixel size of a digital image, the larger the fee, since the licensee gains more benefit from an image with more resolution. The typical charge for an image that reproduces well at a two page magazine spread size may incur a charge of up to $500, whereas a blog-sized image may run much less. Likewise, a longer piece of music or a more complex Flash animation could command higher prices.

Royalty-free does not mean a user is free to take and use whatever content they find available to them. It only refers to a specific licensing contract between two entities. The licensor, usually the content creator, always retains all copyright to the content, including the ability to distribute it, or allow redistribution. Each licensing contract is different. Some may allow reselling of items that include that content, such as a t-shirt or calendar with an image, and others do not. The terms of the license should be researched, to be assured if the license includes the rights desired by the licensee.